<PAGE>
EXHIBIT 4.32
SECURED PROMISSORY NOTE
U.S. $3,900,000
NOVEMBER 8, 2005
FOR
VALUE RECEIVED, the undersigned NORD RESOURCES CORPORATION, a
company
organized under the laws of Delaware (the "COMPANY" or "BORROWER"),
promises to
pay to the order of NEDBANK LIMITED, a limited liability company
organized under
the laws of the Republic of South Africa ("HOLDER"), the principal
sum of
$3,900,000, with simple interest accruing daily from the
above-referenced date
until paid, at a rate of nine percent (9%) per annum. Interest
shall be paid
monthly in cash on the first day of each month commencing November
1, 2005.
Notwithstanding the foregoing, upon the occurrence of a Default and
during the
continuance of a Default, the principal balance then outstanding
shall accrue
interest at a rate of twelve percent (12%) per annum.
This
Promissory Note (the "NOTE") is being issued to Holder in
connection
with a bridge loan (the "Loan") provided to the Company by
Holder.
The
following is a statement of the rights of Holder and the conditions
to
which this Note is subject, and to which Holder, by acceptance of
this Note,
agrees:
1.
MATURITY DATE. The principal balance hereof, and accrued but
unpaid
interest thereon, shall be due and payable on the earlier of (a)
May 8, 2006, or
(b) the closing of an equity offering in which the Company raises
not less than
Twenty-Five Million Dollars ($25,000,000).
2.
LOSS OF NOTE. Upon receipt by the Company of evidence satisfactory
to it
of the loss, theft, destruction or mutilation of this Note, and (in
the case of
loss, theft or destruction) of reasonably satisfactory
indemnification, and upon
surrender and cancellation of this Note, if mutilated, the Company
will execute
and deliver a new Note of like tenor and date. Any such new Note
executed and
delivered shall constitute an additional contractual obligation on
the part of
the Company, whether or not this Note so lost, stolen, destroyed,
or mutilated
shall be at any time enforceable by anyone.
3.
DEFAULT.
(a) Holder may declare the entire unpaid principal and accrued
interest on the Note immediately due and payable, by providing
written notice to
the Company, if any of the following events shall occur (each such
event being a
"DEFAULT"):
(1) the Company shall
fail to pay the principal and accrued but
unpaid interest of the Note on any date such items are due,
provided however, the Company shall have a period of three (3)
Business Days from any such date within which cure a Default on
an interest payment;
(2) any representation
or warranty made by the Company to Holder
herein or in
<PAGE>
any other document, instrument or agreement executed by the
Company in connection with the Loan (as amended or extended
from
time to time and in
effect, each, a "Loan Document," and
collectively, with the Note, the "Loan Documents") shall fail
to
be true and correct in any material respect (provided that the
Company shall have a period of five (5) Business Days from the
date the Company receives written notice thereof from the
Holder
within which to cure such Default(s));
(3) the Company shall
fail to observe or perform any of the
covenants,
agreements or obligations (excluding the Company's
obligation to pay principal and interest as provided herein)
contained in the Note or any other Loan Document or any other
agreement with Holder in any material respect (provided that
the
Company shall have a period of five (5) Business Days from the
date the Company receives written notice thereof from the
Holder
within which to cure such Default(s));
(4) the Company shall
institute proceedings to be adjudicated
bankrupt or insolvent, or the consent by the Company to the
institution of bankruptcy or insolvency proceedings against it
under the Bankruptcy Act, or any other applicable federal or
state insolvency law, or the consent by the Company, or
acquiescence in, the filing of any such petition or in the
appointment of a receiver, liquidator, assignee, trustee, or
other similar official of the Company, or of any substantial
part
or its property, or the making by the Company of an assignment
for the benefit of creditors, or the admission by the Company
in
writing of its inability to pay its debts generally as they
become due;
(5) within sixty (60)
days after the commencement of proceedings
against the Company seeking any bankruptcy, insolvency,
liquidation,
dissolution or similar relief under any present or
future statute, law or regulation, such action shall not have
been dismissed or all orders or proceedings thereunder
affecting
the operations or the business of the Company stayed, or the
stay
of any such order or proceedings shall thereafter be set aside,
or, within thirty (30) days after the appointment without the
consent or acquiescence of the Company of any trustee, receiver
or liquidator of the Company over of all or any substantial
part
of the properties of the Company, such appointment shall have
not
been vacated;
(6) the Company shall
dissolve or take steps toward dissolution;
(7) final judgments
which exceed an aggregate of $100,000 shall be
rendered against the Company or its subsidiaries and shall not
have been paid, discharged or vacated within forty-five (45)
days
after entry or filing of such judgments;
<PAGE>
(8) any event of
default (as such term is defined under any
applicable underlying agreement) of any of the Company's
indebtedness in excess of $75,000 in the aggregate shall occur
or
any failure of the Company to pay any such indebtedness when
due
shall occur; and
(9) the Deed of Trust
(as hereinafter defined) shall for any reason
(other than pursuant to the terms thereof or by reason of any
action taken by the Holder and not with the knowledge of the
Borrower or within its power to control) cease to create a
valid
and perfected (to the extent required thereby or by this
Agreement) first priority lien in the Johnson Camp Collateral
(as
hereinafter defined), or the Company asserts such failure,
provided however, the Company shall have a period of ten (10)
Business Days within which to cure this deficiency and perfect
the Holder's first priority lien in the Johnson Camp
Collateral.
(b) Remedies Upon Default. Upon the occurrence, and at any time
during
the continuance of, any Default, Holder, upon notice in writing to
the Company,
may declare all unpaid principal of the Note and the interest
thereon to be
immediately due and payable and the same shall become immediately
due and
payable upon such declaration and Holder may pursue any remedy
available to
Holder at law or in equity; provided, however, that in the event of
any Default
under clauses (4) or (5) above, all unpaid principal hereof and
interest
hereunder shall automatically become immediately due and payable,
without the
need for declaration, presentment, demand, protest, or other notice
of any kind.
4.
MANDATORY REPURCHASE OF NOTES. As soon as possible, and in any
event
within five (5) Business Days after the occurrence of a Mandatory
Repurchase
Event (as defined below), the Company shall furnish to Holder
written notice
setting forth in reasonable detail the facts and circumstances
underlying such
Mandatory Repurchase Event. The occurrence of any such Mandatory
Repurchase
Event shall constitute an irrevocable offer by the Company to
purchase all of
the Notes held by Holder, at 101% of the principal amount thereof,
on a date to
be specified by the Company, which date shall be not less than
thirty (30) days
nor more than ninety (90) days after the occurrence of such
Mandatory Repurchase
Event, together with all accrued and unpaid interest on the amount
so purchased
through the date of purchase. Following receipt of any offer to
prepay the Notes
hereunder, Holder shall advise the Company, by written notice,
within ten (10)
days after receipt of such offer, as to whether it desires to sell
all, but not
less than all of the Notes held by it (in integral multiples of
$500,000),
specifying the principal amount of the Notes to be sold by it. If
Holder accepts
such offer but does not specify an amount it wishes to receive, it
will be
deemed to have elected to sell all of the Notes held by it.
5.
