Document:

Unassociated Document

AGREEMENT

 

This AGREEMENT (this “Agreement”) is entered into as of this 29th day of August, 2011, by and among Red Oak Partners, LLC, a New York limited liability company, and the persons and entities affiliated with it and listed on the signature pages hereof (“Red Oak”), and RF Industries, Ltd., a Nevada corporation (the “Company”).

 

WHEREAS, on the date hereof Red Oak is the beneficial owner of approximately 9.19% of the outstanding shares of common stock of the Company, par value $0.01 per share (the “Common Stock”);

 

WHEREAS, Red Oak has sent letters to the Company and filed a Schedule 13D with the Securities and Exchange Commission related to Red Oak’s intention to nominate various directors at the Company’s 2011 annual meeting of stockholders (the “2011 Annual Meeting”) for election to the Company’s board of directors (the “Board”), and certain other matters;

 

WHEREAS, the Company is preparing its proxy statement (the “Proxy Statement”) for the 2011 Annual Meeting, and it has agreed to appoint certain of Red Oak’s designees as directors on the Board and to make certain other governance changes, some of which will be described in the Proxy Statement;

 

WHEREAS, David Sandberg is the managing member of Red Oak Partners, LLC, the general partner of Red Oak Partners LP and co-manager of Pinnacle Fund LLP and, therefore, the beneficial owner of the shares owned and controlled by the foregoing entities; and

 

WHEREAS, the Company and Red Oak desire to enter into this Agreement to memorialize their agreements relating to the Red Oak recommendations, the 2011 Annual Meeting, and the Proxy Statement.

 

NOW, THEREFORE, in consideration of the foregoing, the parties hereto agree as follows:

 

1.   Filing of Proxy Statement; Date of Annual Meeting.  The Company hereby agrees to file the preliminary Proxy Statement with the Securities and Exchange Commission (the “SEC”) by no later than September 5, 2011, and to hold the 2011 Annual Meeting by no later than October 31, 2011.

 

2.   Appointment of Red Oak Designated Directors to the Board; Resignation of Red Oak Designated Directors.

 

(a)   Appointment of Red Oak Designated Directors.  The Company agrees that, the Board shall appoint David Sandberg and J. Randall Waterfield as new directors on the Board to fill the vacancies created by the resignations of Robert Jacobs and John Ehret.   The resignations of Messrs. Jacobs and Ehret, and the appointment of Messrs. Sandberg and Mr. Waterfield, will take place, and become effective, upon the earlier of (i) the filing by the Company of its preliminary Proxy Statement with the SEC by the Company, or (ii) the 21st day following the date of this Agreement.  Messrs. Sandberg and J. Randall Waterfield, and their replacements, are herein referred to as the “Red Oak Designated Directors.”

 

  

  

  

 

(b)   Resignation of Red Oak Designated Directors.   The parties hereby agree that in the event that the number of shares of Common Stock beneficially owned by Red Oak at any time falls below 5% (but remains above 2.5%) of the then outstanding shares of Common Stock (other than as a result of additional issuances by the Company), Red Oak shall only be entitled to have one Red Oak Designated Director and that Mr. Waterfield (or his successor) shall promptly be requested to tender his resignation.   In the event that Mr. Waterfield refuses to tender his resignation, Mr. Sandberg (or his successor) agrees to promptly tender his resignation.    The parties further agree that in the event that the number of shares of Common Stock beneficially owned by Red Oak at any time falls below 2.5% of the then outstanding shares of Common Stock (other than as a result of additional issuances by the Company), Red Oak shall no longer be entitled to have any Red Oak Designated Directors and both Mr. Sandberg (or his successor) and Mr. Waterfield (or his successor) shall promptly tender their resignations.   Should Mr. Waterfield (or his successor)  refuse to resign after Red Oak’s Common Stock beneficially ownership falls below 2.5%, (i) Red Oak agrees to cooperate in good faith with the Board in obtaining Mr. Waterfield’s resignation, and (ii) the Board shall thereafter not be required to re-nominate Mr. Waterfield  to the Board for election at the 2012 Annual Meeting (as defined below).  The Company agrees that the failure of Mr. Waterfield  to tender his resignation in accordance with this Section 2(b) shall not constitute a breach of this Agreement by Red Oak (provided that Mr. Sandberg complies with the provisions of this Section and Red Oak reasonably cooperates with the Board in obtaining Mr. Waterfield’s resignation).

 

3.   Board Size; Election of Chairman; Nominating in Proxy Statement.  The Board currently consists of six directors.  The Company hereby agrees that it will not change the number of directors at or prior to the annual meeting of the Company’s stockholders to be held in 2012 (the “2012 Annual Meeting”).  The Board agrees that a Chairman of the Board shall be elected each year within two weeks following the annual meeting of the Company’s stockholders, as is customary with most public reporting companies. The Company and Red Oak hereby agrees that the six nominees to be nominated by the Company for election at the 2011 Annual Meeting and to be included in the Proxy Statement shall consist of Howard Hill, Marv Fink, Darren Clark and William Reynolds (the “Incumbent Directors”) and David Sandberg and Mr. Waterfield  (the two Red Oak Designated Directors).  In the event that David Sandberg and/or Mr. Waterfield  become unavailable for election at the 2011 Annual Meeting or 2012 Annual Meeting, Red Oak shall have the right to designate a replacement for those nominees.  In the event that any of the Incumbent Directors becomes unavailable for election at the 2011 Annual Meeting or the 2012 Annual Meeting, the remaining Incumbent Directors shall have the right to designate a replacement for the Incumbent Director nominee who is unavailable.

 

4.   Voting Agreement.  Red Oak agrees that it will cause all shares of voting stock beneficially owned by it and its affiliates to be present for quorum purposes and to be voted at the 2011 Annual Meeting and 2012 Annual Meeting (a) in favor of each of those individuals listed in Section 3 of this Agreement, and (b) in favor of any proposal explicitly contemplated herein.  The Board hereby agrees that, in the proxy statements for the 2011 Annual Meeting and the 2012 Annual Meeting it will recommend a vote “FOR” the six persons in Section 3 above.

 

  

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5.   Board Committees; Board Meetings.

