Document:

Exhibit
10.1

 

FORM OF SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”)
is dated as of January 26, 2010, between Evergreen Energy Inc., a Delaware
corporation (the “Company”), and each purchaser identified on the
signature pages hereto (each, including its successors and assigns, a “Purchaser”
and collectively the “Purchasers”).

 

WHEREAS, subject to the terms and conditions
set forth in this Agreement and pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the “Securities Act”), the
Company desires to issue and sell to each Purchaser, and each Purchaser,
severally and not jointly, desires to purchase from the Company, securities of
the Company as more fully described in this Agreement.

 

NOW, THEREFORE, IN CONSIDERATION of the
mutual covenants contained in this Agreement, and for other good and valuable
consideration the receipt and adequacy of which are hereby acknowledged, the
Company and each Purchaser agree as follows:

 

ARTICLE
I.

DEFINITIONS

 

1.1                                 Definitions.  In addition to the terms defined elsewhere in
this Agreement, for all purposes of this Agreement, the following terms have
the meanings set forth in this Section 1.1:

 

“Acquiring Person”
shall have the meaning ascribed to such term in Section 4.5.

 

“Action” shall have
the meaning ascribed to such term in Section 3.1(j).

 

“Affiliate” means any
Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person as such
terms are used in and construed under Rule 405 under the Securities Act.

 

“Board of Directors”
means the board of directors of the Company.

 

“Business Day” means
any day except any Saturday, any Sunday, any day which is a federal legal holiday
in the United States or any day on which banking institutions in the State of
New York are authorized or required by law or other governmental action to
close.

 

“Closing” means the
closing of the purchase and sale of the Securities pursuant to Section 2.1.

 

“Closing Date” means
the Trading Day on which all of the Transaction Documents have been executed
and delivered by the applicable parties thereto, and all conditions precedent
to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the
Company’s obligations to deliver the Securities, in each case, have been
satisfied or waived, but in no event later than the third Trading Day following
the date hereof.

 

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“Commission” means
the United States Securities and Exchange Commission.

 

“Common Stock” means
the common stock of the Company, par value $0.001 per share, and any other
class of securities into which such securities may hereafter be reclassified or
changed.

 

“Common Stock Equivalents”
means any securities of the Company or the Subsidiaries which would entitle the
holder thereof to acquire at any time Common Stock, including, without
limitation, any debt, preferred stock, rights, options, warrants or other
instrument that is at any time convertible into or exercisable or exchangeable
for, or otherwise entitles the holder thereof to receive, Common Stock.

 

“Company Counsel”
means Moye White LLP, with offices located at 16 Market Square, 6th Floor, 1400 16th Street,
Denver, CO 80202-1486.

 

“Disclosure Schedules”
means the Disclosure Schedules of the Company delivered concurrently herewith.

 

“Evaluation Date”
shall have the meaning ascribed to such term in Section 3.1(r).

 

“Exchange Act” means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.

 

“Exempt Issuance” means the issuance of (a) shares of
Common Stock or options to employees, officers or directors of the Company in
their capacity as such pursuant to any stock or option plan or employment
agreement duly adopted for such purpose, by a majority of the non-employee
members of the Board of Directors or a majority of the members of a committee
of non-employee directors established for such purpose, (b) securities
upon the exercise or exchange of or conversion of any Securities issued
hereunder and/or other securities exercisable or exchangeable for or
convertible into shares of Common Stock issued and outstanding on the date of
this Agreement, provided that such securities have not been amended since the
date of this Agreement to increase the number of such securities or to decrease
the exercise price, exchange price or conversion price of such securities, and (c) securities
issued pursuant to acquisitions or strategic transactions approved by a
majority of the disinterested directors of the Company, provided that any such
issuance shall only be to a Person (or to the equity holders of a Person) which
is, itself or through its subsidiaries, an operating company or an owner of an
asset in a business synergistic with the business of the Company and shall
provide to the Company additional benefits in addition to the investment of
funds, but shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an entity whose
primary business is investing in securities.

 

“GAAP” shall have the
meaning ascribed to such term in Section 3.1(h).

 

“Indebtedness” shall
have the meaning ascribed to such term in Section 3.1(z).

 

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“Intellectual Property
Rights” shall have the meaning ascribed to such term in Section 3.1(o).

 

“Liens” means a lien,
charge, security interest, encumbrance, right of first refusal, preemptive
right or other restriction.

 

“Material Adverse Effect”
shall have the meaning assigned to such term in Section 3.1(b).

 

“Material Permits”
shall have the meaning ascribed to such term in Section 3.1(m).

 

“Per Share Purchase Price”
equals $0.30, subject to adjustment for
reverse and forward stock splits, stock dividends, stock combinations and other
similar transactions of the Common Stock that occur after the date of this
Agreement.

 

“Person” means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any kind.

 

“Proceeding” means an
action, claim, suit, investigation or proceeding (including, without
limitation, an informal investigation or partial proceeding, such as a
deposition), whether commenced or threatened.

 

“Prospectus” means
the final prospectus filed for the Registration Statement.

 

“Prospectus Supplement”
means the supplement to the Prospectus complying with Rule 424(b) of
the Securities Act that is filed with the Commission and delivered by the
Company to each Purchaser at the Closing.

 

“Purchaser Party”
shall have the meaning ascribed to such term in Section 4.8.

 

“Registration Statement”
means the effective registration statement with Commission file No. 333-162720
which registers the sale of the Shares, the Warrants and the Warrant Shares by
the Purchasers.

 

“Required Approvals”
shall have the meaning ascribed to such term in Section 3.1(e).

 

“Rule 144” means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.

 

“Rule 424” means
Rule 424 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended or interpreted from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
purpose and effect as such Rule.

 

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“SEC Reports” shall
have the meaning ascribed to such term in Section 3.1(h).

 

“Securities” means
the Shares, the Warrants and the Warrant Shares.

 

“Securities Act”
means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

“Shares” means the
shares of Common Stock issued or issuable to each Purchaser pursuant to this
Agreement.

 

“Short Sales” means
all “short sales” as defined in Rule 200 of Regulation SHO under the
Exchange Act (but shall not be deemed to include the location and/or
reservation of borrowable shares of Common Stock).

 

“Subscription Amount”
means, as to each Purchaser, the aggregate amount to be paid for Shares and
Warrants purchased hereunder as specified below such Purchaser’s name on the
signature page of this Agreement and next to the heading “Subscription
Amount,” in United States dollars and in immediately available funds.

 

“Subsidiary” means
any subsidiary of the Company as set forth on Schedule 3.1(a), and
shall, where applicable, also include any direct or indirect subsidiary of the
Company formed or acquired after the date hereof.

 

“Trading Day” means a
day on which the principal Trading Market is open for trading.

 

“Trading Market”
means any of the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the NYSE AMEX, the Nasdaq
Capital Market, the Nasdaq Global Market, NYSE Arca, the Nasdaq Global Select
Market, the New York Stock Exchange or the OTC Bulletin Board (or any
successors to any of the foregoing).

 

“Transaction Documents”
means this Agreement, the Warrants and any other documents or agreements
executed in connection with the transactions contemplated hereunder.

 

“Transfer Agent”
means Intrawest Transfer Company, Inc., the current transfer agent of the
Company, with a mailing address of 1981 East 4800 South, Salt Lake City, Utah
84117 and a facsimile number of (801) 272-9370, and any successor transfer
agent of the Company.

 

“Variable Rate
Transaction” means a transaction in which the Company (i) issues or
sells any debt or equity securities that are convertible into, exchangeable or
exercisable for, or include the right to receive additional shares of Common
Stock either (A) at a conversion price, exercise price or exchange rate or
other price that is based upon and/or varies with the trading prices of or
quotations for the shares of Common Stock at any time after the initial
issuance of such debt or equity securities, or (B) with a conversion,
exercise or exchange price that is subject to being reset at some future date
after the

 

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initial issuance of such
debt or equity security or upon the occurrence of specified or contingent
events directly or indirectly related to the business of the Company or the
market for the Common Stock or (ii) enters into any agreement, including,
but not limited to, an equity line of credit, whereby the Company may sell
securities at a future determined price.

 

“Warrants” means,
collectively, the Common Stock purchase warrants delivered to the Purchasers at
the Closing in accordance with Section 2.2(a) hereof, which Warrants
shall be exercisable 181 days from the date hereof and have a term of exercise
equal to five  years from the date of
exercise, in the form of Exhibit A attached hereto.

 

“Warrant Shares”
means the shares of Common Stock issuable upon exercise of the Warrants.

 

“WS” means Weinstein
Smith LLP with offices located at 420 Lexington Avenue, Suite 2620, New
York, New York 10170-0002.

 

ARTICLE
II.

PURCHASE AND SALE

 

2.1                                 Closing.  On the Closing Date, upon the terms and
subject to the conditions set forth herein, substantially concurrent with the
execution and delivery of this Agreement by the parties hereto, the Company
agrees to sell, and the Purchasers, severally and not jointly,  agree to purchase, up to an aggregate of
$10,000,000 of Shares and Warrants.  Each
Purchaser shall deliver to the Company, via wire transfer or a certified check
of immediately available funds equal to such Purchaser’s Subscription Amount as
set forth on the signature page hereto executed by such Purchaser and the
Company shall deliver to each Purchaser its respective Shares and a Warrant as
determined pursuant to Section 2.2(a), and the Company and each Purchaser
shall deliver the other items set forth in Section 2.2 deliverable at the
Closing.  Upon satisfaction of the
covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur
at the offices of WS or such other location as the parties shall mutually
agree.

 

2.2                                 Deliveries.

 

(a)           On or prior to the Closing Date, the Company shall deliver
or cause to be delivered to each Purchaser the following:

 

(i)                                     this Agreement
duly executed by the Company;

 

(ii)                                  a legal opinion
of Company Counsel, substantially in the form of Exhibit B attached
hereto;

 

(iii)                               a copy of the
irrevocable instructions to the Company’s transfer agent instructing the
transfer agent to deliver via the Depository Trust Company Deposit Withdrawal
Agent Commission System (“DWAC”) Shares equal to such Purchaser’s
Subscription Amount divided by the Per Share Purchase Price, registered in the
name of such Purchaser;

 

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(iv)                              a Warrant
registered in the name of such Purchaser to purchase up to a number of shares
of Common Stock equal to 50% of such
Purchaser’s Shares, with an exercise price equal to $0.3859,
subject to adjustment therein (such Warrant certificate may be delivered within
three Trading Days of the Closing Date); and

 

(v)                                 the Prospectus
and Prospectus Supplement (which may be delivered in accordance with Rule 172
under the Securities Act).

 

(b)                                 On or prior to
the Closing Date, each Purchaser shall deliver or cause to be delivered to the
Company the following:

 

(i)                                     this Agreement
duly executed by such Purchaser; and

 

(ii)                                  such Purchaser’s
Subscription Amount by wire transfer to the account as specified in writing by
the Company.

 

2.3                                 Closing Conditions.

 

(a)           The obligations of the Company hereunder in connection
with the Closing are subject to the following conditions being met:

 

(i)                                     the accuracy in
all material respects on the Closing Date of the representations and warranties
of the Purchasers contained herein (unless as of a specific date therein);

 

(ii)                                  all
obligations, covenants and agreements of each Purchaser required to be
performed at or prior to the Closing Date shall have been performed; and

 

(iii)                               the delivery by
each Purchaser of the items set forth in Section 2.2(b) of this
Agreement.

