Document:

ex10-9.htm

Exhibit 10.9

March __, 2011

By E-mail

Golden Predator Mines US Inc.

Suite 1100 – 888 Dunsmuir Street

Vancouver, British Columbia, Canada V6C 3K4

Attention:  John Legg, President

Re:          Option to Purchase and Purchase Agreement

Lewiston Property, Fremont Co., Wyoming

Dear Sirs:

This letter sets out the Option to Purchase and Purchase Agreement (“Option Agreement” or “Agreement”) reached between Golden Predator Mines US Inc., a Nevada corporation having an office for business located at Suite 1100 – 888 Dunsmuir Street, Vancouver, British Columbia, Canada V6C 3K4 (“GPMUS”)  and Big Bear Mining Corp., a Nevada corporation having an office for business located at 60 E. Rio Salado Parkway, Suite 900, Tempe, AZ USA 85281 (“Big Bear” or the “Company”) whereby GPMUS will grant Big Bear an exclusive option (“Purchase Option”) to purchase one hundred percent (100%) of GPMUS’s interests in the Lewiston properties located in the Lewiston Mining District, Fremont Co., Wyoming and as described more specifically on Attachment A (collectively  the “Lewiston Property”), on the terms and conditions set forth below.

	
1.  

	
Term.  This Option Agreement and Purchase Option will become effective as of the last date signed by the parties below (“Effective Date”) and will expire upon the occurrence of:  (i) Big Bear’s exercise of its Purchase Option and completion of earn-in deliverables set out in Paragraph 6 below prior to the fourth (4th) anniversary of the Effective Date and GPMUS’s conveyance and assignment of one hundred percent (100%) of its interests in the Lewiston Property to Big Bear; or (ii) Big Bear’s relinquishment of its Purchase Option any time prior to the fourth (4th) anniversary of the Effective Date; or (iii)  the fourth (4th) anniversary of the Effective Date if Big Bear has neither exercised nor relinquished its Purchase Option prior to that anniversary.

	
2.  

	
Option Payment.  As full and sufficient consideration for receipt of the Purchase Option, Big Bear shall provide GPMUS with a non-refundable cash deposit of ten thousand dollars (US $10,000) within five (5) business days of receipt of GPMUS’s written execution of this Option Agreement (“Option Payment”).

	
3.  

	
Due Diligence.  Upon delivery of the Option Payment to GPMUS, a forty-five (45) day period (the “Due Diligence Period”) shall commence for Big Bear to conduct normal and customary due diligence at its sole discretion including physical inspection of the Lewiston Property assets.  GPMUS will promptly make available to Big Bear, all information pertaining to the Lewiston Property (including without limitation all agreements, leases, drill core, copies of all reports, maps, assay results and other relevant technical data) compiled by, prepared at the direction of, or in the possession of GPMUS with respect to the Lewiston Property and not previously furnished to Big Bear.

  

  

  

	
4.  

	
Access.  During the term of this Option Agreement, to the fullest extent of its rights to do so, GPMUS grants Big Bear full access to the Lewiston Property, including any rights of ingress and egress which GPMUS enjoys through nearby or adjacent properties, as well as the exclusive right to conduct mineral exploration and development activities on and under the Lewiston Property.

	
5.  

	
Purchase Option Election.  Upon Big Bear’s completion of due diligence, Big Bear may proceed, at its sole discretion, either to:

	
a.  

	
Elect in writing to relinquish its Purchase Option with no further obligation owed to GPMUS except those obligations set forth in that certain Confidentiality Agreement dated December 6, 2010 between the parties (“Confidentiality Agreement”)and remediation of any areas disturbed by Big Bear during its due diligence; or

	
b.  

	
Elect in writing to exercise its Purchase Option by performing the earn-in deliverables outlined in Paragraph 6 below, in which event the non-refundable ten thousand dollar ($10,000) deposit will be applied towards the initial cash payment due to GPMUS before the first anniversary of the Effective Date under Paragraph 6(a)(i) below

provided that prior to electing to exercise its Purchase Option by performing the earn-in deliverables, the parties shall have received the consents required under the Mining Leases described in Attachment A (the “Underlying Agreements”), as well as confirmation from the lessors that the Underlying Agreements are in good standing.  GPMUS will use reasonable commercial efforts to obtain such consents and confirmations prior to the expiry of the Due Diligence Period.

	
6.  

	
Exercise of Purchase Option.  Big Bear’s exercise of its Purchase Option shall consist of performance of the earn-in deliverables set out herein, subject to Big Bear’s right to accelerate its performance of these deliverables at its sole discretion:

	
a.  

	
Tender to GPMUS a total non-refundable cash payment of two hundred thousand dollars (US $200,000), payable in the following increments:  (i) forty thousand dollars ($40,000) consisting of the ten thousand dollar ($10,000) deposit previously paid and an additional thirty thousand dollars ($30,000) payable on or before the first anniversary of the Effective Date; (ii) forty thousand dollars ($40,000) payable on or before each of the second and third anniversaries of the Effective Date; and (iii) the final eighty thousand dollars ($80,000) payable on or before the fourth anniversary of the Effective Date; and

  

  

  

	
b.  

	
Tender to GPMUS shares of Big Bear stock totaling one million one hundred thousand (1,100,000), delivered per the following schedule: (i) five hundred thousand (500,000) shares at the end of the forty-five (45) day due diligence period; and (ii) two hundred thousand (200,000) shares on each of the first, second, and third anniversaries of the Effective Date with such shares being subject to a six month trading restriction and applicable stock exchange rules, provided that if GPMUS cannot sell any of the shares due to Big Bear ceasing to make timely reports required by the US Securities and Exchange Commission, it shall be a condition to the exercise of the option that Big Bear repurchase the Shares not capable of being sold from GPMUS for $0.15 per share; and

	
c.  

	
Incur exploration expenditures on the Lewiston Property totaling one million dollars (US $1,000,000), including evaluation and delineation of gold resources, but exclusive of (A) any charges for overhead, (B) reclamation costs, (C) land holding costs and (D) any other costs not directly related to exploration and development of the Lewiston Property (“Work”) with such expenditures estimated to be broken out as follows:  (i) one hundred thousand dollars ($100,000) before the first anniversary of the Effective Date; (ii) an additional two hundred thousand dollars ($200,000) before the second anniversary of the Effective Date; (iii) an additional five hundred thousand dollars ($500,000) before the third anniversary of the Effective Date; and (iv) the final two hundred thousand dollars ($200,000) before the fourth anniversary of the Effective Date.  In the event that the GPMUS disputes any exploration expenditures, GPMUS may notify Big Bear in writing and Big Bear shall provide GPMUS with reasonable access to its books and records relating to the disputed exploration expenditures for the purpose of conducting an audit of same, which shall be performed at the expense of GPMUS by a recognized CPA.  In the event that the amount of exploration expenditures reported by the auditor are less than those reported by Big Bear, the exploration expenditures shall be deemed to be that lower figure and, if (but only if) the discrepancy is greater than 10%, Big Bear shall be responsible for paying the costs of such report.  In the event that Big Bear spends, in any period, more than the specified sum, the excess shall be carried forward and applied to the exploration expenditures to be incurred in the succeeding period; and

	
d.  

	
Make all payments to the lessors required by the Underlying Agreements, pay all taxes, fees and other charges required to maintain the Lewiston Property in good standing from the Effective Date to the earlier of (i) the relinquishment and forfeiture of the Purchase Option as describe in Paragraph 10, or (ii) the exercise of the Purchase Option in compliance with this Paragraph 6.

 

  

  

  

	
e.  

	
If, at any point, Big Bear fails to fund the amount of exploration expenditure for that period required under Section 6(c), Big Bear will nevertheless be deemed to have satisfied Section 6(c), if Big Bear, on or before the expiry of that period, pays GPMUS an amount which is equal to the difference between the sum of the actual exploration expenditure funded by Big Bear in that period and the exploration expenditure set out in Section 6(c) that ought to have been funded by Big Bear in that period.

	
7.  

	
Performance of the Work.  Big Bear initially plans to undertake a drilling program, and may also undertake a geophysical program, to evaluate target areas within the Lewiston Property.  However, throughout the term of this Agreement, the scope and details of the Work and scheduling will be at Big Bear’s sole discretion.

 

	
8.  