 

(a)   Strategic Committee.  The Company agrees to: (i) create a newly formed Strategic Committee (as defined below) no later than the date that the Red Oak Nominated Directors are appointed to the Board of Directors, and (ii) that at such time as Mr. Sandberg is appointed to the Board, Mr. Sandberg shall also be appointed by the Board to serve as the Chairman of the Strategic Committee of the Board (the “Strategic Committee”) and shall continue to serve as Chairman of the Strategic Committee through at least the first Board meeting following the 2012 Annual Meeting.  The Company agrees that the Strategic Committee be charged with the following responsibilities: (i) review of all existing and future strategic alternatives for the Company and its businesses, including an assessment of the Company’s Radiomobile unit which assessment shall occur during the first meeting of the Strategic Committee which is expected within one week following the 2011 Annual Meeting, (ii)  review of all existing, planned and future M&A activity, and (iii) assess existing and projected cash needs of the Company and whether additional capital may be returned to the Company’s stockholders, and make proposals to the Board with respect to each of the foregoing matters.  The Company further agrees that, the Board shall appoint J. Randall Waterfield, Marv Fink and William Reynolds to serve as the remaining members on the Strategic Committee.  The Company agrees that no new M&A transactions, rights plans or restructurings will be approved prior to the appointment of Mr. Sandberg as Chairman of the Strategic Committee.  The charter for the Strategic Agreement shall provide that such committee shall, unless otherwise unanimously agreed by the Board of Directors: (i) not be dissolved prior to the 2013 Annual Meeting (as defined below), (ii) comprised exclusively of independent directors, and (iii) permit any independent director to be a member of such committee.

 

(b)   Compensation Committee.  The Company agrees that, at such time as Mr. Waterfield is appointed to the Board and subject to his acceptance, Mr. Waterfield shall also be appointed by the Board to serve as the Chairman of the Compensation Committee of the Board (the “Compensation Committee”) and Mr.Waterfield (or his successor) shall continue as Chairman through at least the first meeting of the Board following the 2012 Annual Meeting.  The Company further agrees that, the Board shall appoint David Sandberg, Marv Fink and William Reynolds to serve as the remaining members on the Compensation Committee through at least the first meeting of the Board following the 2012 Annual Meeting.  The Company and Red Oak agree that the duties of the Compensation Committee shall be limited to making recommendations regarding: (i) the compensation payable to the Company’s principal executive officers, including all employees whose salaries are publicly disclosed in the Company’s SEC reports and (ii) the Company’s bonus and incentive programs for the Company as a whole. The parties also agree that the Compensation Committee shall not be involved with setting the compensation of middle management and lower level employees.  The Company agrees that prior to the appointment of Mr. Sandberg as Chairman of the Compensation Committee: (i) no additional Compensation Committee meetings will be held and (ii) no additional employee or executive compensation awards will be granted.  The charter for the Compensation Agreement shall provide that such committee shall, unless otherwise unanimously agreed by the Board of Directors: (i) not be dissolved prior to the 2013 Annual Meeting, (ii) comprised exclusively of independent directors, and (iii) permit any independent director to be a member of such committee.

 

  

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(c)   Other Committees.  The Company hereby agrees that all current and future committees of the Board (including the Audit Committee, the Nominating Committee, the Compensation Committee, and the Strategic Committee) shall until at least the 2012 Annual Meeting be comprised of at least 50% Red Oak Designated Directors, unless at such time Red Oak is only entitled to appoint one Red Oak Designated Director, in which case such committees shall be comprised of at least 33% Red Oak Designated Directors.  Red Oak agrees that, following the appointment of the Red Oak Designated Directors and continuing until the 2012 Annual Meeting, the Chairman of the Audit Committee shall be Mr. Reynolds or his successor.  The Company agrees to create a Nominating and Governance Committee (the “Nominating Committee”) and to appoint Mr. Fink as the Chairman of that committee to serve until at least the 2012 Annual Meeting.

 

(d)   Quarterly Meeting in New York.   The Company agrees to use its best efforts to ensure that at least one quarterly meeting of the Board of Directors is held in New York prior to the 2012 Annual Meeting so that the Board of Directors may visit the Cables Unlimited facility in person as a group.

 

6.   Investor Relations Matters.

 

(a)   Investor Relations Firm.  The Company agrees that it will review and re-evaluate its arrangements with Neil Berkman Associates, the Company’s investor relations firm, to determine whether the Company should continue its current arrangements with that firm.  The foregoing determinations shall be made by no later than June 30, 2012.  Furthermore, the Company agrees that the total amount of fees it will pay to Neil Berkman Associates, on a cumulative basis during the period commencing on July 1, 2011 and ending on June 30, 2012, shall not exceed $53,000.  The Company agrees that any decision to retain Neil Berkman Associates or any other investor relations firm following June 30, 2012 will require the affirmative vote of, and approval by a majority of the Board of Directors.

 

(b)   Earnings Calls.  The Company further agrees that, commencing with the public announcement of the Company’s earnings for the third fiscal quarter ending July 31, 2011 and continuing thereafter through the expiration of this Agreement, the Company shall hold regular quarterly earnings conference calls that are open to all investors and that permit participation by investors.

 

(c)   Timely Filings.  The Company agrees to use its best efforts to ensure that all reports and filings required by the SEC be filed in a timely and accurate manner, consistent in all material respects with the rules and regulations promulgated by the SEC; including without limitation Section 16 reporting under the Exchange Act (e.g. Form 4) and Current Reports on Form 8-K, within the applicable deadlines.

 

  

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7.   Director Compensation/Stock Ownership Guidelines.

 

(a)   Director Compensation.   The Company and Red Oak agree that in order to properly compensate directors for their services on the Board, and to attract future qualified directors, the compensation paid to the directors on the Board should be increased.  Accordingly, the Company and Red Oak agree that at the first meeting of the Board following the appointment of the Red Oak Designated Directors, the directors shall in good faith review and benchmark Board compensation levels and propose any changes to Board compensation that the directors deem appropriate as a result of such review.   Changes to the Board’s compensation to be considered at that meeting shall include increasing the annual retainer, paying directors a fee for each meeting attended in person, paying the directors a fee for each meeting attended telephonically, adjusting the number of stock options granted annually to the directors, and compensating the directors for their services as either chairmen or members of the Board’s various committees.  The parties acknowledge and agree that foregoing provisions of this Section are intended to better enable the Company to attract high quality members to the Board of Directors and not for the personal benefit of Mr. Sandberg or any other existing member of the Board of Directors.  In furtherance of the foregoing, David Sandberg hereby voluntarily agrees to forgo any such fees as follows: (i) with respect to serving on the Board of Directors generally, Mr. Sandberg agrees to forgo any such fees connected therewith (other than travel and other reasonable reimbursement) for the first year of service and (ii) with respect to chairing the Strategic Committee, Mr. Sandberg agrees to indefinitely forgo any additional compensation he may be entitled to as a result of such chairmanship (other than travel and other reasonable reimbursement).  The parties hereto agree that, in order to induce Mr. Watefield to serve on the Board, Mr. Waterfield’s compensation for his services as a member of the Board and its various committees shall consist of the following:  (i)  Mr. Watefield shall receive an annual fee of $15,000 for serving as a director on the Board, (ii) an annual fee of $3,000 for each committee of the Board on which he serves as the Chairman, and (iii) a fee of $500 for each Board meeting Mr. Waterfield attends in person, and a fee of $250 for each telephonic meeting that Mr. Waterfield attends.  The foregoing fees shall be paid in accordance with the Company’s normal schedule for paying directors.  Mr. Waterfield’s total annual cash compensation shall be capped at $25,000.  The Board may, but shall not be obligated to grant Mr. Waterfield  options to purchase shares of Common Stock as part of Mr. Waterfield’s Board compensation.

