EXHIBIT 10.4
GLOBAL DIAMOND RESOURCES, INC.
SECURITIES PURCHASE AGREEMENT
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December 5, 1997
TABLE OF CONTENTS
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Page
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1. Purchase and Sale of Securities ..................................... 1
2. Deliveries at Closing ............................................... 2
3. Representations and Warranties of the Company ....................... 4
4. Representations, Warranties and Covenants of the Purchaser .......... 10
5. Indemnification ..................................................... 12
6. Post-Closing Covenants .............................................. 13
7. Registration Rights ................................................. 16
8. Miscellaneous ....................................................... 26
EXHIBITS
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A. Secured Convertible Promissory Note
B. Pledge Agreement
C. Corporate Guaranty
D. Warrant Certificates
E. Company's Officer's Certificate
F. Opinion of Company Counsel
G. Opinion of GDRIL Counsel
H. Opinion of Global Diamond-SA Counsel
I. Purchaser's Officer's Certificate
SECURITIES PURCHASE AGREEMENT
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This Securities Purchase Agreement ("Agreement") is entered into this 5th
day of December 1997, by and among GLOBAL DIAMOND RESOURCES, INC., a Nevada
corporation (the "Company"), GLOBAL DIAMOND RESOURCES INTERNATIONAL LIMITED, a
British Virgin Islands company ("GDRIL"), and INTERNATIONAL PCM HOLDINGS
LIMITED, a British Virgin Islands company ("Purchaser").
R E C I T A L S
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A. The Company and GDRIL desire to obtain additional capital in order to
further the mine development and operations of GRDIL's South African
subsidiaries.
B. In order to obtain such funds, GDRIL desires to sell and issue to the
Purchaser at Closing (as defined below) GDRIL's Secured Convertible Promissory
Note in the original principal amount of Three Million U.S. Dollars
(U.S.$3,000,000) and the Company desires to sell and issue to the Purchaser
3,525,241 shares of the Company's $.001 par value common stock ("Common Stock"),
for the aggregate payment of Six Million U.S. Dollars (U.S.$6,000,000), on the
terms and subject to the conditions set forth herein.
A G R E E M E N T
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It is agreed as follows:
1. Purchase and Sale of Securities.
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1.1 Purchase and Sale of Shares. Subject to the terms and conditions
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herein stated, the Company agrees to sell and issue to the Purchaser, and the
Purchaser agrees to purchase from the Company, 3,525,241 shares ("Shares") of
Common Stock at a total purchase price of Three Million U.S. Dollars
(U.S.$3,000,000), which Shares constitute thirty percent (30%) of the issued and
outstanding Common Stock of the Company as of the date hereof.
1.2 Purchase and Sale of Note. Subject to the terms and conditions
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herein stated, GDRIL agrees to sell and issue to the Purchaser, and the
Purchaser agrees to purchase from GDRIL, GDRIL's Secured Convertible Promissory
Note ("Note") in the original principal amount of up to Three Million U.S.
Dollars (U.S.$3,000,000) at a purchase price of Three Million U.S. Dollars (U.S.
$3,000,000).
1.2.1 Note. The Note shall be in the form of, and have the
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payment terms, interest rate, and other rights, terms and conditions as provided
in the Note attached hereto as Exhibit "A".
1.2.2 Security for the Note. To secure repayment and full
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and timely performance of the obligations of GDRIL under the Note, GDRIL shall
enter into the Pledge Agreement attached hereto as Exhibit "B" (the "Pledge
Agreement") pursuant to which GDRIL
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shall pledge to the Purchaser and grant to the Purchaser a security interest in
and to 100% of the issued and outstanding shares of Global Diamond Resources
(SA) (Pty) Limited ("Global Diamond-SA"), a South African corporation wholly-
owned by GDRIL.
1.2.3 Corporate Guaranty. As further security for the repayment
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of the Note, the Company shall unconditionally and irrevocably guarantee all of
GDRIL's payment and other obligations under the Note pursuant to a Corporate
Guaranty in the form attached to this Agreement as Exhibit "C" ("Guaranty").
1.3 Purchase and Sale of Warrants. Subject to the terms and
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conditions of this Agreement, the Company agrees to sell and issue to the
Purchaser, for no additional consideration, four (4) separate common stock
purchase warrants in the forms attached to this Agreement as Exhibit "D" (the
"Warrants"). The Warrants shall give the Purchaser the right to purchase a
number of shares of Common Stock at the exercise price and subject to the terms
and conditions as contained in the Warrants, it being understood that the
Warrants have been prepared with the intent of affording the Purchaser the right
to maintain its 30% shareholding in the Company in the event that outstanding
warrants having an exercise price of less than $1.00 are exercised.
1.4 Closing. The closing of the transactions contemplated by this
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Agreement ("Closing") shall take place at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇,
Twelfth Floor, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ at 11:00 a.m. on
December 5, 1997, or at such other time or place as the parties hereto shall by
written instrument designate (with the date on which such Closing takes place
referred to as the "Closing Date"). Except as otherwise provided herein, the
Closing may be conducted by means of exchange of documents via facsimile with
original documents to be exchanged by overnight mail. At the Closing, GDRIL
shall deliver to the Purchaser the Note and the Company shall deliver to the
Purchaser the certificates representing the Shares and Warrants purchased by the
Purchaser under this Agreement in definitive form and registered in the name of
the Purchaser against delivery to the Company by the Purchaser of separate wire
transfers to the general accounts of GDRIL and the Company in the amounts of One
Million One Six Hundred Thousand U.S. Dollars ($U.S.1,600,000), representing the
first installment under the Note, and Three Million U.S. Dollars
(U.S.$3,000,000), respectively (together with the conditional second installment
under the Note in the amount of $U.S.1,400,000, collectively referred to as the
"Purchase Price").
2. Deliveries at Closing.
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2.1 Company's Deliveries at Closing. At the Closing, the Company and
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GDRIL shall deliver or cause to be delivered to the Purchaser all of the
following:
(a) the Note, duly executed by GDRIL;
(b) a certificate or certificates representing the Shares and
each of the Warrants, registered in the name of the Purchaser;
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(c) the Pledge Agreement, duly executed by each of GDRIL, the
Company and Global Diamond-SA;
(d) the Guaranty, duly executed by the Company;
(e) an Officer's Certificate of the Company in the form attached
hereto as Exhibit "E";
(f) certified resolutions of the Board of Directors of each of
the Company, GDRIL and Global Diamond-SA authorizing consummation of the
transactions contemplated by this Agreement;
(g) an opinion letter of counsel for the Company in the form
attached hereto as Exhibit "F";
(h) an opinion letter of counsel for GDRIL in the form attached
hereto as Exhibit "G";
(i) an opinion letter of counsel for Global Diamond-SA in the
form attached hereto as Exhibit "H";
(j) a Certificate of Good Standing from the State of Nevada for
the Company as of a date not earlier than ten (10) business days before the
Closing; and
(k) such other documents and instruments as shall be reasonably
necessary to effect the transactions contemplated hereby.