	
Consents; No Shop.  GPMUS covenants and represents that except for the consents required under the Underlying Agreements and any necessary approvals or consents of governmental entities having jurisdiction over the Lewiston Property, as of the Effective Date there are no, and throughout the term of this Option Agreement there are shall not be, any third party rights of refusal, consent or encumbrances burdening the Lewiston Property (save those previously disclosed to Big Bear), other than encumbrances of record as of the Effective Date including easements and rights of way, all rights of taxation and in all cases the paramount jurisdiction of the United States.  Upon its execution of this Option Agreement and receipt of the Option Payment, and for so long as Big Bear is not in default of its obligations under this Agreement  GPMUS agrees (i) to suspend any and all negotiations in which GPMUS may be currently involved with other persons or entities with regard to the sale of all or any part of the Lewiston Property; and (ii) neither solicit, nor entertain bids or other expressions of interest from third parties concerning the Lewiston Property

	
9.  

	
Sale and Conveyance.  Upon Big Bear’s completion of the earn-in deliverables set out in Paragraph 6 above prior to the fourth (4th) anniversary of the Effective Date:

	
a.  

	
GPMUS shall promptly convey and assign, and/or cause its affiliates to convey and assign, the Lewiston Property to Big Bear with no further consideration due to GPMUS, no other conditions precedent to be satisfied and no other contingencies including, without limitation, no required approvals of the shareholders or board of GPMUS.

	
b.  

	
Within or concurrent with such conveyances, GPMUS will reserve unto itself an additional sliding scale royalty for net smelter returns (“NSR”) production royalty in  mineral products produced from the Lewiston Property as more specifically described on Attachment B to this Option Agreement.

  

  

  

	
c.  

	
The parties hereby stipulate that Big Bear’s completion of the deliverables set out in Paragraph 6 together with accepting the Lewiston Property burdened with the NSR royalties described in Attachments A and B shall be full and sufficient purchase consideration for the Lewiston Property, including any interests acquired by GPMUS after the Effective Date.

	
d.  

	
The confidentiality obligations set forth in this Option Agreement shall supersede and replace in its entirety the Confidentiality Agreement.

	
10.  

	
Relinquishment and Forfeiture.  At any time prior to the fourth (4th) anniversary of the Effective Date, upon written notice to GPMUS, Big Bear may relinquish, at its sole discretion, its Purchase Option, without further obligation or liability owed to GPMUS except for those obligations set forth herein.  By relinquishment, Big Bear shall forfeit to GPMUS all cash payments and shares delivered, and Work expended, prior to notification of relinquishment; however, Big Bear shall have no further duty to complete the deliverables set out in Paragraph 6 and shall not owe GPMUS any further cash payments, shares, or Work.

	
11.  

	
Assignment.  GPMUS may assign or transfer its interests in the Lewiston Property, subject to this Option Agreement, on notice to Big Bear, and Big Bear may assign or transfer its interests under this Option Agreement with the written consent of GPMUS (which consent will not be unreasonably withheld or delayed), in each case with the consent of the lessors under the Underlying Agreements, where required.  However no assignment or transfer by either party shall be effective against the other until the non-transferring party receives the transferee’s written agreement to be bound by the obligations and agreements hereunder.

	
12.  

	
Covenants; Memorandum.  The terms and conditions agreed to herein shall be covenants running with the land.  On expiry of the Due Diligence Period, a memorandum of agreement evidencing Big Bear’s Purchase Option may be recorded.

	
13.  

	
Representations and Warranties of GPMUS.  GPMUS represents, warrants and covenants to and in favor of Big Bear, with the understanding that Big Bear is relying on same in entering into this Option Agreement, that:

	
a.  

	
Subject to the terms and conditions of the Underlying Agreements, GPMUS shall have the right to sell, convey, and assign one hundred percent (100%) interest in the Lewiston Property which shall be more specifically described by Attachment A.  To the best of GPMUS’s knowledge and belief, without inquiry, and other than as described in the Underlying Agreements, there are no individual persons or entities of any kind other than GPMUS that own or hold an interest in, or have asserted any claims to ownership or interest in, any portion of the Lewiston Property in undivided interests or otherwise, and no person or entity other than Big Bear has any right to acquire any interest in any portion of the Lewiston Property;

 

  

  

  

	
b.  

	
the Underlying Agreements are in good standing and no defaults have occurred thereunder;

 

	
c.  

	
no proceedings are pending for, and it is unaware of any basis for the institution of any proceedings leading to, its dissolution or winding up or being placed into bankruptcy;

 

	
d.  

	
it has all requisite power and capacity, and has duly obtained all requisite authorizations and performed all requisite acts, to enter into and perform its obligations hereunder, it has duly executed and delivered this Agreement and such constitutes a legal, valid and binding obligation of it enforceable against it in accordance with the Agreement's terms, and the entering into of this Agreement and the performance of its obligations hereunder does not and will not result in a breach of, default under or conflict with any of the terms and provisions of any of its constituting documents, any resolutions of its partners, any indenture, agreement or other instrument to which it is a party or by which it is bound or the Lewiston Property may be subject, or any statute, order, judgment or other law or ruling of any competent authority;

 

	
e.  

	
it is legally entitled to hold the Lewiston Property and the associated rights and will remain so entitled until and always to the extent such is required for the due transfer to Big Bear of its requisite interest in and to the Property pursuant to and upon the exercise of the Purchase Option;

 

	
f.  

	
it is, and at the time of transfer to Big Bear of its interest in and to the Lewiston Property pursuant to and upon the exercise of the Option it will be, the beneficial owner of all right, title and interest in and to such transferred interest, free and clear of all liens, charges, claims, liabilities and adverse interests of any nature or kind, and no taxes or rentals are or will be due in respect of the Lewiston Property and provided that Big Bear has complied with Section 6(d) hereof;

 

	
g.  

	
the mining claims comprising the Lewiston Property and the mineral agreements in respect thereof have been, to GPMUS's knowledge and   belief without inquiry, duly and validly located, granted, entered into and recorded, as the case may be, pursuant to the laws of the jurisdiction in which the Lewiston Property is situate and are in each case in good standing with respect to all filings, fees, rentals, taxes, assessments, work commitments and other obligations and conditions on the date hereof;

 

	
h.  

	
to GPMUS’s knowledge and belief without inquiry there are neither any adverse claims or challenges against, or to the ownership or title to, any of the mining claims comprising the Lewiston Property or to the validity or enforceability of any of the mineral agreements in respect thereof, nor to the knowledge of GPMUS after due inquiry is there any basis therefor, and there are no outstanding agreements, options or other rights and interests to acquire or purchase the Lewiston Property or any portion thereof or any interest therein, and no person has any royalty or other interest whatsoever in the production from any of the mining claims comprising the Lewiston Property or otherwise except as previously disclosed to Big Bear;

 

  

  

  

	
i.  

	
subject to the paramount title and surface management rights of the United States in respect of unpatented mining claims, it has the right to apply for surface rights in respect of the Lewiston Property necessary to conduct the exploration and development thereof, including but not limited to the activities contemplated in Paragraph 6 hereof; and

 

	
j.  

	
GPMUS confirms it satisfies the criteria for accredited investors as defined by Regulation D of the Securities Act of 1933. The shares issuable pursuant to Section 6(b) will not be registered under the 1933 Act in reliance upon the exemption from registration afforded by Rule 506 of Regulation D and/or Section 4(2) of the 1933 Act.

	
14.  

	
Mutual Cooperation.  During the term of this Option Agreement, Big Bear and GPMUS agree to take all action reasonably necessary to further the objectives of this Option Agreement.

	
15.  

	
Governing Law; Dispute Resolution.  This Option Agreement shall be governed by and construed in accordance with the laws of the State of Wyoming without giving effect to the principles of conflict of laws. Should a dispute arise under this Option Agreement, either party may initiate dispute resolution by providing written notice of a dispute to the other party.  The parties prefer to resolve any disputes that may arise under this Option Agreement informally to the extent possible.  If the dispute is not resolved by good faith informal negotiations within thirty (30) days from the delivery of the notice of dispute, each party shall designate in writing to the other party a company representative having settlement authority for the dispute, and such representatives shall attempt to resolve such dispute within a further period of thirty (30) days.  Unless the parties otherwise agree, if the period of sixty (60) days referred to above has expired and the dispute remains unresolved, either party may submit the dispute to binding arbitration, by a single neutral arbitrator having more than ten (10) years of experience in the metal mining industry, in Denver, Colorado in accordance with the then-current American Arbitration Association Rules.  If the parties are unable to agree upon the arbitrator within thirty (30) days of the non-initiating party’s receipt of the notice to arbitrate, an arbitrator will be appointed in accordance with the then-current American Arbitration Association Rules.  The prevailing party shall be entitled to recover its reasonable attorneys' fees.