 

(b)   Common Stock Ownership.  The Company and Red Oak agree that ownership by the directors of the Company’s Common Stock further aligns the interests of the directors with the interests of the stockholders and, therefore, that the Board should encourage directors to own shares of Common Stock having a market value (based on the closing price of the Common Stock as of the date of the last annual meeting of stockholders) of at least $35,000 (the “Requisite Stock Ownership”).  The parties hereto acknowledge that all of the Incumbent Directors currently satisfy this stock ownership guideline, and that Mr. Sandberg, as the beneficial owner of the shares of Common Stock owned by Red Oak, also satisfies this guideline.  The parties hereto agree that Mr. Waterfield and all future directors who are nominated to the Board, shall be encouraged to acquire the suggested number of shares within the first year of their service on the Board and all incumbent Directors will be required to maintain at least the Requisite Stock Ownership  during their tenure on the Board, or their re-nomination will be negatively influenced by their failure to own $35,000 of Common Stock.  The Company and Red Oak agree that the charter of the Nominating Committee will provide that (i) the considerations used by the Nominating Committee to evaluate the candidates for election to the Board shall include, among the various other factors, the number of shares of Common Stock owned by a candidate (and the value of such shares), and (ii) the Nominating Committee should disfavor the re-nomination of any current director who owns less than $35,000 of shares of Common Stock.  Notwithstanding the foregoing, the Company and Red Oak agree that the failure of a director to own $35,000 of Common Stock shall not be grounds for disqualification, but shall merely be considered as a significant factor in evaluating the overall qualifications of any director nominee and, therefore, that directors may continue to be nominated, and may continue to serve on the Board even if they do not own the suggested amount of shares.

 

  

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8.   Standstill Agreement.

 

(a    Standstill Period.  During the period from the date of this Agreement through the date of the 2012 Annual Meeting (the “Standstill Period”), for so long as the Company remains in material compliance with all of its obligations hereunder, Red Oak will not, and will cause its affiliated entities, not to:

 

i.           solicit proxies or written consents of stockholders, or any other person with the right to vote or power to give or withhold consent in respect of the Common Stock, or conduct, encourage, participate or engage in any other type of referendum (binding or non-binding) with respect to, or from the holders of Common Stock or any other person with the right to vote or power to give or withhold consent in respect of the Common Stock, other than as approved by a majority of the Board;

 

ii.           make, or in any way participate or engage in any “solicitation” of any proxy, consent or other authority to vote any Common Stock, with respect to any matter;

 

iii.           seek to place a representative on the Board (other than as provided herein with respect to the Red Oak Directors) or seek the removal of any director from the Board (except as contemplated by this Agreement);

 

iv.           become a participant in any contested solicitation against the Company, including without limitation relating to the removal or the election of directors proposed by the Company;

 

v.           initiate, propose or otherwise solicit stockholders for the approval of any stockholder proposal with respect to the Company (other than a proposal that the Board has recommended that the Company’s stockholders vote to approve);

 

vi.           cause to be voted any Common Stock that Red Oak has the right to vote (or direct the vote) in a manner other than in accordance with the recommendation of the Board with respect to (i) the election or removal of directors; and (ii) stockholder proposals;

 

vii.           without the prior written consent of the Company, form, join or in any way participate in a partnership, limited partnership, syndicate or other group, including without limitation a group as defined under Section 13(d) of the Securities Exchange Act of 1934, as amended, with respect to the Common Stock, or otherwise support or participate in any effort by a third party with respect to the matters set forth in paragraphs (i) – (v) of this Section 8(a), or deposit any Common Stock in a voting trust or subject any Common Stock to any voting agreement (other than as contemplated herein);

 

viii.           either directly or indirectly for itself or its affiliates, or in conjunction with any other person or entity in which it proposes to be either a principal, partner or financing source, effect or seek, offer or propose (whether publicly or otherwise) to effect, or cause or participate in, or in any way knowingly support, assist or facilitate any other person to effect or seek, offer or propose to effect, or cause or participate in, (i) any tender offer or exchange offer, merger, acquisition or other business combination involving the Company or any of its subsidiaries or affiliates; (ii) any form of business combination or acquisition or other transaction relating to a material amount of assets or securities of the Company or any of its subsidiaries or affiliates; or (iii) any form of restructuring, recapitalization or similar transaction with respect to the Company or any of its subsidiaries or affiliates; provided, however that nothing herein shall limit the rights or activities of the Red Oak Designated Directors acting in their capacity as directors; provided, further however, the restrictions contained in this subsection (viii) shall not be applicable to any such transaction or process approved by a majority of the Board of Directors;

 

  

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ix.           enter into any arrangements, understanding or agreements relating to the Company (whether written or oral) with, or advise, finance, assist or encourage, any other person in connection with any of the foregoing, or make any investment in or enter into any arrangement relating to the Company with, any other person that Red Oak knows or has reason to know engages, or offers or proposes to engage, in any of the activities or transactions referenced in the foregoing paragraphs of this Section 8(a); or

 

x.           take or intentionally cause or actively induce others to take any action directly inconsistent with any of the foregoing.

 

(b)   Director Voting Restrictions.  During the Standstill Period, in the event that David Sandberg or Red Oak seeks to acquire the Company (by way of merger, tender offer or otherwise) or the foregoing are part of any group seeking such, David Sandberg agrees to either: (a) recuse himself from voting on such matter as a member of the Board or (b) if necessary to obtain a quorum, shall participate in such Board meeting such that a quorum exists and then subsequently abstain from voting on such matter.

 

(c)   Termination of Standstill.  Notwithstanding Section 8(a) above, if the Company fails to comply with the terms of this Agreement, and such failure continues uncured for five business days after written notice of such failure is delivered to the Secretary of the Company, then the Standstill Period shall immediately cease as of the expiration of such five day period.