MANDATORY REPURCHASE EVENT. "Mandatory Repurchase Event" shall mean
at
any time prior to or after a public offering (i) any person
together with all
affiliates and associates of such person, shall become the
beneficial owner,
directly or indirectly, of securities of the Company representing
51% or more of
the combined voting power of the Company's then outstanding
securities having
the right to vote in an election of the Company's Board of
Directors; or (ii)
persons who constitute the Company's Board of Directors as of the
date hereof
cease for any
<PAGE>
reason, including, without limitation, as a result of a tender
offer, proxy
contest, merger or similar transaction, to constitute at least a
majority of the
Company's Board of Directors; or (iii) the Board of Directors and
the
stockholders of the Company (if required) shall approve (a) any
consolidation or
merger of the Company where the stockholders of the Company,
immediately prior
to the consolidation or merger, would not, immediately after the
consolidation
or merger, beneficially own, directly or indirectly, shares
representing in the
aggregate at least 51% or more of the voting shares of the
corporation issuing
cash or securities in the consolidation or merger (or of its
ultimate parent
corporation, if any), (b) any sale, lease, exchange or other
transfer (in one
transaction or a series of transactions contemplated or arranged by
any party as
a single plan) of all or substantially all of the assets of the
Company, (c) any
plan or proposal for the liquidation or dissolution of the Company,
or (iv) the
Company terminates the services of Salman Partners without
completing an
offering of the Company's capital stock.
6.
PREPAYMENT.
(a) OPTIONAL PREPAYMENT. The Company may, upon ten (10) days
prior
written notice to Holder, prepay this Note in whole or in part, but
in no event
less than $250,000 for each occurrence of a prepayment, at any time
without
premium or penalty (other than for such premium as is contemplated
in Section 4
hereof in connection with a mandatory repurchase of this Note);
provided,
however, that the Company shall reimburse Holder for any premiums,
penalties or
other costs incurred by Holder on account of the Company's
prepayment of this
Note.
(b) MANDATORY PREPAYMENT. For so long as this Note shall be
outstanding, the Company agrees to apply all funds received by the
Company on
any of its future borrowings or offerings of equity, including
without
limitation any financings, debt offerings, offerings of its equity
or debt
securities, against the outstanding balance due under this Note,
except for
proceeds of (i) short term unsecured working capital facilities but
not in
excess of $1,000,000 in the aggregate at any one time, and (ii)
purchase money
security interest financings used for the acquisition of equipment
to be used at
the Johnson Camp Mine but not to exceed $250,000 in the aggregate
at any one
time.
7.
NOTICES TO HOLDER. So long as this Note shall be outstanding, (i)
if the
Company shall pay any dividend or make any distribution upon the
Common Stock or
(ii) if the Company shall offer to the holders of Common Stock for
subscription
or purchase by them any share of any class of Capital Stock or any
other rights
or (iii) if any capital reorganization of the Company,
reclassification of the
Capital Stock of the Company, consolidation or merger of the
Company with or
into another corporation, sale, lease or transfer of all or
substantially all of
the property and assets of the Company to another corporation, or
voluntary or
involuntary dissolution, liquidation or winding up of the Company
shall be
effected, then in any such case, the Company shall cause to be
mailed by
certified mail to Holder, at least fifteen (15) days prior the date
specified in
(x) or (y) below, as the case may be, a notice containing a brief
description of
the proposed action and stating the date on which (x) a record is
to be taken
for the purpose of such dividend, distribution or rights, or (y)
such
reclassification, reorganization, consolidation, merger,
conveyance, lease,
dissolution, liquidation or winding up is to take place and the
date, if any is
to be fixed, as of which the holders of Common Stock or other
securities shall
receive cash or other property deliverable upon such
<PAGE>
reclassification, reorganization, consolidation, merger,
conveyance,
dissolution, liquidation or winding up. The Company shall also
promptly deliver
a notice to Holder describing any Default of which it has become
aware.
8.
GROSS UP. All payments under this Note by Borrower will be made
without
any deduction or withholding for or on account of any tax or other
withholding
or deduction unless such tax, deduction or withholding is required
by any
applicable law then in effect (a "REQUIRED TAX, DEDUCTION OR
WITHHOLDING"). If
Borrower is so required to deduct or withhold any Required Tax,
Deduction or
Withholding, then Borrower will promptly notify Holder of such
requirement and:
(a) pay to the relevant authorities the full amount of the
Required
Tax Deduction or Withholding (including the full amount required to
be deducted
or withheld from any additional amount paid by the Borrower to
Holder under this
Section 8) promptly upon the earlier of determining that the
Required Tax
Deduction or Withholding is required or receiving notice that such
amount has
been assessed against Holder;
(b) promptly forward to Holder an official receipt (or a
certified
copy), or other documentation reasonably acceptable to Holder
evidencing such
payment to such authorities; and
(c) pay to Holder, in addition to the payment to which Holder
is
otherwise entitled under this Note, such additional amount as is
necessary to
ensure that the net amount actually received by Holder will equal
the full
amount Holder would have received had no such Required Tax,
Deduction or
Withholding been required.
9.
COSTS. The Company agrees to reimburse Holder for any reasonable
legal
fees or other costs associated with this Note or any of the other
Loan
Documents, but in no event more than Fifty Thousand Dollars
($50,000).
10.
REPRESENTATIONS AND WARRANTIES. The Company hereby makes each of
the
representations and warranties set forth on Schedule 1 hereto, as
of the date of
this Agreement.
11.
COVENANTS. The Company hereby agrees to observe and fully perform
each
of the covenants set forth on Schedule 2 hereto.
12.
CONDITIONS PRECEDENT. Prior to the extension of the funds
contemplated
to be advanced herein, unless waived in writing in advance by
Holder, the
Company shall have delivered to Holder the following documents, in
form and
substance satisfactory to Holder, and performed the following
undertakings to
the satisfaction of Holder:
(a) this Note;
(b) a deed of trust, assignment of rents, security agreement
and
fixture filing (the "Deed of Trust") relating to the so-called
Johnson Camp Mine
granting Holder a first priority lien encumbering all of the real
and personal
property associated with the Johnson Camp Mine (the "Johnson Camp
Collateral");
<PAGE>
(c) a UCC-1 financing statement, associated with the Johnson
Camp
Collateral;
(d) a post-closing letter evidencing the Company's obligation
to
perform certain undertakings post closing;
(e) an officer's certificate of the Company with respect to
incumbency
and resolutions authorizing the execution and delivery of the Note
and the other
Loan Documents;
(f) a legal opinion of the August Law Group, P.C., counsel to
the
Company, regarding the due execution, enforceability, authority of
all of the
loan documents by Borrower and the first lien priority of Holder in
the Johnson
Camp Collateral;
(g) a certificate of insurance naming Holder as loss payee and
additional insured;
(h) a memorandum summarizing the sources and uses of the proceeds
of
this Note;
(i) the Subordination Agreement among Ronald A. Hirsch and
Steve
Seymour and the Company;
(j) payment of a closing fee to Holder in an amount equal to
$100,000;
(k) warrants for the purchase of shares of the Company's common
stock,
in the form attached hereto as Exhibit A issued in favor of Holder
up to the
aggregate amount reflected in Exhibit A (the "Warrants");
(l) a standard form lender's title policy from the Trustee under
the
Deed of Trust, insuring the title set forth in the Deed of Trust
subject only to
the Permitted Exceptions set forth in the Deed of Trust; and
(m) such other documents or certificates, and completion of such
other
matters, as the parties may mutually deem necessary or appropriate
in good
faith.