 

 

  

  

  

	
16.  

	
Representations and Warranties of Big Bear.  Big Bear represents, warrants and covenants to and in favor of GPMUS, with the understanding that GPMUS is relying on same in entering into this Agreement, that:

a. Corporate Power and Authority.  Big Bear has been duly incorporated and validly exists as a corporation in good standing It has the full corporate power and capacity to enter into this Agreement,  it has duly obtained all corporate authorizations for the execution of this Agreement and for the performance of this Agreement by it, and the consummation of the transactions herein contemplated will not conflict with or result in any breach of any covenants or agreements contained in, or constitute a default under, or result in the creation of any encumbrance under the provisions of the Articles or its constating documents or any shareholders’ or directors’ resolution, indenture, agreement or other instrument whatsoever to which it is a party or by which it is bound or to which it may be subject, the entering into and the performance of this Agreement and the transactions contemplated herein will not result in the violation of any judgment, decree, order, rule or regulation of any court or administrative body by which it is bound, or any statute or regulation applicable to it; and no proceedings are pending for, and is unaware of any basis for the institution of any proceedings leading to, its dissolution or winding up or the placing of it in bankruptcy or subject to any other laws governing the affairs of insolvent corporations.

b. The Shares.  The Shares upon issuance:

i. are, or will be, free and clear of any security interests, liens, claims or other encumbrances, subject only to restrictions upon transfer under the Securities Act of 1933 (the “1933 Act”), and any applicable state securities laws;

ii. have been, or will be, duly and validly authorized, duly and validly issued, fully paid and non-assessable;

iii. will not have been issued or sold in violation of any preemptive or other similar rights of the holders of any securities of the Company or rights to acquire securities of the Company;

iv. will not subject the holders thereof to personal liability by reason of being such holders; and

v. will not result in a violation of Section 5 under the 1933 Act.

  

  

  

c. No Integrated Offering.   Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any security of the Company nor solicited any offers to buy any security of the Company under circumstances that would cause the offer of the Shares pursuant to this Agreement to be integrated with prior offerings by the Company for purposes of the 1933 Act or any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of the Bulletin Board, which would impair the exemptions relied upon herein or the Company’s ability to timely comply with its obligations hereunder.  No prior offering will impair the exemptions relied upon herein or the Company’s ability to timely comply with its obligations hereunder.  Neither the Company nor any of its affiliates will take any action or steps that would cause the offer or issuance of the Shares to be integrated with other offerings which would impair the exemptions relied upon in this offering or the Company’s ability to timely comply with its obligations hereunder.  The Company will not conduct any offering other than the transactions contemplated hereby that may be integrated with the offer or issuance of the Shares that would impair the exemptions relied upon in this offering or the Company’s ability to timely comply with its obligations hereunder.

d. No General Solicitation.  Neither the Company, nor any of its affiliates, nor to its knowledge, any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the 1933 Act) in connection with the offer or sale of the Shares.

e. Reporting Company/Shell Company.  The Company is a publicly-held company subject to reporting obligations pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the "1934 Act") and has a class of Common Stock registered pursuant to Section 12(g) of the 1934 Act.  Pursuant to the provisions of the 1934 Act, the Company has filed all reports and other materials required to be filed thereunder with the Commission during the preceding twelve months.  As of the Closing Date, the Company is not a “shell company” as such term is employed in Rule 144 under the 1933 Act.

f. Listing.  The Company's Common Stock is quoted on the OTC Bulletin Board under the symbol “BGBR“.  The Company has not received any oral or written notice that its Common Stock is not eligible nor will become ineligible for quotation on the OTC Bulletin Board nor that its Common Stock does not meet all requirements for the continuation of such quotation.  The Company satisfies all the requirements for the continued quotation of its Common Stock on the OTC Bulletin Board.

  

  

  

g. Filing Requirements.  From the date of this Agreement and until the last to occur of (i) one year after the date hereof, or (ii) until all the Shares have been resold or transferred by GPMUS (the date of such latest occurrence being the “End Date”), the Company will (A) cause its Common Stock to continue to be registered under Section 12(b) or 12(g) of the 1934 Act, (B) comply in all respects with its reporting and filing obligations under the 1934 Act, and (C) voluntarily comply with all reporting requirements that are applicable to an issuer with a class of shares registered pursuant to Section 12(g) of the 1934 Act, if the Company is not subject to such reporting requirements.  The Company will use its best efforts not to take any action or file any document (whether or not permitted by the 1933 Act or the 1934 Act or the rules thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under said acts until the End Date.  Until the End Date, the Company will continue the listing or quotation of the Common Stock on the OTC Bulletin Board  and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the OTC Bulletin Board.  The Company agrees to timely file a Form D with respect to the Securities if required under Regulation D and to provide a copy thereof to GPMUS promptly after such filing.

h. Legal Opinion.  The Company will timely provide, at the Company's expense, such legal opinions, if any, as are reasonably necessary in GPMUS’ opinion for the resale of the Shares issued hereunder pursuant to Rule 144 under the 1933 Act or another exemption from registration, provided that GPMUS has provided such documentation as may be reasonably requested in order that such opinion may be rendered.

	
17.  

	
Duties and Obligations of Big Bear during the currency of the Purchase Option.  During the currency of the Purchase Option Big Bear shall:

	
a.  

	
On or before the date which is ninety (90) days from the first, second, third and fourth anniversaries of the Effective Date, deliver to GPMUS a summary report setting forth: (i) the Work completed on the Lewiston Property, (ii) the results of the Work completed, (iii) the exploration expenditures incurred by Big Bear to such dates including reasonable background documentation reasonably required to substantiate the expenditures incurred, and (iv) planned exploration expenditures for the following annual period, if applicable;

	
b.  

	
maintain in good standing the claims comprising the Lewiston Property by the doing and filing of assessment work for the claims or the making of payments in lieu thereof, by the payment of taxes and rentals in respect of the Lewiston Property, and the performance of all other actions which may be necessary in that regard and in order to keep such mining claims free and clear of all encumbrances arising from Big Bear’s activities thereon.  Big Bear shall perform these obligations under this Section 17(b) not less than 30 days before the applicable statutory or regulatory deadline for the actions necessary to maintain the mining claims, and shall provide prompt notice to GPMUS of such payments;

  

  

  

	
c.  

	
maintain in good standing, and perform the obligations of the lessees under, the Underlying Agreements.  Big Bear shall perform these obligations under this Section 17(c) not less than 30 days before the applicable deadline for the necessary actions to maintain the Underlying Agreements, and shall provide prompt notice to GPMUS of such actions;

	
d.  

	
permit GPMUS’ designated representatives at reasonable times and intervals, and in any event on 24 hours courtesy notice to Big Bear, to visit and inspect the Lewiston Property, provided always that GPMUS shall abide by the rules and regulations laid down by Big Bear relating to matters of safety and efficiency in its operations, such access being at the sole risk and expense of GPMUS;

	
e.  

	
do all work on the Lewiston Property in a good and workmanlike fashion and in accordance with all applicable laws;

	
f.  

	
at the request of GPMUS, provide GPMUS with copies of all reports, maps, assay results and other relevant technical data with respect to the Lewiston Property, subject to GPMUS not disclosing such data, or otherwise using such data except in furtherance of this Agreement ;

	
g.  

	
notify GPMUS promptly of any significant exploration results;

	
h.  

	
provide GPMUS with copies of any and all notices received from any governmental authorities  which are material to the Lewiston Property;

	
i.  

	
arrange for and maintain workers’ compensation or equivalent coverage for all eligible employees engaged by it in accordance with local statutory requirements; and

	
j.  

	
maintain public liability insurance against claims for personal injury, including, without limitation, bodily injury, death or property damage occurring on, in or about the Lewiston Property to a limit of not less than Two Million Dollars ($2,000,000.00) in the aggregate with respect to personal injury or death to any one or more persons or damage to property (and provide GPMUS with a certificate of insurance which shows GPMUS as a named insured on the policy).

  

  

  

	
18.  