2.3 Purchaser's Deliveries at Closing. At the Closing, the Purchaser
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shall deliver or cause to be delivered to the Company and to GDRIL all of the
following:
(a) separate wire transfers of immediately available funds to
GDRIL's and the Company's general accounts in the amounts of $1,600,000 and
$3,000,000, respectively;
(b) the Pledge Agreement, duly executed by the Purchaser;
(c) an Officer's Certificate of the Purchaser in the form
attached hereto as Exhibit "I";
(d) certified resolutions of the Purchaser's Board of Directors
authorizing consummation of the transactions contemplated by this Agreement; and
(e) such other documents and instruments as shall be reasonably
necessary to effect the transactions contemplated hereby.
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3. Representations and Warranties of the Company and GDRIL.
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As a material inducement to the Purchaser to enter into this Agreement
and to purchase the Shares, the Note and the Warrants, each the Company and
GDRIL represents and warrants, jointly and severally, that the following
statements are true and correct in all material respects except as expressly
qualified or modified herein.
3.1 Organization and Good Standing. The Company is a corporation
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duly organized, validly existing, and in good standing under the laws of the
State of Nevada and has full corporate power and authority to enter into and
perform its obligations under this Agreement, and to own its properties and to
carry on its business as presently conducted and as proposed to be conducted.
The Company is duly qualified to do business as a foreign corporation in every
jurisdiction in which the failure to so qualify would have a material adverse
effect upon the Company. GDRIL is a corporation duly organized, validly
existing, and in good standing under the laws of the British Virgin Islands and
has full corporate power and authority to enter into and perform its obligations
under this Agreement, and to own its properties and to carry on its business as
presently conducted and as proposed to be conducted. GDRIL is duly qualified to
do business as a foreign corporation in every jurisdiction in which the failure
to so qualify would have a material adverse effect upon GDRIL.
3.2 Capitalization. The authorized capital stock of the Company
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consists of 10,000,000 shares of Preferred Stock, $.001 par value, of which no
shares are issued, and 25,000,000 shares of Common Stock, $.001 par value, of
which 8,225,561 shares are issued and outstanding. All of the issued and
outstanding capital shares of GDRIL are owned by the Company and the Company's
wholly-owned subsidiary, Global Diamond Resources Inc., a British Columbia
corporation. The authorized capital of Global Diamond-SA consists of 100
ordinary shares, of which 95 shares are issued and outstanding and held by
GDRIL. Global Diamond-SA owns 50% of the issued and outstanding share capital
of Nabas Diamonds (Pty) Limited, a South African corporation ("Nabas Diamonds"),
free and clear of any mortgage, deed of trust, pledge, lien, security interest
or other charge or encumbrance of any nature. There are no options, warrants or
rights outstanding which entitle their holder to purchase or acquire any capital
shares of GDRIL, Global Diamond-SA or Nabas Diamonds. All outstanding shares of
Common Stock have been duly authorized and validly issued, and are fully paid,
nonassessable, and free of any preemptive rights. The Shares and the Warrants,
along with the shares of Common Stock underlying the Note and Warrants
(collectively referred to as the "Securities") are duly authorized and, when
issued and paid for in accordance with the terms of the Agreement, the Note or
the Warrants, as the case may be, will be validly issued, fully paid and
nonassessable. Except as set forth in Schedule 3.2, there are no agreements,
options, warrants or other rights to purchase any of the Company's authorized
and unissued Preferred Stock or Common Stock, and there are no voting, pooling
or voting trust agreements, arrangements or contracts known to the Company by
and among the Company, its shareholders, or any of them.
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3.3 No Subsidiaries. Except as set forth on Schedule 3.3, the
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Company does not control, or have any interest in, directly or indirectly, any
corporation, partnership, business trust, association or other business entity.
3.4 SEC Reports. The Company has delivered to the Purchaser its
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annual report on Form 10-KSB for the fiscal year ended December 31, 1996 and all
quarterly reports on Form 10-QSB subsequently filed with the U.S. Securities and
Exchange Commission (collectively, the "SEC Reports"). Except as set forth in
Schedule 3.4 or this Agreement, the information in the SEC Reports, taken as a
whole, is true and correct in all material respects and does not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
3.5 Validity of Transactions. This Agreement, and each document
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executed and delivered by each of the Company and GDRIL in connection with the
transactions contemplated by this Agreement, and the performance of the
transactions contemplated therein have been duly authorized, executed and
delivered by each of the Company and GDRIL and is each the valid and legally
binding obligation of each of the Company and GDRIL, enforceable in accordance
with its terms, except as limited by applicable bankruptcy, insolvency
reorganization and moratorium laws and other laws affecting enforcement of
creditor's rights generally and by general principles of equity. The Shares
issuable hereunder, when issued in accordance with the terms of this Agreement
will be duly authorized, validly issued, fully paid and nonassessable. The
Securities will be free of any liens or encumbrances, except for any
restrictions imposed by federal or state securities laws.
3.6 No Violation. The execution, delivery and performance of this
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Agreement and each document executed and delivered by the Company and GDRIL has
been duly authorized by the Boards of Directors of each of the Company and GDRIL
and, to the extent necessary, the shareholders of each of the Company and GDRIL,
will not violate any law or any order of any court or government agency
applicable to the Company or GDRIL, as amended, as the case may be, or the
Articles of Incorporation or Bylaws of the Company or GDRIL, as amended, and
will not result in any breach of or default under, or, except as expressly
provided herein, result in the creation of any encumbrance upon any of the
assets of the Company or GDRIL pursuant to the terms of any agreement or
instrument by which the Company or GDRIL or any of their assets may be bound.
No approval of or filing with any governmental authority is required for either
of the Company or GDRIL to enter into, execute or perform this Agreement.
3.7 Litigation. Except as set forth in the SEC Reports, there are no
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suits or proceedings (including without limitation, proceedings by or before any
arbitrator, government commission, board, bureau or other administrative agency)
pending or, to the knowledge of the Company or GDRIL, threatened against or
affecting the Company or GDRIL which, if adversely determined, would have a
material adverse effect on the consolidated financial condition, results of
operations, prospects or business of the Company or GDRIL, or which questions
the validity of this Agreement or any action to be taken in connection
therewith, and neither the Company nor GDRIL is subject to or in
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default with respect to any order, writ, injunction or decree of any federal,
state, local or other governmental department. Neither the Company nor GDRIL has
commenced nor currently intends to commence any legal proceedings against any
other person or entity.