13.
MISCELLANEOUS.
(a) Waiver and Amendment. Any provision of this Note may be
waived,
amended or modified only upon the written consent of the Company
and Holder.
(b) Restriction on Transfer. This Note may only be transferred
in
compliance with applicable state and federal laws. All rights and
obligations of
the Company and Holder shall be binding upon and benefit the
successors,
assigns, heirs, and administrators of the parties.
<PAGE>
(c) No Assignment. This Note may be transferred by the Holder,
provided that, unless a Default has occurred and is continuing, the
Holder shall
be obliged to give the company at least fifteen (15) Business Days'
prior
written notice of its intention to transfer this Note. The Company
may not
transfer or assign all or any part of this Note without the prior
written
consent of Holder.
(d) Governing Law. This Note shall be governed by the laws of
the
State of Arizona.
(e) Severability. If any of the provisions of this Note is held
invalid, such invalidity shall not affect the other provisions
hereof that can
be given effect without the invalid provision, and to this end the
provisions of
this Note are intended to be and shall be deemed severable.
(f) Indemnification. The Company agrees to hold harmless, defend
and
indemnify Holder, its officers, employees, agents and
representatives (each, an
"Indemnified Party") from and against any liability, loss, cost,
expense, damage
claim or cause of action due to or arising out of or in connection
with this
Note or any other Loan Document in any way, directly or indirectly.
The
indemnification provided for in the immediately preceding sentence
shall not
apply to liabilities, losses, costs, expenses, damage, claims or
causes of
action which may arise as the result of the willful misconduct or
gross
negligence of the Holder.
(g) Notices. All notices and other communications given to or
made
upon any party hereto in connection with this Note shall, except as
otherwise
expressly herein provided, be in writing (including telecopy,
telefaxed or
telegraphic communication) and mailed via certified mail,
telefaxed, telegraphed
or delivered to the respective parties, as follows:
To
the Company:
Nord Resources Corporation
P.O. Box 384
Dragoon, AZ 85609
Attn: Erland Anderson, President
Telecopier: (520) 586-7020
With
a copy (which shall not constitute notice) to:
August Law Group, P.C.
The Atrium Building
19200 Von Karman Avenue, Suite 500
Irvine, CA 92612
Attn: Kenneth S. August, Esq.
Telecopier: (949) 752-7776
To
Holder
<PAGE>
Nedbank Limited
1st Floor, Old Mutual Place
2 Lambeth Hill
London EC4V 4GG
Attn: Kevin Ryder
Telecopier: 020-7002-3404
And
a copy (which shall not constitute notice) to:
Fennemore Craig, P.C.
3003 North Central Avenue, Suite 2600
Phoenix, Arizona 85012
Attn: Sarah A. Strunk, Esq.
Telecopier: (602) 916-5327
Or in accordance with any subsequent written direction from the
recipient party
to the sending party delivered in accordance with this Section
13(g). All such
notices and other communications shall, except as otherwise
expressly herein
provided, be effective upon (i) delivery if delivered by hand; (ii)
the third
(3rd) Business Day after the date sent, in the case of certified
mail; (iii)
receipt, in the case of telecopy, or (iv) upon delivery to the
telegraph
company, charges prepaid, in the case of telegraph.
(h) Definitions. The following terms shall have the meanings set
forth
below.
"Business Day" means any day that is not a Saturday, Sunday, or
other
day on which banks in the State of New York are authorized or
required to close.
"Common Stock" means the issued and outstanding common stock,
par
value $.01 per share, of the Company.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed by its
officer, thereunto duly authorized as of this 8th day of November,
2005.
NORD RESOURCES CORPORATION
By: /s/ Erland Anderson
------------------------------------
Name: Erland Anderson
Title: President
<PAGE>
EXHIBIT A
FORM OF WARRANT CERTIFICATE
No. ________
[_____] Warrants
THE WARRANTS REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES
ACT OF 1933, AS AMENDED, NOR REGISTERED NOR QUALIFIED UNDER ANY
STATE SECURITIES
LAWS. SUCH WARRANTS MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED
AFTER SALE,
TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS QUALIFIED AND
REGISTERED UNDER
APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR UNLESS, IN THE
OPINION OF
COUNSEL SATISFACTORY TO NORD RESOURCES CORPORATION SUCH
QUALIFICATION AND
REGISTRATION IS NOT REQUIRED PURSUANT TO AN EXEMPTION THEREFROM. NO
TRANSFER OF
ANY SUCH WARRANT SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS
HAVE BEEN
FULFILLED.
WARRANTS FOR THE
PURCHASE OF COMMON STOCK
Issue Date: November 8, 2005
THIS CERTIFIES THAT, FOR VALUE RECEIVED, Nedbank Limited, a limited
liability
company organized under the laws of the Republic of South Africa
(the "Holder"),
is the owner of the number of warrants to purchase an equal number
of
validly-issued, fully-paid and non-assessable shares of Common
Stock of NORD
RESOURCES CORPORATION, a corporation organized and existing under
the laws of
the State of Delaware (the "Corporation"), determined as
follows:
FW =
0.15(FA/EP), where
FW =
the number of warrants represented hereby for the purchase of
an
equal number of shares of the Corporation's Common Stock;
FA =
US$2,900,000, converted into Canadian Dollars on the date of
issue
of this Warrant Certificate.
EP =
the Exercise Price.
1
<PAGE>
The warrants represented by this Warrant Certificate are fully
vested as of the
date hereof. Purchase may be made at any time, and from time to
time, prior to
5:00 p.m. Pacific Time on the Expiration Date (as hereinafter
defined), upon the
presentation and surrender of this Warrant Certificate with a
written notice
signed by the Holder stating the number of shares of Common Stock
with respect
to which such exercise is being made, at the principal corporate
address of the
Corporation, accompanied by payment of the Purchase Price, in
lawful money of
the United States of America in cash or by official bank or
certified check made
payable to NORD RESOURCES CORPORATION. The Purchase Price and the
number of
shares of Common Stock subject to purchase upon the exercise of the
Warrants are
subject to modification or adjustment as set forth herein. The
Warrants
represented by this Warrant Certificate have been issued by the
Corporation in
connection with a Secured Promissory Note, dated as of even date
herewith,
issued by the Company in favor of the Holder (the "Note").
SECTION 1. DEFINITIONS. As used herein, the following terms shall
have the
following meanings, unless the context shall otherwise require:
(a)
"Adjusted Purchase
Price" shall have the meaning given to it in
Section 5 of this Certificate.
(b)
"Change of Shares"
shall have the meaning given to it in Section 5 of
this Certificate.
(c)
"Corporate Office"
shall mean the office of the Corporation at which,
at any particular time, its principal business shall be
administered,
which office is currently located at 3048 Seven Dash Road,
Dragoon,
Arizona 85609.
(d)
"Exercise Date" shall
mean, as to any Warrant, the date on which the
Corporation shall have received both (a) this Warrant
Certificate,
together with a written notice of exercise in accordance
herewith,
duly executed by the Holder hereof, or his attorney duly authorized
in
writing, and indicating that the Holder is thereby exercising
such
Warrant(s), and (b) payment by wire transfer, or by official bank
or
certified check made payable to the Corporation, of an amount
in
lawful money of the United States of America equal to the
applicable
Purchase Price for such Warrant(s).
