DEBENTURE PURCHASE AGREEMENT
THIS DEBENTURE PURCHASE AGREEMENT (this "AGREEMENT") is
made as of
December 15, 2005, by and between Chief Consolidated Mining
Company, an
Arizona corporation ("COMPANY"), and Dimeling, Schreiber & Park
Reorganization
Fund II, L.P., a Pennsylvania limited partnership ("PURCHASER").
BACKGROUND
Purchaser desires to invest an aggregate of Two Million
Five Hundred
Thousand Dollars ($2,500,000) in Company in exchange for a
convertible debenture
as described in this Agreement and on the terms set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises and
mutual promises
and covenants contained herein and for other good and valuable
consideration,
and intending to be legally bound hereby, the parties hereby agree
as follows.
ARTICLE I
PURCHASE OF DEBENTURE AND WARRANT
1.1 Sale and Purchase of the Debenture. Upon and subject
to the
conditions of this Agreement, Company hereby agrees to sell and
issue to
Purchaser and Purchaser hereby agrees to acquire from Company, at
the Closing
(as defined below), a convertible debenture, in substantially the
form attached
hereto as Exhibit A (the "DEBENTURE"), in the aggregate principal
amount of Two
Million Five Hundred Thousand Dollars ($2,500,000) (the "PURCHASE
PRICE").
1.2 Certain Terms of the Debenture
(a) The Debenture shall bear interest at the rate of
eight
percent (8%) per annum, which shall accrue while the Debenture is
outstanding
and shall be due and payable at the time of Conversion (as defined
below) in
either cash or additional shares of Company's Common Stock, par
value $0.50,
(the "COMMON STOCK"), at the sole discretion of Company.
(b) The Debenture shall be convertible into shares
of Common
Stock at the rate of four thousand (4,000) shares for each One
Thousand Dollars
($1,000) in principal amount of the Debenture (the "CONVERSION").
The Conversion
shall occur automatically upon the adoption of the Charter
Amendment (defined
below) by the requisite percentage of shareholders of the Company.
1.3 Closing.
(a) Place and Time. The closing (the "CLOSING") in
connection
with this Agreement shall take place in the offices of Pepper
Hamilton LLP,
Philadelphia PA, or at such other place as agreed upon by Company
and Purchaser,
on December 15, 2005, or at such other date (the "CLOSING DATE") as
mutually
agreed by the parties hereto in writing.
(b) Deliveries by Company. At the Closing, Company
shall deliver
following to Purchaser:
(i) A fully executed copy of this Agreement;
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(ii) A fully executed copy of the Debenture;
(iii) A certificate confirming the good
standing of Company
as of recent date prior to the Closing issued by the Secretary of
State of the
State of Arizona; and
(iv) such other documents, instruments and
writings as
Purchaser may reasonably require.
(c) Deliveries by Purchaser. At the Closing,
Purchaser shall
deliver following to Company:
(i) A fully executed copy of this Agreement;
(ii) A wire transfer in the amount of Two
Million Five
Hundred Thousand Dollars ($2,500,000); and
(iii) such other documents, instruments and
writings as
Company may reasonably require.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Company. Company
hereby
represents and warrants to Purchaser as follows:
(a) Organization and Good Standing. Company is a
corporation duly
organized, validly existing and in good standing under the laws of
the State of
Arizona and has all requisite corporate power and corporate
authority to carry
on its business as now conducted and as proposed to be conducted.
(b) Capitalization. The authorized capitalization of
Company consists
of 50,000,000 shares of Common Stock. Except as disclosed in public
filings
with the United States Securities and Exchange Commission (the
"SEC") or as
contemplated hereby, there are no options, warrants, rights
(including rights of
first refusal or any preemptive rights), proxy or stockholders
agreements or
agreements of any kind in connection with the issuance of the
Debenture or the
shares issuable upon conversion or exercise thereof (the "SHARES"
and, together
with the Debenture, the "SECURITIES") or with respect to any future
offer, sale
or issuance of securities by Company. Company is not a party or
subject to any
agreement or understanding and, to Company's knowledge, there is no
agreement or
understanding between any persons that affects or relates to the
voting or
giving of written consents with respect to any security or the
voting by a
director of the Company.
(c) Authorization. All corporate action on the part
of Company,
its officers, directors and shareholders necessary for the
authorization,
execution and delivery of the documents to be delivered by Company
pursuant to
Section 1.3(b) hereof (the "TRANSACTION DOCUMENTS") and the
transactions
contemplated thereby, the performance of all obligations of Company
under the
Transaction Documents and the authorization, issuance and delivery
of the
Securities has been taken. Each of the Transaction Documents
constitutes the
valid and legally binding obligation of Company enforceable in
accordance with
its terms.
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(d) Valid Issuance of the Shares. The Shares, when
issued, sold
and delivered in accordance with the terms of the Debenture, will
be: duly
authorized, validly issued, fully paid and nonassessable; free of
any liens,
options, encumbrances, proxies, adverse claims or restrictions;
and, assuming
the accuracy of Purchaser's representations in this Agreement at
the time of
issuance, issued in compliance with all applicable federal and
state securities
laws.
