Document:

f8k121211a1ex10v_leviathan.htm

Exhibit 10.5

 

SECURITY AGREEMENT

 

This SECURITY AGREEMENT, dated as of August 22, 2011 (“Agreement”), is made by and between Leviathan Minerals Group Incorporated, a Delaware corporation (the “Company”) and each of its wholly-owned subsidiaries party hereto (each a “Subsidiary Grantor” and together with the Company, the “Grantors” and each a “Grantor”) the holders of the Notes described herein (each, an “Investor”, collectively, the “Investors”) and New Asia Partners, LLC (the “Collateral Agent”) for its own benefit and on behalf of each Investor.

 

RECITALS

 

A.          The Company is entering into a Securities Purchase Agreement, dated as of the date hereof (such agreement, as it may hereafter be amended or modified from time to time, the “Purchase Agreement”) pursuant to which the Company is selling and the Investors party thereto are purchasing Senior Secured Convertible Promissory Notes (collectively the “Notes” and each a “Note”).

 

B.           Each Subsidiary Grantor is a subsidiary of Company and will receive substantial direct and indirect benefit from the proceeds of the sale of the Notes.

 

C.           It is a condition precedent to the extension of credit by the Investors under the Notes that each Grantor shall have executed and delivered this Agreement and shall have granted a security interest in the Collateral to the Collateral Agent in accordance herewith to secure their obligations under the Notes and the Transaction Documents.

 

AGREEMENT

 

NOW, THEREFORE, in order to induce the Investors to enter into the Purchase Agreement and to purchase the Notes and for other good and valuable consideration, the receipt and adequacy of which hereby is acknowledged, each Grantor hereby agrees as follows:

 

1. Definitions.  Unless the context otherwise requires, terms defined in the Note and not otherwise defined herein have the same respective meanings when used herein, and terms defined in the Uniform Commercial Code of the State of Minnesota (the “UCC”) and not otherwise defined in this Agreement or in the Note shall have the meanings defined for those terms in the UCC.  In addition, the following terms shall have the meanings respectively set forth after each:

 

“Certificates” means all certificates now or hereafter representing or evidencing any Pledged Securities.

 

“Collateral” means and includes all right, title and interest in or to any and all of the following assets and properties of each Grantor, wherever located, and now owned or hereafter acquired:

 

	
  

	
(a)

	
All Accounts;

	
  

	
(b)

	
All Chattel Paper;

	
  

	
(c)

	
All Deposit Accounts and cash;

	
  

	
(d)

	
All Documents;

	
  

	
(e)

	
All Equipment;

	
  

	
(f)

	
All General Intangibles;

	
  

	
(g)

	
All Goods;

	
  

	
(h)

	
All Instruments;

	
  

	
(i)

	
All Intellectual Property;

	
  

	
(j)

	
All Inventory;

	
  

	
(k)

	
To the extent not otherwise included, all Proceeds and products of any and all of the foregoing, and all accessions to, substitutions and replacements for, and rents and profits of each of the foregoing.

Collateral shall not include, by Indonesian law, the Indonesia mining permits owned by the Subsidiary Grantors (in Indonesian, an Izin Usaha Pertambangan or “IUP”) or any mineral deposits.

 

  

  

  

 

“Event of Default” has the meaning given to that term in the Notes.

 

“Intellectual Property” means all intellectual and similar property of every kind and nature now owned or hereafter acquired by any Grantor, including inventions, designs, patents, trademarks, trade secrets, domain names, confidential or proprietary technical and business information, know-how, methods, processes, drawings, specifications or other data or information and all memoranda, notes and records with respect to any research and development, software and databases and all embodiments or fixations thereof whether in tangible or intangible form or contained on magnetic media readable by machine together with all such magnetic media and related documentation, registrations and franchises, and all additions, improvements and accessions to, and books and records describing or used in connection with, any of the foregoing and any claims for damages by way of any past, present or future infringement of any of the foregoing.

 

“Liens” means, with respect to any property, any security interest, mortgage, pledge, lien, claim, charge or other encumbrance in, of, or on such property or the income therefrom, including, without limitation, the interest of a vendor or lessor under a conditional sale agreement, capital lease or other title retention agreement, or any agreement to provide any of the foregoing.

 

“Obligations” means all loans, advances, debts, liabilities and obligations, howsoever arising, owed by Grantors to Collateral Agent and the Investors of every kind and description (whether or not evidenced by any note or instrument and whether or not for the payment of money), now existing or hereafter arising under or pursuant to the terms of the Notes and the other Transaction Documents.

 

“Permitted Liens” means (a) Liens in favor of the Collateral Agent and the Investors, (b)Liens for taxes not yet delinquent or Liens for taxes being contested in good faith and by appropriate proceedings for which adequate reserves have been established, (c) Liens in respect of property or assets imposed by law which were incurred in the ordinary course of business, such as carriers’, warehousemen’s, materialmen’s and mechanics’ Liens and other similar Liens arising in the ordinary course of business which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings, (d) Liens incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, and other Liens to secure the performance of tenders, statutory obligations, contract bids, government contracts, performance and return of money bonds and other similar obligations, incurred in the ordinary course of business, whether pursuant to statutory requirements, common law or consensual arrangements, (e) Liens upon any equipment to secure the purchase price of such equipment or indebtedness incurred solely for the purpose of financing the acquisition of such equipment, so long as such Lien extends only to the equipment financed, and any accessions, replacements, substitutions and proceeds (including insurance proceeds) thereof or thereto; (f) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under the Note; (g) Liens in favor of customs and revenue authorities arising as a matter of law to secure payments of customs duties in connection with the importation of goods, (h) Liens which constitute rights of setoff of a customary nature or liens with respect to deposit or investment accounts provided that such liens only secure customary fees associated with such accounts and provided further that Collateral Agent and the Investors have a first priority perfected Lien with respect to all such accounts; (i) Liens on insurance proceeds in favor of insurance companies granted solely as security for financed premiums; and (j) non-exclusive licenses granted in the ordinary course of business.

 

“Pledged Securities” means all shares of capital stock of each Grantor in which any Grantor owns an interest, including, but not limited to those shares of capital stock set forth in Schedule 1-C attached hereto.