 

(b)                                 The respective
obligations of the Purchasers hereunder in connection with the Closing are
subject to the following conditions being met:

 

(i)                                     the accuracy in
all material respects when made and on the Closing Date of the representations
and warranties of the Company contained herein (unless as of a specific date
therein);

 

(ii)                                  all
obligations, covenants and agreements of the Company required to be performed
at or prior to the Closing Date shall have been performed;

 

(iii)                               the delivery by
the Company of the items set forth in Section 2.2(a) of this
Agreement;

 

(iv)                              there shall
have been no Material Adverse Effect with respect to the Company since the date
hereof; and

 

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(v)                                 from the date
hereof to the Closing Date, trading in the Common Stock shall not have been
suspended by the Commission or the Company’s principal Trading Market (except
for any suspension of trading of limited duration agreed to by the Company,
which suspension shall be terminated prior to the Closing), and, at any time
prior to the Closing Date, trading in securities generally as reported by
Bloomberg L.P. shall not have been suspended or limited, or minimum prices
shall not have been established on securities whose trades are reported by such
service, or on any Trading Market, nor shall a banking moratorium have been
declared either by the United States or New York State authorities nor shall
there have occurred any material outbreak or escalation of hostilities or other
national or international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each case, in the
reasonable judgment of each Purchaser, makes it impracticable or inadvisable to
purchase the Securities at the Closing.

 

ARTICLE
III.

REPRESENTATIONS AND WARRANTIES

 

3.1                                 Representations and
Warranties of the Company. 
Except as set forth in the Disclosure Schedules, which Disclosure
Schedules shall be deemed a part hereof and shall qualify any representation or
statement otherwise made herein to the extent of the disclosure contained in
the corresponding section of the Disclosure Schedules, the Company hereby makes
the following representations and warranties to each Purchaser:

 

(a)                                  Subsidiaries.  All of the direct and indirect subsidiaries
of the Company are set forth on Schedule 3.1(a).  Except as set forth on Schedule 3.1(a),
the Company owns, directly or indirectly, all of the capital stock or other
equity interests of each Subsidiary free and clear of any Liens, and all of the
issued and outstanding shares of capital stock of each Subsidiary are validly
issued and are fully paid, non-assessable and free of preemptive and similar
rights to subscribe for or purchase securities. 
If the Company has no subsidiaries, all other references to the
Subsidiaries or any of them in the Transaction Documents shall be disregarded.

 

(b)                                 Organization
and Qualification.  The Company
and each of the Subsidiaries is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted.  Neither the
Company nor any Subsidiary is in violation nor default of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. 
Each of the Company and the Subsidiaries is duly qualified to conduct
business and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, could not have or reasonably
be expected to result in: (i) a material adverse effect on the legality,
validity or enforceability of any Transaction Document, (ii) a material
adverse effect on the results of operations, assets, business, prospects or
condition (financial or

 

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otherwise) of
the Company and the Subsidiaries, taken as a whole, or (iii) a material
adverse effect on the Company’s ability to perform in any material respect on a
timely basis its obligations under any Transaction Document (any of (i), (ii) or
(iii), a “Material Adverse Effect”) and no Proceeding has been instituted in
any such jurisdiction revoking, limiting or curtailing or seeking to revoke,
limit or curtail such power and authority or qualification.

 

(c)                                  Authorization;
Enforcement.  The Company
has the requisite corporate power and authority to enter into and to consummate
the transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations hereunder and thereunder.  The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required
by the Company, the Board of Directors or the Company’s stockholders in
connection therewith other than in connection with the Required Approvals.  Each Transaction Document to which it is a
party has been (or upon delivery will have been) duly executed by the Company
and, when delivered in accordance with the terms hereof and thereof, will
constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions
may be limited by applicable law.

 

(d)                                 No Conflicts.  The execution, delivery and performance by
the Company of the Transaction Documents, the issuance and sale of the
Securities and the consummation by it of the transactions contemplated hereby
and thereby to which it is a party do not and will not (i) conflict with
or violate any provision of the Company’s or any Subsidiary’s certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, result in the
creation of any Lien upon any of the properties or assets of the Company or any
Subsidiary, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both)
of, any agreement, credit facility, debt or other instrument (evidencing a
Company or Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or asset of the
Company or any Subsidiary is bound or affected, or (iii) subject to the
Required Approvals, conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations), or by which any
property or asset of the Company or a Subsidiary is bound or affected; except
in the case of each of clauses (ii) and (iii), such as could not have or
reasonably be expected to result in a Material Adverse Effect.

 

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(e)                                  Filings,
Consents and Approvals.  The
Company is not required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court or
other federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than: (i) the filings required pursuant to Section 4.4
of this Agreement, (ii) the filing with the Commission of the Prospectus
Supplement, (iii) application(s) to each applicable Trading Market
for the listing of the Securities for trading thereon in the time and manner
required thereby and (iv) such filings as are required to be made under
applicable state securities laws (collectively, the “Required Approvals”).

 

(f)                                    Issuance of the
Securities; Registration.  The
Securities are duly authorized and, when issued and paid for in accordance with
the applicable Transaction Documents, will be duly and validly issued, fully
paid and nonassessable, free and clear of all Liens imposed by the
Company.  The Warrant Shares, when issued
in accordance with the terms of the Warrants, will be validly issued, fully
paid and nonassessable, free and clear of all Liens imposed by the
Company.  The Company has reserved from
its duly authorized capital stock the maximum number of shares of Common Stock
issuable pursuant to this Agreement and the Warrants. The Company has prepared
and filed the Registration Statement in conformity with the requirements of the
Securities Act, which became effective on January 19, 2010 (the “Effective Date”), including the
Prospectus, and such amendments and supplements thereto as may have been
required to the date of this Agreement. 
The Registration Statement is effective under the Securities Act and no
stop order preventing or suspending the effectiveness of the Registration
Statement or suspending or preventing the use of the Prospectus has been issued
by the Commission and no proceedings for that purpose have been instituted or,
to the knowledge of the Company, are threatened by the Commission.  The Company, if required by the rules and
regulations of the Commission, proposes to file the Prospectus, with the
Commission pursuant to Rule 424(b). 
At the time the Registration Statement and any amendments thereto became
effective, at the date of this Agreement and at the Closing Date, the
Registration Statement and any amendments thereto conformed and will conform in
all material respects to the requirements of the Securities Act and did not and
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; and the Prospectus and any amendments or supplements
thereto, at time the Prospectus or any amendment or supplement thereto was
issued and at the Closing Date, conformed and will conform in all material
respects to the requirements of the Securities Act and did not and will not
contain an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.

 

(g)                                 Capitalization.  The capitalization of the Company is as set
forth on Schedule 3.1(g).  Except
as set forth on Schedule 3.1(g), the Company has not issued any capital
stock since its most recently filed periodic report under the Exchange Act,
other than pursuant to the exercise of employee stock options under the Company’s
stock option plans, the issuance of shares of Common Stock to employees
pursuant to the Company’s employee stock purchase plans and pursuant to the
conversion and/or

 

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exercise of Common Stock
Equivalents outstanding as of the date of the most recently filed periodic
report under the Exchange Act.  Except as
set forth on Schedule 3.1(g), no Person has any right of first refusal,
preemptive right, right of participation, or any similar right to participate
in the transactions contemplated by the Transaction Documents.  Except as a result of the purchase and sale
of the Securities or as disclosed in the SEC Reports or set forth on Schedule
3.1(g), there are no outstanding options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exercisable or
exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock or Common Stock Equivalents.  Except as set forth in Schedule 3.1(g), the
issuance and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Purchasers) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under any of such
securities. All of the outstanding shares of capital stock of the Company are
validly issued, fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities.  No further
approval or authorization of any stockholder, the Board of Directors or others
is required for the issuance and sale of the Securities.  Except as set forth in Schedule 3.1(g),
there are no stockholders agreements, voting agreements or other similar
agreements with respect to the Company’s capital stock to which the Company is
a party or, to the knowledge of the Company, between or among any of the
Company’s stockholders.

 

(h)                                 SEC Reports;
Financial Statements.  The Company
has filed all reports, schedules, forms, statements and other documents
required to be filed by the Company under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for
the two years preceding the date hereof (or such shorter period as the Company
was required by law or regulation to file such material) (the foregoing
materials, including the exhibits thereto and documents incorporated by
reference therein, together with the Prospectus and the Prospectus Supplement,
being collectively referred to herein as the “SEC Reports”) on a timely
basis or has received a valid extension of such time of filing and has filed
any such SEC Reports prior to the expiration of any such extension.  As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, as applicable, and none of the SEC Reports, when filed,
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 the light of the circumstances under which they were
made, not misleading. The Company has never been an issuer subject to, or
identified in, Rule 144(i) under the Securities Act. The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of
filing.  Such financial statements have
been prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements or

 

10

 

the notes thereto and except
that unaudited financial statements may not contain all footnotes required by
GAAP, and fairly present in all material respects the financial position of the
Company and its consolidated Subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject,
in the case of unaudited statements, to normal, immaterial, year-end audit
adjustments.

 

(i)                                     Material
Changes; Undisclosed Events, Liabilities or Developments.  Except as set forth on Schedule 3.1(i),
since the date of the latest audited financial statements included within the
SEC Reports, except as specifically disclosed in a subsequent SEC Report filed
prior to the date hereof, (i) there has been no event, occurrence or
development that has had or that could reasonably be expected to result in a
Material Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent with past
practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or disclosed in SEC Reports, (iii) the
Company has not altered its method of accounting, (iv) the Company has not
declared or made any dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to purchase or
redeem any shares of its capital stock and (v) the Company has not issued
any equity securities to any officer, director or Affiliate, except pursuant to
existing Company stock option plans.  The
Company does not have pending before the Commission any request for
confidential treatment of information. 
Except for the issuance of the Securities contemplated by this Agreement
or as set forth on Schedule 3.1(i), no event, liability, fact,
circumstance, occurrence or development has occurred or exists or is reasonably
expected to occur or exist with respect to the Company or its Subsidiaries or
their respective business, prospects, properties, operations, assets or
financial condition that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made or deemed
made that has not been publicly disclosed at least 1 Trading Day prior to the
date that this representation is made.

 

(j)                                     Litigation.  Except as set forth in Schedule 3.1(j),
there is no action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against
or affecting the Company, any Subsidiary or any of their respective properties
before or by any court, arbitrator, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign) (collectively,
an “Action”) which (i) adversely affects or challenges the
legality, validity or enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision, have or
reasonably be expected to result in a Material Adverse Effect.  Except as set forth in Schedule 3.1(j),
neither the Company nor any Subsidiary, nor any director or officer thereof, is
or has been the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach of
fiduciary duty.  Except as set forth in Schedule
3.1(j), there has not been, and to the knowledge of the Company, there is
not pending or contemplated, any investigation by the Commission involving the
Company or any current or former director or officer of the Company.  The Commission has not issued any stop order
or other order suspending the effectiveness of any registration statement filed
by the Company or any Subsidiary under the Exchange Act or the Securities Act.