(e) Governmental Consents. No consent, approval,
order or
authorization of, or registration, qualification, designation,
declaration or
filing with, any federal, state, or local governmental authority
(other than
filings required to be made under applicable federal and state
securities laws)
on the part of Company is required in connection with the
authorization,
execution, delivery of the Transaction Documents and performance of
all
obligations of Company under the Transaction Documents, and the
authorization,
issuance and delivery of the Securities.
(f) No Conflict with Other Instruments. Company is
not in
violation or default of any provisions of Company's Articles of
Incorporation,
Bylaws or other charter documents (collectively, the "CHARTER
DOCUMENTS") or of
any instrument, judgment, order, writ, decree or contract to which
Company is a
party or by which Company is bound or of any provision of any
statute, rule or
regulation applicable to Company. The execution, delivery and
performance of
this Agreement will not result in any violation of, be in conflict
with, or
constitute a default under, with or without the passage of time or
the giving of
notice: (i) any provision of the Charter Documents; (ii) any
provision of any
judgment, decree or order to which Company is a party or by which
Company is
bound; (iii) any material contract, obligation or commitment to
which Company is
a party or by which Company is bound; or (iv) any statute, rule or
regulation
applicable to Company.
(g) Absence of Claims. There are no actions, suits,
claims,
investigations or legal or administrative proceedings pending or,
to the best of
Company's knowledge and belief, threatened, against Company, and
there are no
judgments, decrees or orders of any court, or government
department, commission
or agency entered or existing against Company or any of its assets
or
properties;
(h) Transfer Restrictions. There are no restrictions
on the
transfer of capital stock of Company imposed by the Charter
Documents, any
agreement to which Company is a party (other than those agreements
expressly
contemplated by this Agreement), any order of any court or any
governmental
agency to which Company is subject, or any statute other than those
imposed by
relevant state and federal securities laws.
(i) No Undisclosed Liabilities. Company has no
material
liabilities or obligations not disclosed to Purchaser, other than
those
liabilities incurred (i) in the ordinary course of the Company's
business since
December 31, 2004, or (ii) in connection with the negotiation and
execution of
this Agreement.
(j) No Broker. No finder, broker, agent, financial
advisor or
other intermediary has acted on behalf of Company in connection
with the
offering or sale of the Shares or the negotiation or consummation
of this
Agreement or any of the transactions contemplated hereby.
(k) Compliance with Securities Laws. Assuming the accuracy
of
Purchaser's representations in this Agreement, the offer, grant,
sale, and/or
issuance of the Debenture will not be in violation of the
Securities Act of
1933, as amended (the "SECURITIES ACT"), the Securities Exchange
Act of 1934, as
amended (the "EXCHANGE ACT"), any state securities or "blue sky"
law, or the
Charter Documents, when offered, sold and issued in accordance with
this
Agreement. The Company is not current in its required reports under
the Exchange
Act.
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2.2 Representations and Warranties of Purchaser.
Purchaser, in order
to induce Company to issue and sell the Securities, hereby
represents and
warrants to Company as follows:
(a) No Registration. Purchaser understands that: (i)
none of the
Securities have been registered under the Securities Act or under
the securities
laws of any state or other jurisdiction and are characterized as
"restricted
securities" under the Securities Act and applicable regulations;
(ii) no federal
or state authority has approved or disapproved the Securities or
the offering
thereof, endorsed the merits of the offering of the Securities or
made any
determination as to the fairness of the offering; and (iii)
Company's sale of
the Securities to Purchaser hereunder is in reliance upon the
exemption from the
registration provisions under the Securities Act contained in
Section 4(2)
thereof and applicable state securities laws and the
representations of
Purchaser herein.
(b) Accredited Investor. Purchaser is an "accredited
investor" as
that term is defined in Rule 501 of Regulation D promulgated under
the
Securities Act.
(c) No Obligation to Register. Purchaser
acknowledges that,
except as provided herein, Company has no obligation, and does not
intend, to
register any the Securities under the Securities Act or to make
available public
information (in the form of reports pursuant to Section 13 or
Section 15 of the
Exchange Act, or otherwise) without which resale pursuant to SEC
Rule 144
adopted under the Securities Act will not be possible. Accordingly,
Purchaser
may be precluded from selling any of the Securities, or any
interest therein,
for an indefinite period of time or at any particular time.
(d) Investment Intent. Purchaser is acquiring the
Securities
solely for its own account, for investment, and not with a view to,
or for
resale in connection with, any distribution thereof. Purchaser's
officers and
directors, together with its advisors, have such knowledge and
experience in
financial and business matters that Purchaser is capable of
evaluating the
merits and risks of purchasing the Securities.
(e) Transfer Restrictions. No transfer of any of the
Securities
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