“Subsidiary Grantor” means Top Yield Holdings Limited., a British Virgin Islands exempt company, Europe-China Commercial Union Holding Limited, a British Virgin Islands exempt company, Crown Sail Limted, a British Virgin Island exempt company, PT Havilah Abadi Sejahtera, a company incorporated in the Republic of Indonesia, PT Aega Prima, a company incorporated in the Republic of Indonesia, and PT Alam Lestari Kencana, a company incorporated in the Republic of Indonesia.

 

“Transaction Documents” means the Purchase Agreement, Notes, and Warrants to Purchase Common Stock.

 

  

  

  

 

2. Creation of Security Interest.  Each Grantor, in order to secure its Obligations, does hereby grant and pledge to the Collateral Agent on behalf of the Investors, a security interest in and to, all right, title and interest of such Grantor in and to all presently existing and hereafter acquired Collateral.  The security interest and pledge created by this Section 2 shall continue in effect so long as any Obligation remains outstanding or the Investors have any obligation to purchase Notes under the Purchase Agreement.  The creation of the security interest in the Collateral in Indonesia shall be created and perfected in the manner described in Schedule 2.

 

3. Delivery of Pledged Securities.

 

(a) Each Certificate shall be delivered to and held by the Collateral Agent and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed undated endorsements, instruments of transfer or assignment in blank, all in form and substance reasonably satisfactory to the Collateral Agent.

 

(b) The Collateral Agent shall have the right, upon the occurrence and during the continuance of an Event of Default, without notice to any of the Grantors, in connection with a commercially reasonable foreclosure sale, to transfer to, or to direct the applicable Grantor or any nominee of such Grantor to register or cause to be registered in the name of, the Collateral Agent or any of its nominees any or all of the Pledged Securities.  In addition, the Collateral Agent shall have the right at any time to exchange certificates or instruments representing or evidencing Pledged Securities for certificates or instruments of smaller or larger denominations.

 

4. Further Assurances.

 

(a) At any time and from time to time at the request of the Collateral Agent, each Grantor shall execute and deliver to the Collateral Agent, at such Grantor's expense, all instruments, certificates and documents, including account control agreements, in form and substance reasonably satisfactory to the Collateral Agent, and perform all such other acts as shall be necessary or reasonably desirable to fully perfect or protect or maintain, when filed, recorded, delivered or performed, the Collateral Agent's security interests granted pursuant to this Agreement or to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral.

(b) At any time and from time to time, the Collateral Agent shall be entitled to file and/or record any or all such financing statements, instruments and documents held by it, and any or all such further financing statements, documents and instruments, relative to the Collateral or any part thereof in each instance, and to take all such other actions as the Collateral Agent may reasonably deem appropriate to perfect and to maintain perfected the security interests granted herein.

 

(c) With respect to any Collateral consisting of securities, instruments, partnership or joint venture interests, limited liability company interests, or the like, each Grantor hereby consents and agrees that, upon the occurrence and during the continuance of an Event of Default, the issuers of, or obligors on, any such Collateral, or any registrar or transfer agent or trustee for any such Collateral, shall be entitled to accept the provisions of this Agreement as conclusive evidence of the right of the Collateral Agent to effect any transfer or exercise any right hereunder or with respect to any such Collateral subject to the terms hereof, notwithstanding any other notice or direction to the contrary heretofore or hereafter given by any Grantor or any other  person to such issuers or such obligors or to any such registrar or transfer agent or trustee.

 

5. The Grantors' Representations and Warranties.  Each Grantor represents and warrants as follows:

 

(a) Such Grantor (i) is incorporated in the jurisdiction disclosed on Schedule 1-A and neither such Grantor nor any corporate predecessor has, during the preceding five years, been incorporated in any other jurisdiction, except as disclosed on Schedule 1-A, (ii) is qualified to do business in the jurisdictions disclosed on Schedule 1-A, and (iii) has the organizational identification number disclosed on Schedule 1-A.

 

(b) Such Grantor currently conducts business only under its own name and the trade names listed on Schedule 1-A.  Neither such Grantor nor any corporate predecessor has, during the preceding five years, been known as or used any other corporate or fictitious name, except the names disclosed on Schedule 1-A.

 

  

  

  

 

(c) Such Grantor (i) maintains its chief executive office, where such Grantor keeps its records concerning the Collateral, at the address set forth for such Grantor on Schedule 1-A and (ii) has exclusive possession and control of the Collateral owned by such Grantor.

 

(d) Such Grantor has only the Deposit Accounts and securities accounts disclosed on Schedule 1-B.

 

(e) Such Grantor is the legal and beneficial owner of the Collateral free and clear of all Liens except for Permitted Liens.  Such Grantor has the power, authority and legal right to grant the security interests in the Collateral purported to be granted hereby, and to execute, deliver and perform under this Agreement.  The grant of security interest in the Collateral pursuant to this Agreement creates a valid first priority security interest in the Collateral, except for Permitted Liens.

 

(f) Except as set forth on Schedule 1-C, the Pledged Securities described on Schedule 1-C constitute (i) all of the shares of capital stock of any person owned by such Grantor and (ii) that percentage of the issued and outstanding shares of the respective issuers thereof indicated on Schedule 1-C, and there is no other class of shares issued and outstanding of the respective issuers thereof except as set forth on Schedule 1-C.

 

(g) No authorization, approval or other action by, and no notice to or filing with, any governmental authority (other than such authorizations, approvals and other actions as have already been taken and are in full force and effect and listed on Schedule 2) is required (A) for the pledge of the Collateral or the grant of the security interest in the Collateral by any of the Grantors hereby or for the execution, delivery or performance of this Agreement by any of the Grantors, or (B) for the exercise by the Collateral Agent of the voting rights in the Pledged Securities or of any other rights or remedies in respect of the Collateral hereunder except as may be required in connection with any disposition of Collateral consisting of securities by laws affecting the offering and sale of securities generally.

6. Grantors' Covenants.  Each Grantor covenants and agrees as follows:

 

(a) Such Grantor will keep the Collateral in reasonably good repair, working order and operating condition (normal wear and tear excluded), and from time to time make all necessary and proper repairs, renewals, replacements, additions and improvements thereto and, as appropriate and applicable, will otherwise deal with the Collateral in all such ways as are considered customary practice by owners of like property.

 

(b) Such Grantor will not sell, encumber, lease, rent, or otherwise dispose of or transfer any Collateral or right or interest therein, provided that Company may sell, lease, transfer, license or otherwise dispose of any of the Collateral consisting of (i) the sale of inventory in the ordinary course of business, (ii) sales of worn-out or obsolete equipment in the ordinary course of business, and (iii) non-exclusive licenses and similar arrangements for the use of the property of Company in the ordinary course of business.