 

9.   Compliance by Red Oak Affiliates.  Red Oak agrees it will use its best efforts to cause its affiliates to comply with the terms of this Agreement.  Notwithstanding the foregoing, the Company acknowledges and agrees that Red Oak has expressed concern relating to certain employment agreements (the “Executive Employment Agreements”) that the Company entered into on August 22, 2011 with the Company’s CEO and President/CFO.  While Red Oak does not object to the compensation paid under the Executive Employment Agreements, Red Oak does not agree with the manner in which “Change of Control” is defined for certain “change of control payments” that are payable to the CEO and President/CFO under the Executive Employment Agreements (the “Payment Provisions”).  Therefore, notwithstanding anything contained herein to the contrary, neither Red Oak nor the Red Oak Designated Directors shall be required to support or vote in favor of such Employment Agreements for so long as they contain such Payment Provisions; provided, however, Red Oak agrees not to commence any stockholder action or lawsuit against the Company or the Directors as a result of any approval of such Employment Agreements containing such Payment Provisions.

 

  

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10.   Board Observer Rights.   Commencing with the date of this Agreement and continuing until the date that the Red Oak Designated Directors are appointed to the Board, the Company shall invite Mr. Sandberg to attend all meetings of its Board in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents, and other materials that it provides to its directors at the same time and in the same manner as provided to such directors; provided, however, that Mr. Sandberg shall agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided; and provided further, that the Company reserves the right to withhold any information and to exclude Mr. Sandberg from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorney-client privilege between the Company and its counsel.

 

11.   Public Information.

 

(a)   Press Release.  Promptly following the execution of this Agreement, the Company and Red Oak shall jointly issue a mutually agreeable press release announcing the terms of this Agreement, substantially in the form attached hereto as Exhibit A, and the Company shall file a Current Report on Form 8-K with the SEC disclosing and attaching as exhibits this Agreement and the press release.

 

(b)   Non-Disparagement.  During the period beginning on the date hereof and ending on the date that is ninety days prior to the anticipated annual stockholders meeting for 2013, neither the Company, the members of the Company’s Board, nor Red Oak, nor any of their respective affiliates will, directly or indirectly, make or issue or cause to be made or issued any disclosure, announcement or statement (including without limitation the filing of any document or report with the SEC or any other governmental agency or any disclosure to any journalist, member of the media or securities analyst) concerning the other party or any of its affiliates, which disparages such party or any of its affiliates, including as individuals (provided that each party, after consultation with counsel, may make any disclosure that it determines in good faith is required to be made under applicable law).

 

12.   Fiduciary Obligations.  The provisions of Section 8 and 11(b) are not intended to impede, obstruct or otherwise interfere with any individual’s fiduciary obligations with respect to the stockholders of the Company in that individuals capacity as an officer or director of the Company.  Hence, notwithstanding anything contained in this Agreement to the contrary, a party hereto shall not be deemed to be in breach of its obligations hereunder as a result of any action or inaction taken by an individual which was taken based upon advice of legal counsel to fulfill such fiduciary obligations.

 

13.   Corporate Governance.  All terms and provisions in this Agreement involving corporate governance and the duties and obligations of the Board or the Company are intended to be binding on the Board and the Company to the maximum extent permitted by Nevada (Nevada Revised Statutes governing corporations), any NASDAQ or SEC rule or regulation applicable to the Company, or any applicable case law pertaining thereto (as based upon advice of counsel) (collectively, "Applicable Law").  However, in the event that any term or provision in this Agreement is found to directly conflict or violate Applicable Law, such term or provision shall be limited and interpreted in a manner as minimally necessary so as to avoid such conflict or violation of Applicable Law.  In the event a conflict or violation of law is determined to exist under this Section and, as a result, the offending provision is deleted or amended, the conflict or violation shall not be deemed a violation or breach of this Agreement by the Company, but shall release Red Oak from the performance of its obligations to the extent such application of this Section materially adversely effects the benefits and consideration Red Oak expected to receive hereunder.

 

  

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14.   Amendments and Waivers.  No amendment or waiver of any provision of this Agreement shall be valid and binding unless it is in writing and signed, in the case of an amendment, by the Company and Red Oak, or in the case of a waiver, by the party against whom the waiver is to be effective.  No waiver by any party of any breach or violation or, default under or inaccuracy in any representation, warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent breach, violation, default of, or inaccuracy in, any such representation, warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.  No delay or omission on the part of any party in exercising any right, power or remedy under this Agreement shall operate as a waiver thereof.

 

15.   Successors and Assigns.  Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

 

16.   Expiration of Agreement.  This Agreement shall automatically expire and terminate immediately prior to the annual stockholder meeting held in 2013.

 

17.   Counterparts.  This Agreement may be executed in any number of counterparts, which may be exchanged by PDF or facsimile each of which shall be deemed an original, but all of which together shall constitute but one and the same instrument.  This Agreement shall become effective when duly executed by each party hereto.

 

18.   Severability.  Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.  In the event that any provision hereof would, under applicable law, be invalid or unenforceable in any respect, each party hereto intends that such provision shall be construed by modifying or limiting it so as to be valid and enforceable to the maximum extent compatible with, and possible under, applicable law.

 

  

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19.   Governing Law.  This Agreement, the rights of the parties and all actions arising in whole or in part under or in connection herewith, shall be governed by and construed in all respects, including validity, interpretation and effect, in accordance with the laws of Nevada, applicable to contracts executed and to be performed wholly within such state without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any other jurisdiction.  Each of the parties hereto (a) consents to submit itself to the personal jurisdiction of the state courts in Nevada in the event any dispute arises out of this Agreement or the transactions contemplated by this Agreement, (b) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (c) agrees that it shall not bring any action relating to this Agreement or the transactions contemplated by this Agreement in any court other than the state or federal courts in Nevada, (d) agrees to waive any bonding requirement under any applicable law, in the case any other party seeks to enforce the terms by way of equitable relief and (e) each of the parties irrevocably consents to service of process by first class certified mail, return receipt requested, postage prepaid, to the address of such parties’ principal place of business or as otherwise provided by applicable law.

 

20.   Construction.  Each party cooperated and participated in the drafting and preparation of this Agreement and the documents referred to herein.  Accordingly, any rule of law or any legal decision that would require interpretation of any ambiguities in this Agreement against any party that drafted or prepared it is of no application and is hereby expressly waived by each of the parties hereto, and any controversy over interpretations of this Agreement shall be decided without regard to events of drafting or preparation.