(e)
"Exercise Price" shall
mean, as to any Warrant, the final price at
which a share of the Corporation's Common Stock is sold in the
Initial
Public Offering of its Common Stock.
(f)
"Expiration Date"
shall mean 5:00 P.M. (Pacific Time) on the date that
is twenty-four (24) months following the date of this Warrant
Certificate; provided, however, that if the Corporation fails
to
complete an
Initial Public Offering of its Common Stock on or
2
<PAGE>
before May 8, 2006, then this Warrant Certificate shall expire on
May
8, 2006 and the Corporation shall issue a Warrant Certificate to
the
Holder granting warrants to purchase 743,590 shares of Common Stock
at
an exercise price equal to the average closing price of the
Common
Stock (as listed on the bulletin board) for the 20 trading days
prior
to May 8, 2006. This replacement Warrant Certificate shall expire
on
May 8, 2008.
If the Expiration Date falls on a holiday or a day on which banks
are
authorized to be closed in the State of Arizona, then the
Expiration
Date shall mean 5:00 P.M. (Pacific Time) of the next consecutive
day
which does not fall on a holiday or a day on which banks are
authorized to be closed in the State of Arizona.
(g)
"Holder" shall mean,
as to any Warrant and as of any particular date,
the person in whose name the Warrant Certificate representing
such
Warrant is registered as of that date on the Warrant Register
maintained by the Corporation.
(h)
"Common Stock" shall
mean the common stock of the Corporation, which
has the right to participate in the distribution of earnings
and
assets of the Corporation without limit as to amount or
percentage.
(i)
"Purchase Price" shall
mean the purchase price to be paid upon
exercise of each Warrant hereunder in accordance with the terms
hereof, which price shall be the Exercise Price, subject to
adjustment
from time to time pursuant to the provisions of Section 5
hereof.
(j)
"Securities Act" shall
mean the Securities Act of 1933, and any
amendments or modifications, or successor legislation, thereto
adopted, and all regulations, rules or other laws enacted or
adopted
pursuant thereto.
(k)
"Warrants" shall mean
the Warrants represented by this Warrant
Certificate.
(l)
"Warrant Certificate"
shall mean any certificate representing
Warrants, and "this Certificate" shall mean they warrant
Certificate
issued to the Holder identification on the first page hereof.
(m)
"Warrant Registry"
means the official record maintained by the
Corporation in which are recorded, with respect to each Warrant
Certificate issued by the Corporation: the date of issuance, the
name
and address of the original Holder, the name and address of
3
<PAGE>
each subsequent transferee of such original Holder, and the
number
identifying, such Warrant Certificate.
(n)
"Warrant Shares" shall
have the meaning given to it in Section 2 of
this Certificate.
SECTION 2. EXERCISE OF WARRANTS.
(a)
Each Warrant evidenced
hereby may be exercised by the Holder at any
time on
the Exercise Date, upon the terms and subject to the
conditions set forth herein. A Warrant shall be deemed to have
been
exercised immediately prior to the close of business on the
Exercise
Date and the person entitled to receive shares of restricted
common
stock of the Corporation deliverable upon such exercise shall
be
treated for all purposes as the Holder of a Warrant Share upon
the
exercise of the applicable Warrant as of the close of business on
the
Exercise Date. Promptly following, and in any event within ten
(10)
business days after, the date on which the Corporation first
receives
clearance of all funds received in payment of the Purchase
Price
pursuant to this Warrant Certificate, the Corporation shall cause
to
be issued and delivered to the person or persons entitled to
receive
the same, a certificate or certificates evidencing the issuance
to
such Holder of the applicable number of Warrant Shares (plus a
Warrant
Certificate for any remaining issued but unexercised Warrants of
the
Holder). Notwithstanding the foregoing sentence, in the event that
any
registration or qualification (or filing for exemption from any
such
requirements) is required prior to the issuance of such Warrant
Shares
by the Corporation in accordance with Section 3(b) below, then
the
obligation to deliver any such certificates shall arise only
upon
completion of such requirements and at such time as the
Corporation
may lawfully do so.
(b)
Upon the exercise of
the Warrants represented hereby, if the
Corporation so requests, the Holder shall certify to the
Corporation
that it is not exercising such Warrants with a view to distribute
the
Warrant Shares in violation of the Securities Act, and shall
provide
such other investor representations as the Corporation may require
to
confirm the ability of the Corporation to rely upon the exemption
from
registration under the Securities Act which applies to the
distribution of Warrant Shares at the time of such
distribution.
4
<PAGE>
SECTION 3. RESERVATION OF SHARES; REGISTRATION; RIGHTS; TAXES;
ETC.
(a)
The Corporation
covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the
purpose
of issue upon the valid exercise of Warrants, such number of
Warrant
Shares as shall then be issuable upon the exercise of all
Warrants
then outstanding. The Corporation covenants that all shares of
Common
Stock which shall be issuable upon exercise of the Warrants shall,
at
the time of delivery, be duly and validly issued, fully-paid,
non-assessable and free from all taxes, liens and charges with
respect
to the issuance thereof (other than those which the Corporation
shall
promptly pay or discharge, or any liens created thereon by the
Holder
thereof and/or any predecessor of such Holder).
(b)
The Corporation shall
not be obligated to deliver any Warrant Shares
pursuant to the exercise of the Warrants represented hereby unless
and
until a registration statement under the Securities Act and/or
under
any applicable state securities laws and regulations, with respect
to
such securities is effective, or an exemption from such
registration
is available to the Corporation at the time of such exercise.
The
Corporation covenants that if any Warrant Shares reserved for
the
purpose of exercise of Warrants hereunder require registration
with,
or approval of, any governmental authority under any federal or
state
securities law before such securities may be validly issued or
delivered upon such exercise, then the Corporation will in good
faith
and as expeditiously as reasonably possible, endeavor to secure
such
registration or approval. However, in the event that this
Warrant
Certificate represents Warrants which have been transferred by
an
initial holder thereof, the Warrants represented hereby may not
be
exercised by, nor shares of Common Stock issued to, the Holder
hereof
in any state in which such exercise and issuance would be unlawful.
If
the Holder exercises its right to purchase Warrant Shares
following
the initial public offering of the Corporation's Common Stock,
the
Warrant Shares issuable to the Holder upon exercise of the
Warrants
will be registered under the Securities Act and freely tradeable
by
the Holder.
(c)
The Corporation shall
pay all documentary, stamp or similar taxes and
other governmental charges that may be imposed with respect to
the
issuance of the Warrants, or the issuance or delivery of any shares
of
Common Stock upon exercise of the Warrants; provided, however, that
if
the shares of Common Stock are to be delivered in a name other
than
the name of the Holder hereof, then no such
5
<PAGE>
delivery shall be made unless the person requesting the same has
paid
to the Corporation the amount of transfer taxes or charges
incident
thereto, if any.