	
Duties and Obligations of Big Bear on Termination of the Purchase Option.  If the Purchase Option is terminated otherwise than upon the exercise thereof, Big Bear shall:

	
a.  

	
leave in good standing for a period of at least one year from the termination of the Purchase Option those mining claims comprising the Lewiston Property;

	
b.  

	
ensure that, as soon as practicable and in any event within sixty (60) days following termination, the Lewiston Property is not subject to any encumbrances other than those encumbrances existing as of the Effective Date;

	
c.  

	
make available to GPMUS within ninety (90) days of such termination, all drill core, reports, maps, assay results and other relevant technical data compiled by, prepared at the direction of, or in the possession of Big Bear with respect to the Lewiston Property and not theretofore furnished to GPMUS; and

	
d.  

	
within the time periods prescribed by applicable law, complete all reclamation work required under applicable law on the project by virtue of the activities of Big Bear during the currency of the Purchase Option.  However, in no event shall Big Bear be responsible for reclamation of conditions existing on the Lewiston Property as of the Effective Date except to the extent Big Bear’s activities further disturb or otherwise impact such pre-exisiting conditions.

	
19.  

	
Confidentiality.  All proprietary information provided to or received from one party to the other party not already in the public domain shall be treated as confidential (“Confidential Information”) and shall not be disclosed by either party or used by either party except in furtherance of this Option Agreement.  During the due diligence period, the period during which Big Bear is proceeding to exercise its Purchase Option and for all time periods following Big Bear’s completion of the earn-in deliverables set out herein, this confidentiality provision will supersede and take precedence over the Confidentiality Agreement. GPMUS agrees to agree to Big Bear’s reasonable requests for disclosure during these time periods including needs to disclose information to potential investors and governmental agencies having jurisdiction over Big Bear, the Lewiston Property, and Big Bear’s mining operations.   Any news releases to be issued by a party which mention the name of the other party must first be reviewed and approved by the other party.

	
20.  

	
Indemnification. Big Bear covenants and agrees with GPMUS, and GPMUS covenants and agrees with Big Bear (the Party so covenanting being referred to in this Paragraph as the “Indemnifying Party”, and the other Party being referred to in this Paragraph as the “Indemnified Party”) that the Indemnifying Party shall:

	
(a)  

	
be solely liable and responsible for any and all claims, demands, actions, causes of action, damages, losses, costs, liabilities or expenses, and all reasonable costs incurred in investigating or pursuing any of the foregoing or any proceeding relating to any of the foregoing which the Indemnified Party or any of its respective directors, officers, servants, agents and employees, together with the successors, assigns, administrators, executors, heirs and all other legal representatives of the foregoing, may suffer, sustain, pay or incur; and

  

  

  

	
(b)  

	
defend, indemnify and save the Indemnified Party and its respective directors, officers, servants, agents and employees, together with the successors, assigns, administrators, executors, heirs and all other legal representatives of the foregoing, harmless from any and all claims which may be brought against or suffered by such Persons or which they may sustain, pay or incur,

as a result of, arising out of, attributable to or connected with any breach or non-fulfillment of any representation, warranty, covenant or agreement on the part of the Indemnifying Party under this Agreement (other than Big Bear’s failure to exercise the Purchase Option) or any misstatement or inaccuracy of or any other incorrectness in or breach of any representation or warranty of the Indemnifying Party contained in this Agreement or in any certificate or other document furnished by the Indemnifying Party pursuant to this Agreement.

If this Option Agreement and its attachments thereto accurately reflect your understanding and agreement, please execute and return this Option Agreement to my attention at your earliest convenience for counter-execution.    I will return a fully executed copy for your records.

Sincerely,

BIG BEAR MINING CORP.

Steve Rix

ACKNOWLEDGED AND AGREED

this ___ day of March, 2011 by:

GOLDEN PREDATOR MINES US INC.

____________________________

John W. Legg, President

  

  

  

Attachment A

to Option Agreement between

Golden Predator Mines US Inc. and Big Bear Mining Corp.

As of the Effective Date, the Lewiston Property generally consists of all  documents, records, data, permits, approvals, information, analyses, reports, and other information in whatever form owned or possessed by GPMUS concerning the following mining claims and rights.   The parties intend to develop a final Attachment A that will supersede and replace this Attachment A to be used in a sale, conveyance and transfer of the Lewiston Property from GPMUS to Big Bear upon Big Bear’s completion of the earn-in deliverables set out in Paragraph 6 of the Option Agreement.  The final  Attachment A will address any necessary corrections and after-acquired title of GPMUS concerning the Lewiston Property as well as include descriptions of all contracts, agreements, books, records, etc. owned or possessed by GPMUS concerning the Lewiston Property.

	
1.  

	
BM 1-13, BM 13A, BM 16-54, BM 56-60, BM 64-105, BMW 1-17, W No. 1-15, W No. 19, W No. 21-28, and W No. 30-60 claims acquired by GMPUS from Bald Mountain (Paul Miller) pursuant to a Deed and Assignment dated May 2008. 

	
2.  

	
Good Hope, Good Foot, Miracle, Veta Grande, Jerry Dain, Jerry Dain #2, Jerry Dain #3, Amanda Lode, JDW and Hidden Hand claims acquired by GMPUS under a Mining Lease dated July 2006 between Quincy Energy Corp. and John Gyorvary (assigned to GPMUS April 2009). NOTE THAT Section 10 of the Lease provides that either party can assign the lease with the consent of the other, which cannot be unreasonably withheld.

	
3.  

	
Ruby, Ruby No. 1-4, Star Lode, Helen G. Lode and Mill Lode claims acquired by GMPUS under a Mining Lease dated October 2004 between Quincy Energy Corp. and the Shrankler Family Trust/Robert Ewers (assigned to GPUS April 2009).  NOTE THAT Section 10 of the Lease provides that either party can assign the lease with the consent of the other, which cannot be unreasonably withheld.

[To be reviewed and confirmed by Big Bear as set forth above.]

  

  

  

Attachment B

to Option Agreement between

 Golden Predator Mines US Inc. and Big Bear Mining Corp.

In its conveyance of mineral interests to Big Bear, GPMUS will retain an incremental sliding scale interest in net smelter returns (a “Royalty”), as defined and determined in accordance with Exhibit A attached hereto. on mineral products (or any insurance proceeds in case of a loss) from the claims covered without deduction such that the total royalty burden on each claim equals:

	
·  

	
five cent (5%) if the price of gold is equal to or greater than two thousand dollars (US $2000) per ounce; or

	
·  

	
four percent (4%) if the price of gold is equal to or greater than one thousand four hundred dollars (US $1400) per ounce; or

	
·  

	
three and three quarters percent (3.75%) if the price of gold is equal to or greater than one thousand one hundred dollars (US $1100) per ounce; or

	
·  

	
three and a half percent (3.5%) if the price of gold is equal to greater than seven hundred and fifty dollars (US $750) per ounce; or

	
·  

	
three and one quarter percent (3.25%) if the price of gold is equal to or greater than five hundred dollars (US $500) per ounce; or

	
·  

	
three percent (3%) if the price of gold is less than five hundred dollars (US $500) per ounce.

For example if the royalty burden on a claim is three and three quarters percent (3.75%) on the Effective Date, GPMUS may further burden that claim by retaining an additional sliding scale royalty interest that will fluctuate, in accordance with the values described above, with the price of gold from a maximum of two percent (2%) interest in net smelter returns when the price of gold is equal to or greater than two thousand dollars ($2000) per ounce to a minimum of three percent interest in net smelter returns when the price of gold is less than five hundred dollars ($500) per ounce.  The price of gold shall be determined by the gross spot price of gold on the London Bullion market or other mutually agreeable price source or index on the day the smelter or other recipient of such production credits the account of Big Bear.

The Royalty will run with the land and not be merely contractual in nature.  To this end Big Bear will cooperate with GPMUS in recording the Royalty on title to the claims.

 

 

 

 

 

  

  

  

Exhibit A

Net Smelter Returns

	
Payor:

	
Golden Predator Mines US Inc.

	
Recipient:

	
Big Bear Mining Corp.

1)         Definitions.  The terms defined in the instrument to which this Exhibit is attached and made part of shall have the same meanings in this Exhibit.  The following definitions shall apply to this Exhibit.

a)           "Gold Production" means the quantity of refined gold outturned to Payor's account by an independent third party refinery for gold produced from the Property during the quarter on either a provisional or final settlement basis.

b)           "Gross Value" shall be determined on a quarterly basis and have the following meanings with respect to the following Minerals:

i)           Gold

(a)           If Payor sells gold concentrates, dore or ore, then Gross Value shall be the value of the gold contained in the gold concentrates, dore and ore determined by utilizing:  (1) the mine weights and assays for such gold concentrates, dore and ore; (2) a reasonable recovery rate for the refined gold recoverable from such gold concentrates, dore and ore (which shall be adjusted annually to reflect the actual recovery rate of refined metal from such gold concentrates, dore and ore); and (3) the Quarterly Average Gold Price for the quarter in which the gold concentrates, dore and ore were sold.