 

[Next page is the signature page.]

 

 

  

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IN WITNESS WHEREOF, the undersigned parties have duly executed this Agreement as of the date first written above.

 

	 	RF INDUSTRIES, LTD.	 
	 	 	 	 
	
 

	
By: 

	/s/ Howard Hill	 
	 	 	

Name:    Howard Hill

Title:      Chief Executive Officer

	 

 

	 	THE RED OAK FUND, LP	 
	 	 	 	 
	
 

	
By: 

	Red Oak Partners, LLC, 

its general partner

	 
	 	 	 	 
	 	 	By:  /s/ David Sandberg	 
	 	 	

Name:      David Sandberg

Title:        Managing Member

	 

 

	 	RED OAK PARTNERS, LLC	 
	 	 	 	 
	
 

	
By: 

	/s/ David Sandberg	 
	 	 	

Name:     David Sandberg

Title:       Managing Member

	 

 

	 	PINNACLE PARTNERS, LLP	 
	 	 	 	 
	
 

	
By: 

	Red Oak Partners, LLC, 

its general partner

	 
	 	 	 	 
	 	 	By:  /s/ David Sandberg	 
	 	 	

Name:      David Sandberg

Title:        Managing Member

	 

 

	 	PINNACLE FUND, LLLP	 
	 	 	 	 
	
 

	
By: 

	Red Oak Partners, LLC, 

its general partner

	 
	 	 	 	 
	 	 	By:  /s/ David Sandberg	 
	 	 	

Name:      David Sandberg

Title:        Managing Member

	 

 

	 	DAVID SANDBERG	 
	 	 	 	 
	
 

	
By: 

	/s/ David Sandberg	 
	 	Name:    David Sandberg	 

 

  

- 11 -Unassociated Document

INVESTMENT AGREEMENT

INVESTMENT AGREEMENT (this “Agreement”) made and entered into effective as of August 29, 2011, by and between NORTH AMERICAN GOLD CORP., with a notice address at North American Gold's address is: Two International Finance Centre, Level 19 Two International Finance Centre, 8 Finance Street, Central Hong Kong (hereinafter, the “Subscriber”), and LONE STAR GOLD, INC., a Nevada corporation, with a notice address at 6565 Americas Parkway NE, Suite 200, Albuquerque, New Mexico 87110 (hereinafter, the “Company”).

WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, Subscriber shall invest up to Fifteen Million Dollars ($15,000,000) to purchase the Company’s Common Stock, $0.001 par value per share (the “Common Stock”), upon the Company’s election as noted below;

NOW THEREFORE, in consideration of the foregoing recitals, which shall be considered an integral part of this Agreement, the covenants and agreements set forth hereafter, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and Subscriber hereby agree as follows:

ARTICLE 1 – DEFINITIONS

As used in this Agreement, the following terms shall have the following meanings specified or indicated below, and such meanings shall be equally applicable to the singular and plural forms of such defined terms:

“Agreement” shall mean this Investment Agreement.

“Banking Day” shall mean any day other than a Saturday, Sunday, public holiday under the laws of the State of Nevada or other day on which banking institutions are authorized or obligated to close in Nevada.

“Closing Date” shall have the meaning given to such term in Section 2.4 below.

“Completion Date” shall mean August 31, 2013.

 “Consent” shall mean any permit, license, approval, consent, order, right, certificate, judgment, writ, injunction, award, determination, direction, decree, authorization, franchise, privilege, grant, waiver, exemption and other concession or bylaw, rule or regulation;

“Dollar” or “$” shall mean the currency of the United States of America.

“Open Period” shall mean the period beginning on the date of this Agreement and ending on the Completion Date.

“Principal Market” shall mean any NASDAQ stock market (www.nasdaq.com), the OTC Bulletin Board (www.otcbb.com), or any other source of stock quotes as agreed to in writing by the parties from time to time.

“Put Amount” shall mean the aggregate amount payable by Subscriber for Shares to be sold in connection with a particular Put exercised by the Company, which amount shall be equal to the product of (x) the number of Shares to be sold upon the Closing of such Put, and (y) the Share Price for those Shares.

 

  

1

  

“Put Notice” shall mean a written notice in the form attached hereto as Exhibit A, sent to Subscriber by the Company as notice of its exercise of a Put pursuant to the terms of this Agreement.

“Put Notice Date” shall mean, with respect to a particular Put, the Trading Day immediately preceding the day on which the Company sends a Put Notice to Subscriber for such Put, as set forth on such Put Notice. No Put Notice may be sent on a day that is not a Trading Day, and any Put Notice sent on a day that is not a Trading Day shall be deemed to have been sent on the first Trading Day preceding the date on which it was actually sent by the Company.

“Securities Act” shall mean the Securities Act of 1933, as amended from time to time.

“Share” shall mean a share of Common Stock.

“Share Price” as used for a particular Put shall mean a price equal to ninety percent (90%) of the VWAP of the Common Stock for the twenty (20) Trading Days immediately preceding the Put Notice Date for the Put Notice related to such Put.

“Trading Day” shall mean a day on which the Principal Market is open for business; provided, that if the Common Stock is not listed on a Principal Market or admitted for trading or quotation, then it shall mean a Banking Day.

“VWAP” shall mean the volume weighted average of the closing price of the Common Stock over a stated period of Trading Days, as quoted on the Principal Market; provided, that (x) if the Common Stock is at any time no longer quoted on a Principal Market, then the VWAP may be calculated according to a formula or method as agreed upon in writing by the Company and Subscriber to determine the fair market value of the Common Stock, and (y) if the Company and Subscriber have not agreed in writing upon such a formula or method, then the Company may not deliver any Put Notice unless and until there is such an agreement or the Common Stock is thereafter quoted on a Principal Market.

ARTICLE 2  PURCHASE AND SALE OF COMMON STOCK

Section 2.1. Purchase and Sale of Common Stock. Subject to the terms and conditions set forth herein, during the Open Period the Company may issue and sell to Subscriber, and Subscriber shall purchase from the Company, up to that number of Shares having an aggregate Purchase Price of Fifteen Million Dollars ($15,000,000), in accordance with the provisions of this Article 2.