SECTION 4. LOSS OR MUTILATION. Upon receipt by the Corporation of
evidence
satisfactory to it of the ownership of, and loss, theft,
destruction or
mutilation of, this Warrant Certificate and (in case of loss, theft
or
destruction) of indemnity satisfactory to the Corporation, and (in
the case
of
mutilation) upon surrender and cancellation thereof, the
Corporation
shall execute and deliver to the Holder in lieu thereof a new
Warrant
Certificate of like tenor representing an equal aggregate number
of
Warrants as was indicated to be outstanding on the prior lost or
mutilated
Warrant Certificate (provided, however, that to the extent that
any
discrepancy may exist between the number of Warrants purported to
be
outstanding in respect of any Holder as evidenced by a Warrant
Certificate
that
has been lost or mutilated and the number attributable to such
Holder
in
the Warrant Registry, then the Warrant Registry shall control for
all
purposes, absent a showing of manifest error. Each Holder
requesting a
substitute Warrant Certificate due to loss, theft or destruction
shall,
prior to receiving such substitute certificate, provide an
affidavit to the
Corporation in the form prescribed thereby and signed by (and
notarized on
behalf of) such Holder. Applicants for a substitute Warrant
Certificate
shall comply with such other reasonable regulations and pay such
other
reasonable charges as the Corporation may prescribe.
SECTION 5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF WARRANT
SHARES OR
WARRANTS.
(a)
Subject to the
provisions of this Warrant Certificate and applicable
law, in the event the Corporation shall, at any time or from time
to
time after the date hereof, issue any shares of Common Stock as
a
stock dividend to the holders of Common Stock, or subdivide or
combine
the outstanding shares of Common Stock into a greater or lesser
number
of shares (any such sale, issuance, subdivision or combination
being
herein called a "Change of Shares"), then, and thereafter upon
each
further Change of Shares, the Purchase Price in effect
immediately
prior to such Change of Shares shall be reduced, but in no
event
increased, to a price (the "Adjusted Purchase Price") determined
by
multiplying the Purchase Price in effect immediately prior to
such
Change of Shares by a fraction, the numerator of which shall be
the
sum of the number of shares of Common Stock outstanding
immediately
prior to the issuance of such additional shares plus the number
of
shares of Common Stock which the aggregate consideration received
by
the Corporation would purchase at such Purchase Price, and the
denominator of which shall be the sum of the number of shares
of
Common Stock
6
<PAGE>
outstanding immediately after the issuance of such additional
shares.
Such adjustment to the Purchase Price shall be made
successively
whenever an issuance is made after a Change of Shares has
occurred.
Upon each adjustment of the Purchase Price pursuant to this
Section
5(a), the total number of shares of Common Stock purchasable upon
the
exercise of each Warrant shall become (subject to the
provisions
contained in Section 5(b) hereof) such number of shares (calculated
to
the nearest tenth) purchasable at the Purchase Price in effect
immediately prior to such adjustment multiplied by a fraction,
the
numerator of which shall be the Purchase Price in effect
immediately
prior to such adjustment and the denominator of which shall be
the
applicable
Adjusted Purchase Price (rounded to the nearest whole
number of shares). No fractional shares shall be issued or called
for
as a result of any adjustment made hereunder.
(b)
The Corporation may
elect, at its sole discretion, upon any adjustment
of the Purchase Price hereunder, to adjust the number of
Warrants
outstanding, in lieu of adjustment of the number of Warrant
Shares
purchasable upon the exercise of each Warrant as hereinabove
provided,
so that each Warrant outstanding after such adjustment shall
represent
the right to purchase one Warrant Share. Each Warrant held of
record
prior to such adjustment of the number of Warrants shall become
that
number of Warrants (calculated to the nearest tenth) determined
by
multiplying the number one by a fraction, the numerator of which
shall
be the Purchase Price in effect immediately prior to such
adjustment
and the denominator of which shall be the Adjusted Purchase
Price.
Upon each adjustment of the number of Warrants pursuant to this
Section 5(b), the Corporation shall, as promptly as practicable,
cause
to be distributed to each Holder of Warrant Certificates, on the
date
of such adjustment, Warrant Certificates evidencing the
adjusted
number of Warrants to which such Holder shall be entitled as a
result
of such adjustment or, at the sole option of the Corporation, cause
to
be distributed to such Holder in substitution and replacement for
the
Warrant Certificates held by him prior to the date of adjustment,
and
upon surrender thereof, (if required by the Corporation) new
Warrant
Certificates evidencing the aggregate number of Warrants to which
such
Holder shall be entitled after such adjustment.
(c)
In case of any
reclassification, capital reorganization or other
change of outstanding shares of Common Stock, or in case of any
consolidation or merger of the Corporation with or into another
7
<PAGE>
corporation (other than a consolidation or merger in which the
Corporation is the continuing corporation and which does not result
in
any reclassification, capital reorganization or other change of
outstanding shares of Common Stock), or in case of any sale or
conveyance to another corporation of all, or substantially all, of
the
property of the Corporation (other than a sale/leaseback, mortgage
or
other financing transaction), the Corporation shall cause
effective
provision to be made so that each holder of a Warrant then
outstanding
shall have the right thereafter, by exercising such Warrant, to
purchase the kind and number of shares of stock or other securities
or
property (including cash) receivable upon such
reclassification,
capital reorganization or other change, consolidation, merger, sale
or
conveyance by a holder of the number of Warrant Shares that might
have
been purchased upon exercise of such Warrant immediately prior to
such
reclassification, capital reorganization or other change,
consolidation, merger, sale or conveyance. Any such provision
shall
include provision for adjustments that shall be as nearly
equivalent
as may be practicable to the adjustments provided for in this
Section
5 upon a Change of Shares. The Corporation shall not effect any
such
consolidation, merger or sale without the written consent of
Holders
of a majority of the Warrants then outstanding, unless prior to
or
simultaneously
with the consummation thereof the successor (if other
than the Corporation) resulting from such consolidation or merger
or
the corporation purchasing assets or other appropriate corporation
or
entity shall assume, by written instrument executed and delivered
to
the Corporation, the obligation to deliver to the holder of
each
Warrant such substitute warrants, shares of stock, securities
or
assets as, in accordance with the foregoing provisions, such
Holders
may be entitled to purchase, and the other obligations of the
Corporation set out in this Certificate. The foregoing
provisions
shall similarly apply to successive reclassifications, capital
reorganizations and
other changes of outstanding shares of Common
Stock and to successive consolidations, mergers, sales or
conveyances.
(d)
Irrespective of any
adjustments or changes in the Purchase Price or
the number of Warrant Shares purchasable upon exercise of the
Warrants, all Warrant Certificates issued (whether prior to or
subsequent to any event causing an adjustment thereof) shall
continue
to express the Purchase Price per share, and the number of
shares
purchasable thereunder as originally expressed in the Warrant
Certificate initially issued to any Holder.
(e)
After each adjustment
of the Purchase Price pursuant to this Section
5, the Corporation will promptly prepare a certificate
8
<PAGE>
signed by the Chairman or Chief Executive Officer, and attested by
the
Secretary or an Assistant Secretary, of the Corporation setting
forth:
(i) the Purchase Price as so adjusted, (ii) the number of shares
of
Common Stock purchasable upon exercise of each Warrant after
such
adjustment or, if the Corporation shall have elected to adjust
the
number of Warrants, the number of Warrants to which the Holder of
each
Warrant shall then be entitled, and (iii) a brief statement of
the
facts accounting for such adjustment. The Corporation will
promptly
cause a brief summary thereof to be sent by ordinary first class
mail
to each Holder of Warrants at his or her last address as it
shall
appear on the registry books of the Corporation. No failure to
mail
such notice nor any defect therein nor in the mailing thereof
shall
affect the validity thereof. The affidavit of the Secretary or
an
Assistant Secretary of the Corporation that such notice has
been
mailed shall, in the absence of fraud, be prima facie evidence of
the
facts stated therein.