(b)           If Payor produces refined gold (meeting the specifications of the London Bullion Market Association, and if the London Bullion Market Association no longer prescribes specifications, the specifications of such other association generally accepted and recognized in the mining industry) from Minerals, and if Section 1.2.1(a) above is not applicable, then for purposes of determining Gross Value, the refined gold shall be deemed to have been sold at the Quarterly Average Gold Price for the quarter in which it was refined.  The Gross Value shall be determined by multiplying Gold Production during the quarter by the Quarterly Average Gold Price.

ii)           Silver.

(a)            If Payor sells silver concentrates, dore or ore, then Gross Value shall be the value of the silver contained in the silver concentrates, dore and ore determined by utilizing:  (1) the mine weights and assays for such silver concentrates, dore and ore; (2) a reasonable recovery rate for the refined silver recoverable from such silver concentrates, dore and ore (which shall be adjusted annually to reflect the actual recovery rate of refined metal from such silver concentrates, dore and ore); and (3) the Quarterly Average Silver Price for the quarter in which the silver concentrates, dore and ore were sold.

(b)           If Payor produces refined silver (meeting the specifications for refined silver subject to the New York Silver Price published by Handy & Harmon, and if Handy & Harmon no longer publishes such specifications, the specifications of such other association or entity generally accepted and recognized in the mining industry) from Minerals, and if Section 1.2.2(a) above is not applicable, the refined silver shall be deemed to have been sold at the Quarterly Average Silver Price for the quarter in which it was refined.  The Gross Value shall be determined by multiplying Silver Production during the quarter by the Quarterly Average Silver Price.

  

  

  

iii)           All Other Minerals.

(a)           If Payor sells any concentrates, dore or ore of Minerals other than gold or silver, then Gross Value shall be the value of such Minerals determined by utilizing:  (1) the mine weights and assays for such Minerals; (2) a reasonable recovery rate for the Minerals (which shall be adjusted annually to reflect the actual recovery rate of recovered or refined metal or  product from such Minerals); and (3) the quarterly average price for the Minerals or product of the Minerals for the quarter in which the concentrates, dore or ore was sold.  The quarterly average price shall be determined by reference to the market for such Minerals or product which is recognized in the mining industry as authoritative and reflective of the market for such Minerals or product.

(b)           If Payor produces refined or processed metals from Minerals other than refined gold or refined silver, and if Section 1.2.3(a) above is not applicable, then Gross Value shall be equal to the amount of the proceeds received by Payor during the quarter from the sale of such refined or processed metals. Payor shall have the right to sell such refined or processed metals to an affiliated party, provided that such sales shall be considered, solely for purposes of determining Gross Value, to have been sold at prices and on terms no less favorable than those that would be obtained from an unaffiliated third party in similar quantities and under similar circumstances.

c)           "Minerals" means gold, silver, platinum, antimony, mercury, copper, lead, zinc, and all other mineral elements and mineral compounds, but not geothermal resources, which are contemplated to exist on the Property or which are after the Effective Date discovered on the Property and which can be extracted, mined or processed by any method presently known or developed or invented after the Effective Date.

d)           "Quarterly Average Gold Price" means the average London Bullion Market Association Afternoon Gold Fix, calculated by dividing the sum of all such prices reported for the quarter by the number of days for which such prices were reported during that quarter.  If the London Bullion Market Association Afternoon Gold Fix ceases to be published, all such references shall be replaced with references to prices of gold for immediate sale in another established marked selected by Payor, as such prices are published in Metals Week magazine, and if Metals Week magazine no longer publishes such prices, the prices of such other association or entity generally accepted and recognized in the mining industry.

e)           "Quarterly Average Silver Price" means the average New York Silver Price as published daily by Handy & Harmon, calculated by dividing the sum of all such prices reported for the quarter by the number of days in such quarter for which such prices were reported.  If the Handy & Harmon quotations cease to be published, all such references shall be replaced with references to prices of silver for immediate sale in another established market selected by Payor as published in Metals Week magazine, and if Metals Week magazine no longer publishes such prices, the prices of such other association or entity generally accepted and recognized in the mining industry.

f)           "Net Smelter Returns" means the Gross Value of all Minerals, less the following costs, charges and expenses paid or incurred by Payor with respect to the refining and smelting of such Minerals:

  

  

  

i)           Charges for smelting and refining (including sampling, assaying and penalty charges), but not any charges or costs of agglomeration, beneficiation, crushing, extraction, milling, mining or other processing; and

ii)           Actual costs of transportation (including freight, insurance, security, transaction taxes, handling, port, demurrage, delay and forwarding expenses incurred by reason of or in the course of such transportation) of concentrates or dore metal from the Property to the smelter or refinery, but not any charges or costs of transportation of Minerals or ores from any mine on the Property to an autoclave, concentrator, crusher, heap or other leach process, mill or plant.

g)           "Property" means the real property described in the instrument to which these Net Smelter Returns provisions are attached and made a part.

h)           "Silver Production" means the quantity of refined silver outturned to Payor's account by an independent third-party refinery for silver produced from the Property during the quarter on either a provisional or final settlement basis.

2)         Payment Procedures.

a)           Accrual of Obligation.  Payor's obligation to pay the royalty shall accrue and become due and payable upon the sale or shipment from the Property of unrefined metals, dore metal, concentrates, ores or other Minerals or Minerals products or, if refined metals are produced, upon the outturn of refined metals meeting the requirements of the specified published price to Payor's account.

b)           Futures or Forward Sales, Etc..  Except as provided in Sections 1.2.1(a), 1.2.2(a) and 1.2.3 (a) (regarding sales of unprocessed gold and silver and sales of Minerals other than gold and silver), Gross Value shall be determined irrespective of any actual arrangements for the sale or other disposition of Minerals by Payor, specifically including but not limited to forward sales, futures trading or commodities options trading, and any other price hedging, price protection, and speculative arrangements that may involve the possible delivery of gold, silver or other metals produced from Minerals.

c)           Quarterly Calculations and Payments. Net Smelter Returns royalties shall be determined on a quarterly basis.  Payor shall pay Payor each quarterly royalty payment on or before the last business day of the quarter immediately following the quarter in which the royalty payment obligation accrued.  Payor acknowledges that late payment by Payor to Recipient of royalty payments will cause Recipient to incur costs, the exact amount of which will be difficult to ascertain.  Accordingly, if any amount due and payable by Payor is not received by Recipient within ten (10) days after such amount is due, then Payor shall pay to Recipient a late charge equal to 10 percent (10%) of such overdue amount.  Recipient’s acceptance of such late charge shall not constitute a waiver of Payor’s default with respect to such overdue amount, nor prevent Recipient from exercising any of Recipient’s other rights and remedies.  If any amount payable by Payor remains delinquent for a period in excess of thirty (30) days, Payor shall pay to Recipient, in addition to the late payment, interest from and after the due date at the statutory interest rate.

d)           Statements.  At the time of payment of the royalty, Payor shall accompany such payment with a statement which shows in detail the quantities and grades of refined gold, silver or other metals or dore, concentrates or ores produced and sold or deemed sold by Payor in the preceding quarter; the Quarterly Average Gold Price and Quarterly Average Silver Price, as applicable; costs and other deductions, and other pertinent information in detail to explain the calculation of the payment with respect to such quarter.  Payment shall be made to the address provided in the agreement or instrument to which this Exhibit is attached for purposes of notices or by wire transfer to an account which Recipient designates.

  

  

  

e)           Inventories and Stockpiles.  Payor shall include in all quarterly statements a description of the quantity and quality of any gold or silver dore that has been retained as inventory for more than ninety (90) days.  Recipient shall have thirty (30) days after receipt of the statement to either:  (a) elect that the dore be deemed sold, with Gross Value to be determined as provided in Sections 1.2.1 (b), with respect to gold, and 1.2.2(b), with respect to silver, as of such thirtieth (30th) day utilizing the mine weights and assays for such dore and utilizing a reasonable recovery rate for refined metal and reasonable deemed charges for all deductions which Payor is authorized to take, or (b) elect to wait until such time as the royalty payment otherwise would become payable pursuant to Sections 1.2.1(b) and 1.2.2(b).  The Payor’s failure to respond within such time shall be deemed to be an election to use the methods described in Sections 1.2.1(b) and 1.2.2(b).

f)           Audit.  Upon reasonable notice and at a reasonable time, the Recipient shall have the right to audit and examine the Payor’s accounts and records relating to the calculation of the Net Smelter Returns royalty payments.  If such audit determines that there has been a deficiency or an excess in the payment made to Recipient, such deficiency or excess shall be resolved by adjusting the next quarterly royalty payment due Recipient.  Recipient shall pay all costs of such audit unless a deficiency of three percent (3%) or more of the royalty payment due for the calendar quarter in question is determined to exist.  All books and records used by Payor to calculate the royalty payments shall be kept in accordance with generally accepted accounting principles applicable to the mining industry.