Section 2.2. Delivery of Put Notices. The Company shall have the option, exercisable in its sole discretion and subject to the terms and conditions of this Agreement (the “Put”), to deliver a Put Notice to Subscriber at any time during the Open Period.  Any such Put Notice shall state the number of Shares the Company intends to sell to Subscriber, along with the applicable Share Price and Put Amount for the Shares subject to such Put, all of which shall be calculated by the Company in accordance with this Agreement.  Upon delivery of such a Put Notice, Subscriber shall be obligated to purchase the number of Shares stated in such Put Notice on the terms stated therein and according to the terms of this Agreement. The Put Notice shall be in the form attached hereto as Exhibit A, which is incorporated herein by reference.  Each Put set forth in a separate Put Notice shall be for an aggregate Put Amount that is in an integral multiple of One Hundred Thousand Dollars ($100,000); provided, that if the Share Price for any Put would result in a fractional number of Shares using an otherwise qualifying Put Amount, then the number of Shares shall be reduced to the next lowest whole number of Shares, and the total Put Amount for that particular Put shall be adjusted accordingly without being deemed in violation of the requirements of this Section.  The Company shall send wire transfer instructions to Subscriber for each Put Notice.  Subscriber shall sign each Put Notice and deliver it back to the Company, after adding an eligible Closing Date in accordance with Section 2.3, at least three (3) Trading Days prior to the Closing Date chosen by Subscriber.

 

  

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Section 2.3. Mechanics of Purchase of Shares by Subscriber.  The purchase by Subscriber of Shares subject to a particular Put (a “Closing”) shall occur on a date chosen by Subscriber and set forth in the executed Put Notice (the “Closing Date”).  The Closing Date chosen by Subscriber for a particular Put shall be no later than ten (10) Trading Days following the applicable Put Notice Date.  If Subscriber fails to return a counter-signed copy of a Put Notice that includes an eligible Closing Date within seven (7) Trading Days following the Put Notice Date, then the Closing Date for the Put subject to such Put Notice will be the tenth (10th) Trading Day after the applicable Put Option Date; provided, that if Subscriber sends a written notice to the Company within such seven Trading Day period stating that Subscriber does not intend to close the Put because of negative market conditions affecting the Common Stock,  then there will be no Closing with respect to such Put Notice.  The delivery of written notice from Subscriber indicating that negative market conditions exist will not affect the right of the Company to deliver subsequent Put Notices as contemplated in this Agreement.  On or before the applicable Closing Date for a particular Put, Subscriber shall deliver to the Company the Put Amount to be paid for the Shares subject to such Put, according to the wire transfer instructions provided by the Company.  At each Closing, and effective as of the Closing Date, the Company shall be deemed to make the representations set forth in Section 3.1 of this Agreement, and Subscriber shall be deemed to make the representations set forth in Section 3.2 of this Agreement.

Section 2.4. Equity Issuance.  The Company shall issue (or cause its registrar and transfer agent to issue), within ten (10) Trading Days following the date on which the Company receives the Purchase Price for any Put under this Agreement, the number of Shares subject to such Put and purchased at the Share Price, as set forth in the Put Notice for such Put.

Section 2.5. Regulation S Exemption.  The Company has not registered the offer or sale of the Shares under the Securities Act, and it proposes to sell the Shares to Subscriber in reliance upon an exemption under the provisions of Regulation S of the Securities Act.  Accordingly, Subscriber agrees that (i) Subscriber will not transfer or sell the Shares, except (A) in accordance with the provisions of Regulation S of the Securities Act, (B) pursuant to registration under the Securities Act, or (C) pursuant to an available exemption from registration under the Securities Act; (ii) the Company will not register any transfer of the Shares that is not made (A) in accordance with the provisions of Regulation S of the Securities Act, (B) pursuant to registration under the Securities Act, or (C) pursuant to an available exemption from registration; (iii) Subscriber has no right to require the Company to register the sale or the resale of the Shares under the Securities Act; and (iv) Subscriber will not engage in hedging transactions involving the Common Stock, except in compliance with the Securities Act.

Section 2.6  Use of Proceeds. The Company shall use the net proceeds from any Put to fund operating expenses, working capital and general corporate activities related to the exploration and development of gold and silver mining concessions for the “La Candelaria” property, which are held by the Company and/or a subsidiary of the Company.

ARTICLE 3  REPRESENTATIONS AND WARRANTIES

Section 3.1. Representations and Warranties of the Company. The Company represents and warrants to, and agrees with, Subscriber that the following are true as of the date hereof and as of each Closing Date:

	
  

	
(a)

	
Organization and Corporate Power. The Company has been duly incorporated and organized and is validly subsisting and in good standing under the laws of its jurisdiction and has full corporate right, power and authority to enter into and perform its obligations under this Agreement and has full corporate right, power and authority to own and operate its properties and to carry on its business.

 

  

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(b)

	
Conflict with Other Instruments. The execution and delivery by the Company of this Agreement and the performance by the Company of its obligations thereunder, do not and will not: (i) conflict with or result in a breach of any of the terms, conditions or provisions of: (A) the Charter Documents of the Company; (B) any law applicable to or binding on the Company; or (C) any contractual restriction binding on or affecting the Company or its properties the breach of which would have a material adverse effect on the Company; or (ii) result in, or require or permit: (A) the imposition of any lien on or with respect to the properties now owned or hereafter acquired by the Company; or (B) the acceleration of the maturity of any debt of the Company, under any contractual provision binding on or affecting the Company.

	
  

	
(c)

	
Consents, Official Body Approvals. The execution and delivery of this Agreement and the performance by the Company of its obligations hereunder have been duly authorized by all necessary action on the part of the Company, and no Consent under any applicable law and no registration, qualification, designation, declaration or filing with any official body having jurisdiction over the Company is or was necessary therefore.  The Company has taken all necessary action to authorize the issuance of the Shares on the terms and conditions of this Agreement.  The Company possesses all Consents, in full force and effect, under any applicable law, which are necessary in connection with the operation of its business, the nonpossession of which could reasonably be expected to have a material adverse effect on the Company.

	
  

	
(d)

	
Execution of Binding Obligation. This Agreement has been duly executed and delivered by the Company and, when duly executed by the Company and delivered for value, this Agreement will constitute legal, valid and binding obligations of the Company, enforceable against the Company, in accordance with its terms.

	
  

	
(e)

	
No Litigation. There are no actions, suits or proceedings pending or, to the knowledge of the Company, after due inquiry, threatened against or affecting the Company (nor, to the knowledge of the Company, after due inquiry, any basis therefor) before any official body having jurisdiction over the Company which purport to or do challenge the validity or propriety of the transactions contemplated by this Agreement, which if adversely determined could reasonably be expected to have a material adverse effect on the Company.

	
  

	
(f)

	
Absence of Changes. Since the date of the financial statements most recently filed by the Company with the United States Securities and Exchange Commission (the “SEC”), the Company has carried on its business, operations and affairs only in the ordinary and normal course consistent with past practice.