(f)
As used in this
Section 5, references to "Common Stock" shall mean and
include all of the Corporation's Common Stock authorized on the
date
hereof and shall also include any capital stock of any class of
the
Corporation thereafter
authorized which shall not be limited to a
fixed sum or percentage in respect of the rights of the holders
thereof to participate in dividends and in the distribution of
assets
upon the voluntary liquidation, dissolution or winding up of
the
Corporation; provided, however, that "Warrant Shares" shall
include
only shares of such class designated in the Corporation's
Certificate
of Incorporation as Common Stock on the date hereof or (i) in the
case
of any reclassification, change, consolidation, merger, sale or
conveyance of the character referred to in Section 5(c) hereof,
the
stock, securities or property provided for in such section, or (ii)
in
the case of any reclassification or change in the outstanding
shares
of Common Stock issuable upon exercise of the Warrants as a result
of
a subdivision or combination or consisting of a change in par
value,
or from par value to no par value, or from no par value to par
value,
such shares of Common Stock as so reclassified or changed.
(g)
Any determination as
to whether an adjustment in the Purchase Price in
effect hereunder is required pursuant to this Section 5, or as to
the
amount of any such adjustment, if required, shall be binding upon
all
holders of Warrants and the Corporation if made in good faith by
the
Board of Directors of the Corporation. For purposes of this
Section
5(g), the Corporation's Board of Directors shall be deemed to
have
acted in good faith if it makes any such decision in reliance
upon
advice of its legal counsel and/or another
9
<PAGE>
independent professional hired to advise the Board on such
matters.
SECTION 6. RESTRICTIVE LEGEND.
(a)
Except as otherwise
provided in this Section 6, each certificate
evidencing the issuance of Warrant Shares (whether issued in the
name
of the original Holder of this Certificate or of any subsequent
transferee thereof), shall be stamped or otherwise imprinted with
a
legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR
REGISTERED NOR QUALIFIED UNDER ANY STATE SECURITIES LAWS. SUCH
SHARES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE,
TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS QUALIFIED AND
REGISTERED UNDER APPLICABLE STATE AND FEDERAL SECURITIES LAWS
OR
UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO NORD
RESOURCES
CORPORATION, SUCH QUALIFICATION AND REGISTRATION IS NOT
REQUIRED.
NO TRANSFER OF ANY SUCH SHARE SHALL BE VALID OR EFFECTIVE UNTIL
SUCH CONDITIONS HAVE BEEN FULFILLED."
(b)
Except as otherwise
provided in this Section 6, each Warrant
Certificate shall be stamped or otherwise imprinted with a legend
in
substantially the following form:
"THE WARRANTS REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES
ACT OF 1933, AS AMENDED, NOR REGISTERED NOR
QUALIFIED UNDER ANY STATE SECURITIES LAWS. SUCH WARRANTS MAY
NOT
BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED,
PLEDGED, OR HYPOTHECATED UNLESS QUALIFIED AND REGISTERED UNDER
APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR UNLESS, IN THE
WRITTEN OPINION OF
10
<PAGE>
COUNSEL SATISFACTORY TO NORD RESOURCES CORPORATION, SUCH
QUALIFICATION AND REGISTRATION IS NOT REQUIRED. NO TRANSFER OF
ANY SUCH WARRANT SHALL BE VALID OR EFFECTIVE UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED."
(c)
The legend
requirements of Sections 6(a) and 6(b) above shall
terminate as to any particular Warrant or Warrant Share: (i) when
and
so long as such security shall have been effectively registered
under
the Securities Act and is disposed of pursuant thereto; or (ii)
when
the Company shall have received an opinion of counsel
reasonably
satisfactory to it that such shares may be sold to the public
without
registration thereof under the Securities Act. Whenever the
legend
requirements imposed by this Section 6 shall terminate as to
any
Warrant Share, as hereinabove provided, the Holder hereof shall
be
entitled to receive from the Corporation, at the Corporation's
expense, a new certificate representing such Warrant Shares and
not
bearing the restrictive legend set forth in Section 6(a).
SECTION 7. RIGHTS OF ACTION. All rights of action with respect to
the Warrants
are
vested in the Holders of the Warrants, and any Holder of a
Warrant,
without consent of the holder of any other Warrant, may, in such
Holder's
own
behalf and for his own benefit, enforce against the Company his
right
to
exercise his Warrants for the purchase of Warrant Shares in the
manner
provided in this Warrant Certificate.
SECTION 8. AGREEMENT OF WARRANT HOLDERS. Every holder of a Warrant,
by his or
her
acceptance thereof, consents and agrees with the Corporation and
every
other holder of a Warrant that:
(a)
The Warrant Registry
shall be maintained by the Corporation's
Secretary, and shall be the official register of all Warrants
issued
to any person in the Offering. The Warrant Registry shall be
dispositive as to the issuance, ownership, transfer and other
aspects
of each Warrant issued by the Corporation which are recorded
therein
and, absent manifest error, such records shall control for all
purposes.
(b)
The Warrants are
transferable only on the Warrant Registry by the
Holder thereof in person or by his attorney duly authorized in
writing
and only if the Warrant Certificates representing such Warrants
are
surrendered at the Corporate Office of the Corporation, duly
endorsed
or accompanied by a proper instrument
11
<PAGE>
of transfer satisfactory to the Corporation in its sole
discretion,
together with payment of the amount of any applicable transfer
taxes;
and
(c)
The Corporation may
deem and treat the person in whose name the
Warrant Certificate is registered on the Warrant Registry as
the
holder and as the absolute, true and lawful owner of the
Warrants
represented thereby for all purposes, and the Corporation shall not
be
affected by any notice or knowledge to the contrary, except as
otherwise expressly provided in this Certificate.
SECTION 9. MODIFICATION OF WARRANTS. Other than with respect to any
adjustment
made
by the Corporation in accordance with the provisions of Section
5
hereof, this Certificate may only be modified, supplemented or
altered by
the
Corporation, and only with the consent in writing of the Holders
of
Warrants representing
greater than fifty percent (50%) of the total
Warrants then outstanding; provided, that no change in the number
or nature
of
the securities purchasable upon the exercise of any Warrant, or
the
acceleration of the Exercise Date, shall be made without the
consent in
writing of the Holder of the Warrant Certificate representing such
Warrant,
other than such changes as are specifically prescribed by this
Certificate
as
originally executed or are made in compliance with applicable
law.
SECTION 10. NOTICES. All notices, requests, consents and other
communications
hereunder shall be in writing and shall be deemed to have been made
when
delivered or mailed first class registered or certified mail,
postage
prepaid as follows: if to the Holder of a Warrant Certificate, at
the
address of such Holder as shown on the Warrant Registry maintained
by the
Corporation; and if to the Corporation, at 3048 Seven Dash Road,
Dragoon,
AZ
85609, or such other place as may be designated by the Corporation
from
time
to time in accordance with this Section 10.