3)         Sampling and Commingling. Payor shall have the right to commingle Minerals and ores from the Property and materials from other properties, provided, that Payor first informs Recipient, in writing, of Payor’s intention to commingle and delivers to Recipient a detailed written description of Payor’s commingling plan.  Recipient shall have ninety (90) days during which to review and comment on Payor’s proposed commingling plan.  In any and all events, all Minerals and ores shall be measured and sampled by Payor in accordance with sound mining and metallurgical practices for metal and mineral content before commingling of any such Minerals or ores with materials from any other property.  Representative samples of materials from the Property intended to be commingled shall be retained by Payor, and assays of these samples shall be made before commingling to determine the metal content of each ore.  Detailed records shall be kept by Recipient showing measurements, assays of metal content and gross metal content of the materials from the Property are commingled.ex10-9.htm

Exhibit 10.9

 

SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of August 3, 2011, by and between THE MINT LEASING, INC., a Nevada corporation, with headquarters located at 323 North Loop West, Houston, TX 77008 (the “Company”), and ASHER ENTERPRISES, INC., a Delaware corporation, with its address at 1 Linden Place, Suite 207, Great Neck, NY 11021 (the “Buyer”).

 

WHEREAS:

 

A. The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(2) and Rule 506 as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”);

 

B. Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement an 8% convertible note of the Company, in the form attached hereto as Exhibit A, in the aggregate principal amount of $68,000.00 (together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the “Note”), convertible into shares of common stock, $0.001 par value per share, of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note; and

 

C. The Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set forth immediately below its name on the signature pages hereto; and

 

NOW THEREFORE, the Company and the Buyer severally (and not jointly) hereby agree as follows:

 

1. Purchase and Sale of Note.

 

a. Purchase of Note.  On the Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees to purchase from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the signature pages hereto.

 

b. Form of Payment.  On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the Note to be issued and sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately available funds to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note in the principal amount equal to the Purchase Price as is set forth immediately below the Buyer’s name on the signature pages hereto, and (ii) the Company shall deliver such duly executed Note on behalf of the Company, to the Buyer, against delivery of such Purchase Price.

 

  

  

  

c. Closing Date.  Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 6 and Section 7 below, the date and time of the issuance and sale of the Note pursuant to this Agreement (the “Closing Date”) shall be 12:00 noon, Eastern Standard Time on or about August 5, 2011, or such other mutually agreed upon time.  The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties.

 

2. Buyer’s Representations and Warranties.  The Buyer represents and warrants to the Company that:

 

a. Investment Purpose.  As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon conversion of or otherwise pursuant to the Note (including, without limitation, such additional shares of Common Stock, if any, as are issuable (i) on account of interest on the Note or (ii) as a result of the events described in Section 1.4(g) of the Note (such shares of Common Stock being collectively referred to herein as the “Conversion Shares” and, collectively with the Note, the “Securities”) for its own account and not with a present view towards the public sale or distribution thereof; provided, however, that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act.

 

b. Accredited Investor Status.  The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”).

 

c. Reliance on Exemptions.  The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.

 

d. Information.  The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Buyer or its advisors.  The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, afforded the opportunity to ask questions of the Company.  Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer.  Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below.  The Buyer understands that its investment in the Securities involves a significant degree of risk. The Buyer is not aware of any facts that may constitute a breach of any of the Company's representations and warranties made herein.

 

  

  

  

e. Governmental Review.  The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.

 

f. Transfer or Re-sale.  The Buyer understands that (i) the sale or re-sale of the Securities has not been and is not being registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities are sold pursuant to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, which opinion shall be accepted by the Company, (c) the Securities are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited Investor, (d) the Securities are sold pursuant to Rule 144 (accompanied by a legal opinion in the Form of Opinion attached as Exhibit B to the Note), or (e) the Securities are sold pursuant to Regulation S under the 1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions, which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case).  Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bonafide margin account or other lending arrangement.

 

g. Legends.  The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the 1933 Act or may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Conversion Shares, shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for such Securities):

 

 

  

  

  

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT (ALONG WITH AN OPINION OF COUNSEL).  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

 

The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold (provided that Rule 144(i) is not applicable to the Company), or (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted by the Company so that the sale or transfer is effected.  The Buyer agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

 

h. Authorization; Enforcement. This Agreement has been duly and validly authorized.  This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.

 

i. Residency.  The Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s name on the signature pages hereto.

 

3. Representations and Warranties of the Company.  The Company represents and warrants to the Buyer that:

 

 

  

  

  

a. Organization and Qualification.  The Company and each of its Subsidiaries (as defined below), if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted.  The Company’s public filings set forth a list of all of the Subsidiaries of the Company and the jurisdiction in which each is incorporated.  The Company and each of its Subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such qualification necessary except where the failure to be so qualified or in good standing would not have a Material Adverse Effect.  “Material Adverse Effect” means any material adverse effect on the business, operations, assets, financial condition or prospects of the Company or its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements or instruments to be entered into in connection herewith.  “Subsidiaries” means any corporation or other organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership interest.

 

b. Authorization; Enforcement.  (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required, (iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.

 

c. Capitalization.  As of the date hereof, the authorized capital stock of the Company consists of: (i) 480,000,000 shares of Common Stock, $0.001 par value per share, of which 82,224,504 shares are issued and outstanding; and (ii) 20,000,000 shares of Preferred Stock, $0.001 par value per share, of which 2,000,000 shares are issued and outstanding; no shares are reserved for issuance pursuant to the Company’s stock option plans, no shares are reserved for issuance pursuant to securities (other than the Note) exercisable for, or convertible into or exchangeable for shares of Common Stock other than warrants to purchase 3,000,000 shares at $.10 per share and those securities disclosed in the Company’s SEC filings, and 9,555,035 shares are reserved for issuance upon conversion of the Note.  All of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully paid and non-assessable.  No shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the shareholders of the Company or any liens or encumbrances imposed through the actions or failure to act of the Company.  As of the effective date of this Agreement, (i) there are no outstanding options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries except for warrants to purchase 3,000,000 shares at $.10 per share  and those securities disclosed in the Company’s SEC filings, (ii) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities under the 1933 Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of the Note or the Conversion Shares.  The Company has furnished to the Buyer true and correct copies of the Company’s Certificate of Incorporation as in effect on the date hereof (“Certificate of Incorporation”), the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the terms of all securities convertible into or exercisable for Common Stock of the Company and the material rights of the holders thereof in respect thereto.  The Company shall provide the Buyer with a written update of this representation signed by the Company’s Chief Executive on behalf of the Company as of the Closing Date.

 

  

  

  

d. Issuance of Shares.  The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.

 

e. Acknowledgment of Dilution.  The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Conversion Shares upon conversion of the Note.  The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.

 

f. No Conflicts.  The execution, delivery and performance of this Agreement, the Note by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws, or (ii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect).  Neither the Company nor any of its Subsidiaries is in violation of its Certificate of Incorporation, By-laws or other organizational documents and neither the Company nor any of its Subsidiaries is in default (and no event has occurred which with notice or lapse of time or both could put the Company or any of its Subsidiaries in default) under, and neither the Company nor any of its Subsidiaries has taken any action or failed to take any action that would give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party or by which any property or assets of the Company or any of its Subsidiaries is bound or affected, except for possible defaults as would not, individually or in the aggregate, have a Material Adverse Effect. The businesses of the Company and its Subsidiaries, if any, are not being conducted, and shall not be conducted so long as the Buyer owns any of the Securities, in violation of any law, ordinance or regulation of any governmental entity.  Except as specifically contemplated by this Agreement and as required under the 1933 Act and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency, regulatory agency, self regulatory organization or stock market or any third party in order for it to execute, deliver or perform any of its obligations under this Agreement, the Note in accordance with the terms hereof or thereof or to issue and sell the Note in accordance with the terms hereof and to issue the Conversion Shares upon conversion of the Note.  All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof.  The Company is not in violation of the listing requirements of the Over-the-Counter Bulletin Board (the “OTCBB”) and does not reasonably anticipate that the Common Stock will be delisted by the OTCBB in the foreseeable future.  The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

 

  

  

  

g. SEC Documents; Financial Statements.  The Company has timely filed all reports, schedules, forms (other than Section 16 ownership forms and Schedule 13D/G’s), statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”) (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein, being hereinafter referred to herein as the “SEC Documents”).  Upon written request the Company will deliver to the Buyer true and complete copies of the SEC Documents, except for such exhibits and incorporated documents.  As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  None of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except for such statements as have been amended or updated in subsequent filings prior the date hereof).  As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto.  Such financial statements have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved  and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).  Except as set forth in the financial statements of the Company included in the SEC Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to March 31, 2011, and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in such financial statements, which, individually or in the aggregate, are not material to the financial condition or operating results of the Company. The Company is subject to the reporting requirements of the 1934 Act.