 

(c) Such Grantor shall not create or permit to exist any Lien upon or with respect to any of its property, except for Permitted Liens.

 

(d) Such Grantor shall (i) carry and maintain insurance at its expense of the types and in the amounts customarily carried by others engaged in substantially the same business as such person and operating in the same geographic area as such person, including, but not limited to, fire, property damage and worker's compensation, such insurance to be in such form as is carried with companies and in amounts satisfactory to Collateral Agent.

(e) Such Grantor will promptly notify the Collateral Agent in writing in the event of any material damage to the Collateral from any source whatsoever.

 

(f) Such Grantor will not (i) move its principal place of business or any other office listed in Schedule 1-A or (ii) adopt, use or conduct business under any trade name or other corporate or fictitious name not disclosed in Schedule 1-A, except, in each case, upon not less than 30 days prior written notice to the Collateral Agent and such Grantor's prior compliance with all applicable requirements of Section 4 hereof necessary to perfect the Collateral Agent's security interest hereunder.

 

  

  

  

 

(g) Such Grantor shall not establish any additional Deposit Account or securities account not listed on Schedule 1-B, except upon prior written notice to the Collateral Agent and such Grantor’s compliance with all applicable requirements of Section 4 hereof necessary to perfect the Collateral Agent’s security interest hereunder, including without limitation, delivery of duly executed account control agreements by all necessary parties, in form and substance satisfactory to the Collateral Agent.

 

7. The Collateral Agent.

 

(a) Appointment.  The Investors hereby appoint Collateral Agent as collateral agent for the Investors under this Agreement to serve from the date hereof until the termination of the Security Agreement.

 

(b) Powers and Duties of Collateral Agent, Indemnity by Investors.

 

(i) Each Investor hereby irrevocably authorizes the Collateral Agent to take such action and to exercise such powers hereunder as provided herein or as requested in writing by the majority in interest of Investors in accordance with the terms hereof, together with such powers as are reasonably incidental thereto.  Collateral Agent may execute any of its duties hereunder by or through agents or employees and shall be entitled to request and act in reliance upon the advice of counsel concerning all matters pertaining to its duties hereunder and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance therewith.

 

(ii) Neither the Collateral Agent nor any of its directors, officers or employees shall be liable or responsible to any Investor or to any Grantor for any action taken or omitted to be taken by Collateral Agent or any other such person hereunder or under any related agreement, instrument or document, except in the case of gross negligence or willful misconduct on the part of the Collateral Agent, nor shall the Collateral Agent or any of its directors, officers or employees be liable or responsible for (i) the validity, effectiveness, sufficiency, enforceability or enforcement of the Notes, this Agreement or any instrument or document delivered hereunder or relating hereto; (ii) the title of a Grantor to any of the Collateral or the freedom of any of the Collateral from any prior or other liens or security interests; (iii) the determination, verification or enforcement of a Grantor’s compliance with any of the terms and conditions of this Agreement; (iv) the failure by a Grantor to deliver any instrument  or document required to be delivered pursuant to the terms hereof; or (v) the receipt, disbursement, waiver, extension or other handling of payments or proceeds made or received with respect to the Collateral, the servicing of the Collateral or the enforcement or the collection of any amounts owing with respect to the Collateral.

(iii) In the case of this Agreement and the transactions contemplated hereby and any related document relating to any of the Collateral, each of the Investors agrees to pay to the Collateral Agent, on demand, its pro rata share of all fees and all expenses incurred in connection with the operation and enforcement of this Agreement, the Notes or any related agreement to the extent that such fees or expenses have not been paid by Grantors.  In the case of this Agreement and each instrument and document relating to any of the Collateral, each of the Investors and each of the Grantors hereby agrees to hold the Collateral Agent harmless, and to indemnify the Collateral Agent from and against any and all loss, damage, expense or liability which may be incurred by the Collateral Agent under this Agreement and the transactions contemplated hereby and any related agreement or other instrument or document, as the case may be, unless such liability shall be caused by the willful misconduct or gross negligence of the Collateral Agent.

 

8. Subsidiary Grantors

 

(a) Continuing Guaranty.  Each Subsidiary Grantor unconditionally guarantees and promises to pay to Collateral Agent and the Investors on written demand after the occurrence and during the continuance of an Event of Default, in lawful money of the United States, any and all Obligations, and to perform on demand after the occurrence and during the continuance of an Event of Default any and all Obligations.  The liability of each Subsidiary Grantor hereunder is independent of the Obligations, and a separate action or actions may be brought and prosecuted against such Subsidiary Grantor irrespective of whether action is brought against any other Subsidiary Grantor or any other guarantor of the Obligations or whether any other Subsidiary Grantor or any other guarantor of the Obligations is joined in any such action or actions.  This guaranty is a guaranty of payment and not of collection.

 

  

  

  

 

(b) Authorized Actions.  Each Subsidiary Grantor authorizes Collateral Agent and the Investors, in their discretion, without notice to such Subsidiary Grantor, irrespective of any change in the financial condition of such Subsidiary Grantor, the other Subsidiary Grantors or any other guarantor of the Obligations, and without affecting or impairing in any way the liability of such Subsidiary Grantor hereunder, from time to time to (a) create new Obligations, renew, compromise, extend, accelerate or otherwise change the time for payment or performance of, or otherwise change the terms of the Obligations or any part thereof, including increase or decrease of the rate of interest thereon; (b) take and hold security for the payment or performance of the Obligations and exchange, enforce, waive or release any such security; (c) apply such security and direct the order or manner of sale thereof; (d) purchase such security at public or private sale; (e) otherwise exercise any right or remedy it may have against such Subsidiary Grantor, the other Subsidiary Grantors, any other guarantor of the Obligations or any security, including, without limitation, the right to foreclose upon any such security by judicial or nonjudicial sale; (f) settle, compromise with, release or substitute any one or more makers, endorsers or guarantors of the Obligations; and (g) assign the Obligations, or the other Transaction Documents in whole or in part.