3.8 Mining Properties. Neither the Company nor any of its
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subsidiaries own any real property or mining interests except as set forth on
Schedule 3.8 attached hereto. Set forth on Schedule 3.8 attached hereto is a
complete list as of the date hereof of all contracts and permits which represent
Global Diamond-SA's and Nabas Diamond's mining properties and interests ("Mining
Contracts"). Each of the Mining Contracts is legal, binding and enforceable, is
in full force and effect, and grants to the Company or its subsidiaries, as the
case may be, the exclusive right to mine the property interest demised
thereunder, except as expressly limited by the terms of the respective Mining
Contract and applicable South African law. Except as set forth in Schedule 3.8,
none of the Mining Contracts will expire or be terminated or be subject to any
modification of terms or conditions upon the consummation of the transactions
contemplated by this Agreement. All amounts due and payable by the Company or
its subsidiaries under the Mining Contracts have been fully paid. There are no
actual or, to the knowledge of the Company and GDRIL, threatened expropriations,
interdicts or ▇▇▇▇ proclamations relating to the premises covered by the Mining
Contracts, and no claims for restitution of land rights have been lodged under
the South African Restitution of Lands Rights Act 20 of 1994 in relation to the
premises covered by the Mining Contracts. Nabas Diamonds has all necessary
statutory consents to prospect in that area of the Richtersveld National Park
covered by the prospecting permit therefor and it has obtained a Section 51(3)
permission in terms of the Rural Areas Act 9 of 1987 to prospect in the area
covered by the Grasdrif prospecting permit. Except as set forth in Schedule
3.8, neither Global Diamond-SA nor Nabas Diamonds is in default in any material
respect under the terms of any Mining Contract nor has any event occurred which,
with the passage of time or giving of notice, would constitute such a default by
Global Diamond-SA or Nabas Diamonds and, to the Company's knowledge, no other
party to any such Mining Contract is in default in any material respect
thereunder nor has any such event occurred with respect to such party. The
Company or its subsidiaries, as the case may be, has good and valid title to
each of the mining interests demised under the Mining Contracts free and clear
of any liens or encumbrances, except those set forth in the Mining Contracts and
applicable South African law.
3.9 Use of Proceeds. The Company and GDRIL shall use the proceeds
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from the sale of the Securities solely for the purpose of furthering the
operations of the Company, GDRIL and its South African subsidiaries.
3.10 Taxes. All federal income tax returns and state and local income
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tax returns for each of the Company and GDRIL have been filed as required by
law; all taxes as shown on such returns or on any assessment received subsequent
to the filing of such returns have been paid, and there are no pending
assessments or adjustments or any income tax payable for which reserves, which
are reasonably believed by the Company to be adequate for the payment of any
additional taxes that may come due, have not been established. All other taxes
imposed by any government authority on either the Company or GDRIL have been
paid and any reports or returns due in connection therewith have been filed. No
outstanding claim for assessment or collection of taxes has been asserted
against
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the Company or GDRIL, and there are no pending, or to the knowledge of
the Company or GDRIL, threatened tax audits, examinations or claims.
3.11 No Defaults. No material default (or event which, with the
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passage of time or the giving of notice, or both, would become a material
default) exists or is alleged to exist with respect to the performance of any
obligation either of the Company or GDRIL under the terms of any indenture,
license, mortgage, deed of trust, lease, note, guaranty, joint venture
agreement, operating agreement, partnership agreement, or other contract or
instrument to which either the Company or GDRIL is a party or any of its assets
are subject, or by which it is otherwise bound, and, to the best knowledge of
the Company, no such default or event exists or is alleged to exist with respect
to the performance of any obligation of any party thereto.
3.12 Environmental Matters. Based on the actual knowledge of the
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Company and GDRIL: (i) the operations of Global Diamond-SA and Nabas Diamonds
comply in all respects with all applicable South African environmental, health
and safety statutes and regulations; (ii) none of the operations of the Company,
Global Diamond-SA and Nabas Diamonds involve the unlawful generation of,
transportation, treatment or disposal of hazardous waste; (iii) neither Global
Diamond-SA or Nabas Diamonds has disposed of any hazardous waste or substance by
placing it in or on the ground of any premises owned, leased or used by it; and
(iv) no underground storage tanks or surface impoundments are on any of the
premises owned, leased or used by the Company, Global Diamond-SA or Nabas
Diamonds. There are no pending or to the actual knowledge of the Company and
GDRIL, threatened claims, encumbrances or restrictions of any nature resulting
from environmental laws with respect to or affecting any properties in which the
Company or its subsidiaries has an interest.
3.13 Insurance. The Company has insurance with respect to its
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property and operations in the United States as set forth in Schedule 3.13.
3.14 Absence of Undisclosed Liabilities. The Company has no
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liabilities or obligations of any nature, whether known or unknown, absolute,
accrued contingent or otherwise, and whether due or to become due, not disclosed
in the SEC Reports, except: (a) those set forth in Schedule 3.14; and (b) those
which (i) were incurred in the ordinary course of business subsequent to
September 30, 1997, and (ii) individually and in the aggregate are not material
to the operations or financial condition of the Company.
3.15 Securities Law Compliance. Assuming the accuracy of the
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representations and warranties of the Purchaser set forth in Section 4 of this
Agreement, the offer, issue, sale and delivery of the Securities constitutes or
will constitute, as the case may be, an exempted transaction under the
Securities Act of 1933 ("1933 Act"), as now in effect, and registration of the
Securities under the 1933 Act, is not required, and no notice, filing,
registration, or qualification under any U.S. state securities or "Blue Sky" law
is required in connection therewith except for such filings as may be necessary
to comply with the Blue Sky laws of any state, which filings will be made in a
timely manner.
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3.16 Directors and Officers. None of the directors or officers of the
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Company has:
(a) ever filed, or had filed against him or her, a petition under
the bankruptcy or insolvency laws of any governmental regulatory authority,
whether U.S. or foreign, or had a receiver, fiscal agent or similar officer
appointed by a court for his or her business or property or any partnership in
which he or she was a general partner at or within two years before the date
hereof; or
(b) been convicted of a crime or named in a criminal proceeding
which is presently pending or, to the knowledge of the Company, threatened
(excluding traffic violations and other minor offenses); or
(c) been the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction permanently or temporarily enjoining him or her from, or otherwise
limiting, any of the following activities: (i) acting as a futures commission
merchant, introducing broker, commodity trading advisor, commodity pool
operator, floor broker, leverage transaction merchant, any other person
regulated by the Commodity Futures Trading Commission, or an associated person
of any of the foregoing, or as an investment adviser, underwriter, broker or
dealer in securities, or as an affiliated person, director or employee of any
investment company, bank, savings and loan association or insurance company, or
engaging in or continuing any conduct or practice in connection with any such
activity; (ii) engaging in any type of business practice; or (iii) engaging in
any activity in connection with the purchase or sale of any security or
commodity or in connection with any violation of the U.S. Federal commodities
laws or the securities laws of any other governmental regulatory authority,
whether U.S. or foreign; or
(d) been the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of a governmental regulatory
authority, whether U.S. or foreign, barring, suspending or otherwise limiting
for more than sixty (60) days his or her right to engage in any activity
described in Section 3.11(c) above or to be associated with persons engaged in
any such activity; or
(e) been found by a court in a civil action or any governmental
authority to have violated any U.S. Federal or State securities laws or the
securities laws of any other country, which judgment or finding has not been
subsequently reversed, suspended or vacated;
(f) been found by a court in a civil action or by the U.S.