 

h. Absence of Certain Changes.  Since March 31, 2011, there has been no material adverse change and no material adverse development in the assets, liabilities, business, properties, operations, financial condition, results of operations, prospects or 1934 Act reporting status of the Company or any of its Subsidiaries.

 

i. Absence of Litigation.  There is no material action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their officers or directors in their capacity as such, that could have a Material Adverse Effect.  Schedule 3(i) contains a complete list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the Company or any of its Subsidiaries, without regard to whether it would have a Material Adverse Effect.  The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

 

j. Patents, Copyrights, etc.  The Company and each of its Subsidiaries owns or possesses the requisite licenses or rights to use all patents, patent applications, patent rights, inventions, know-how, trade secrets, trademarks, trademark applications, service marks, service names, trade names and copyrights (“Intellectual Property”) necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); there is no claim or action by any person pertaining to, or proceeding pending, or to the Company’s knowledge threatened, which challenges the right of the Company or of a Subsidiary with respect to any Intellectual Property necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); to the best of the Company’s knowledge, the Company’s or its Subsidiaries’ current and intended products, services and processes do not infringe on any Intellectual Property or other rights held by any person; and the Company is unaware of any facts or circumstances which might give rise to any of the foregoing.  The Company and each of its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of their Intellectual Property.

 

k. No Materially Adverse Contracts, Etc.  Neither the Company nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s officers has or is expected in the future to have a Material Adverse Effect.  Neither the Company nor any of its Subsidiaries is a party to any contract or agreement which in the judgment of the Company’s officers has or is expected to have a Material Adverse Effect.

 

  

  

  

l. Tax Status.  The Company and each of its Subsidiaries has made or filed all federal, state and foreign income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply.  There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.  The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, state or local tax.  None of the Company’s tax returns is presently being audited by any taxing authority.

 

m. Certain Transactions.  Except for arm’s length transactions pursuant to which the Company or any of its Subsidiaries makes payments in the ordinary course of business upon terms no less favorable than the Company or any of its Subsidiaries could obtain from third parties and other than the grant of stock options disclosed on Schedule 3(c), none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.

 

n. Disclosure.  All information relating to or concerning the Company or any of its Subsidiaries set forth in this Agreement and provided to the Buyer in connection with the transactions contemplated hereby is true and correct in all material respects and the Company has not omitted to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they were made, not misleading.  No event or circumstance has occurred or exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed (assuming for this purpose that the Company’s reports filed under the 1934 Act are being incorporated into an effective registration statement filed by the Company under the 1933 Act).

 

o. Acknowledgment Regarding Buyer’ Purchase of Securities.  The Company acknowledges and agrees that the Buyer is acting solely in the capacity of arm’s length purchasers with respect to this Agreement and the transactions contemplated hereby.  The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of its respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Buyer’ purchase of the Securities.  The Company further represents to the Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.

 

  

  

  

p. No Integrated Offering.  Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance of the Securities to the Buyer.  The issuance of the Securities to the Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any shareholder approval provisions applicable to the Company or its securities.

 

q. No Brokers.  The Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby.

 

r. Permits; Compliance.  The Company and each of its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its business as it is now being conducted (collectively, the “Company Permits”), and there is no action pending or, to the knowledge of the Company, threatened regarding suspension or cancellation of any of the Company Permits.  Neither the Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of the Company Permits, except for any such conflicts, defaults or violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.  Since March 31, 2011, neither the Company nor any of its Subsidiaries has received any notification with respect to possible conflicts, defaults or violations of applicable laws, except for notices relating to possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material Adverse Effect.

 

s. Environmental Matters.

 

(i) There are, to the Company’s knowledge, with respect to the Company or any of its Subsidiaries or any predecessor of the Company, no past or present violations of Environmental Laws (as defined below), releases of any material into the environment, actions, activities, circumstances, conditions, events, incidents, or contractual obligations which may give rise to any common law environmental liability or any liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 or similar federal, state, local or foreign laws and neither the Company nor any of its Subsidiaries has received any notice with respect to any of the foregoing, nor is any action pending or, to the Company’s knowledge, threatened in connection with any of the foregoing.  The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.

 

  

  

  

(ii) Other than those that are or were stored, used or disposed of in compliance with applicable law, no Hazardous Materials are contained on or about any real property currently owned, leased or used by the Company or any of its Subsidiaries, and no Hazardous Materials were released on or about any real property previously owned, leased or used by the Company or any of its Subsidiaries during the period the property was owned, leased or used by the Company or any of its Subsidiaries, except in the normal course of the Company’s or any of its Subsidiaries’ business.

 

(iii) There are no underground storage tanks on or under any real property owned, leased or used by the Company or any of its Subsidiaries that are not in compliance with applicable law.

 

t. Title to Property.  The Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(t) or such as would not have a Material Adverse Effect.  Any real property and facilities held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as would not have a Material Adverse Effect.

 

u. Insurance.  The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged.  Neither the Company nor any such Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.  Upon written request the Company will provide to the Buyer true and correct copies of all policies relating to directors’ and officers’ liability coverage, errors and omissions coverage, and commercial general liability coverage.

 

v. Internal Accounting Controls.  Except as disclosed in the Company's SEC Documents, the Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient, in the judgment of the Company’s board of directors, to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

  

  

  

w. Foreign Corrupt Practices.  Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any Subsidiary has, in the course of his actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

 

x. Solvency.  The Company (after giving effect to the transactions contemplated by this Agreement) is solvent (i.e., its assets have a fair market value in excess of the amount required to pay its probable liabilities on its existing debts as they become absolute and matured) and currently the Company has no information that would lead it to reasonably conclude that the Company would not, after giving effect to the transaction contemplated by this Agreement, have the ability to, nor does it intend to take any action that would impair its ability to, pay its debts from time to time incurred in connection therewith as such debts mature.  The Company did not receive a qualified opinion from its auditors with respect to its most recent fiscal year end and, after giving effect to the transactions contemplated by this Agreement, does not anticipate or know of any basis upon which its auditors might issue a qualified opinion in respect of its current fiscal year.

 

y. No Investment Company.  The Company is not, and upon the issuance and sale of the Securities as contemplated by this Agreement will not be an “investment company” required to be registered under the Investment Company Act of 1940 (an “Investment Company”).  The Company is not controlled by an Investment Company.

 

z. Breach of Representations and Warranties by the Company.  If the Company breaches any of the representations or warranties set forth in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of default under Section 3.4 of the Note.

 

4. COVENANTS.

 

a. Best Efforts.  The parties shall use their best efforts to satisfy timely each of the conditions described in Section 6 and 7 of this Agreement.

 

 

  

  

  

b. Form D; Blue Sky Laws.  The Company agrees to file a Form D with respect to the Securities as required under Regulation D, if required, and to provide a copy thereof to the Buyer promptly after such filing.  The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary to qualify the Securities for sale to the Buyer at the applicable closing pursuant to this Agreement under applicable securities or “blue sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Buyer on or prior to the Closing Date.

 

c. Use of Proceeds.  The Company shall use the proceeds for general working capital purposes.

 

d. [INTENTIONALLY DELETED]

 

e. Expenses.  The Company’s sole obligation with respect to this transaction is to reimburse Buyer’s expenses totaling not more than $3,000.

 

f. Financial Information.  Upon written request the Company agrees to send or make available the following reports to the Buyer until the Buyer transfers, assigns, or sells all of the Securities: (i) within ten (10) days after the filing with the SEC, a copy of its Annual Report on Form 10-K its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; (ii) within one (1) day after release, copies of all press releases issued by the Company or any of its Subsidiaries; and (iii) contemporaneously with the making available or giving to the shareholders of the Company, copies of any notices or other information the Company makes available or gives to such shareholders.