Section 3.2.  Representations and Warranties of Subscriber.  Subscriber represents and warrants to, and agrees with, the Company that the following are true as of the date hereof and as of each Closing Date:

	
  

	
(a)

	
Organization and Corporate Power. Subscriber has been duly incorporated and organized and is validly subsisting and in good standing under the laws of its jurisdiction and has full corporate right, power and authority to enter into and perform its obligations under this Agreement and has full corporate right, power and authority to own and operate its properties and to carry on its business.  Subscriber was not formed for the purpose of acquiring the Shares.

 

  

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(b)

	
Consents, Official Body Approvals. The execution and delivery of this Agreement and the performance by Subscriber of its obligations hereunder have been duly authorized by all necessary action on the part of Subscriber, and no Consent under any applicable law and no registration, qualification, designation, declaration or filing with any official body having jurisdiction over Subscriber is or was necessary therefor. Subscriber possesses all Consents, in full force and effect, under any applicable law, which are necessary in connection with the operation of its business, the nonpossession of which could reasonably be expected to have a material adverse effect on Subscriber.

	
  

	
(c)

	
Execution of Binding Obligation. This Agreement has been duly executed and delivered by Subscriber and, when duly executed by Subscriber and delivered for value, this Agreement will constitute legal, valid and binding obligations of Subscriber, enforceable against Subscriber, in accordance with its terms.

	
  

	
(d)

	
Trading Activities. Subscriber’s trading activities with respect to the Common Stock has been and shall continue to be in compliance with all applicable federal and state securities laws, rules and regulations and the rules and regulations of any Principal Market on which the Common Stock is listed or traded.  Neither Subscriber nor its affiliates has an open short position in the Common Stock of the Company and Subscriber shall not and will cause its affiliates not to engage in any short sale as defined in any applicable SEC or FINRA rules on any hedging transactions with respect to the Common Stock. Without limiting the foregoing, Subscriber agrees not to engage in any naked short transactions (or an offsetting long position) during the Commitment Period.

	
  

	
(e)

	
Brokers.  No broker or finder has acted for Subscriber in connection with this Agreement or the transactions contemplated thereby, and no broker or finder is entitled to any brokerage or finder’s fees or other commission in respect of such transactions based in any way on agreements, arrangements or understandings made by or on behalf of Subscriber.

	
  

	
(f)

	
Investment Representations.  Subscriber further represents and warrants as follows:

(i)           Subscriber is purchasing the Shares for investment purposes and not with a present view to, or for sale in connection with, a distribution thereof within the meaning of the Securities Act or reselling or otherwise disposing of all or any portion of the Shares.  Subscriber does not intend any sale of the Shares either currently or after the passage of a fixed or determinable period of time or upon the occurrence or non-occurrence of any predetermined event or circumstance.  Subscriber has no present or contemplated agreement, undertaking, arrangement, obligation, indebtedness or commitment providing for or which is likely to compel a disposition of the Shares.  Subscriber is not aware of any circumstances presently in existence which are likely in the future to prompt a disposition of the Shares.  Subscriber understands that it may not be able to sell or otherwise dispose of the Shares, and accordingly it might need to bear the economic risk of this investment indefinitely.

(ii)           The representations, warranties and covenants of Subscriber herein are made with the intent that they be relied upon by the Company in determining the eligibility of a purchaser of the Shares, and Subscriber agrees to indemnify the Company and its respective trustees, affiliates, shareholders, directors, officers, partners, employees, advisors and agents against all losses, claims, costs, expenses and damages or liabilities which any of them may suffer or incur which are caused or arise from a breach thereof.  Subscriber undertakes to immediately notify the Company at in writing of any change in any statement or other information relating to Subscriber set forth herein.  Subscriber agrees to timely make all filings required to be made by it under the Securities Act or any other applicable laws.

 

  

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(iii)           Subscriber has read, reviewed and relied solely on the publicly available information concerning the Company and any independent investigation made by it and its representatives, if any, and has been furnished all documents relating to the Company that Subscriber requested from the Company and has evaluated the risks and merits associated with an investment in the Shares to its satisfaction.  Subscriber has been afforded the opportunity to ask questions of the Company’s representatives concerning the Company in making the decision to purchase and acquire the Shares, and such questions have been answered to its satisfaction. Subscriber acknowledges that no person has been authorized to give any information or to make any representation concerning the Company or the Shares, other than as contained in this Agreement, and if given or made, any such other information or representation has not been relied upon as having been authorized by the Company.

(iv)           Subscriber understands that no federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Shares.

(v)           Subscriber is capable of evaluating the merits and risks of an investment in the Shares.

(vi)           Subscriber understands that the sales of the Shares by the Company under this Agreement have not been registered under the Securities Act or any state securities laws and are being offered and sold in reliance upon specific exemptions from the registration requirements of federal and state securities laws.  Subscriber covenants and agrees that it shall not transfer any of the Shares in a transaction that is not registered under the Securities Act, unless an exemption from registration and qualification requirements is available under the Securities Act and applicable state securities laws and the Company has received an opinion of counsel satisfactory to it stating that such registration and qualification is not required.  Subscriber understands that certificates representing the Shares will be endorsed with the following legend in accordance with Regulation S of the Securities Act, together with any other legends reasonably required by counsel for the Company:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PROVIDED BY REGULATION S PROMULGATED UNDER THE SECURITIES ACT.  SUCH SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED, EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.  HEDGING TRANSACTIONS INVOLVING SUCH SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.”

 

  

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(vii)           Subscriber is not a “U.S. person” as defined in Regulation S of the Securities Act and is not acquiring the Shares for the account or benefit of any U.S. person.  Subscriber acknowledges that Subscriber was not in the Shareed States at the time the offer to purchase the Shares was received.  Subscriber acknowledges that the Shares are “restricted securities” within the meaning of the Securities Act and will be issued to Subscriber in accordance with Regulation S of the Securities Act.

(viii)           Subscriber has relied completely on the advice of, or has consulted with, its own tax, investment, legal or other advisors and has not relied on the Company, or any of its officers, directors, attorneys, accountants, representatives, agents, advisors for any advice.  Subscriber has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Shares or any use of this Agreement, including: (a) the legal requirements within its jurisdiction for the purchase of the Shares; (b) any foreign exchange restrictions applicable to such purchase; (c) any governmental or other consents that may need to be obtained; (d) the income tax and other tax consequences, if any, that may be relevant to an investment in the Shares; and (e) any restrictions on transfer applicable to any disposition of the Shares imposed by the jurisdiction in which Subscriber is resident.