 

11

 

(k)           Labor Relations.  No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company, which could reasonably be expected to result in a Material Adverse
Effect.  None of the Company’s or its
Subsidiaries’ employees is a member of a union that relates to such employee’s
relationship with the Company or such Subsidiary, and neither the Company nor
any of its Subsidiaries is a party to a collective bargaining agreement, and
the Company and its Subsidiaries believe that their relationships with their
employees are good.  No executive
officer, to the knowledge of the Company, is, or is now expected to be, in
violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition agreement,
or any other contract or agreement or any restrictive covenant in favor of any
third party, and the continued employment of each such executive officer does
not subject the Company or any of its Subsidiaries to any liability with
respect to any of the foregoing matters. 
The Company and its Subsidiaries are in compliance with all U.S.
federal, state, local and foreign laws and regulations relating to employment
and employment practices, terms and conditions of employment and wages and
hours, except where the failure to be in compliance could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(l)            Compliance.  Except as set forth in Schedule 3.1(l),
neither the Company nor any Subsidiary: (i) is in default under or in
violation of (and no event has occurred that has not been waived that, with
notice or lapse of time or both, would result in a default by the Company or
any Subsidiary under), nor has the Company or any Subsidiary received notice of
a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether
or not such default or violation has been waived), (ii) is in violation of
any judgment, decree or order of any court, arbitrator or governmental body or (iii) is
or has been in violation of any statute, rule, ordinance or regulation of any
governmental authority, including without limitation all foreign, federal,
state and local laws relating to taxes, environmental protection, occupational
health and safety, product quality and safety and employment and labor matters,
except in each case as could not have or reasonably be expected to result in a
Material Adverse Effect.

 

(m)          Regulatory Permits.  The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not reasonably be expected to result in a
Material Adverse Effect (“Material Permits”), and neither the Company
nor any Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.

 

(n)           Title to Assets.  Except as disclosed in  the SEC Reports or on Schedule 3.1(n),
the Company and the Subsidiaries have good and marketable title in fee simple
to all real property owned by them and good and marketable title in all
personal property owned by them that is material to the business of the Company
and the Subsidiaries, in each case free and clear of all Liens, except for
Liens as do not materially affect the value

 

12

 

of such property and do
not materially interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor
subject to penalties.  Any real property
and facilities held under lease by the Company and the Subsidiaries are held by
them under valid, subsisting and enforceable leases with which the Company and
the Subsidiaries are in compliance.

 

(o)           Patents and Trademarks.  The Company and the Subsidiaries have, or
have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions,
copyrights, licenses and other intellectual property rights and similar rights
necessary or material for use in connection with their respective businesses as
described in the SEC Reports and which the failure to so have could have a
Material Adverse Effect (collectively, the “Intellectual Property Rights”).  None of, and neither the Company nor any
Subsidiary has received a notice (written or otherwise) that any of, the
Intellectual Property Rights has expired, terminated or been abandoned, or is
expected to expire or terminate or be abandoned, within two (2) years from
the date of this Agreement.  Neither the
Company nor any Subsidiary has received, since the date of the latest audited
financial statements included within the SEC Reports, a written notice of a
claim or otherwise has any knowledge that the Intellectual Property Rights
violate or infringe upon the rights of any Person, except as would not have a
Material Adverse Effect.  To the knowledge
of the Company, all such Intellectual Property Rights are enforceable and there
is no existing infringement by another Person of any of the Intellectual
Property Rights.  The Company and its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties, except where
failure to do so could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

 

(p)           Insurance.  The Company and the Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses in
which the Company and the Subsidiaries are engaged.  Neither the Company nor any 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 without a
significant increase in cost.

 

(q)           Transactions With Affiliates and
Employees.  Except as set forth in
the SEC Reports, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (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 entity in which any officer, director, or any
such employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $120,000 other than for (i) payment of
salary or consulting fees for services rendered, (ii) reimbursement for
expenses incurred on behalf

 

13

 

of the Company and (iii) other
employee benefits, including stock option agreements under any stock option
plan of the Company.

 

(r)            Sarbanes-Oxley; Internal
Accounting Controls.  The Company is
in compliance with any and all applicable requirements of the Sarbanes-Oxley
Act of 2002 that are effective as of the date hereof, and any and all
applicable rules and regulations promulgated by the Commission thereunder
that are effective as of the date hereof and as of the Closing Date. The
Company and the Subsidiaries maintain a system of internal accounting controls
sufficient 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 GAAP 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. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that information required to be disclosed by the Company in the
reports it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Commission’s rules and
forms.  The Company’s certifying officers
have evaluated the effectiveness of the Company’s disclosure controls and
procedures as of the end of the period covered by the Company’s most recently
filed periodic report under the Exchange Act (such date, the “Evaluation
Date”).  The Company presented in its
most recently filed periodic report under the Exchange Act the conclusions of
the certifying officers about the effectiveness of the disclosure controls and
procedures based on their evaluations as of the Evaluation Date.  Since the Evaluation Date, there have been no
changes in the Company’s internal control over financial reporting (as such
term is defined in the Exchange Act) that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.

 

(s)           Certain Fees.  Except for fees to Rodman & Renshaw
LLC and as otherwise set forth on Schedule 3.1(s) attached hereto,
no brokerage or finder’s fees or commissions are or will be payable by the
Company to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other Person with respect to the transactions
contemplated by the Transaction Documents. 
The Purchasers shall have no obligation with respect to any fees or with
respect to any claims made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the
transactions contemplated by the Transaction Documents.

 

(t)            Investment Company. The
Company is not, and is not an Affiliate of, and immediately after receipt of
payment for the Securities, will not be or be an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.  The Company shall conduct its business in a
manner so that it will not become an “investment company” subject to
registration under the Investment Company Act of 1940, as amended.

 

14

 

(u)           Registration Rights.  Except as set forth on Schedule 3.1(u),
no Person has any right to cause the Company to effect the registration under
the Securities Act of any securities of the Company.

 

(v)           Listing and Maintenance
Requirements.  The Common Stock is
registered pursuant to Section 12(b) or 12(g) of the Exchange
Act, and the Company has taken no action designed to, or which to its knowledge
is likely to have the effect of, terminating the registration of the Common
Stock under the Exchange Act nor has the Company received any notification that
the Commission is contemplating terminating such registration.  Except as set forth on Schedule 3.1(v),
the Company has not, in the 12 months preceding the date hereof, received
notice from any Trading Market on which the Common Stock is or has been listed
or quoted to the effect that the Company is not in compliance with the listing
or maintenance requirements of such Trading Market.  Except as set forth on Schedule 3.1(v),
the Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and
maintenance requirements.

 

(w)          Application of Takeover Protections.  The Company and the Board of Directors have
taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Company’s certificate of incorporation (or similar charter documents)
or the laws of its state of incorporation that is or could become applicable to
the Purchasers as a result of the Purchasers and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including without limitation as a result of the Company’s issuance of the
Securities and the Purchasers’ ownership of the Securities.

 

(x)            Disclosure.  Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company confirms that neither it nor any other Person acting on its behalf has
provided any of the Purchasers or their agents or counsel with any information
that it believes constitutes or might constitute material, non-public
information which is not otherwise disclosed in the Prospectus Supplement.   The Company understands and confirms that
the Purchasers will rely on the foregoing representation in effecting
transactions in securities of the Company. 
All of the disclosure furnished by or on behalf of the Company to the
Purchasers regarding the Company, its business and the transactions
contemplated hereby, including the Disclosure Schedules to this Agreement, is
true and correct and does not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading. The press releases disseminated by the Company during the twelve
months preceding the date of this Agreement taken as a whole do not contain any
untrue statement of a material fact or omit 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 and when made, not misleading.  The Company acknowledges and agrees that no
Purchaser makes or has made any representations or warranties with respect to
the transactions contemplated hereby other than those specifically set forth in
Section 3.2 hereof.

 

15

 

(y)           No Integrated Offering.
Assuming the accuracy of the Purchasers’ representations and warranties set
forth in Sections 3.2 and 4.15, 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 or solicited any offers to buy any
security, under circumstances that would cause this offering of the Securities
to be integrated with prior offerings by the Company for purposes of any
applicable shareholder approval provisions of any Trading Market on which any
of the securities of the Company are listed or designated.

 

(z)            Solvency.  Based on the consolidated financial condition
of the Company as of the Closing Date, after giving effect to the receipt by
the Company of the proceeds from the sale of the Securities hereunder, (i) the
fair saleable value of the Company’s assets exceeds the amount that will be
required to be paid on or in respect of the Company’s existing debts and other
liabilities (including known contingent liabilities) as they mature and (ii) the
Company’s assets do not constitute unreasonably small capital to carry on its
business as now conducted and as proposed to be conducted including its capital
needs taking into account the particular capital requirements of the business
conducted by the Company, and projected capital requirements and capital
availability thereof.  The Company does
not intend to incur debts beyond its ability to pay such debts as they mature
(taking into account the timing and amounts of cash to be payable on or in
respect of its debt).  Except as set
forth on Schedule 3.1(z), the Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for reorganization or
liquidation under the bankruptcy or reorganization laws of any jurisdiction
within one year from the Closing Date.  Schedule
3.1(z) sets forth as of the date hereof all outstanding secured and
unsecured Indebtedness of the Company or any Subsidiary, or for which the
Company or any Subsidiary has commitments. 
For the purposes of this Agreement, “Indebtedness” means (x) any
liabilities for borrowed money or amounts owed in excess of $200,000 (other
than trade accounts payable incurred in the ordinary course of business), (y) all
guaranties, endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same are or should be reflected in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (z) the present value
of any lease payments in excess of $200,000 due under leases required to be
capitalized in accordance with GAAP.  Neither
the Company nor any Subsidiary is in default with respect to any Indebtedness.

 

(aa)         Tax Status.  Except for matters that would not,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect, the Company and each Subsidiary (i) has made or
filed all United States federal and state income and all foreign income and
franchise tax returns, reports and declarations required by any jurisdiction to
which it is subject, (ii) 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 and (iii) has set aside on
its books provision reasonably adequate for the payment of all material 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 or of any Subsidiary know of no
basis for any such claim.

 

16

 

(bb)         Foreign Corrupt Practices.  Neither the Company, nor to the knowledge of
the Company, any agent or other person acting on behalf of the Company, has (i) directly
or indirectly, used any funds for unlawful contributions, gifts, entertainment
or other unlawful expenses related to foreign or domestic political activity, (ii) made
any unlawful payment to foreign or domestic government officials or employees
or to any foreign or domestic political parties or campaigns from corporate
funds, (iii) failed to disclose fully any contribution made by the Company
(or made by any person acting on its behalf of which the Company is aware)
which is in violation of law, or (iv) violated in any material respect any
provision of the Foreign Corrupt Practices Act of 1977, as amended.

 

(cc)         Accountants.  The Company’s accounting firm is set forth on
Schedule 3.1(cc) of the Disclosure Schedules.  To the knowledge and belief of the Company,
such accounting firm (i) is a registered public accounting firm as
required by the Exchange Act and (ii) shall express its opinion with
respect to the financial statements to be included in the Company’s Annual
Report for the year ending December 31, 2009.