SECTION 11. GOVERNING LAW. This Certificate shall be governed by
and construed
in
accordance with the corporations laws of the State of Delaware,
without
giving effect to the law of conflicts of laws applied thereby. In
the event
that
any dispute shall occur between the parties arising out of or
resulting from the construction, interpretation, enforcement or any
other
aspect of this
Certificate, the parties hereby agree to accept the
exclusive jurisdiction of the Courts of the State of Delaware. In
the event
either party shall be forced to bring any legal action to protect
or defend
its
rights hereunder, then the prevailing party in such proceeding
shall be
entitled to reimbursement from the non-prevailing party of all
fees, costs
and
other expenses (including,
12
<PAGE>
without limitation, the reasonable expenses of its attorneys) in
bringing
or
defending against such action.
SECTION 12. ENTIRE UNDERSTANDING. This Certificate contains the
entire
understanding among the Corporation and the Holder relating to the
subject
matter covered herein, and merges all prior discussions,
negotiations and
agreements, if any between them. Neither of the parties to this
agreement
shall be bound by any representations, warranties, covenants, or
other
understandings relating to such subject matter, other than as
expressly
provided for or referred to herein.
13
<PAGE>
IN
WITNESS WHEREOF, the Corporation has caused this Warrant
Certificate to
be duly executed, manually or in facsimile, by two of its officers
thereunto
duly authorized, as of the date set forth below.
NORD RESOURCES CORPORATION
ATTEST:
By:
By:
---------------------------------
------------------------------------
Erland A.
Anderson
Ronald A. Hirsch
President
Chief Executive Officer
Date: November 8, 2005
14
<PAGE>
SCHEDULE 1
Except as expressly disclosed on Appendix I delivered to Holder
together with
this Note, and which is hereby incorporated herein by reference as
an integral
part of this Schedule 1, the Company hereby represents and warrants
to Holder,
as of the date of this Note, the following:
(a) Organization. The Company is a corporation duly organized,
validly
existing, and in good standing under the laws of the State of
Delaware,
with
full power and authority, and all necessary consents,
authorizations,
approvals, orders, licenses, certificates, and permits of and from,
and
declarations and filings with all Federal, state, local, foreign,
and other
governmental authorities and all courts and other tribunals, to
own, lease,
license and use its properties and assets, and to carry on its
business or
proposed business as required. The Company is duly licensed and
qualified
to
do business and be in good standing in every jurisdiction in which
the
ownership, leasing, licensing or use of property and assets or the
conduct
of
its business makes such qualification necessary. The Company has
no
subsidiaries.
(b) Capitalization. The authorized, issued and outstanding
capital
stock of the Company has been validly issued, and consists of
28,789,240
fully paid and nonassessable shares of the Company's common stock
and
6,497,249 warrants and options to purchase common stock. There are
no other
classes of capital stock or other securities authorized or issued
by the
Company. The Company has no obligation (contingent or otherwise) to
pay any
dividend or make any other distribution in respect of its capital
stock.
There exist no voting trusts or agreements, stockholders'
agreements,
pledge agreements, buy-sell agreements, rights of first refusal or
proxies
relating to any securities of the Company. The Company has no
obligation
(contingent or otherwise) to repurchase, redeem or otherwise
acquire any
shares of its capital stock. There is no commitment by the Company
to issue
shares, subscriptions, warrants, options, preemptive rights,
convertible
securities or other such rights or to distribute to holders of any
of its
equity securities any evidence of indebtedness or asset.
(c) Financial Statements. The unaudited balance sheet of the
Company
for
the year ended December 31, 2004, the related unaudited statements
of
operations and statements of cash flow for the year ended December
31, 2004
and
the unaudited balance sheet of the Company for the six months
ended
June
30, 2005 (such date being referred to herein as the "Balance
Sheet
Date" and collectively, the "Financial Statements"), present fairly
in all
material respects the financial position and cash flows of the
Company at
the
indicated dates and for the indicated periods. Except as set forth
in
the
Financial Statements, the Company has no liabilities, contingent
or
otherwise, other than (i) liabilities incurred in the ordinary
course of
business subsequent to the Balance Sheet Date and (ii) obligations
under
contracts and commitments incurred in the ordinary course of
business which
are
not required to be reflected in the Financial Statements, which,
in
both
cases, individually or in the aggregate, are not material to
the
business, proposed business, financial condition or operating
results of
the
Company. The Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
-1-
<PAGE>
(d) Absence of Undisclosed Liabilities. The Company has no
material
outstanding claims, liabilities, obligations or indebtedness,
contingent or
otherwise, whether asserted or unasserted, except as set forth in
the
Financial Statements, or referred to in any of the notes thereto,
except as
incurred in the ordinary course of business since the Balance Sheet
Date.
All
liabilities of the Company incurred subsequent to the Balance
Sheet
Date
have been incurred in the ordinary course of business and do
not
involve borrowings which individually exceed $5,000 and which do
not exceed
$15,000 in the aggregate.
(e)
Absence of Changes. Since the Balance Sheet Date, the Company
has
operated in the ordinary course of business consistent with past
practice.
Since the Balance Sheet Date, there has not occurred any change in
the
financial condition, results of operations, assets, liabilities or
business
of
the Company which, in the aggregate, has had a material adverse
effect
on
the Company's business.
(f) Title to Properties; Encumbrances. To the Company's knowledge,
the
Company has good, valid and marketable title to (A) all of its
properties
and
assets (real, personal, tangible and intangible), including,
without
limitation, all the properties and assets reflected in the
Financial
Statements, and (B) all the properties and assets purchased or
otherwise
acquired since the Balance Sheet Date; in each case clear of
all
encumbrances, liens, claims, charges or other restrictions of
whatever kind
or
character, except for Permitted Liens (as defined in Schedule
2)
existing as of the date of this Note.
(g) Material Agreements. The Company is not in material violation
or
breach of or in material default with respect to, complying with
any
provision of any material contract, agreement, instrument, lease,
license,
arrangement or understanding to which the Company is a party, and
each such
material contract, agreement, instrument, lease, license,
arrangement and
understanding is in full force and effect and is the legal, valid
and
binding obligation of the Company enforceable as to the Company
in
accordance with its terms (subject to applicable bankruptcy,
insolvency and
other laws affecting the enforceability of creditors' rights
generally and
to
general equitable principles). The Company has performed in all
material
respects all obligations to have been performed on such contracts
through
the
date hereof. The Company is not in violation or breach of, or
in
default with respect to, any term of its Certificate of
Incorporation or
By-Laws. To the Company's knowledge, no third party is in default
under any
agreement, contract or other instrument, document or agreement to
which the
Company is a party, which default would or could have a material
adverse
effect on the Company's properties or assets or the business of the
Company
as
presently conducted or proposed to be conducted.
(h) Patents, Trademarks, and Copyrights, Etc. All patents,
trademarks,
trade names, brand
names and copyrights (in each case, whether issued or
pending), all applications for any of the foregoing, and all
licenses or
rights with respect to any of the foregoing, necessary for the
conduct of
the
Company's business as currently being conducted are owned by
the
Company, or the Company otherwise has the legal right to use the
foregoing,
free
and clear of all liens and encumbrances of any nature. To the
Company's knowledge, the Company is not infringing any
copyright,
trademark, trade secret or other intellectual property rights of
others
and,
to the Company's knowledge,
-2-
<PAGE>
any
patent. All trade secrets, know how, technical processes and
procedures
developed by and belonging to the Company which are material to
the
business of the Company and which have not been patented have been
kept
confidential. The Company has the right to use, free and clear of
claims or
rights of others, other than as set forth under applicable license
or
assignment agreements to which the Company is bound, all trade
secrets,
customer lists, processes, software, patents, copyrights,
trademarks, or
other intellectual property required for the business of the
Company as now
being and as proposed to be conducted. The Company has not entered
into any
agreement granting any third party the right to bring infringement
actions
with
respect to, or otherwise to enforce rights with respect to, any
intellectual property right. The Company has the exclusive right to
file,
prosecute and maintain all applications and registrations with
respect to
its
intellectual property rights. Each current and former service
provider
of
the Company has executed a proprietary information and
inventions
agreement (or similar agreement) with the Company. To the extent
the
Company has ever utilized consultants or independent contractors
for such
purpose, each consultant or independent contractor has executed a
written
agreement, validly assigning to the Company his or her rights in
and to all
copyrights and works of authorship relating to products, services
or
technology designed, developed, manufactured, licensed, sold,
marketed or
serviced by the Company and its business. To the Company's
knowledge, none
of
the Company's service providers is in violation thereof.