Commodity Futures Trading Commission to have violated any U.S. Federal
commodities law, which judgment or finding has not been subsequently reversed,
suspended or vacated; or
(g) have or will have an interest adverse to the Company or any
of its subsidiaries in any pending litigation or contemplated legal proceeding
(including administrative proceedings and investigations by governmental
authorities).
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3.17 Corporate Documents. The Company has furnished to the Purchaser,
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or will furnish upon request, true and complete copies of the Articles of
Incorporation and Bylaws of the Company certified by its secretary and copies of
the resolutions adopted by the Company's Board of Directors authorizing and
approving this Agreement and the transactions contemplated hereby. The Company
has made available to the Purchaser and its representatives all corporate minute
books of the Company, and such minute books contain complete and accurate
records of the proceedings of the Company's shareholders and directors.
3.18 Compliance with Laws. The Company has complied in all material
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respects with all laws, regulations and orders affecting its business and
operations and is not in default under or in violation of any provision of any
federal, state or local rule, regulation or law.
3.19 Board of Directors. At the completion of the Closing, the Board
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of Directors of the Company shall take the necessary corporate action to
increase the authorized number of directors of the Company to nine (9) and then
appoint three (3) nominees of the Purchaser to the Board of Directors.
3.20 Brokers and Finders. Except as set forth in Schedule 3.20, the
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Company has not incurred, nor shall it incur, directly or indirectly, any
liability for any brokerage or finders' fees, agent commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby. As more fully set forth in Section 5.1, the Company shall indemnify and
hold the Purchaser harmless against all claims for brokers' or finders' fees
made or asserted by any party claiming to have been employed by the Company or
any shareholder, director, officer, employee or agent of the Company and all
costs and expenses (including the reasonable fees of counsel) of investigating
and defending such claims.
3.21 Copies of Certain Documents. Prior to the date hereof, the
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Company has delivered or made available to the Purchaser true and complete
copies of all documents relating to the operations of the Company that the
Purchaser has requested.
4. Representations, Warranties and Covenants of the Purchaser.
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As a material inducement to the Company and GDRIL to enter into this
Agreement and to sell and issue the Note, the Shares and the Warrants, the
Purchaser represents, warrants and covenants that the following statements are
true and correct in all material respects except as expressly qualified or
modified herein.
4.1 Domicile and Accredited Purchaser. The Purchaser is domiciled in
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the British Virgin Islands and is an "accredited investor" as defined under Rule
501 under the 1933 Act. All of the beneficial owners of the Purchaser are
domiciled in the Kingdom of Saudi Arabia.
4.2 Power and Authority. The Purchaser, if organized as a
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corporation, partnership or other entity (i) is duly organized, validly existing
and in good standing under
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the laws of the jurisdiction of its organization, and (ii) the Purchaser has
taken all corporate, partnership and other action on the part of the Purchaser,
as applicable, necessary for the execution, delivery and consummation of the
transactions contemplated by this Agreement. The Purchaser has full and absolute
right, power and authority and legal capacity to execute, deliver and perform
this Agreement and all other agreements contemplated hereby to be executed by
the Purchaser and, upon such execution, this Agreement and Pledge Agreement will
be the valid and binding obligation of the Purchaser, enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization and
moratorium laws and other laws of general application affecting enforcement of
creditors rights generally.
4.3 No Violation. The execution, delivery and performance of this
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Agreement and all other agreements contemplated hereby to be executed and
delivered by the Purchaser, and the consummation of the transactions
contemplated hereby and thereby will not materially violate, with or without the
giving of notice or the lapse of time, or both, any provision of law applicable
to the Purchaser and will not conflict with or result in the breach or
termination of any provision of, or constitute a default under, or give any
person the right to accelerate any material obligation under, or result in the
creation of any lien, security interest, charge or encumbrance upon any material
properties, assets or business of the Purchaser.
4.4 Limited Transferability. The Purchaser acknowledges that the
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Securities have not been registered under the 1933 Act, as amended, or the
securities laws of any state (collectively the "Acts") and are being offered,
and will be sold, pursuant to applicable exemptions from such registration for
nonpublic offerings and will be issued as "restricted securities" as defined by
Rule 144 promulgated pursuant to the ▇▇▇▇ ▇▇▇. The Securities may not be resold
in the absence of an effective registration thereof under the 1933 Act and
applicable state securities laws unless, in the opinion of the Company's
counsel, an applicable exemption from registration is available.
4.5 Acquisition for Investment. The Purchaser is acquiring the
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Securities for the Purchaser's own account, for investment purposes only and not
with a view to, or for sale in connection with, a distribution, as that term is
used in Section 2(11) of the 1933 Act thereof in a manner which would require
registration under the 1933 Act or any state securities laws.
4.6 Restrictive Legends. The Purchaser understands and acknowledges
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that the Securities will bear the following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR THE SECURITIES LAWS OF
ANY STATE. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE SOLD OR TRANSFERRED FOR VALUE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION THEREOF UNDER THE SECURITIES ACT OF 1933 AND/OR THE
SECURITIES ACT OF ANY STATE HAVING JURISDICTION OR AN OPINION OF
COUNSEL
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ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER SUCH ACT OR ACTS.
4.7 Rule 144. The Purchaser acknowledges that an investment in the
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Securities is not liquid and is transferable only under limited conditions. The
Purchaser acknowledges that such securities must be held indefinitely unless
they are subsequently registered under the 1933 Act or an exemption from such
registration is available. The Purchaser is aware of the provisions of Rule 144
promulgated under the 1933 Act, which permits limited resale of securities
purchased in a private placement subject to the satisfaction of certain
conditions and that such Rule is not now available and, in the future, may not
become available for resale of the Securities.
4.8 Speculative Nature and Risk. The Purchaser understands and
---------------------------
acknowledges the speculative nature of and substantial risk of loss associated
with an investment in the Securities. The Purchaser represents and warrants
that the Securities constitute an investment which is suitable and consistent
with the Purchaser's financial condition and that the Purchaser is able to bear
the risks of this investment for an indefinite period of time, which may include
the total loss of the Purchaser's investment in the Securities. The Purchaser
further represents that (a) the Purchaser has adequate means of providing for
the Purchaser's current financial needs and contingencies, (b) there is no need
for liquidity in the Purchaser's investment in the Securities, and (c) the
Purchaser has sufficient financial and business experience to evaluate the
merits and risks of an investment in the Securities.