 

(dd)         Acknowledgment Regarding Purchasers’
Purchase of Securities.  The Company
acknowledges and agrees that each of the Purchasers is acting solely in the
capacity of an arm’s length purchaser with respect to the Transaction Documents
and the transactions contemplated thereby. 
The Company further acknowledges that no Purchaser is acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to the Transaction Documents and the transactions contemplated thereby
and any advice given by any Purchaser or any of their respective
representatives or agents in connection with the Transaction Documents and the
transactions contemplated thereby is merely incidental to the Purchasers’
purchase of the Securities.  The Company
further represents to each Purchaser that the Company’s decision to enter into
this Agreement and the other Transaction Documents has been based solely on the
independent evaluation of the transactions contemplated hereby by the Company
and its representatives.

 

(ee)         Acknowledgement Regarding
Purchaser’s Trading Activity. 
Anything in this Agreement or elsewhere herein to the contrary
notwithstanding (except for Sections 3.2(e) and 4.14 hereof), it is
understood and acknowledged by the Company that: (i) none of the Purchasers
have been asked by the Company to agree, nor has any Purchaser agreed, to
desist from purchasing or selling, long and/or short, securities of the
Company, or “derivative” securities based on securities issued by the Company
or to hold the Securities for any specified term; (ii) past or future open
market or other transactions by any Purchaser, specifically including, without
limitation, Short Sales or “derivative” transactions, before or after the
closing of this or future private placement transactions, may negatively impact
the market price of the Company’s publicly-traded securities; (iii) any
Purchaser, and counter-parties in “derivative” transactions to which any such
Purchaser is a party, directly or indirectly, presently may have a “short”
position in the Common Stock, and (iv) each Purchaser shall not be deemed
to have any affiliation with or control over any arm’s length counter-party in
any “derivative” transaction.  The
Company further understands and acknowledges that (y) one or more
Purchasers may engage in hedging activities at various times during the period
that the Securities are outstanding, including, without limitation, during the
periods that the value of the

 

17

 

Warrant Shares deliverable
with respect to Securities are being determined, and (z) such hedging
activities (if any) could reduce the value of the existing stockholders’ equity
interests in the Company at and after the time that the hedging activities are
being conducted.  The Company acknowledges that such aforementioned
hedging activities do not constitute a breach of any of the Transaction
Documents.

 

(ff)           Regulation M Compliance. 
The Company has not, and to its knowledge no one acting on its behalf has, (i) taken,
directly or indirectly, any action designed to cause or to result in the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold, bid
for, purchased, or, paid any compensation for soliciting purchases of, any of
the Securities, or (iii) paid or agreed to pay to any Person any
compensation for soliciting another to purchase any other securities of the
Company, other than, in the case of clauses (ii) and (iii), compensation
paid to the Company’s placement agent in connection with the placement of the
Securities.

 

(gg)         Office of Foreign Assets Control.  Neither the Company nor, to the Company’s
knowledge, any director, officer, agent, employee or affiliate of the Company
is currently subject to any U.S. sanctions administered by the Office of
Foreign Assets Control of the U.S. Treasury Department (“OFAC”).

 

(hh)         U.S. Real Property Holding
Corporation.  The Company is not and
has never been a U.S. real property holding corporation within the meaning of Section 897
of the Internal Revenue Code of 1986, as amended, and the Company shall so
certify upon Purchaser’s request.

 

(ii)           Bank Holding Company Act.  Neither the Company nor any of its
Subsidiaries or Affiliates is subject to the Bank Holding Company Act of 1956,
as amended (the “BHCA”) and to regulation by the Board of Governors of
the Federal Reserve System (the “Federal Reserve”).  Neither the Company nor any of its
Subsidiaries or Affiliates owns or controls, directly or indirectly, five
percent (5%) or more of the outstanding shares of any class of voting
securities or twenty-five percent or more of the total equity of a bank or any
entity that is subject to the BHCA and to regulation by the Federal Reserve.  Neither the Company nor any of its
Subsidiaries or Affiliates exercises a controlling influence over the
management or policies of a bank or any entity that is subject to the BHCA and
to regulation by the Federal Reserve.

 

(jj)           Money Laundering.  The operations of the Company are and have
been conducted at all times in compliance with applicable financial
record-keeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, applicable money laundering
statutes and applicable rules and regulations thereunder (collectively,
the “Money Laundering Laws”), and no action, suit or proceeding by or
before any court or governmental agency, authority or body or any arbitrator
involving the Company with respect to the Money Laundering Laws is pending or,
to the knowledge of the Company, threatened.

 

18

 

3.2           Representations and Warranties of
the Purchasers.  Each Purchaser, for
itself and for no other Purchaser, hereby represents and warrants as of the
execution of this Agreement on the date hereof to the Company as follows
(unless as of a specific date therein):

 

(a)           Organization;
Authority.  Such Purchaser is either
an individual or an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization with full
right, corporate or partnership power and authority to enter into and to
consummate the transactions contemplated by this Agreement and otherwise to
carry out its obligations hereunder and thereunder. The execution and delivery
of this Agreement and performance by such Purchaser of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate, partnership, limited liability company or similar action, as applicable,
on the part of such Purchaser.  Each
Transaction Document to which it is a party has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with the terms
hereof, will constitute the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms, except: (i) as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.

 

(b)           Understandings
or Arrangements.  Such Purchaser is
acquiring the Securities as principal for its own account and has no direct or
indirect arrangement or understandings with any other persons to distribute or
regarding the distribution of such Securities (this representation and warranty
not limiting such Purchaser’s right to sell the Securities pursuant to the
Registration Statement or otherwise in compliance with applicable federal and
state securities laws).  Such Purchaser
is acquiring the Securities hereunder in the ordinary course of its business.

 

(c)           Purchaser
Status.  At the time such Purchaser
was offered the Securities, it was, and as of the date hereof it is, and on
each date on which it exercises any Warrants, it will be either: (i) an
“accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or
(a)(8) under the Securities Act or (ii) a “qualified institutional
buyer” as defined in Rule 144A(a) under the Securities Act.  Such Purchaser is not required to be
registered as a broker-dealer under Section 15 of the Exchange Act.

 

(d)           Experience
of Such Purchaser.  Such Purchaser,
either alone or together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment.  Such Purchaser is able to bear the economic
risk of an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.

 

(e)           Certain
Transactions and Confidentiality. 
Other than consummating the transactions contemplated hereunder, such
Purchaser has not, nor has any Person acting on behalf of or pursuant to any
understanding with such Purchaser, directly or indirectly executed any
purchases or sales, including Short Sales, of the securities of the
Company

 

19

 

during the period
commencing as of the time that such Purchaser first received a term sheet
(written or oral) from the Company or any other Person representing the Company
setting forth the material terms of the transactions contemplated hereunder and
ending immediately prior to the execution hereof.  Notwithstanding the foregoing, in the case of
a Purchaser that is a multi-managed investment vehicle whereby separate
portfolio managers manage separate portions of such Purchaser’s assets and the
portfolio managers have no direct knowledge of the investment decisions made by
the portfolio managers managing other portions of such Purchaser’s assets, the
representation set forth above shall only apply with respect to the portion of
assets managed by the portfolio manager that made the investment decision to
purchase the Securities covered by this Agreement.  Other than to other Persons party to this
Agreement, such Purchaser has maintained the confidentiality of all disclosures
made to it in connection with this transaction (including the existence and
terms of this transaction). Notwithstanding the foregoing, for avoidance of
doubt, nothing contained herein shall constitute a representation or warranty,
or preclude any actions, with respect to the identification of the availability
of, or securing of, available shares to borrow in order to effect Short Sales
or similar transactions in the future.

 

(f)            Reliance.  Each of the Purchasers specifically
acknowledges that the Company is relying upon the accuracy and completeness of
each of the representations, warranties and agreements made by the Purchasers
in this Agreement and each of the Transaction Documents.

 

The Company acknowledges and agrees that the
representations contained in Section 3.2 shall not modify, amend or affect
such Purchaser’s right to rely on the Company’s representations and warranties
contained in this Agreement or any representations and warranties contained in
any other Transaction Document or any other document or instrument executed
and/or delivered in connection with this Agreement or the consummation of the
transaction contemplated hereby.

 

ARTICLE
IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1           Warrant Shares.  If all or any portion of a Warrant is
exercised at a time when there is an effective registration statement to cover
the issuance or resale of the Warrant Shares or if the Warrant is exercised via
cashless exercise, the Warrant Shares issued pursuant to any such exercise
shall be issued free of all legends.  If
at any time following the date hereof the Registration Statement (or any
subsequent registration statement registering the sale or resale of the Warrant
Shares) is not effective or is not otherwise available for the sale or resale
of the Warrant Shares, the Company shall immediately notify the holders of the
Warrants in writing that such registration statement is not then effective and
thereafter shall promptly notify such holders when the registration statement
is effective again and available for the sale or resale of the Warrant Shares
(it being understood and agreed that the foregoing shall not limit the ability
of the Company to issue, or any Purchaser to sell, any of the Warrant Shares in
compliance with applicable federal and state securities laws).  The Company shall use best efforts to keep a
registration statement (including the Registration Statement) registering the
issuance or resale of the Warrant Shares effective during the term of the
Warrants.

 

20

 

4.2           Furnishing of Information. 
Until the earliest of the time that (i) no Purchaser owns
Securities or (ii) the Warrants have expired, the Company covenants to
timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Company after
the date hereof pursuant to the Exchange Act even if the Company is not then
subject to the reporting requirements of the Exchange Act.  As long as any Purchaser owns Securities, if
the Company is not required to file reports pursuant to the Exchange Act, it
will prepare and furnish to the Purchasers and make publicly available in
accordance with Rule 144(c) such information as is required for the
Purchasers to sell the Securities, including without limitation, under Rule 144.
The Company further covenants that it will take such further action as any
holder of Securities may reasonably request, to the extent required from time
to time to enable such Person to sell such Securities without registration under
the Securities Act, including without limitation, within the requirements of
the exemption provided by Rule 144.

 

4.3           Integration. 
The Company shall not sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in Section 2 of
the Securities Act) that would be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading Market
such that it would require shareholder approval prior to the closing of such other
transaction unless shareholder approval is obtained before the closing of such
subsequent transaction.

 

4.4           Securities Laws Disclosure; Publicity. 
The Company shall, by 8:30 a.m. (Eastern time) on the Trading Day
immediately following the date hereof, issue a press release disclosing the
material terms of the transactions contemplated hereby.  From and after the issuance of such press
release, the Company shall have publicly disclosed all material, non-public information
delivered to any of the Purchasers by the Company or any of its subsidiaries,
or any of their respective officers, directors, employees or agents in
connection with the transactions contemplated by the Transaction
Documents.  The Company and each
Purchaser shall consult with each other in issuing any other press releases
with respect to the transactions contemplated hereby, and neither the Company
nor any Purchaser shall issue any such press release nor otherwise make any
such public statement without the prior consent of the Company, with respect to
any press release of any Purchaser, or without the prior consent of each
Purchaser, with respect to any press release of the Company, which consent
shall not unreasonably be withheld or delayed, except if such disclosure is
required by law, in which case the disclosing party shall promptly provide the
other party with prior notice of such public statement or communication.  Notwithstanding the foregoing, the Company
shall not publicly disclose the name of any Purchaser, or include the name of
any Purchaser in any SEC Reports or any regulatory agency or Trading Market,
without the prior written consent of such Purchaser, except (a) as
required by federal securities law in connection with the filing of final
Transaction Documents (including signature pages thereto) with the
Commission and (b) to the extent such disclosure is required by law or
Trading Market regulations, in which case the Company shall provide the
Purchasers with prior notice of such disclosure permitted under this clause
(b).