(c) Waivers.  Each Subsidiary Grantor waives (a) any right to require Collateral Agent or any Investor to (i) proceed against any other Subsidiary Grantor or any other guarantor of the Obligations, (ii) proceed against or exhaust any security received from any other Subsidiary Grantor or any other guarantor of the Obligations, or (iii) pursue any other remedy in Collateral Agent’s or an Investor’s power whatsoever; (b) any defense arising by reason of the application by any Subsidiary Grantor of the proceeds of any borrowing; (c) any defense resulting from the absence, impairment or loss of any right of reimbursement, subrogation, contribution or other right or remedy of such Subsidiary Grantor against any other Subsidiary Grantor, any other guarantor of the Obligations or any security, whether resulting from an election by Collateral Agent or any Investor to foreclose upon security by nonjudicial sale, or otherwise; (d) any setoff or counterclaim of such Subsidiary Grantor or any defense which results from any disability or other defense of any Subsidiary Grantor or the cessation or stay of enforcement from any cause whatsoever of the liability of any Subsidiary Grantor (including, without limitation, the lack of validity or enforceability of any Transaction Document); (e) any right to exoneration of sureties which would otherwise be applicable; (f) so long as any Obligations remain outstanding, any right of subrogation or reimbursement and, if there are any other guarantors of the Obligations, any right of contribution, and right to enforce any remedy which Collateral Agent or any Investor now has or may hereafter have against any Subsidiary Grantor, and any benefit of, and any right to participate in, any security now or hereafter received by the Collateral Agent or any Investor; (g) all presentments, demands for performance, notices of non-performance, notices delivered under this Agreement or any Transaction Document, protests, notice of dishonor, and notices of acceptance of this guaranty and of the existence, creation or incurring of new or additional Obligations and notices of any public or private foreclosure sale; (h) the benefit of any statute of limitations to the extent permitted by law; (i) any appraisement, valuation, stay, extension, moratorium redemption or similar law or similar rights for marshalling; and (j) any right to be informed by Collateral Agent or any Investor of the financial condition of any Subsidiary Grantor or any other guarantor of the Obligations or any change therein or any other circumstances bearing upon the risk of nonpayment or nonperformance of the Obligations.  Each Subsidiary Grantor has the ability and assumes the responsibility for keeping informed of the financial condition of any other Subsidiary Grantor and any other guarantors of the Obligations and of other circumstances affecting such nonpayment and nonperformance risks.

 

9. Remedies.

 

(a) Rights Upon Event of Default.  Upon the occurrence and during the continuance of an Event of Default, the Grantors shall be in default hereunder and, subject to applicable law, the Collateral Agent shall have, in any jurisdiction where enforcement is sought, in addition to all other rights and remedies that the Collateral Agent may have under this Agreement and under applicable laws or in equity, all rights and remedies of a secured party under the Uniform Commercial Code as enacted in any such jurisdiction in effect at that time, and in addition the following rights and remedies, all of which may be exercised with or without further notice to the Grantors except such notice as may be specifically required by applicable law.

 

  

  

  

 

(b) Sale of Collateral.  Any public or private sale or other disposition of the Collateral may be held at any office of the Collateral Agent, or at the Grantors’ places of business, or at any other place permitted by applicable law, and without the necessity of the Collateral being within the view of prospective purchasers.  The Collateral Agent may direct the order and manner of sale of the Collateral, or portions thereof, as it in its sole and absolute discretion may determine provided such sale is commercially reasonable, and each Grantor expressly waives, to the extent permitted by applicable law, any right to direct the order and manner of sale of any Collateral.  The Collateral Agent or any person acting on the Collateral Agent's behalf may bid and purchase at any such sale or other disposition.  In furtherance of the Collateral Agent's rights hereunder, each Grantor hereby grants to the Collateral Agent an irrevocable, non-exclusive license (exercisable without royalty or other payment by the Collateral Agent) to use, license or sublicense any patent, trademark, trade name, copyright or other intellectual property in which Grantor now or hereafter has any right, title or interest together with the right of access to all media in which any of the foregoing may be recorded or stored; provided, however, that such license shall only be exercisable in connection with the disposition of Collateral upon the Collateral Agent's exercise of its remedies hereunder.

(c) Notice of Sale.  Unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, the Collateral Agent will give the Grantors reasonable notice of the time and place of any public sale thereof or of the time on or after which any private sale thereof is to be made.  The requirement of reasonable notice conclusively shall be met if: such notice is mailed, certified mail, postage prepaid, to the Grantors at their addresses set forth on the signature page hereto or delivered or otherwise sent to the Grantors, at least ten (10) days before the date of the sale.  Each Grantor expressly waives, to the fullest extent permitted by applicable law, any right to receive notice of any public or private sale of any Collateral or other security for the Obligations except as expressly provided for in this paragraph.  The Collateral Agent shall not be obligated to make any sale of the Collateral if it shall determine not to do so regardless of the fact that notice of sale of the Collateral may have been given.  The Collateral Agent may, without notice or publication, except as required by applicable law, adjourn the sale from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice (except as required by applicable law), be made at the time and place to which the same was so adjourned.

 

(d) Private Sales.  With respect to any Collateral consisting of securities, partnership interests, limited liability company interests, joint venture interests or the like, and whether or not any of such Collateral has been effectively registered under the Securities Act of 1933, as amended, or other applicable laws, the Collateral Agent may, in its sole and absolute discretion, sell all or any part of such Collateral at private sale in such manner and under such circumstances as the Collateral Agent may deem necessary or advisable in order that the sale may be lawfully conducted in a commercially reasonable manner.  Without limiting the foregoing, the Collateral Agent may (i) approach and negotiate with a limited number of potential purchasers, and (ii) restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing such Collateral for their own account for investment and not with a view to the distribution or resale thereof.  In the event that any such Collateral is sold at private sale, each Grantor agrees to the extent permitted by applicable law that if such Collateral is sold for a price which is commercially reasonable, then (A) the Grantors shall not be entitled to a credit against the Obligations in an amount in excess of the purchase price, and (B) the Collateral Agent shall not incur any liability or responsibility to the Grantors in connection therewith, notwithstanding the possibility that a substantially higher price might have been realized at a public sale.  Each Grantor recognizes that a ready market may not exist for such Collateral if it is not regularly traded on a recognized securities exchange, and that a sale by the Collateral Agent of any such Collateral for an amount substantially less than a pro rata share of the fair market value of the issuer's assets minus liabilities may be commercially reasonable in view of the difficulties that may be encountered in attempting to sell a large amount of such Collateral or Collateral that is privately traded.