 

g. [INTENTIONALLY DELETED]

 

h. Listing.  The Company shall promptly secure the listing of the Conversion Shares upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, so long as the Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Conversion Shares from time to time issuable upon conversion of the Note.  The Company will obtain and, so long as the Buyer owns any of the Securities, maintain the listing and trading of its Common Stock on the OTCBB or any equivalent replacement exchange, the Nasdaq National Market (“Nasdaq”), the Nasdaq SmallCap Market (“Nasdaq SmallCap”), the New York Stock Exchange (“NYSE”), or the American Stock Exchange (“AMEX”) and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”) and such exchanges, as applicable.  The Company shall promptly provide to the Buyer copies of any notices it receives from the OTCBB and any other exchanges or quotation systems on which the Common Stock is then listed regarding the continued eligibility of the Common Stock for listing on such exchanges and quotation systems.  In the event the Company is delisted from the OTCBB for failure of a Market Maker to quote the Company’s common stock on the OTCBB, the Company shall have a period of 15 days to relist the Company’s common stock on the OTCBB, provided that the Company is still traded on the Pink Sheets.

 

  

  

  

i. Corporate Existence.  So long as the Buyer beneficially owns any Note, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded corporation whose Common Stock is listed for trading on the OTCBB, Nasdaq, Nasdaq SmallCap, NYSE or AMEX.

 

j. No Integration.  The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities.

 

k. Breach of Covenants.  If the Company breaches any of the covenants set forth in this Section 4, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an event of default under Section 3.4 of the Note.

 

l. Failure to Comply with the 1934 Act.  So long as the Buyer beneficially owns the Note, the Company shall comply with the reporting requirements of the 1934 Act; and the Company shall continue to be subject to the reporting requirements of the 1934 Act.

 

m. Trading Activities.  Neither the Buyer nor its affiliates has an open short position in the common stock of the Company and the Buyer agree that it shall not, and that it will cause its affiliates not to, engage in any short sales of or hedging transactions with respect to the common stock of the Company.

 

5. Transfer Agent Instructions.  The Company shall issue irrevocable instructions to its transfer agent to issue certificates, registered in the name of the Buyer or its nominee, for the Conversion Shares in such amounts as specified from time to time by the Buyer to the Company upon conversion of the Note in accordance with the terms thereof (the “Irrevocable Transfer Agent Instructions”).  In the event that the Borrower proposes to replace its transfer agent, the Borrower shall provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower. Prior to registration of the Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a particular date that can then be immediately sold (including restrictions on the sale of shares pursuant to Rule 144(i)), all such certificates shall bear the restrictive legend specified in Section 2(g) of this Agreement.  The Company warrants that: (i) no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 5, and stop transfer instructions to give effect to Section 2(f) hereof (in the case of the Conversion Shares, prior to registration of the Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a particular date that can then be immediately sold (including restrictions on the sale of shares pursuant to Rule 144(i))), will be given by the Company to its transfer agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Note; (ii) it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its transfer agent in transferring (or issuing)(electronically or in certificated form) any certificate for Conversion Shares to be issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement; and (iii) it will not fail to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement.  Nothing in this Section shall affect in any way the Buyer’s obligations and agreement set forth in Section 2(g) hereof to comply with all applicable prospectus delivery requirements, if any, upon re-sale of the Securities.  If the Buyer provides the Company, at the cost of the Buyer, with (i) an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect that a public sale or transfer of such Securities may be made without registration under the 1933 Act and such sale or transfer is effected or (ii) the Buyer provides reasonable assurances that the Securities can be sold pursuant to Rule 144 along with an opinion of counsel in the Form of Opinion attached as Exhibit B to the Note, the Company shall permit the transfer, and, in the case of the Conversion Shares, promptly instruct its transfer agent to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by the Buyer.  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer, by vitiating the intent and purpose of the transactions contemplated hereby.  Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5 may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that the Buyer shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security being required.

 

  

  

  

6. Conditions to the Company’s Obligation to Sell.  The obligation of the Company hereunder to issue and sell the Note to the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:

 

a. The Buyer shall have executed this Agreement and delivered the same to the Company.

 

b. The Buyer shall have delivered the Purchase Price in accordance with Section 1(b) above.

 

c. The representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date.

 

d. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

 

7. Conditions to The Buyer’s Obligation to Purchase.  The obligation of the Buyer hereunder to purchase the Note at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that these conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion:

 

a. The Company shall have executed this Agreement and delivered the same to the Buyer.

 

b. The Company shall have delivered to the Buyer the duly executed Note (in such denominations as the Buyer shall request) in accordance with Section 1(b) above.

 

c. The Irrevocable Transfer Agent Instructions, in form and substance satisfactory to a majority-in-interest of the Buyer, shall have been delivered to and acknowledged in writing by the Company’s Transfer Agent.

 

d. The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at such time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date.  The Buyer shall have received a certificate or certificates, executed by the chief executive officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer including, but not limited to certificates with respect to the Company’s Certificate of Incorporation, By-laws and Board of Directors’ resolutions relating to the transactions contemplated hereby.

 

e. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

 

  

  

  

f. No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not limited to a change in the 1934 Act reporting status of the Company or the failure of the Company to be timely in its 1934 Act reporting obligations.

 

g. The Conversion Shares shall have been authorized for quotation on the OTCBB and trading in the Common Stock on the OTCBB shall not have been suspended by the SEC or the OTCBB.

 

h. The Buyer shall have received an officer’s certificate described in Section 3(c) above, dated as of the Closing Date.

 

8. Governing Law; Miscellaneous.

 

a. Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws.  Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state and county of Nassau.  The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens.  The Company and Buyer waive trial by jury.  The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs.  In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.   Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

b. Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party.

 

  

  

  

 

c. Headings.  The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.

 

d. Severability.  In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

 

e. Entire Agreement; Amendments.  This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters.  No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the majority in interest of the Buyer.

 

f. Notices.  All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice.  Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall be:

 

If to the Company, to:

THE MINT LEASING, INC.

323 North Loop West

Houston, TX 77008

Attn: JERRY PARISH, Chief Executive Officer

facsimile: (800) 591-6468

 

With a copy by fax only to (which copy shall not constitute notice):

The Loev Law Firm, P.C.

Attn: David M. Loev

6300 West Loop South, Suite 280

Bellaire, Texas 77401

facsimile: 713-524-4122

 

  

  

  

                   If to the Buyer:

ASHER ENTERPRISES, INC.

1 Linden Pl., Suite 207

Great Neck, NY. 11021

Attn: Curt Kramer, President

facsimile: 516-498-9894

 

With a copy by fax only to (which copy shall not constitute notice):

Naidich Wurman Birnbaum & Maday LLP

80 Cuttermill Road, Suite 410

Great Neck, NY 11021

Attn: Bernard S. Feldman, Esq.

facsimile: 516-466-3555

 

Each party shall provide notice to the other party of any change in address.

 

g. Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns.  Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other.  Notwithstanding the foregoing, subject to Section 2(f), the Buyer may assign its rights hereunder to any person that purchases Securities in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act, without the consent of the Company.

 

h. Third Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

 

i. Survival.  The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer.  The Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.

 

j. Publicity.  The Company, and the Buyer shall have the right to review a reasonable period of time before issuance of any press releases, SEC, OTCBB or FINRA filings, or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of the Buyer, to make any press release or SEC, OTCBB (or other applicable trading market) or FINRA filings (including a Form 8-K with regards to this Agreement and the Note) with respect to such transactions as is required by applicable law and regulations (although the Buyer shall be consulted by the Company in connection with any such press release prior to its release and shall be provided with a copy thereof and be given an opportunity to comment thereon).

 

  

  

  

k. Further Assurances.  Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

l. No Strict Construction.  The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

 

m. Remedies.  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby.  Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required.

 

IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.

 

THE MINT LEASING, INC.

 

By: /s/ Jerry Parish

JERRY PARISH

Chief Executive Officer

 

ASHER ENTERPRISES, INC.

 

 

By: /s/ Curt Kramer                                                              

Name: Curt Kramer

Title:   President

 

1 Linden Pl., Suite 207

Great Neck, NY. 11021

 

AGGREGATE SUBSCRIPTION AMOUNT:

	
Aggregate Principal Amount of Note:

	
$68,000.00

	
Aggregate Purchase Price:

	
$68,000.00

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