4.9 Independent Investigation and Advisors. The Purchaser confirms
--------------------------------------
that (a) the Purchaser has received, reviewed, and understands the financial
statements included in the SEC Reports; (b) the Purchaser has been expressly
offered the opportunity to be provided a copy of and to review all reports,
documents and exhibits referenced therein and such other agreements, documents
and information as the Purchaser deems necessary or appropriate in determining
to make an investment in the Securities, and (c) the Purchaser is purchasing the
Securities without any offering memoranda or prospectus of any kind, other than
the SEC Reports. The Purchaser represents and warrants that in making the
decision to acquire the Securities the Purchaser has relied upon its own
independent investigation of the Company, GDRIL and Global Diamond-SA and the
independent investigations of the Company, GDRIL and Global Diamond-SA by the
Purchaser's representatives, including the Purchaser's own professional legal,
tax, mining and investment advisors, and (d) the Purchaser and the Purchaser's
representatives have been given the opportunity to examine all relevant
documents and to ask questions of and to receive answers from the Company, GDRIL
and Global Diamond-SA, or person(s) acting on their behalf, concerning the terms
and conditions of acquisition by the Purchaser of the Securities and any other
matters concerning an investment in the Securities, and to obtain any additional
information the Purchaser deems necessary or appropriate to verify the accuracy
of the information provided.
4.10 Board of Directors. At the completion of the Closing, the
------------------
Purchaser shall have the right to nominate three (3) of the nine (9) members of
the Company's Board of Directors. The Purchaser represents and warrants that
none of its nominees to the
-11-
Company's Board of Directors shall have undertaken or been the subject of any
actions or proceedings set forth in Section 3.16. The Purchaser also agrees that
all of its nominees to the Company's Board of Directors at the time of said
nomination will complete an Officers and Directors Questionnaire in a form to be
provided by the Company.
4.11 Copies of Certain Documents. Prior to the date hereof, the
---------------------------
Company has delivered or made available to the Purchaser true and complete
copies of all documents relating to the operations of the Company that the
Purchaser has requested.
5. Indemnification.
---------------
5.1 Indemnity by the Company. Each of the Company and GDRIL, jointly
------------------------
and severally agrees to and does hereby indemnify and hold the Purchaser, the
Purchaser's successors and assigns and their respective directors, officers,
employees and agents, harmless from and against any and all loss, damage,
liability, injury, cost and expense (including attorneys fees) incurred by such
party in connection with or arising from: (a) the non-performance, partial or
total, by the Company or GDRIL of any of its agreements and covenants contained
in this Agreement or the Note; (b) the non-performance, partial or total, by the
Company, GDRIL or Global Diamond-SA of any of its agreements and covenants
contained in the Pledge Agreement; (c) the inaccuracy of any representation of
the Company or GDRIL contained or referred to in this Agreement or any Schedule,
Exhibit or certificate delivered by or on behalf of the Company pursuant hereto;
(d) the inaccuracy of any representation of the Company or GDRIL contained or
referred to in the Pledge Agreement or any Schedule, Exhibit or certificate
delivered by or on behalf of the Company or GDRIL pursuant thereto; (e) claims
for any brokers' or finders' fees made or asserted by any party claiming to have
been employed by the Company or any shareholder, director, officer, employee or
agent of the Company; and (f) any and all actions, suits, proceedings, demands,
assessments or judgments, costs and expenses incidental to any of the foregoing
matters set forth in this Section 5.1.
5.2 Indemnity by the Purchaser. The Purchaser agrees to and does
--------------------------
hereby indemnify and hold each of the Company and GDRIL, their successors and
assigns, and their respective directors, officers, employees and agents harmless
from and against any and all loss, damage, liability, injury, cost and expense
(including attorneys fees) incurred by such party in connection with or arising
from: (a) the non-performance, partial or total, by the Purchaser of any of its
agreements and covenants contained in this Agreement; (b) the inaccuracy of any
representation of the Purchaser contained or referred to in this Agreement or
any Schedule, Exhibit or certificate delivered by or on behalf of the Purchaser
pursuant hereto; (c) claims for any brokers' or finders' fees made or asserted
by any party claiming to have been employed by the Purchaser or any shareholder,
director, officer, employee or agent of the Purchaser; and (d) any and all
actions, suits, proceedings, demands, assessments or judgments, costs and
expenses incidental to any of the foregoing matters set forth in this Section
5.2.
-12-
6. Post-Closing Covenants.
----------------------
6.1 Additional Information. Prior to the complete repayment of the
----------------------
Note, each of the Company and GDRIL shall permit the Purchaser and its
affiliated companies, their officers, directors and authorized representatives,
at their expense, to visit and inspect the properties of the Company, GDRIL and
Global Diamond-SA, to examine the Company's, GDRIL's and Global Diamond-SA's
books of account and records and to discuss the Company's, GDRIL's and Global
Diamond-SA's affairs, finances and accounts with its officers, all at such
reasonable times as may be requested by the Purchaser.
6.2 Confidentiality. Each of the parties hereto has, prior to the
---------------
Closing, through their respective representatives, permitted investigation of
the property, records and the financial condition of the other parties hereto.
In the course of said investigation and in the course of the negotiation of this
Agreement, each party has received confidential information regarding the
operations of the other parties hereto. Each party shall each keep confidential
and not use any information so obtained which is not otherwise publicly
available or ascertainable. In this regard, the Purchaser acknowledges that it
is aware, and that it's representatives will be made aware, that in connection
with its discussions with the Company regarding this transaction and pursuant to
the terms of the Note, it has and will come into possession of material, non-
public information about the Company. Accordingly, the Purchaser agrees that it
will not trade (or cause or encourage any third party to trade), and it will use
its best efforts to assure that none of its representatives will trade (or cause
or encourage any third party to trade), in any securities of the Company while
in the possession of such material non-public information. The provisions of
this Section 6.2 shall also apply to all confidential information received by
the Purchaser and its representatives under the Note.
6.3 Employment Agreements. As soon as reasonably practicable
---------------------
following the date hereof, the Company shall commission an independent study of
compensation and benefits paid to executive officers of corporations similarly
situated to the Company. No later than sixty (60) days following the Closing,
the Company shall enter into written employment agreements with ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇ as its Chief Executive Officer, Pieter van Wyk as its Director of
Mining and Exploration, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ as its Chief Financial Officer and
▇▇▇▇▇▇ ▇▇▇▇▇ as its Vice President of Investor Relations on terms consistent
with the independent study. The employment agreements shall be subject to the
approval of the compensation committee of the Company's Board of Directors
("Compensation Committee"), whose approval shall not be withheld provided that
the terms of the employment agreements are consistent with the independent
study. The Compensation Committee shall consist of ▇▇▇▇ ▇▇▇▇▇ and two (2) of
the members of the Company's Board of Directors that were nominated by Purchaser
pursuant to Section 4.10 herein.
6.4 Indemnification of Directors and Officers. As soon as reasonably
-----------------------------------------
practicable following the date hereof, but in no event more than thirty (30)
days following the Closing, the Company shall prepare and execute written
Indemnification Agreements with all directors of the Company nominated by the
Purchaser, the terms of which agreements shall be reasonably acceptable to the
Purchaser.