 

(e) Disposition of Proceeds of Sale.  The proceeds resulting from the collection, liquidation, sale or other disposition of the Collateral shall be applied, first, to the reasonable costs and expenses (including reasonable attorneys' fees) of retaking, holding, storing, processing and preparing for sale, selling, collecting and liquidating the Collateral, and the like; second, to the satisfaction of all Obligations; and third, any surplus remaining after the satisfaction of all Obligations, to be paid over to the Grantors or to whomsoever may be lawfully entitled to receive such surplus.

 

(f) Remedies Cumulative.  The rights and remedies provided under this Agreement are cumulative and may be exercised singly or concurrently, and are not exclusive of any other rights and remedies provided by law or equity.

  

  

  

10. Miscellaneous.

 

(a) The Collateral Agent Appointed Attorney-in-Fact.  To the full extent permitted by applicable law, each Grantor hereby irrevocably appoints the Collateral Agent as such Grantor's attorney-in-fact, with full authority in the place and stead of such Grantor, and in the name of such Grantor, or otherwise, from time to time, in the Collateral Agent's sole and absolute discretion to do any of the following acts or things upon the occurrence and during the continuance of an Event of Default: (a) to do all acts and things and to execute all documents necessary or advisable to perfect and continue perfected the security interests created by this Agreement and to preserve, maintain and protect the Collateral; (b) to do any and every act which such Grantor is obligated to do under this Agreement; (c) to endorse and transfer the Collateral upon foreclosure by the Collateral Agent; and (d) to file any claims or take any action or institute any proceedings which the Collateral Agent may reasonably deem necessary or desirable for the protection or enforcement of any of the rights of the Collateral Agent with respect to any of the Collateral; provided, however, that the Collateral Agent shall be under no obligation whatsoever to take any of the foregoing actions, and the Collateral Agent shall have no liability or responsibility for any act or omission (other than the Collateral Agent's own gross negligence or willful misconduct) taken with respect thereto.

 

(b) Costs and Expenses.  Each Grantor shall pay on written demand (i) all reasonable fees and expenses, including reasonable attorneys' fees and expenses, incurred by the Collateral Agent and the Investors in connection with the exercise of its duties under this Agreement and the preparation, execution and delivery of amendments and waivers hereunder and (ii) all reasonable fees and expenses, including reasonable attorneys' fees and expenses, incurred by the Collateral Agent and the Investors in connection with the enforcement or attempted enforcement of this Agreement or any of the Obligations or in preserving any of the Collateral Agent’s and the Investors’ rights and remedies (including, without limitation, all such fees and expenses incurred in connection with any “workout” or restructuring affecting the Transaction Documents or the Obligations or any bankruptcy or similar proceeding involving such Grantor, any other Grantor, Company or any of their affiliates).

 

(c) Counterparts.  This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement.  Signatures sent by facsimile or email shall bind the parties hereto and to the Transaction Documents to the same extent as original signatures.

 

(d) Amendments, etc.  No amendment or waiver of any provision of this Agreement nor consent to any departure by the Grantors herefrom (other than supplements to the Schedules hereto in accordance with the terms of this Agreement) shall in any event be effective unless the same shall be in writing and executed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

 

(e) Notices.  All notices and other communications provided for hereunder shall be given in the manner and to the addresses set forth in the Purchase Agreement.

 

(f) Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota, excluding that body of law relating to conflict of laws.  Venue for any legal action taken in connection with this Note shall be in the state or Federal courts located in the City of Minneapolis, Minnesota; provided that the creation, perfection and enforcement of security interests shall be governed by local laws.

 

(g) Waiver of Requirement for Any Judicial Approval. The Parties agree that for the effectiveness of the termination clauses under this Agreement, to waive any provisions, procedures and operations of any applicable law to the extent that a court order is required for termination of this Agreement.

 

(h)  Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement and without affecting the validity or enforceability of such provision in any other jurisdiction.

 

(i)  Headings.  The various headings of this Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any provisions hereof.

 

(j)  Schedules Incorporated.  The schedules to this Agreement are incorporated into and constitute and integral part of this Agreement.

 

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IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed this Security Agreement as of the day and year first above written.

 

	Company: 	
LEVIATHAN MINERALS GROUP INCORPORATED

                                                    

By:  /s/Samuel K. Zia                                                                                                      

Name:  Samuel Zia

Title:    Chief Executive Officer

                                                  

	Subsidiary Grantor:	

TOP YIELD HOLDINGS LIMITED

 

By:   /s/Sevinwardi Cerdika Khio                                                                                   

Name:  Sevinwardi Cerdika Khio

Title:    Director

 

	Subsidiary Grantor:	
PT HAVILAH ABADI SEJAHTERA

                                                    

By:   /s/Aripin Bunarwan                                                                                               

Name:  Aripin Bunarwan

Title:    President Director

 

	Subsidiary Grantor:	
PT AEGA PRIMA

                                                    

By:  /s/Sumadi                                                                                                                  

Name:  Sumadi

Title:    President Director

 

	Subsidiary Grantor:   	PT ALAM LESTARI KENCANA 

                                                    

By:  /s/Saman Tedja                                                                                                         

Name:  Saman Tedja

Title:    President Director

 

	Subsidiary Grantor:	
EUROPE-CHINA COMMERCIAL HOLDING LIMITED

                                                    

By:  /s/Sevinwardi Cerdika Khio                                                                                   

Name:  Sevinwardi Cerdika Khio (on behalf of Top Yield Holdings Limited)

Title:    Director

                

	Subsidiary Grantor:	
CROWN SAIL LIMITED

                                                    

By:  /s/Denny Tio                                                                                                            

Name:  Denny Tio

Title:    Director

 

	 Collateral Agent:  	
NEW ASIA PARTNERS, LLC

                                                    

By: /s/Dennis Nguyen                                                                                                    

Name:  Dennis Nguyen

Title:    Chairman

[Signature Page to Security Agreement]

  

  

  

Investor:                       

                                                   By:                                                  

                                                   Name:                  

                                                   Title:          

[Investor Signature Page to Security Agreement]

  

  

  

	
Schedule 1-A

	
Jurisdiction of Incorporation & Qualifications to do Business

	  	  	  	  	  	  
	
Grantor

	  	  	
Jurisdiction of Incorporation

	  	
Organizational Identification Number

	
Leviathan Minerals Group Incorporated

	  	  	
Delaware

	  	
27-2f5684

	
Top Yield Holdings Limited

	  	  	
British Virgin Islands

	  	
1568642

	
Crown Sail Limited

	  	  	
British Virgin Islands

	  	
1568022

	
Europe-China Commercial Union Holding Limited 

	  	  	
British Virgin Islands

	  	
1007669

	
PT. Havilah Abadi Sejahtera

	  	  	
Indonesia

	  	
The Minister of Law and Human Rights of the Republic of Indonesia ("MOLHR") Decree No. AHU-10932.AH.01.01.Tahun 2008 dated 5 March 2008