 

4.5           Shareholder Rights Plan. 
No claim will be made or enforced by the Company or, with the consent of
the Company, any other Person, that any Purchaser is an “Acquiring Person”
under any control share acquisition, business combination, poison pill (including
any distribution under a rights agreement) or similar anti-takeover plan or
arrangement in effect or hereafter

 

21

 

adopted by the Company, or that any Purchaser could be
deemed to trigger the provisions of any such plan or arrangement, by virtue of
receiving Securities under the Transaction Documents or under any other
agreement between the Company and the Purchasers.

 

4.6           Non-Public Information. 
Except with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents, the Company covenants
and agrees that neither it, nor any other Person acting on its behalf will
provide any Purchaser or its agents or counsel with any information that the
Company believes constitutes material non-public information, unless prior
thereto such Purchaser shall have executed a written agreement with the Company
regarding the confidentiality and use of such information.  The Company understands and confirms that
each Purchaser shall be relying on the foregoing covenant in effecting
transactions in securities of the Company.

 

4.7           Use of Proceeds. 
Except as set forth on Schedule 4.7 attached hereto, the Company
shall use the net proceeds from the sale of the Securities hereunder for
working capital purposes and shall not use such proceeds for: (a) the
satisfaction of any portion of the Company’s debt (other than payment of trade
payables in the ordinary course of the Company’s business and prior practices),
(b) the redemption of any Common Stock or Common Stock Equivalents, (c) the
settlement of any outstanding litigation or (d) in violation of the FCPA
or OFAC regulations.

 

4.8           Indemnification of Purchasers.  
Subject to the provisions of this Section 4.8, the Company will
indemnify and hold each Purchaser and its directors, officers, shareholders,
members, partners, employees and agents (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title), each Person who controls such Purchaser
(within the meaning of Section 15 of the Securities Act and Section 20
of the Exchange Act), and the directors, officers, shareholders, agents,
members, partners or employees (and any other Persons with a functionally
equivalent role of a Person holding such titles notwithstanding a lack of such
title or any other title) of such controlling persons (each, a “Purchaser
Party”) harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such Purchaser Party may suffer or incur as a result of
or relating to (a) any breach of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or in the other
Transaction Documents or (b) any action instituted against a Purchaser in
any capacity, or any of them or their respective Affiliates, by any stockholder
of the Company who is not an Affiliate of such Purchaser, with respect to any
of the transactions contemplated by the Transaction Documents (unless such
action is based upon a breach of such Purchaser’s representations, warranties
or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any
violations by such Purchaser of state or federal securities laws or any conduct
by such Purchaser which constitutes fraud, gross negligence, willful misconduct
or malfeasance).  If any action shall be
brought against any Purchaser Party in respect of which indemnity may be sought
pursuant to this Agreement, such Purchaser Party shall promptly notify the Company
in writing, and the Company shall have the right to assume the defense thereof
with counsel of its own choosing reasonably acceptable to the Purchaser
Party.  Any Purchaser Party shall have
the right to employ separate counsel in any such action and participate in the
defense thereof, but the fees

 

22

 

and expenses of such
counsel shall be at the expense of such Purchaser Party except to the extent
that (i) the employment thereof has been specifically authorized by the
Company in writing, (ii) the Company has failed after a reasonable period
of time to assume such defense and to employ counsel or (iii) in such
action there is, in the reasonable opinion of counsel, a material conflict on
any material issue between the position of the Company and the position of such
Purchaser Party, in which case the Company shall be responsible for the
reasonable fees and expenses of no more than one such separate counsel.  The Company will not be liable to any
Purchaser Party under this Agreement (y) for any settlement by a Purchaser
Party effected without the Company’s prior written consent, which shall not be
unreasonably withheld or delayed; or (z) to the extent, but only to the
extent that a loss, claim, damage or liability is attributable to any Purchaser
Party’s breach of any of the representations, warranties, covenants or
agreements made by such Purchaser Party in this Agreement or in the other
Transaction Documents. The indemnification required by this Section 4.8
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received or are incurred.
The indemnity agreements contained herein shall be in addition to any cause of
action or similar right of any Purchaser Party against the Company or others,
and (y) any liabilities the Company may be subject to pursuant to law.

 

4.9           Reservation of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement and Warrant Shares pursuant to any exercise of the Warrants.

 

4.10         Listing of Common Stock. The Company hereby agrees to use best
efforts to maintain the listing or quotation of the Common Stock on the Trading
Market on which it is currently listed, and concurrently with the Closing, the
Company shall apply to list or quote all of the Shares and Warrant Shares on
such Trading Market and promptly secure the listing of all of the Shares and
Warrant Shares on such Trading Market. The Company further agrees, if the
Company applies to have the Common Stock traded on any other Trading Market, it
will then include in such application all of the Shares and Warrant Shares, and
will take such other action as is necessary to cause all of the Shares and
Warrant Shares to be listed or quoted on such other Trading Market as promptly
as possible.  The Company will then take
all action reasonably necessary to continue the listing and trading of its
Common Stock on a Trading Market and will comply in all respects with the
Company’s reporting, filing and other obligations under the bylaws or rules of
the Trading Market.

 

4.11         [RESERVED]

 

4.12         Subsequent Equity Sales. 
From the date hereof until February 26, 2010 neither the Company
nor any Subsidiary shall issue, enter into any agreement to issue or announce
the issuance or proposed issuance of any shares of Common Stock or Common Stock
Equivalents.  Notwithstanding the
foregoing, this Section 4.12 shall not apply in respect of an Exempt
Issuance, except that no Variable Rate Transaction shall be an Exempt Issuance.

 

4.13         [RESERVED]

 

23

 

4.14         Certain Transactions and Confidentiality. Each Purchaser, severally and not
jointly with the other Purchasers, covenants that neither it nor any Affiliate
acting on its behalf or pursuant to any understanding with it will execute any
purchases or sales, including Short Sales of any of the Company’s securities
during the period commencing with the execution of this Agreement and ending at
such time that the transactions contemplated by this Agreement are first
publicly announced pursuant to the initial press release as described in Section 4.4. 
Each Purchaser, severally and not jointly with the other Purchasers, covenants
that until such time as the transactions contemplated by this Agreement are
publicly disclosed by the Company pursuant to the initial press release as
described in Section 4.4, such Purchaser will maintain the confidentiality
of the existence and terms of this transaction and the information included in
the Disclosure Schedules.  Notwithstanding the foregoing and
notwithstanding anything contained in this Agreement to the contrary, the
Company expressly acknowledges and agrees that (i) no Purchaser makes any
representation, warranty or covenant hereby that it will not engage in
effecting transactions in any securities of the Company after the time that the
transactions contemplated by this Agreement are first publicly announced
pursuant to the initial press release as described in Section 4.4, (ii) no
Purchaser shall be restricted or prohibited from effecting any transactions in
any securities of the Company in accordance with applicable securities laws and
regulations from and after the time that the transactions contemplated by this
Agreement are first publicly announced pursuant to the initial press release as
described in Section 4.4 and (iii) no Purchaser shall have any duty
of confidentiality to the Company or its Subsidiaries after the issuance of the
initial press release as described in Section 4.4.  Notwithstanding
the foregoing, in the case of a Purchaser that is a multi-managed investment
vehicle whereby separate portfolio managers manage separate portions of such
Purchaser’s assets and the portfolio managers have no direct knowledge of the
investment decisions made by the portfolio managers managing other portions of
such Purchaser’s assets, the covenant set forth above shall only apply with
respect to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this Agreement.

 

ARTICLE
V.

MISCELLANEOUS

 

5.1           Termination.  This Agreement may be terminated
by any Purchaser, as to such Purchaser’s obligations hereunder only and without
any effect whatsoever on the obligations between the Company and the other
Purchasers, by written notice to the other parties, if the Closing has not been
consummated on or before February 2, 2010; provided, however,
that no such termination will affect the right of any party to sue for any
breach by the other party (or parties).

 

5.2           Fees and Expenses. 
Except as expressly set forth in the Transaction Documents to the
contrary, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement.  The
Company shall pay all Transfer Agent fees, stamp taxes and other taxes and
duties levied in connection with the delivery of any Securities to the
Purchasers.

 

5.3           Entire Agreement. 
The Transaction Documents, together with the exhibits and schedules
thereto, the Prospectus and the Prospectus Supplement, contain the entire

 

24

 

understanding of the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents, exhibits
and schedules.

 

5.4           Notices.  Any and all
notices or other communications or deliveries required or permitted to be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of: (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth on
the signature pages attached hereto prior to 5:30 p.m. (Eastern time)
on a Trading Day, (b) the next Trading Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
number set forth on the signature pages attached hereto on a day that is
not a Trading Day or later than 5:30 p.m. (Eastern time) on any Trading
Day, (c) the second (2nd) Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon
actual receipt by the party to whom such notice is required to be given.  The address for such notices and
communications shall be as set forth on the signature pages attached
hereto.

 

5.5           Amendments; Waivers. 
No provision of this Agreement may be waived, modified, supplemented or
amended except in a written instrument signed, in the case of an amendment, by
the Company and the Purchasers holding at least 67% in interest of the Shares
based on the initial Subscription Amounts hereunder or, in the case of a
waiver, by the party against whom enforcement of any such waived provision is
sought.  No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof,
nor shall any delay or omission of any party to exercise any right hereunder in
any manner impair the exercise of any such right.

 

5.6           Headings.  The headings
herein are for convenience only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any of the provisions hereof.

 

5.7           Successors and Assigns. 
This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns.  The Company may not assign this Agreement or
any rights or obligations hereunder without the prior written consent of each
Purchaser (other than by merger).  Any
Purchaser may assign any or all of its rights under this Agreement to any
Person to whom such Purchaser assigns or transfers any Securities, provided
that such transferee agrees in writing to be bound, with respect to the
transferred Securities, by the provisions of the Transaction Documents that
apply to the “Purchasers.”

 

5.8           No Third-Party Beneficiaries. 
This Agreement is intended for the benefit of the parties hereto and
their respective successors and permitted assigns and is not for the benefit
of, nor may any provision hereof be enforced by, any other Person, except as
otherwise set forth in Section 4.8.

 

5.9           Governing Law. 
All questions concerning the construction, validity, enforcement and
interpretation of the Transaction Documents shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York,
without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings
concerning the interpretations, enforcement and defense of the transactions contemplated
by this Agreement and

 

25

 

any other Transaction
Documents (whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New York.
Each party hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in the City of New York, borough of Manhattan
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or is an inconvenient venue for
such proceeding.  Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding 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.  If
either party shall commence an action or proceeding to enforce any provisions
of the Transaction Documents, then, in addition to the obligations of the
Company under Section 4.8, the prevailing party in such action or
proceeding shall be reimbursed by the other party for its reasonable attorneys’
fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.

 

5.10         Survival.  The
representations and warranties contained herein shall survive the Closing and
the delivery of the Securities.

 

5.11         Execution.  This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same
counterpart.  In the event that any
signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf”
format data file, such signature shall create a valid and binding obligation of
the party executing (or on whose behalf such signature is executed) with the
same force and effect as if such facsimile or “.pdf” signature page were
an original thereof.