(ix)           Subscriber understands and acknowledges that an investment in the Shares involves a high degree of risk. Subscriber acknowledges that it has the ability to bear the economic risk of its investment pursuant to this Agreement.  Subscriber acknowledges that it is possible that Subscriber may incur a total loss of its investment. Subscriber has adequate means of providing for Subscriber’s current needs and possible contingencies and does not have a need for liquidity of this investment.

(x)           None of the Shares were offered to Subscriber through, and Subscriber is not aware of, any form of general solicitation or general advertising with respect to this Agreement and the transactions contemplated hereby, including, without limitation: (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television, radio or via the Internet, and (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. Subscriber further understands that the Company is relying in part on this representation to ensure compliance with the Securities Act.

ARTICLE 4  COVENANTS OF THE COMPANY

Section 4.1. Affirmative Covenants. Until the Completion Date, the Company shall:

	
  

	
(a)

	
Compliance with Laws, etc. Comply with all applicable laws, rules and ordinances, in any case where the noncompliance with same could have a material adverse effect on the Company;

 

  

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(b)

	
Payment of Taxes and Claims. Pay and discharge before the same shall become delinquent: (i) all taxes and assessments; and (ii) all lawful claims which, if unpaid, might become a lien upon or in respect of the Company’s assets or properties;

	
  

	
(c)

	
Maintain Title. Maintain and, as soon as reasonably practicable, defend and take, all action necessary or advisable at any time, and from time to time, to maintain, defend, exercise or renew its right, title and interest in and to all of its property and assets; and

	
  

	
 (d)

	
Further Assurances. At its cost and expense, upon request by Subscriber, duly execute and deliver, or cause to be duly executed and delivered, to Subscriber, such further instruments and do and cause to be done such other acts as may be necessary or proper in the reasonable opinion of Subscriber to carry out more effectually the provisions and purposes of this Agreement.

ARTICLE 5  MISCELLANEOUS

Section 5.1. Notices, etc. All notices, requests, demands, directions and communications by one party to the other shall be sent by hand delivery or registered mail or fax, and shall be effective when hand delivered or when delivered by the relevant postal service or when faxed and confirmed, as the case may be. All such notices shall be addressed to the President of the notified party at its address given on the signature page of this Agreement, or in accordance with any unrevoked written direction from such party to the other party.

Section 5.2. No Waiver; Remedies. No failure on the part of Subscriber or the Company to exercise, and no delay in exercising, any right under this Agreement shall operate as a waiver thereof. The remedies herein provided are cumulative and not exclusive of any remedies provided by applicable law.

Section 5.3. Entire Agreement; Successors and Assigns.                                                                                                This Agreement represents the entire agreement of the parties hereto relating to the subject matter hereof and there are no representations, covenants or other agreements relating to the subject matter hereof except as stated or referred to herein.  This Agreement shall inure to the benefit of and bind the parties hereto and their respective successors and assigns.  The Company shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of Subscriber, which consent may be arbitrarily withheld. Subscriber may not sell, transfer, assign, participate, syndicate or negotiate to one or more third parties, in whole or in part, the Commitment and its rights under this Agreement, without the prior written consent of the Company, which consent may not be arbitrarily withheld.  The covenants, representations and warranties contained herein shall survive the closing of the transactions contemplated hereby.

Section 5.4. Severability. If one or more provisions of this Agreement be or become invalid, or unenforceable in whole or in part in any jurisdiction, the validity of the remaining provisions of this Agreement shall not be affected. The parties hereto undertake to replace any such invalid provision without delay with a valid provision which as nearly as possible duplicates the economic intent of the invalid provision.

Section 5.5. Headings.  The headings used in this Agreement have been inserted for convenience of reference only and shall not affect the meaning or interpretation of this Agreement or any provision hereof.

Section 5.6  Counterparts. This Agreement may be executed in counterparts and by different parties in separate counterparts, each of which when so executed shall be deemed an original and all of which, taken together, shall constitute one and the same instrument.

[SIGNATURES APPEAR ON FOLLOWING PAGE]

 

  

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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

 

	 	

THE COMPANY

LONE STAR GOLD, INC.

	 
	 	 	 	 
	
 

	
By: 

	/s/ Dan M. Ferris	 
	 	 	

Dan M. Ferris, President

	 
	 	 	 	 
	 	Address for Notice:	 
	 	 	

6565 Americas Parkway NE, Suite 200

Albuquerque, New Mexico 87110

	 
	 	 	 	 
	 	

SUBSCRIBER

NORTH AMERICAN GOLD CORP.

	 
	 	 	 	 
	 	By: 	/s/ A. Ratsaphong, Director	 
	 	 	A. Ratsaphong, Director	 
	 	 	 	 
	 	
Address for Notice:

	 
	 	 	

Two International Finance Centre

Level 19 Two International Finance Centre

8 Finance Street

Central Hong Kong

	 

 

  

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EXHIBIT A

PUT NOTICE

[____________], 201__

NORTH AMERICAN GOLD CORP.

[______________]

[______________]

[______________]

Attn: [______________]

	
RE:

	
Investment Agreement made and entered into effective as of August _______, 2011 (the “Agreement”), by and between LONE STAR GOLD, INC., a Nevada corporation (the “Company”), and NORTH AMERICAN GOLD CORP., a corporation organized under the laws of [___________] (“Investor”).  All capitalized terms below shall have the meaning given to them in the Agreement.

 

 

This is to inform you that as of today, the Company, hereby elects to exercise a Put and to require Investor to purchase the Shares described below as of the Closing Date, in accordance with the terms of the Agreement.  Accordingly, at the applicable Closing Date, the Company will issue and sell shares to Investor, as Subscriber, according to the following terms:

 

	 	
Put Amount:

	  	  
	 	  	  	  
	 	
Put Notice Date:

	  	
 

	 	  	  	  
	 	
Share Price:

	  	
 

	 	  	  	  
	 	
Shares to be sold:

	  	  
	 	 	 	 
	 	
Remaining Commitment under the Agreement:

	  	  

                                                                                   

	 	LONE STAR GOLD, INC.	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	Its: 	 	 
	 	 	 	 

Subscriber hereby acknowledges receipt of this Notice and chooses the Closing Date set forth below, in accordance with the terms of the Agreement.

Closing Date:                                                                                     

NORTH AMERICAN GOLD CORP.

	By: 	 	 	 	 	 
	Its:	 	 	 	
 

	 

 

  

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