	
PT. Aega Prima

	  	  	
Indonesia

	  	
MOLHR Decree No.  AHU-43699.AH.01.01.Tahun 2008 dated 22 July 2008

	
PT. Alam Lestari Kencana

	  	  	
Indonesia

	  	
MOLHR Decree No. AHU-17082.AH.01.01.Tahun 2008 dated 7 April 2008

	  	  	  	  	  	  
	
Location of Principal Place of Business of each Grantor

	
(including any other locations where books and record are maintained)

	  	  	  	  	  	  
	
Grantor

	  	  	
Location of Principal Place of Business

	
Leviathan Minerals Group Incorporated

	  	  	
Unit 4309-10, 43/F Cosco Tower, 183 Queen's Road, Central, Hong Kong

	
Top Yield Holdings Limited

	  	  	
Unit 4309-10, 43/F Cosco Tower, 183 Queen's Road, Central, Hong Kong

	
Crown Sail Limited

	  	  	
Unit 4309-10, 43/F Cosco Tower, 183 Queen's Road, Central, Hong Kong

	
Europe-China Commercial Union Holding Limited 

	  	  	
Unit 4309-10, 43/F Cosco Tower, 183 Queen's Road, Central, Hong Kong

	
PT. Havilah Abadi Sejahtera

	  	  	
Gedung The Honey Lady Lt. 7 No. 702-703 Komp. CBD, Jl. Pluit Selatan Raya RT/RW 022/008, Kelurahan Penjaringan, Kecamatan Penjaringan, Kotamadya Jakarta Utara, Propinsi DKI Jakarta, Indonesia

	
PT. Aega Prima

	  	  	
Komplek Villa Bangka Asri A 20 RT/RW 12/07, Kelurahan Dul, Kecamatan Pangkalan Baru, Kabupaten Bangka Tengah, Propinsi Kepulauan Bangka Belitung, Indonesia

	
PT. Alam Lestari Kencana

	  	  	
Jl. TPI Ketapang RT 019/002, Kelurahan Air Itam, Kecamatan Bukit Intan, Kota Pangkalpinang, Propinsi Kepulauan Bangka Belitung, Indonesia

  

  

  

 

Schedule 1-B

List of Deposit Accounts

	  	  	  	  	  	  	  	  	  
	
Grantor

	  	
Depository Bank

	  	
Account Number

	  	
Account Type

	  	
Contact Information *

	  	  	  	  	  	  	  	  	  

 

  

  

  

 

Schedule 1-C

List of Pledged Securities

 

	
Grantor

	  	
Issuer

	  	
Shares or

Interests

Pledged

	  	
Shares Issued

And Outstanding

	  	
Percentage

Ownership

	  
	
Leviathan Minerals Group Incorporated

	  	
Top Yield Holdings Limited

	  	  	  	  	  	  	  	  	
      100%

	  
	
Top Yield Holdings Limited

	  	
Europe-China Commercial Union Holding Limited

	  	  	
1

	  	  	
1

	  	  	
100%

	  
	
Top Yield Holdings Limited

	  	
Crown Sail Limited

	  	  	
100

	  	  	
100

	  	  	
100%

	  
	
Top Yield Holdings Limited

	  	
PT Havilah Abadi Sejahtera

	  	  	
9,900

	  	  	
10,000

	  	  	
99%

	  
	
PT Havilah Abadi Sejahtera

	  	
PT Aega Prima

	  	  	
160,000

	  	  	
200,000

	  	  	
80%

	  
	
 PT Havilah Abadi Sejahtera

	  	
 PT Alam Lestari Kencana

	  	  	
9,900

	  	  	
10,000

	  	  	
99%

	  

  

  

  

 

SCHEDULE 2

 

The security to be pledged by HAS, AP and ALK shall be comprised of the following:

1.           A pledge by HAS of the shares it owns in AP and ALK;

2.           A mortgage of immovable assets (e.g., the smelter owned by ALK); and

3.           A fiducia security over movable assets of AP and ALK.

 

The security interest shall be perfected after the execution of this Security Agreement in the following manner:

For the pledge of shares:

	
(a)

	
approval from more than 75% of HAS’s shareholders;

	
(b)

	
execution of Deed of Pledge of Shares by HAS and the Collateral Agent;

	
(c)

	
delivery of the original share certificates being pledged by HAS to the Collateral Agent; and

	
(d)

	
registration of the pledge of shares in the Shareholders Register and Special Register of AP and ALK.

For the mortgage:

	
(a)

	
approval from more than 75% of ALK's shareholders;

	
(b)

	
execution of a Deed of Mortgage of Land and Building by ALK and the Collateral Agent;

	
(c)

	
registration of the mortgage with the local Land Office having jurisdiction over the location of ALK's smelter.

 

For a Fiducia Security:

	
(a)

	
approval from more than 75% of AP's and ALK's shareholders;

	
(b)

	
execution of Fiducia Security Deed by AP and ALK and the Collateral Agent; and

	
(c)

	
registration of the Fiducia Security Deed with the local Fiducia Registration Office having jurisdiction over the domicile of AP and ALK.f8k121211a1ex10vi_leviathan.htm

Exhibit 10.6

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT THERETO UNDER SUCH ACT AND APPLICABLE LAWS OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS AND AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

 

 

	  	
Warrant to Purchase ______ Shares of

	
Dated: August 22, 2011

	
Common Stock (subject to adjustment)

 

WARRANT TO PURCHASE COMMON STOCK

of

LEVIATHAN MINERALS GROUP INCORPORATED

 

This certifies that, for value received, Ang Liang Kim, or registered assigns (“Holder”) is entitled, subject to the terms set forth below, to purchase from LEVIATHAN MINERALS GROUP INCORPORATED, a Delaware corporation (the “Company”), _______ shares of the Common Stock, par value $0.0001 per share, of the Company (the “Common Stock”), upon surrender hereof, at the principal office of the Company referred to below, with the Notice of Exercise attached hereto duly executed, and simultaneous payment therefor in lawful money of the United States or otherwise as hereinafter provided, at the Exercise Price as set forth in Section 2 below. The number and character of such shares of Common Stock and the Exercise Price are subject to adjustment as provided below. The term “Warrant” as used herein shall include this Warrant and any warrants delivered in substitution or exchange therefor as provided herein.  This Warrant is issued pursuant to the Securities Purchase Agreement by and among the Company, the Holder and the other Investors described therein, dated as of the date hereof, as the same may from time to time be amended, modified or supplemented (the “Purchase Agreement”).