 

5.12         Severability. 
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means
to achieve the same or substantially the same result as that contemplated by
such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any
of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

5.13         Rescission and Withdrawal Right. 
Notwithstanding anything to the contrary contained in (and without
limiting any similar provisions of) any of the other Transaction Documents,
whenever any Purchaser exercises a right, election, demand or option under a
Transaction Document and the Company does not timely perform its related
obligations within

 

26

 

the periods therein
provided, then such Purchaser may rescind or withdraw, in its sole discretion
from time to time upon written notice to the Company, any relevant notice,
demand or election in whole or in part without prejudice to its future actions
and rights; provided, however, that in the case of a rescission
of an exercise of a Warrant, the applicable Purchaser shall be required to
return any shares of Common Stock subject to any such rescinded exercise notice
concurrently with the return to such Purchaser of the aggregate exercise price
paid to the Company for such shares and the restoration of such Purchaser’s
right to acquire such shares pursuant to such Purchaser’s Warrant (including,
issuance of a replacement warrant certificate evidencing such restored right).

 

5.14         Replacement of Securities. 
If any certificate or instrument evidencing any Securities is mutilated,
lost, stolen or destroyed, the Company shall issue or cause to be issued in
exchange and substitution for and upon cancellation thereof (in the case of
mutilation), or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction. 
The applicant for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs (including
customary indemnity) associated with the issuance of such replacement
Securities.

 

5.15         Remedies.  In addition
to being entitled to exercise all rights provided herein or granted by law,
including recovery of damages, each of the Purchasers and the Company will be
entitled to specific performance under the Transaction Documents.  The parties agree that monetary damages may
not be adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agree to waive
and not to assert in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.

 

5.16         Payment Set Aside. 
To the extent that the Company makes a payment or payments to any
Purchaser pursuant to any Transaction Document or a Purchaser enforces or
exercises its rights thereunder, and such payment or payments or the proceeds
of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law,
common law or equitable cause of action), then to the extent of any such
restoration the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had
not been made or such enforcement or setoff had not occurred.

 

5.17         Independent Nature of Purchasers’
Obligations and Rights.  The obligations of each
Purchaser under any Transaction Document are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be responsible in
any way for the performance or non-performance of the obligations of any other
Purchaser under any Transaction Document. 
Nothing contained herein or in any other Transaction Document, and no
action taken by any Purchaser pursuant thereto, shall be deemed to constitute
the Purchasers as a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Purchasers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents.  Each Purchaser shall be entitled to

 

27

 

independently protect and
enforce its rights including, without limitation, the rights arising out of
this Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.  Each
Purchaser has been represented by its own separate legal counsel in their
review and negotiation of the Transaction Documents.  For reasons of administrative convenience
only, each Purchaser and its respective counsel have chosen to communicate with
the Company through WS.  WS does not
represent any of the Purchasers and only represents Rodman & Renshaw,
LLC, the placement agent.  The Company
has elected to provide all Purchasers with the same terms and Transaction
Documents for the convenience of the Company and not because it was required or
requested to do so by any of the Purchasers. 
It is expressly understood and agreed that each provision contained in
this Agreement and in each other Transaction Document is between the Company
and a Purchaser, solely, and not between the Company and the Purchasers collectively
and not between and among the Purchasers.

 

5.18         Liquidated Damages. 
The Company’s obligations to pay any partial liquidated damages or other
amounts owing under the Transaction Documents is a continuing obligation of the
Company and shall not terminate until all unpaid partial liquidated damages and
other amounts have been paid notwithstanding the fact that the instrument or
security pursuant to which such partial liquidated damages or other amounts are
due and payable shall have been canceled.

 

5.19         Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking of any
action or the expiration of any right required or granted herein shall not be a
Business Day, then such action may be taken or such right may be exercised on
the next succeeding Business Day.

 

5.20         Construction. The parties agree that each of them
and/or their respective counsel has reviewed and had an opportunity to revise
the Transaction Documents and, therefore, the normal rule of construction
to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the Transaction Documents
or any amendments hereto. In addition, each and every reference to share prices
and shares of Common Stock in any Transaction Document shall be subject to
adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur
after the date of this Agreement.

 

5.21         WAIVER OF JURY TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH
KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE
LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER
TRIAL BY JURY.

 

(Signature
Pages Follow)

 

28

 

IN WITNESS WHEREOF, the
parties hereto have caused this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.

 

 

	
  EVERGREEN
  ENERGY INC.

  	
   

  	
  Address for Notice:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  Fax:

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

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

  	
   

  	
   

  

 

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR
PURCHASER FOLLOWS]

 

29

 

[PURCHASER
SIGNATURE PAGES TO EEE SECURITIES PURCHASE AGREEMENT]

 

IN WITNESS WHEREOF, the
undersigned have caused this Securities Purchase Agreement to be duly executed
by their respective authorized signatories as of the date first indicated
above.

 

 

	
  Name
  of Purchaser:

  	
   

  
	
   

  
	
  Signature of Authorized Signatory of Purchaser:

  	
   

  
	
   

  
	
  Name
  of Authorized Signatory:

  	
   

  
	
   

  
	
  Title
  of Authorized Signatory:

  	
   

  
	
   

  
	
  Email
  Address of Authorized Signatory:

  	
   

  
	
   

  
	
  Facsimile
  Number of Authorized Signatory:

  	
   

  
	
   

  
	
  Address
  for Notice of Purchaser:

  
	
   

  
	
   

  
	
  Address
  for Delivery of Securities for Purchaser (if not same as address for notice):

  
	
   

  
	
   

  
	
  Subscription
  Amount: $

  
	
   

  
	
  Shares:

  
	
   

  
	
  Warrant
  Shares:

  
	
   

  
	
  Warrant
  Beneficial Ownership Limitation (circle one): 4.99%/9.99%

  
							

 

[SIGNATURE PAGES
CONTINUE]

 

30ex101.htm

    

    

    

    

    

    

    

    

    Effective
as from January 25, 2010

    

    by
and

    between

    

    TEMASEK
INVESTMENTS INC.

    

    as
Optionor

    

    and

    

    CONSTITUTION
MINING CORP.

    

    as
Optionee

    

    

    

    

    _________________________________

    

    

    MINERAL
RIGHT OPTION AGREEMENT

    

    __________________________________

    

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    MINERAL RIGHT OPTION
AGREEMENT

    

    

    THIS
MINERAL RIGHT OPTION AGREEMENT (hereinafter the “Agreement”) made effective as
of the 25th day of January, 2010 (hereinafter the “Effective Date”) is executed
by and between:

    

    TEMASEK INVESTMENTS INC., a company duly incorporated
and organized under the laws of Panama with address for delivery and notice
located at 16th
Floor, MMG  Tower, Ubanzacion Marbella, 53rd E
Street, Panama City, Panama (hereinafter the "Optionor" or “TEMASEK”) of the
first part; and

    

    CONSTITUTION MINING CORP., a
company organized under the laws of Delaware, United States of America, with
address for delivery and notice located at Pasaje Mártir Olaya 129, Oficina
1203, Centro Empresarial José Pardo Torre A, Miraflores, Lima, Perú,
(hereinafter the “Optionee” or “CONSTITUTION”), of the second part.

    

    Optionor
and Optionee collectively referred to as the Parties, and individually and
indistinctively referred to as the Party.

    

    WHEREAS

    

    (i)           Both
Parties are mining exploration and development companies with experience in the
identification and development of mining projects, particularly in the region of
South America.

    

    (ii)           CONSTITUTION
is interested in acquiring the ownership and title of certain claim
applications, claims, and assorted mining rights, including all obligations
arisen therefrom, with respect to certain areas located in Peru as detailed in
Annex I hereto
(hereinafter the “Mineral Rights”) that are of the property and title of Minera
Saramiriza S.A.C.., a company duly incorporated and organized under the laws of
Peru (hereinafter “MINERA SARAMIRIZA”).

    

    (iii)           TEMASEK
is the indirect beneficial owner of 100% interest in the Mineral Rights through
the direct and indirect control of different wholly owned subsidiaries, as
detailed below.

    

    (iii)           The
ownership of TEMASEK in the Mineral Rights is evidenced through (a) the direct
ownership of 1 share of the shareholding of MINERA SARAMIRIZA, and (b) the
direct ownership of 100% of the outstanding shareholding in WOODBURN
INVESTMENTS, INC., a company duly incorporated and organized under the laws of
Panama, with address for delivery and notice at 16th
Floor, MMG  Tower, Ubanzacion Marbella, 53rd E
Street, Panama City, Panama (hereinafter “WOODBURN”), being WOODBURN the
registered owner of 999 shares in MINERA SARAMIRIZA. WOODBURN and TEMASEK are
the registered owners of 100% of the outstanding shareholding in MINERA
SARAMIRIZA represented in 1,000 shares.

     

     

    
      
         

      

      
        Page 1 of
13

        
          

        

      

      
         

      

    

    

    (iv)           The
Optionor has agreed to grant three exclusive options (hereinafter, collectively
referred to as the “Options”, and each individually and indistinctively referred
to as the “Option”) to the Optionee, and the Optionee has agreed to receive the
Options, each such Options entitling the Optionor to acquire a one third (1/3)
undivided interest in and to the Mineral Rights in the manner hereto below
described, for an aggregate interest of a one hundred percent (100%) undivided
interest if all three Options are exercised, as detailed herein.

    

    NOW THEREFORE THIS AGREEMENT
WITNESSES that in consideration of the covenants and agreements
hereinafter set forth the parties agree that:

    

    REPRESENTATIONS,
WARRANTIES AND COVENANTS

    

    1.1           The
Optionor represents, warrants and covenants (representation, warrants and
covenants that are extensive, when applicable, to the situation of its
subsidiaries WOODBURN and MINERA SARAMIRIZA) to and with the Optionee
that:

    

    a) it has been duly incorporated and
validly exists as a corporation in good standing under its laws of
origin;

    

    b) it is qualified to do business in
those jurisdictions where it is necessary to fulfil its obligations under this
Agreement, and it has the full power and authority to enter into this Agreement
and any agreement or instrument referred to or contemplated by this
Agreement;

    

    c) it has the requisite power,
authority and capacity to fulfil its obligations under this
Agreement;

    

    d) the execution and delivery of this
Agreement and the agreements contemplated hereby have been duly authorized by
all necessary action on its part;

    

    e) prior to the Effective Date, it has
obtained all authorizations, approvals, including regulatory approval, or
waivers that may be necessary or desirable in connection with the transactions
contemplated in this Agreement;

    

    f) there are no other consents,
approvals or conditions precedent to the performance of this Agreement which
have not been obtained;

    

    g) it is not in breach of any laws,
ordinances, statutes, regulations, by-laws, orders or decrees to which is
subject or which apply to it;

    

    h) the making of this Agreement and the
completion of the transactions contemplated hereby and the performance of and
compliance with the terms hereof does not and will not conflict with or result
in a breach of or violate any of the terms, conditions or provisions of any law,
judgment, order, injunction, decree, regulation or ruling of any court or
governmental authority, domestic or foreign, to which the Optionor is
subject;

    

    i) it is now, and will also be
thereafter at the time of legal transfer of interests in the Mineral Rights when
any of the Options are exercised, the registered and beneficial owner of the
Mineral Rights free and clear of all liens, charges and claims of others and no
taxes, royalties or lease payments or like amounts are due in respect of any of
the mineral claims that comprised the Mineral Rights;

     

     

    
      
         

      

      
        Page 2 of
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    j) there is no adverse claim or
challenge against or to the ownership of or title to the interest it has on
WOODBURN and MINERA SARAMIRIZA and on the Mineral Rights, nor to its knowledge
is there any basis therefore, and there are no outstanding agreements or options
to acquire or purchase any shares in WOODBURN and MINERA SARAMIRIZA and on the
Mineral Rights or any portion thereof, and no person other than the Optionor
pursuant to the provisions hereof, has any interest whatsoever in WOODBURN and
MINERA SARAMIRIZA and in the production from any of the mineral claims
comprising the Mineral Rights;

    

    k) the Mineral Rights have been duly
and validly located and recorded in a good and miner-like manner pursuant to
applicable mining laws in Peru;

    

    l) all permits and licenses covering
the Mineral Rights as they currently stand have been duly and validly issued
pursuant to applicable mining laws in Peru and are in good standing by the
proper doing and filing of assessment work and the payment of all fees, taxes
and rentals in accordance with the requirements of applicable mining laws in
Peru and the performance of all other actions necessary in that regard;
and

    

    m) it requires no third party consent
of any kind to enter into this Agreement and grant the Options contemplated
hereby.