(i) Litigation. There is no action, suit, investigation,
customer
complaint, claim or
proceeding at law or in equity by or before any
arbitrator, governmental instrumentality or other agency now
pending or, to
the
Company's knowledge, threatened against or affecting the Company,
nor,
to
the Company's knowledge, does there exist any basis therefor.
The
Company is not subject to any judgment, order, writ, injunction or
decree
of
any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign.
To
the Company's knowledge, none of the Company's officers or
directors is
a
party to, or subject to the provisions of, any order, writ,
injunction,
judgment or decree of any court or governmental agency or
instrumentality
relating to the Company. There is no action, suit or proceeding by
the
Company currently pending or which the Company presently intends
to
initiate.
(j) Non-Defaults. To the Company's knowledge, the Company is not
in
default in the performance or observance of any obligation with
respect to
any
order, writ, injunction or decree of any court of any Federal,
state,
municipal or other governmental department, commission, board,
bureau,
agency or instrumentality, domestic or foreign and there exists
no
condition, event or act which constitutes, nor which after notice,
the
lapse of time or both, would constitute, a default under any of
the
foregoing. Upon the execution of the Loan Documents, the Company
will not
be
in material breach of any term of any of the Loan Documents nor
will any
Default be presently occurring, which, in either event, if not
cured
pursuant to the terms of the Note, would materially and adversely
impair
the
Company's ability to perform its obligations under the Note.
-3-
<PAGE>
(k) Employment of Officers, Employees and Consultants. To the
Company's knowledge, no third party may assert any valid claim
against the
Company with respect to the (i) continued employment by, or
association
with, the Company of any of its present officers, employees or
consultants;
or
(ii) use by the Company of any information which the Company would
be
prohibited from using under any prior agreements or arrangements or
any
laws
applicable to unfair competition, trade secrets or proprietary
information.
(l) Taxes. The Company has filed all Federal, state, local and
foreign
tax
returns which are required to be filed by it and all such returns
are
true
and correct in all material respects. The Company has paid all
taxes
pursuant to such returns or pursuant to any assessments received by
it and
have
withheld all amounts which it is obligated to withhold from
amounts
owing to any employee, creditor or third party. The tax returns of
the
Company have never been audited by any state, local or Federal
authorities.
The
Company has not waived any statute of limitations with respect to
taxes
or
agreed to any extension of time with respect to any tax assessment
or
deficiency. All tax elections have been made by the Company in
accordance
with
generally accepted practices. No deficiency assessment with respect
to
or
proposed adjustment of the Company's Federal, state, county or
local
taxes is pending or, to the Company's knowledge, threatened. There
is no
tax
lien, whether imposed by any Federal, state, county or local
taxing
authority, outstanding against the assets, properties or business
of the
Company.
(m) Compliance with Laws; Environmental Matters, Licenses, Etc.
The
Company has not received any notice of any violation of, or
noncompliance
with, any Federal, state, local or foreign laws, ordinances,
regulations or
orders (including, without limitation, those relating to all
applicable
Federal, state and local insurance laws, rules and regulations,
environmental protection, occupational safety and health and other
labor
laws, ERISA, Federal drug laws, Federal securities laws, equal
employment
opportunity, consumer protection, credit reporting,
"truth-in-lending," and
warranties and trade practices) ("Notice of Violation") applicable
to the
business of the Company operated under the direction of the
Company, the
violation of, or noncompliance with which, would have a material
adverse
effect on the Company's business or operations, and the Company
knows of no
facts or set of circumstances which, to its knowledge, would give
rise to
such
a notice. The Company has all licenses and permits and other
governmental certificates, authorizations and permits and
approvals
(collectively, "Governmental Licenses") required by every Federal,
state
and
local government or regulatory body for the operation of its
business
and
the use of its properties where the failure to obtain or possess
such
license or permit would have a material adverse effect on the
business of
the
Company. The Governmental Licenses are in full force and effect
and, to
the
Company's knowledge, no violations are or have been recorded in
respect
of
any Governmental License and no proceeding is pending or threatened
to
revoke or limit any thereof. The Company has not received any
written
opinion or memorandum from legal counsel indicating that it has
taken any
action which has resulted in, or is reasonably likely to result in,
the
Company incurring any liability which may be material to its
business,
prospects, financial condition, operations, property or affairs.
The
Company is in compliance with all applicable laws, rules,
regulations and
orders, the noncompliance
-4-
<PAGE>
with
which could materially adversely affect the Company's business
or
condition, financial or otherwise.
(n) Authorization. The execution and delivery of the Note and
the
other Loan Documents has been duly authorized by all requisite
corporate
action of the Company, and when so executed and delivered, the Note
and the
other Loan Documents will constitute the valid and binding
obligation of
the
Company, enforceable against the Company in accordance with
their
terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance,
reorganization, moratorium and similar laws affecting creditors'
rights and
remedies generally and general principles of equity. The issuance
of the
Note
and the Warrants is exempt from the registration requirements of
the
Securities Act of 1933, as amended (the "Act") and the rules
and
regulations promulgated thereunder and the Note and the Warrants
will be
issued in compliance with all applicable Federal securities
laws.
(o) Non-Contravention Etc. The execution, delivery and performance
of
the
terms of the Notes and the other Loan Documents will not (i)
violate
any
provision of law or statute or any order of any court or other
agency
of
government binding on the Company; or (ii) conflict with or result
in
any
breach of any of the terms, conditions or provisions of, or
constitute
(with due notice or lapse of time or both) a default under, or
result in
the
creation of any lien, security interest, charge or encumbrance upon
any
of
the properties or assets of the Company under the Certificate
of
Incorporation, or By-Laws of the Company or any indenture,
mortgage, deed
of
trust, note, credit or lease agreement or other material agreement
or
instrument to which the Company is a party or by which it or any of
its
property is bound or affected, except for such conflict, breach or
default
as
to which requisite waivers or consents shall have been obtained by
the
Company.
(p) Insurance. All insurable assets and properties of the Company
are
insured against all risks usually insured against by persons owning
or
operating similar properties and assets in the localities where
such
properties or assets are located, through insurance policies all of
which
are
in full force and effect. The Company is insured against all
claims
relating to its activities to the same extent that the risks of
such claims
are
usually insured against by persons or entities involved in
similar
activities. Each of the insurance policies referred to in this
section is
issued by an insurer of recognized responsibility, and the Company
has not
received any notice or threat of the cancellation or nonrenewal of
any such