 

1. Term of Warrant.  Subject to the terms and conditions set forth herein, this Warrant shall be exercisable, in whole or in part, during the term commencing on the date hereof (the “Issuance Date”), and ending at 5:00 p.m., Eastern Standard Time, on the 2nd anniversary of the Issuance Date, and shall be void thereafter.

 

2. Exercise Price.  The exercise price at which this Warrant may be exercised shall be $4.25 per share of Common Stock (the “Exercise Price”), as such Exercise Price may be adjusted from time to time pursuant to Section 11 hereof.

 

3. Exercise of Warrant.

 

(a) Method of Exercise.  The purchase rights represented by this Warrant are exercisable by the Holder in whole or in part, at any time, or from time to time, during the term hereof as described in Section 1 above, by the surrender of this Warrant and the Notice of Exercise annexed hereto duly completed and executed on behalf of the Holder, at the principal office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company), upon payment by wire transfer or certified bank check.

 

  

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(b) Issuance of Shares.  This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the shares of Common Stock issuable upon such exercise shall be treated for all purposes as the holder of record of such shares as of the close of business on such date. As promptly as practicable on or after such date, the Company or the Company’s transfer agent, at the Company’s expense, shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of shares issuable upon such exercise. In the event that this Warrant is exercised in part, the Company at its expense will execute and deliver a new Warrant of like tenor exercisable for the number of shares for which this Warrant may then be exercised.

 

4. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. In lieu of any fractional share to which the Holder would otherwise be entitled (after aggregating all shares that are being issued upon such exercise), the Company shall make a cash payment equal to the Exercise Price multiplied by such fraction.

 

5. Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and substance to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor and amount.

 

6. Rights of Stockholders.  The Holder shall not be entitled to vote or receive dividends or be deemed the holder of Common Stock or any other securities of the Company that may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, or change of stock to no par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise, until this Warrant shall have been exercised as provided herein.

 

7. Transfer of Warrant.

 

(a) Warrant Register. The Company will maintain a register (the “Warrant Register”) containing the names and addresses of the Holder or Holders.  Any Holder of this Warrant or any portion thereof may change its address as shown on the Warrant Register by written notice to the Company requesting such change.  Any notice or written communication required or permitted to be given to the Holder may be delivered or given by mail to such Holder as shown on the Warrant Register and at the address shown on the Warrant Register.  Until this Warrant is transferred on the Warrant Register of the Company, the Company may treat the Holder as shown on the Warrant Register as the absolute owner of this Warrant for all purposes, notwithstanding any notice to the contrary.

 

(b) Warrant Agent.  The Company may, by written notice to the Holder, appoint an agent for the purpose of maintaining the Warrant Register referred to in Section 7(a) above, issuing the Common Stock or other securities then issuable upon the exercise of this Warrant, exchanging this Warrant, replacing this Warrant, or any or all of the foregoing (the “Warrant Agent”).  Thereafter, any such registration, issuance, exchange or replacement, as the case may be, shall be made at the office of the Warrant Agent.

 

  

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(c) Transferability and Negotiability of Warrant.  This Warrant may not be transferred or assigned in whole or in part without prior written notice to the Company and compliance with all applicable federal and state securities laws by the transferor and the transferee (including the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, if such are requested by the Company).  Subject to the provisions of this Warrant with respect to compliance with the Securities Act of 1933, as amended (the “Act”), title to this Warrant may be transferred by endorsement (by the Holder executing the Assignment Form annexed hereto) and delivery in the same manner as a negotiable instrument transferable by endorsement and delivery; provided, however, any purported transfer by the Holder without prior written notice to the Company shall be void ab initio.

 

(d) Exchange of Warrant Upon a Transfer.  On surrender of this Warrant for exchange, properly endorsed on the Assignment Form and subject to the provisions of this Warrant with respect to compliance with the Act and with the limitations on assignments and transfers contained in this Section 7, the Company at its expense shall issue to or on the order of the Holder a new warrant or warrants of like tenor, in the name of the Holder or as the Holder (on payment by the Holder of any applicable transfer taxes) may direct, for the number of shares issuable upon exercise hereof.

 

(e) Compliance with Securities Laws.

 

(i) The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the shares of Common Stock to be issued upon exercise hereof are being acquired for investment, and that the Holder will not offer, sell or otherwise dispose of this Warrant or any shares of Common Stock to be issued upon exercise hereof except under circumstances that will not result in a violation of the Act or any state securities laws.

 

(ii) This Warrant and all shares of Common Stock issued upon exercise hereof or conversion thereof shall be stamped or imprinted with a legend in substantially the following form (in addition to any legend required by state securities laws):

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT THERETO UNDER SUCH ACT AND APPLICABLE LAWS OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS AND AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

 

8. Reservation of Stock.  The Company covenants that during the term this Warrant is exercisable, the Company will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock upon the exercise of this Warrant and, from time to time, will take all steps necessary to amend its Articles of Incorporation to provide sufficient reserves of shares of Common Stock issuable upon exercise of this Warrant.  The Company further covenants that all shares of Common Stock that may be issued upon the exercise of rights represented by this Warrant and payment of the Exercise Price, all as set forth herein will be duly and validly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously therewith).  The Company agrees that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock upon the exercise of this Warrant.

 

  

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9. Notices.  Whenever the Exercise Price or the shares purchasable hereunder shall be adjusted pursuant to Section 11 hereof, the Company shall issue a certificate signed by its Chief Executive Officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Exercise Price and the shares purchasable hereunder after giving effect to such adjustment, and shall cause a copy of such certificate to be mailed (by first-class mail, postage prepaid) to the Holder of this Warrant.

 

10. Amendments and Waivers.

 

(a) Any term or condition of this Warrant may be amended with the written consent of the Company and the Holder.  Any amendment effected in accordance with this Section 10(a) shall be binding upon the Holder and each future holder of this Warrant and the Company.

 

(b) No waivers of, or exceptions to, any term, condition or provision of this Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision.