    

    1.2           The
Optionee represents, warrants and covenants to and with the Optionor
that:

     

    a) it has
been duly incorporated and validly exists as a corporation in good standing
under its laws of origin;

     

    b)
neither the execution and delivery of this Agreement by the Optionee nor the
performance by the Optionee of its obligations hereunder conflicts with the
Optionee’s constating documents or any agreement to which it is
bound;

     

    c) the
execution, delivery and performance by the Optionee of this Agreement and any
other agreement or instrument to be executed and delivered by it hereunder and
the consummation by it of all the transactions contemplated hereby and thereby
have been duly authorised by all necessary corporate action on the part of the
Optionee; and

     

    d)
excepting only as otherwise disclosed herein, the Optionee is not subject to, or
a party to, any charter or by-law restriction, any law, any claim, any
encumbrance or any other restriction of any kind or character which would
prevent the execution of its obligations as hereof or the consummation of the
transaction contemplated by this Agreement or any other agreement or instrument
to be executed and delivered by the Optionee hereunder.

     

    The
representations and warranties contained hereof are provided for the exclusive
benefit of the other Party and a breach of any one or more thereof may be waived
by the non-breaching Party in whole or in part at any time without prejudice to
its rights in respect of any other breach of the same or any other
representation or warranty.

     

    GRANT
AND EXERCISE OF OPTIONS

     

    2.1           The
Optionor hereby grants to the Optionee the sole and exclusive right and option
to acquire a one hundred percent (100%) undivided interest in the Mineral
Rights, such 100% interest to be free and clear of all liens, charges,
encumbrances, security interests and adverse claims.

     

     

    
      
         

      

      
        Page 3 of
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    2.2           The
Parties agreed that the Optionee may exercise the Options in three
separate  increments, as described below, each such increment being
its own Option.

     

    2.3           The
Optionee agrees to issue, within 30 business days as from the Effective Date,
500,000 Optionee Shares to the order and the direction of the Optionor, or
whoever persons the Optionor indicates.

     

    (a)           33%
Option

     

    The
Optionee may exercise the initial thirty-three percent (33%) option to acquire a
33% interest in the Mineral Rights in accordance with the terms set out below
(hereinafter, the “33% Option”).

     

    In order
to exercise the 33% Option the Optionee, within 12 months as from the Effective
Date, shall:

     

    (i) have
issued the 500,000 Optionee Shares within 30 days of the Effective
Date;

     

    (ii) pay
$ 250,000 (United States Dollars Two Hundred Fifty) to the order and the
direction of the Optionor; and

     

    (ii)
issue 1,000,000 Optionee Shares to the order and the direction of the Optionor,
or whoever persons the Optionor indicates.

     

    For the
purposes of this Agreement the Optionee is deemed to have fully exercised the
33% Option only once all three obligations described above in points (i), (ii)
and (iii) have been completed.

     

    Upon
exercise of the 33% Option by the Optionee, the Optionor will immediately
proceed to transfer to Optionee, or to the person the Optionee indicates, 33% of
all of the outstanding shareholding in WOODBURN.

     

    (c)           66%
Option

     

    Subject
to the prior and due and complete exercise by the Optionee of the 33% Option in
accordance with the paragraph before, the Optionee may exercise the option to
acquire an additional thirty-three percent (33%) interest in the Mineral Rights,
in accordance with the terms set out below (hereinafter, the “66%
Option”).

     

    In order
to exercise the 66% Option the Optionee, within 24 months as from the Effective
Date, shall:

     

    (i) have
exercised and completed the 33% Option; and

     

    (ii) pay
$ 1,000,000 (United States Dollars One Million) to the order and the direction
of the Optionor; and

     

    (iii)
issue 1,000,000 Optionee Shares to the order and the direction of the Optionor,
or whoever persons the Optionor indicates.

     

     

    
      
         

      

      
        Page 4 of
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    For the
purposes of this Agreement the Optionee is deemed to have fully exercised the
66% Option only once all three obligations described above in points (i), (ii)
and (iii) have been completed.

     

    Upon
exercise of the 66% Option by the Optionee, the Optionor will immediately
proceed to transfer to Optionee, or to the person the Optionee indicates, an
additional thirty-three percent (33%) of all the outstanding shareholding in
WOODBURN.

     

    (d)           100%
Option

     

    Subject
to the prior and due and complete exercise by the Optionee of the 66% Option in
accordance with the paragraph before, the Optionee may exercise the third and
final option to acquire an additional 34% interest in the Mineral Rights, in
accordance with the terms set out below (hereinafter, the “100%
Option”).

     

    In order
to exercise the 100% Option the Optionee, within 36 months as from the Effective
Date, shall:

     

    (i) have
exercised and completed the 66% Option; and

     

    (ii) pay
$ 2,000,000 (United States Dollars Two Million) to the order and the direction
of the Optionor; and

     

    (iii)
issue 2,000,000 Optionee Shares to the order and the direction of the Optionor,
or whoever persons the Optionor indicates.

     

    For the
purposes of this Agreement the Optionee is deemed to have fully exercised the
100% Option only once all three obligations described above in points (i), (ii)
and (iii) have been completed.

     

    Upon
exercise of the 100% Option by the Optionee, the Optionor will immediately
proceed to transfer to Optionee, or to the person the Optionee indicates, the
final and remaining 34% of all the outstanding shareholding in WOODBURN.
Additionally, upon exercise of the 100% Option, the Optionor shall become holder
of the one (1) share that currently holds in MINERA SARAMIRIZA as nominee and on
trust for the exclusive and sole benefit and interest of the Optionee. The
Optionor hereby undertakes to the Optionee at all times to exercise all rights
in respect of the share that holds in MINERA SARAMIRIZA strictly in accordance
with the Optionee instructions.

     

    On
completion of the 100% Option the Optionee shall be the owner of one hundred
percent (100%) undivided interest in the Mineral Rights through the direct
ownership of 100% of the outstanding shareholding of WOODBURN and indirect
ownership of 100% of the outstanding shareholding of MINERA
SARAMIRIZA.

    

    NET
RETURNS ROYALTY

     

    3.1           Upon
completion by Optionee of the 100% Option, the Optionee shall recognize to the
Optionor a 2.5% Net Returns Royalty, where Net Returns Royalty has the meaning
set out in Annex
II (hereinafter the “NET RETURN ROYALTY”). The NET RETURN ROYALTY will be
calculated and paid to the Optionor or to its appointed nominees in accordance
with the Annex
II.

     

    3.2           As
from 90 days from the exercise and completion of the 100% Option, the Optionee
shall have the right to acquire 1% of NET RETURN ROYALTY from the Optionor for
the total amount of $ 2,000,000 (United States Dollars Two
Million).

     

    
      
         

      

      
        Page 5 of
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    JOINT
VENTURE DEVELOPMENT

     

    4.1           Following
the due and complete acquisition by the Optionee of 66% interest in the Mineral
Rights under this Agreement and with the Optionee failing to acquire the 100%
interest in the Mineral Rights, for any reason whatsoever, the Optionor and the
Optionee will thereby be deemed to form a Joint Venture for the purpose of
carrying out further development work and production on the Mineral Rights and
will, in good faith, negotiate and execute a Joint Venture Agreement, under
which the Optionee will be the operator of the mining project to develop. The
interest of the Parties in the Mineral Rights shall be the interest of the
Parties under the Joint Venture Agreement (hereinafter the “Joint Venture
Development”).

     

    4.2           Under
the Joint Venture Development, the Optionee shall have the whole responsibility
for developing a feasible mining project and all necessary facilities for the
extraction, crushing, processing and beneficiation of commercially valuable
minerals, including all necessary facilities for compliance with the applicable
laws, including environmental laws governing mining activity in Peru
(hereinafter the “Feasible Project”). All necessary costs and investment
required for the developing of a Feasible Project shall be supported exclusively
by the Optionee. Optionor shall have a carried free interest in the Mineral
Rights.

     

    4.3           If
under the Joint Venture Development, a Feasible Project is not developed within
3 years as from the Effective Date, the Optionee shall pay to the Optionor and
advance minimum mining royalty per year of $ 500,000 (United States Dollars Five
Hundred Thousand), that will be deducted from the NET RETURN ROYALTY
(hereinafter the “Advance Minimum Royalty”).

     

    OBLIGATIONS
OF OPTIONOR DURING OPTION PERIOD

     

    5.1           During
the 36 months as from the Effective Date, the Optionor will:

     

    a)
maintain in good standing the Mineral Rights that are in good standing on the
date hereof by the performance of all actions (except for those economic
obligations arisen as from the Effective Date of this Agreement, which shall be
of the responsibility of the Optionee) which may be necessary under Peruvian law
in that regard and in order to keep such Mineral Rights free and clear of all
liens and other charges arising from the Optionee’s activities thereon except
those at the time contested in good faith by the Optionee;

    

    b) maintain in good standing both
WOODBURN and MINERA SARAMIRIZA, and the shareholding of both companies free and
clear of all liens;
 

    c) restrain from issuing any additional
shares or cause to issue any additional shares either in WOODBURN and/or MINERA
SARAMIRIZA;

     

     

    
      
         

      

      
        Page 6 of
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    d) restrain from transferring any of
its shares in WOODBURN and/or in MINERA SARAMIRIZA to any other third party
and/or cause to transfer any shares in MINERA SARAMIRIZA to any other third
party;

     

    e) permit
the directors, officers, employees and designated consultants of the Optionee,
at their own risk, access to the Mineral Rights at all reasonable times, and
providing the Optionee agrees to indemnify the Optionor against and to save the
Optionor harmless from all costs, claims, liabilities and expenses that the
Optionor may incur or suffer as a result of any injury (including injury causing
death) to any director, officer, employee or designated consultant of the
Optionee while on the Mineral Rights;

     

    OBLIGATIONS
OF OPTIONEE DURING OPTION PERIOD

     

    6.1           During
the 36 months as from the Effective Date, the Optionee will:

     

    a) do all
work on the Mineral Rights in a good and workmanlike fashion and in accordance
with all applicable laws, regulations, orders and ordinances of any governmental
authority; and

     

    b)
indemnify and save the Optionor harmless in respect of any and all costs,
claims, liabilities and expenses arising out of the Optionee’s activities
through WOODBURN and MINERA SARAMIRIZA and/or on the Mineral
Rights.