-13-
6.5 Directors and Officers Liability Insurance. As soon as
------------------------------------------
reasonably practicable following the date hereof, but in no event more than
ninety (90) days following the Closing, the Company shall have investigated and
presented to the Board of Directors of the Company an analysis, including
quotations, of the available Directors' and Officers' Liability Insurance ("D &
O Insurance") covering certain liabilities which may be incurred by its
directors and officers. Within a reasonable time thereafter, and subject to
availability, the Company shall purchase D & O Insurance if requested by the
Purchaser from such carrier, on such terms and in such amounts as the board of
directors of the Company determines are reasonable in light of the nature of the
business of the Company.
6.6 Insurance. As soon as reasonably practicable following the date
---------
hereof, but in no event more than sixty (60) days following the Closing, the
Company shall cause each of Global Diamond-SA and Nabas Diamonds to obtain
insurance covering the conduct of its respective business in such amounts and
against such losses and risks as are customary for the type and scope of such
business.
6.7 Rights to Purchase of Future Securities. In the event that the
---------------------------------------
Company, at any time and from time to time after the Closing and prior to an
event described in Section 6.7 (b) below, wishes to offer, directly or
indirectly, shares of its capital stock or securities exchangeable or
convertible into its capital stock ("Stock") to any person or entity (each a
"Buyer"), then the Company shall send each such time a written notice ("Notice")
to the Purchaser, prior to or contemporaneous with offering Stock to the Buyers,
and in any event no less than thirty (30) business days prior to the proposed
closing date of the sale of Stock. The Notice(s) shall describe the number of
shares of Stock offered and the purchase price and terms. Upon receipt of any
Notice, the Purchaser shall have the right ("Participation Right") to purchase
such number of shares of Stock being sold in the offering that is the subject of
the Notice, at the price and on the terms contained in the Notice, as is
computed by multiplying the total number of shares of Stock being offered by a
fraction, the numerator of which shall be the number of shares of the Company's
Stock held by the Purchaser as of the date of the Notice and the denominator of
which shall be the number of outstanding shares of Stock of the Company as of
the date of the Notice. The provisions of this Section 6.7 shall not apply to
(i) any offers of Stock in exchange for non-cash consideration, or (ii) the
exercise of the warrants and options set forth on Schedule 3.2; provided,
however, until such time as the Purchaser's rights under this Section 6.7 shall
have been terminated or expired, the Company shall provide the Purchaser with
thirty (30) days prior written notice of any proposed or pending issuances of
Common Stock contemplated by either subpart (i) or (ii) of this sentence.
(a) Exercise of Right. The Purchaser may exercise the Participation
-----------------
Right by notifying the Company in writing, within fifteen (15) business days
after the date of the Notice, of the Purchaser's desire to exercise its
Participation Right. The Purchaser must tender the funds and purchase its
proportionate share of the Stock on the date otherwise set for the closing of
the purchase, subject only to the closing of the purchase with the other buyers.
If the Purchaser does not exercise its right in the manner described in this
Section 6.7(a), the Participation Right will lapse with respect to that
offering.
-14-
(b) Term of Participation Right. The Participation Right under this
---------------------------
Section 6.7 shall commence on the day of this Agreement and shall remain in
effect for so long as (i) any amount remains outstanding under the Note, or (ii)
Purchaser maintains ownership of thirty percent (30%) of the issued and
outstanding Common Stock; provided that such Participation Right shall terminate
upon a registration statement for an underwritten public offering of the shares
of Common Stock being declared effective by the Securities and Exchange
Commission (the "SEC").
6.8 Conversion Rights. The Company covenants and agrees that it
-----------------
shall issue shares of its Common Stock subject to and in accordance with the
terms of Section 7 of the Note.
6.9 Second Installment. Purchaser covenants and agrees that it shall
------------------
advance the second installment under the Note in the amount of One Million Four
Hundred Thousand Dollars ($1,400,000) subject to and in accordance with the
terms and conditions of the Note.
6.10 Acquisition of Nabas Diamonds. The Company covenants and agrees
-----------------------------
to cause Global Diamond-SA to acquire one hundred percent (100%) of the issued
and outstanding shares of capital stock of Nabas Diamonds within forty-five (45)
days of Closing.
6.11 Beneficial Ownership of Shares. Purchaser covenants and agrees
------------------------------
to use its best efforts to file on a timely basis all beneficial ownership of
securities reports, and amendments thereto ("Beneficial Ownership Reports"),
with regards to the securities of the Company in compliance with Sections 13 and
16 of the Securities Exchange Act of 1934. Purchaser further covenants and
agrees to at all times maintain record ownership of its Common Stock in its own
name until such time as it files a Beneficial Ownership Report disclosing that
its percentage ownership of the issued and outstanding Common Stock is less than
thirty percent (30%).
6.12 Further Assurances. From time to time following the Closing
------------------
Date, each of the Company and the Purchaser shall, and shall cause its
affiliates to, reasonably cooperate with the other and assist, where feasible,
to consummate the transactions contemplated herein as soon as possible following
the date hereof.
7. Registration Rights. To induce the Purchaser to purchase the
-------------------
Securities, the Company has agreed to provide registration rights with respect
to the Registrable Securities (as defined below) as set forth in this Section 7.
The Company hereby covenants and agrees as follows:
7.1 Definitions. As used in this Section 7, the following terms have
-----------
the meanings indicated:
(a) "Demand Registration" has the meaning assigned such term in
Section 7.3(a).
-15-
(b) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(c) "Inspector" has the meaning assigned such term in Section
7.5(a)(viii).
(d) "Holders" means the Purchaser and any Person to whom
Registrable Securities are transferred by any of them other than a transferee to
whom such securities have been transferred pursuant to a registration statement
under the 1933 Act or Rule 144 (as defined below).
(e) "NASD" has the meaning assigned such term in Section
7.5(a)(xiv).
(f) "Person" shall mean any individual, firm, corporation,
partnership, trust, incorporated or unincorporated association, joint venture,
joint stock company, limited liability company, government (or an agency or
political subdivision thereof) or other entity of any kind, and shall include
any successor (by merger or otherwise) of such entity.
(g) "Registrable Securities" mean each of the following: (a) the
Shares, (b) the shares of Common Stock issuable upon conversion of the Note or
exercise of the Warrants, and (c) any shares of Common Stock issued or issuable
to the Holders of the shares of Common Stock considered by subparts (a) or (b)
by way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise and shares of Common Stock issuable upon conversion, exercise or
exchange thereof.
(h) "Registration Expenses" has the meaning assigned to such term
in Section 7.5(d).
(i) "Rule 144" means Rule 144 as promulgated by the SEC under the
1933 Act, as such Rule may be amended from time to time, or any similar
successor rule that may be promulgated by the SEC.
(j) "SEC" means the Securities and Exchange Commission.
(k) "Underwriter" has the meaning assigned such term in Section
7.3(e).
7.2 Securities Subject to this Agreement.
------------------------------------
(a) Registrable Securities. For the purposes of this Agreement,
----------------------
Registrable Securities will cease to be Registrable Securities when a
registration statement covering such Registrable Securities has been declared
effective under the 1933 Act by the SEC and such Registrable Securities have
been disposed of pursuant to such effective registration statement.