 

11. Adjustments. The Exercise Price and the shares purchasable hereunder are subject to adjustment from time to time as follows:

 

(a) Reclassification, etc.  If the Company, at any time while this Warrant remains outstanding and unexpired, by reclassification of securities or otherwise, shall change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities that were subject to the purchase rights under this Warrant immediately prior to such reclassification or other change and the Exercise Price therefor shall be appropriately adjusted, all subject to further adjustment as provided in this Section 11.

 

(b) Split, Subdivision or Combination of Shares.  If the Company at any time while this Warrant remains outstanding and unexpired shall split, subdivide or combine the securities as to which purchase rights under this Warrant exist, into a different number of securities of the same class, the Exercise Price for such securities shall be proportionately decreased in the case of a split or subdivision or proportionately increased in the case of a combination and the number of such securities shall be proportionately increased in the case of a split or subdivision or proportionately decreased in the case of a combination.

 

(c) Issuance of Additional Shares of Common Stock.  In the event the Company shall, at any time this Warrant remains outstanding and unexpired, issue shares of Common Stock in an Equity Sale (as hereinafter defined), the number of shares of Common Stock, for which this Warrant and the warrants issued to other Investors that are parties to the Purchase Agreement is exercisable, shall be increased after the occurrence of any such Equity Sale by 1% of the number of shares of Common Stock issued in the Equity Sale pro rata in accordance with each Investors respective investment.  An “Equity Sale” means the first underwritten public offering of shares of Common Stock to the general public under the Securities Act of 1933, as amended,

 

  

4

  

 

(d) Anti-Dilution.  If the Company, at any time while this Warrant remains outstanding and unexpired, shall issue any securities (other than the issuance, vesting or exercise of any securities issued pursuant to a stock option plan approved by shareholders) for a consideration per share (the “New Issuance Price”) less than the Exercise Price in effect immediately prior to such issue or sale (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, the Exercise Price then in effect shall be reduced to an amount equal to a price determined by multiplying such Exercise Price by a fraction, the numerator of which shall be a sum equal to the number of shares of Common Stock outstanding immediately prior to such issuance, plus the number of shares of Common Stock that the aggregate consideration received by this Company for such issuance would purchase at such Exercise Price; and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issuance plus the number of shares of such Additional Stock.

 

(e) Calculations.  All calculations under this Section 11 shall be made to the nearest four decimal points.

 

12. Merger, Sale of Assets, etc.  If at any time while this Warrant is outstanding and unexpired there shall be (i) a reorganization (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), (ii) a merger or consolidation of the Company with or into another corporation in which the Company is not the surviving entity, or a reverse triangular merger in which the Company is the surviving entity but the shares of the Company’s capital stock outstanding immediately prior to the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise, or (iii) a sale or transfer of the Company’s properties and assets as, or substantially as, an entirety to any other corporation or other entity, then, in connection with such reorganization, merger, consolidation, sale or transfer (each, a “Fundamental Transaction”), the Company shall provide the Holder with at least 30 days notice prior to the consummation of such Fundamental Transaction, during which 30-day period the Holder may exercise this Warrant.  If and to the extent this Warrant is not exercised during such 30-day period, this Warrant shall be cancelled, void and of no further force or effect.

 

13. Saturdays, Sundays and Holidays.  If the last or appointed day for the taking of any action or the expiration of any right granted herein shall be a Saturday, Sunday or United States federal holiday, then (notwithstanding anything herein to the contrary) such action may be taken or such right may be exercised on the next succeeding day that is not a Saturday, Sunday or holiday.

 

14. Governing Law; Venue.  This Warrant shall be governed by and construed in accordance with the laws of the State of Minnesota applicable to agreements made and to be performed entirely within such State, without regard to the conflicts of law principles of such State.  Any and all actions brought under this Warrant shall be brought in the state or federal courts located in the State of Minnesota.

 

15. Binding Effect.  The terms of this Warrant shall be binding upon and inure to the benefit of the Company and the Holder and their respective successors and assigns.

 

[SIGNATURES FOLLOW]

 

  

5

  

 

IN WITNESS WHEREOF, LEVIATHAN MINERALS GROUP INCORPORATED has caused this Warrant to be executed by its officers thereunto duly authorized.

 

	
Dated:  August 22, 2011

	  	  
	  	  	
LEVIATHAN MINERALS GROUP INCORPORATED

 

	  	  	
By:    /s/ Samuel K. Zia                                           

Samuel K. Zia

Its:          Chief Executive Officer

 

  

6

  

 

NOTICE OF EXERCISE

 

(1)           The undersigned hereby elects to purchase _______ shares of Common Stock of LEVIATHAN MINERALS GROUP INCORPORATED, pursuant to the provisions of Section 3(a) of the attached Warrant, and tenders herewith payment of the purchase price for such shares in full, as provided in Section 3(a) of the Warrant.

 

(2)           In exercising this Warrant, the undersigned hereby confirms and ac­knowledges that (a) the Holder is an “accredited investor” as defined in Rule 501(a) under the Securities Act of 1933, as amended, (b) the shares of Common Stock to be issued upon exercise hereof are being acquired for investment, and (c) the undersigned will not offer, sell or otherwise dispose of any such shares of Common Stock except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any applicable state securities laws.

 

(3)           Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below:

 

                                                                                                                  

                                                                                                                 _____________________________

     (Name)

 

                                                                                                                 _____________________________

     (Name)

 

(4)           Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned or in such other name as is specified below:

 

                                                                                                                

                                                                                                                 _____________________________

     (Name)

 

 

______________          ___________________________

(Date)                                 (Signature)

 

  

7

  

 

ASSIGNMENT

 

 

FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the within Warrant, with respect to the number of shares of Common Stock set forth below:

 

	
Name of Assignee

	
Address

	
No. of Shares

	  	  	  
	  	  	  
	  	  	  
	  	  	  
	  	  	  

and does hereby irrevocably constitute and appoint ____________________________ Attorney to make such transfer on the books of LEVIATHAN MINERALS GROUP INCORPORATED, maintained for the purpose, with full power of substitution in the premises.

 

The undersigned also represents that, by assignment hereof, the Assignee acknowledges that this Warrant and the shares of stock to be issued upon exercise hereof are being acquired for investment, and that the Assignee will not offer, sell or otherwise dispose of this Warrant or any shares of stock to be issued upon exercise hereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended, or any applicable state securities laws.

Dated: _________________________

                                                                                                                 ________________________________

      Signature of Holder

 

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