     

    ARBITRATION

     

    7.1           All
questions or matters in dispute with respect to the interpretation of this
Agreement will, insofar as lawfully possible, be submitted to arbitration
pursuant to the terms hereof using “final offer” arbitration
procedures.

     

    7.2           It
will be a condition precedent to the right of any party to submit any matter to
arbitration pursuant to the provisions hereof, that any party intending to refer
any matter to arbitration will have given not less than 10 days’ prior written
notice of its intention so to do to the other party together with particulars of
the matter in dispute.

     

    7.3           On
the expiration of such 10 days, the party who gave such notice may proceed to
commence procedure in furtherance of arbitration as provided in this
Section.

     

    7.4           The
party desiring arbitration (the “First Party”) will nominate in writing three
proposed arbitrators, and will notify the other party (the “Second Party”) of
such nominees, and the other party will, within 10 calendar days after receiving
such notice, either choose one of the three or recommend three nominees of its
own. All nominees of either party must hold accreditation as either a lawyer,
accountant or mining engineer. If the First Party fails to choose one of the
Second Party’s nominees then all six names shall be placed into a hat and one
name shall be randomly chosen by the president of the First Party and that
person if he/she is prepared to act shall be the nominee. Except as specifically
otherwise provided in this Section the arbitration herein provided for will be
conducted in accordance with the UNCITRAL Arbitration Rules and the place of
arbitration shall be Reno, Nevada, United States of America. The parties shall
thereupon each be obligated to proffer to the Arbitrator within 21 calendar days
of his/her appointment a proposed written solution to the dispute and the
arbitrator shall within 10 calendar days of receiving such proposals choose one
of them without altering it except with the consent of both
parties.

     

     

    
      
         

      

      
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    7.5           The
expense of the arbitration will be paid as specified in the award.

     

    7.6           The
parties agree that the award of the arbitrator will be final and binding upon
each of them.

     

    DEFAULT
AND TERMINATION

     

    8.1           If
at any time during the term of this Agreement either party fails to perform any
obligation hereunder or any representation or warranty given by it proves to be
untrue, then the other party may terminate this Agreement (without prejudice to
any other rights it may have) providing:

     

    
      	
               
      

            	
              (i)

            	
              it
      first gives to the party allegedly in default a notice of default
      containing particulars of the obligation which such has not performed, or
      the warranty breached;

            

    

     

    
      	
               
      

            	
              (ii)

            	
              the
      other party does not dispute the default, then if it is reasonably
      possible to cure the default without irreparable harm to the
      non-defaulting party, the defaulting party does not, within 30 calendar
      days after delivery of such notice of default, cure such default by
      appropriate payment or commence to correct such default and diligently
      prosecute the matter until it is
corrected.

            

    

    

    NOTICES

    

    9.1           All
notices and other communications in connection with this Agreement must be in
writing and given by (i) hand delivery (ii) through a major international
courier service, or (iii) facsimile transmissions, in each case addressed as
specified below or in any subsequent notice from the intended recipient to the
party sending the notice. Such notices and communications will be effective upon
delivery if delivered by hand, upon receipt if sent by international courier
service, or upon receipt if sent by facsimile transmission. Notices shall be
addressed as follows:

    

    CONSTITUTION

    Pasaje
Mártir Olaya 129, Oficina 1203

    Centro
Empresarial José Pardo Torre A

    Miraflores,
Lima, Perú

    

    TEMASEK

    16th
Floor, MMG  Tower

    Ubanzacion
Marbella

    53rd E
Street, Panama

    

    GOVERNING
LAW

    

    10.1           This
assignment agreement and any dispute arising hereunder will be governed by the
laws of the state of Delaware, United States of America, without giving effect
to the conflict of laws provisions thereof.

    

    10.2           Each
of the Optionor and the Optionee hereby irrevocable submits to the exclusive
jurisdiction of the courts of the state of Delware, United States of America, in
respect of any action or proceeding brought against it by the Optionor or the
Optionee, respectively, arising under this Agreement.

    

    ENTIRE
AGREEMENT

    

    11.1           This
Agreement represents the final agreement between the Parties with respect to the
subject matter hereof and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements of the Parties.

     

    
      
         

      

      
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    EXECUTION
IN COUNTERPARTS

    

    11.2           This
Agreement is executed in two (2) counterparts and by the Parties hereto in
separate counterparts, each of which when so executed will be deemed to be an
original and both of which when taken together will constitute one and the same
agreement.

    

    IN
WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as
of the date first above written.

    

    
      	
              TEMASEK INVESTMENTS
      INC.

               

            	
              CONSTITUTION
      MINING CORP.

               

               

            
	
              By: /s/ Jose
      Silva                                             
      

                          Jose
      Silva

            	
              By:  /s/ Michael
      Stocker                               

                          
      Michael Stocker

            

    

     

    
 

    
      
         

      

      
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    ANNEX I

    

    

    
      	
               

              Name

               

            	
               

              Area
      (ha)

            	
               

              Department

            	
               

              Province

            	
               

              District

            	
               

              Observation

            
	
               

              Aixa
      1

               

            	
               

              1000

            	
               

              Loreto

            	
               

              Datem
      del Marañon

               

            	
               

              Manseriche

            	 
      
	
               

              Alana
      1

            	
               

              600

            	
               

              Loreto

            	
               

              Datem
      del Marañon

            	
               

              Manseriche-Morona

            	
              Overlaps

              010188704,
      010188604, 010188504

            
	
               

              Alana
      2

               

            	
               

              600

            	
               

              Loreto

            	
               

              Datem
      del Marañon

               

            	
               

              Manseriche-
      Morona

            	 
      
	
               

              Alana
      3

               

            	
               

              800

            	
               

              Loreto

            	
               

              Datem
      del Marañon

               

            	
               

              Manseriche

            	
              Overlaps
      010045107

            
	
               

              Casandra

              1

               

            	
               

              1000

            	
               

              Loreto

            	
               

              Datem
      del Marañon

               

            	
               

              Barranca-Manseriche

            	 
      
	
               

              Casandra

              2

               

            	
               

              1000

            	
               

              Loreto

            	
               

              Datem
      del Marañon

               

            	
               

              Barranca-
      Morona

            	 
      
	
               

              Casandra

              3

            	
               

              900

            	
               

              Loreto

            	
               

              Datem
      del Marañon

               

            	
               

              Barranca-
      Morona

            	 
      
	
               

              Casandra

              4

               

            	
               

              1000

            	
               

              Loreto

            	
               

              Datem
      del Marañon

               

            	
               

              Barranca

            	 
      
	
               

              Casandra

               5

               

            	
               

              1000

            	
               

              Loreto

            	
               

              Datem
      del Marañon

               

            	
               

              Barranca

            	 
      

    

    
      
         

      

      
        Page 10
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        Page 11
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    ANNEX II

    

    NET
RETURNS ROYALTY

    

    Pursuant
to the Agreement to which this Exhibit is attached, Optionee (for the purposes
herein the “Payee”) will be entitled to a royalty equal to 2.5% of net returns
(the “Net Returns Royalty”) payable by Optionor (“Payor”) as set forth
below.

    

    Net
Returns Royalty

    

    A.    
“Net Returns Royalty”
means the aggregate of:

     

    
      	
               
      

            	
              1.

            	
              all
      revenues from the sale or other disposition of ores, concentrates or
      minerals produced from the mineral properties arisen as from the Mineral
      Rights (the “Properties”); and

               

            

    

    
      	
               
      

            	
              2.

            	
              all
      revenues from the operation, sale or other disposition of any facilities
      the cost of which is included in the definition of “Operating Expenses”,
      “Capital Expenses” or “Exploration Expenses”; less (without duplication)
      Working Capital, Operating Expenses, Capital Expenses and Exploration
      Expenses.

               

            

    

     

    B.     
“Working Capital” means
the amount reasonably necessary to provide for the operation of the mining
operation on the Properties and for the operation and maintenance of the
Facilities for a period of six months.

     

    C.     
“Operating Expenses”
means all costs, expenses, obligations, liabilities and charges of whatsoever
nature or kind incurred or chargeable directly or indirectly in connection with
Commercial Production from the Properties and in connection with the maintenance
and operation of the Facilities, all in accordance with generally accepted
accounting principles, consistently applied, including, without limiting the
generality of the foregoing, all amounts payable in connection with mining,
handling, processing, refining, transporting and marketing of ore, concentrates,
metals, minerals and other products produced from the Property, all amounts
payable for the operation and maintenance of the Facilities including the
replacement of items which by their nature require periodic replacement, all
taxes (other than income taxes), royalties and other imposts and all amounts
payable or chargeable in respect of reasonable overhead and administrative
services.

     

    D.      
“Capital Expenses” means
all expenses, obligations and liabilities of whatsoever kind (being of a capital
nature in accordance with generally accepted accounting principles) incurred or
chargeable, directly or indirectly, with respect to the development,
acquisition, redevelopment, modernization and expansion of the Properties and
the Facilities, including, without limiting the generality of the foregoing,
interest thereon from the time so incurred or chargeable at a rate per annum
from time to time equal to prime rate established by the Bank of America, New
York Branch, New York, plus 2 percent per annum, but does not include Operating
Expenses nor Exploration Expenses.

     

    E.        
“Exploration Expenses”
means all costs, expenses, obligations, liabilities and charges of whatsoever
nature or kind incurred or chargeable, directly or indirectly, in connection
with the exploration and development of the Properties including, without
limiting the generality of the foregoing, all costs reasonably attributable, in
accordance with generally accepted accounting principles, to the design,
planning, testing, financing, administration, marketing, engineering, legal,
accounting, transportation and other incidental functions associated with the
exploration and mining operation contemplated by this agreement and with the
Facilities, but does not include Operating Expenses nor Capital
Expenses.

     

    
      
         

      

      
        Page 12
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    F.         
“Facilities” means all
plant, equipment, structures, roads, rail lines, storage and transport
facilities, housing and service structures, real property or interest therein,
whether on the Properties or not, acquired or constructed exclusively for the
mining operation on the Properties contemplated by this Agreement (all commonly
referred to as “infrastructure”).

     

    G.           “Commercial Production” means
the operation of the Properties or any portion thereof as a producing mine and
the production of mineral products therefrom (but does not include bulk
sampling, pilot plant or test operations).

    

    Payment

     

                 
Net Returns shall be calculated for each calendar quarter in which Net Returns
are realized, and payment as due hereunder shall be made within 30 days
following the end of each such calendar quarter. Such payments shall be
accompanied by a statement summarizing the computation of Net Returns and copies
of all relevant settlement sheets. Such quarterly payments are provisional and
subject to adjustment within 90 days following the end of each calendar
year.  Within ninety days after the end of each calendar year, Payor
shall deliver to Payee an unaudited statement of royalties paid to Payee during
the year and the calculation thereof. All year end statements shall be deemed
true and correct six months after presentation, unless within that period Payee
delivers notice to Payor specifying with particularity the grounds for each
exception.  Payee shall be entitled, at Payees’s expense, to an annual
independent audit of the statement by a national firm of chartered accountants,
only if Payee delivers a demand for an audit to Payor within four months after
presentation of the related year-end statement.

    

    

    

    
      
         

      

      
        Page 13
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