-16-
(b) Holders of Registrable Securities. A Person is deemed to be a
---------------------------------
holder of Registrable Securities whenever such Person owns of record Registrable
Securities, or holds an option to purchase, or a security convertible into or
exercisable or exchangeable for, Registrable Securities whether or not such
acquisition or conversion has actually been effected and disregarding any legal
restrictions upon the exercise of such rights. If the Company receives
conflicting instructions, notices or elections from two or more persons with
respect to the same Registrable Securities, the Company may act upon the basis
of the instructions, notice or election received from the registered owner of
such Registrable Securities. Registrable Securities issuable upon exercise of
an option or upon conversion of another security shall be deemed outstanding for
the purposes of this Agreement.
7.3 Demand Registration.
-------------------
(a) Request for Demand Registration. At any time commencing six
-------------------------------
(6) months from the Closing, the Holders may make a written request for
registration (such Holders making such request being deemed to be "Initiating
Holders") of Registrable Securities under the 1933 Act, and under the securities
or blue sky laws of any jurisdiction reasonably designated by such Holder or
Holders (a "Demand Registration"); provided, the Company will not be required to
effect more than five (5) Demand Registrations at the request of the Holders
pursuant to this Section 7.3. Such request for a Demand Registration shall
specify the amount of the Registrable Securities proposed to be sold, the
intended method of disposition thereof and the jurisdictions in which
registration is desired. Upon a request for a Demand Registration, the Company
shall promptly take such steps as are necessary or appropriate to prepare for
the registration of the Registrable Securities to be registered. Within 15 days
after the receipt of such request, the Company shall give written notice thereof
to all other Holders holding Registrable Securities (the "Non-Initiating
Holders") and include in such registration all Registrable Securities held by a
Holder with respect to which the Company has received written requests for
inclusion therein within 15 days of the receipt by such Holder of such written
notice. Each such request shall specify the number of Registrable Securities to
be registered, the intended method of disposition thereof and the jurisdictions
in which registration is desired.
(b) Effective Demand Registration. A registration shall not
-----------------------------
constitute a Demand Registration until it has become effective and remains
continuously effective until the earlier of (i) the date of sale of all
Registrable Securities registered thereunder or (ii) 60 days from the effective
date. The Company shall use its best efforts to cause any such Demand
Registration to become effective not later than 60 days after it receives a
request under Section 7.3(a) hereof.
(c) Expenses. The Company shall pay all Registration Expenses
--------
(other than underwriting discounts and commissions) in connection therewith,
whether or not such Demand Registration becomes effective; provided, however,
that each Holder participating in such Demand Registration shall bear the costs
of its own legal counsel.
(d) Underwriting Procedures. If Initiating Holders holding a
-----------------------
majority of the Registrable Securities held by all such Initiating Holders so
elect, the offering of such
-17-
Registrable Securities pursuant to such Demand Registration shall be in the form
of a firm commitment underwritten offering and the managing underwriter or
underwriters selected for such offering shall be the Underwriter selected in
accordance with Section 7.3(e). In such event, if the Underwriter advises the
Company in writing that in its opinion the aggregate amount of such Registrable
Securities requested to be included in such offering is sufficiently large to
have a material adverse affect on the success of such offering, the Company
shall include in such registration only the aggregate amount of Registrable
Securities that in the opinion of the Underwriter may be sold without any such
material adverse affect and shall reduce, first as to any stockholders who are
the Non-Initiating Holders as a group and then as to the Initiating Holders as a
group, pro rata within each group based on the number of Registrable Securities
included in the request for Demand Registration, the amount of Registrable
Securities to be included by each Holder in such registration.
(e) Selection of Underwriters. If any Demand Registration of
-------------------------
Registrable Securities is in the form of an underwritten offering, the
Initiating Holders holding a majority of the Registrable Securities held by all
such Initiating Holders shall, in their discretion, select and obtain an
investment banking firm to act as the managing underwriter of the offering (the
"Underwriter"), subject to approval by the Company which shall not be
unreasonably withheld.
7.4 Holdback Agreements and Termination.
-----------------------------------
(a) Delay of Rights Under Special Circumstances. Upon receipt
-------------------------------------------
by the Company of a request for Demand Registration pursuant to Section 7.3(a)
hereof, the Company shall have the right, in the event that the Company is then
engaged in business negotiations which would be materially adversely affected by
a Demand Registration, to delay the effectiveness of such request by the
Initiating Holders for a period of up to 30 days. The Company shall exercise the
foregoing delay right by delivering to the Initiating Holders, within 5 days
after the receipt of such request, a written notice attesting to the necessity
of such a delay.
(b) Restrictions on Demands by Holders and Termination of Demand
------------------------------------------------------------
Rights. Subject to the provision of Section 7.6 hereof, each Holder of
------
Registrable Securities agrees that the right to request a Demand Registration
shall be suspended for a period of up to 180 days commencing upon the date the
Company executes a letter of intent with an underwriter for a firm commitment
underwritten public offering of its securities having an aggregate offering
price of not less than $5,000,000, provided that a registration statement with
respect to such offering is filed by the Company with the SEC within 45 days
from the date of execution of such letter of intent. The foregoing suspension
of the rights of the Holders will cease if such registration statement is not
declared effective by the SEC within 60 days of the filing thereof.
7.5 Registration Procedures.
-----------------------
(a) Obligations of the Company. Whenever registration of
--------------------------
Registrable Securities has been requested pursuant to Article 7 of this
Agreement, the
-18-
Company shall use its best efforts to effect the registration and sale of such
Registrable Securities in accordance with the intended method of distribution
thereof as quickly as practicable, and in connection with any such request, the
Company shall, as expeditiously as possible:
(i) diligently use its best efforts to prepare and file with the
SEC a registration statement on any form for which the Company then qualifies of
which counsel for the Company shall deem appropriate and which form shall be
available for the sale of such Registrable Securities in accordance with the
intended method of distribution thereof, and use its best efforts to cause such
registration statement to become effective; provided, however, that before
filing a registration statement or prospectus or any amendments or supplements
thereto, the Company shall (A) provide counsel selected by the Holders holding a
majority of the Registrable Securities being registered in such registration
("Holders' Counsel") and any other Inspector (as hereinafter defined) with an
adequate and appropriate opportunity to participate in the preparation of such
registration statement and each prospectus included therein (and each amendment
or supplement thereto) to be filed with the SEC, which documents shall be
subject to the review of Holders' Counsel, and (B) notify the Holders' Counsel
and each seller of Registrable Securities of any stop order issued or threatened
by the SEC and take all reasonable action required to prevent the entry of such
stop order or to remove it if entered;
(ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
a period of not less than 60 days, or such shorter period which will terminate
when all Registrable Securities covered by such registration statement have been
sold, and comply with the provisions of the 1933 Act with respect to the
disposition of all securities covered by such registration statement during such
period in accordance with the intended methods of disposition by the sellers
thereof set forth in such registration statement;
(iii) as soon as reasonably possible, furnish to each seller of
Registrable Securities, prior to filing a registration statement, copies of such
registration statement as is proposed to be filed, and thereafter such number of
copies of such registration statement, each amendment and supplement thereto (in
each case including all exhibits thereto), the prospectus included in such
registration statement (including each preliminary prospectus) and such other
documents as each such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such seller;
(iv) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller of Registrable Securities reasonably requests, and to continue such
qualification in effect in such jurisdiction for as long as is permissible
pursuant to the laws of such jurisdiction, or for as long as any such seller
requests or until all of such Registrable Securities are sold, whichever is
shortest, and do any and all other acts and things which may be reasonably
necessary or advisable to enable any such seller to consummate the disposition
in such jurisdictions of the Registrable Securities owned by such seller;
provided, however, that the
-19-
Company shall not be required to (A) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 7.5(a)(iv), (B) subject itself to taxation in any such jurisdiction or
(C) consent to general service of process in any such jurisdiction;
(v) use its best efforts to cause the Registrable Securities
covered by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable the seller or sellers of
Registrable Securities to consummate the disposition of such Registrable
Securities;
(vi) notify each seller of Registrable Securities at any time
when a prospectus relating thereto is required to be delivered under the 1933
Act, upon discovery that, or upon the happening of any event as a result of
which, the prospectus included in such registration statement contains an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made, and the Company shall
promptly prepare a supplement or amendment to such prospectus and furnish to
each seller a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, after delivery to the purchasers of
such Registrable Securities, such prospectus shall not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made;
(vii) enter into and perform customary agreements (including an
underwriting agreement in customary form with the Underwriter, if any, selected
as provided in Section 7.3) and take such other actions as are prudent and
reasonably required in order to expedite or facilitate the disposition of such
Registrable Securities;
(viii) make available for inspection by any seller of Registrable
Securities, any managing underwriter participating in any disposition pursuant
to such registration statement, Holders' Counsel and any attorney, accountant or
other agent retained by any such seller or any managing underwriter (each, an
"Inspector" and collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the Company and its
subsidiaries (collectively, the "Records") as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause the
Company's and its subsidiaries, officers, directors and employees, and the
independent public accountants of the Company, to supply all information
reasonably requested by any such Inspector in connection with such registration
statement. Records that the Company determines, in good faith, to be
confidential and which it notifies the Inspectors are confidential shall not be
disclosed by the Inspectors unless (A) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in the registration
statement, (B) the release of such Records is ordered pursuant to a subpoena or
other order from a court of competent jurisdiction, or (C) the information in
such records has been made generally available to the public other than through
a breach of the confidentiality requirement set forth above. Each Seller of
Registrable Securities agrees that
-20-
it shall, upon learning that disclosure of such Records is required by any court
of competent jurisdiction, give notice to the Company and allow the Company, at
the Company's expense, to undertake appropriate action to prevent disclosure of
the Records deemed confidential;
(ix) if such sale is pursuant to an underwritten offering, use
its best efforts to obtain a "cold comfort" letter from the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by "cold comfort" letters as Holders' Counsel or
the managing underwriter reasonably request;
(x) use its best efforts to furnish, at the request of any seller
of Registrable Securities on the date such securities are delivered to the
underwriters for sale pursuant to such registration or, if such securities are
not being sold through underwriters, on the date the registration statement with
respect to such securities becomes effective, an opinion, dated such date, of
counsel representing the Company for the purposes of such registration,
addressed to the underwriters, if any, and to the seller making such request,
covering such legal matters with respect to the registration in respect of which
such opinion is being given as such seller may reasonably request and are
customarily included in such opinions;
(xi) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to its security holders, as
soon as reasonably practicable but no later than 15 months after the effective
date of the registration statement, an earnings statement covering a period of
12 months beginning after the effective date of the registration statement, in a
manner which satisfies the provisions of Section 7.10(a) of the 1933 Act;
(xii) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed, provided, that the applicable listing requirements are satisfied;
(xiii) keep each seller of Registrable Securities advised in
writing as to the initiation and progress of any registration hereunder;
(xiv) cooperate with each seller of Registrable Securities and
each underwriter participating in the disposition of such Registrable Securities
and their respective counsel in connection with any filings required to be made
with the National Association of Securities Dealers, Inc. (the "NASD"); and
(xv) use best efforts to take all other steps necessary to
effect the registration of the Registrable Securities contemplated hereby.
(b) Seller Information The Company may require each seller of
------------------
Registrable Securities as to which any registration is being effected to furnish
to the Company such information regarding the seller and the distribution of
such securities as the Company may from time to time reasonably request in
writing.
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(c) Notice to Discontinue. Each Holder of Registrable Securities
---------------------
agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 7.5(a)(vi), such Holder shall forthwith
discontinue disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such Holder's receipt of
the copies of the supplemented or amended prospectus contemplated by Section
7.5(a)(vi) and, if so directed by the Company, such Holder shall deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such Holder's possession, of the prospectus covering such Registrable
Securities which is current at the time of receipt of such notice. If the
Company shall give any such notice, the Company shall extend the period during
which such registration statement shall be maintained effective pursuant to this
Agreement (including without limitation the period referred to in Section
7.5(a)(ii)) by the number of days during the period from and including the date
of the giving of such notice pursuant to Section 7.5(a)(vi) to and including the
date when the Holder shall have received the copies of the supplemented or
amended prospectus contemplated by and meeting the requirements of Section
7.5(a)(vi).
(d) Registration Expenses. The Company shall pay all expenses (other
---------------------
than as set forth in Section 7.3(c)) arising from or incident to the performance
of, or compliance with, the terms of Article 7 of this Agreement, including
without limitation, (i) SEC, stock exchange and NASD registration and filing
fees, (ii) all fees and expenses incurred in complying with securities or blue
sky laws (including reasonable fees, charges and disbursements of counsel in
connection with blue sky qualifications of the Registrable Securities), (iii)
all printing, messenger and delivery expenses, (iv) the fees, charges and
disbursements of counsel to the Company and of its independent public
accountants and any other accounting and legal fees, charges and expenses
incurred by the Company (including without limitation any expenses arising from
any special audits incident to or required by any registration or
qualification), and (v) any liability insurance or other premiums for insurance
obtained (which insurance the Company agrees to use its best efforts to obtain
upon the reasonable request of any seller of Registrable Securities) retained in
connection with any Demand Registration pursuant to the terms of this Agreement,
regardless of whether such registration statement is declared effective. All of
the expenses described in this Section 7.4(d) are referred to herein as
"Registration Expenses."
7.6 Piggy-Back Registration. If the Company proposes to file a
-----------------------
registration statement under the Act, other than pursuant to Section 7.3 hereof,
with respect to an offering by the Company for its own account of any class of
security (other than a registration statement on Form S-4 or S-8 or any
successor or other forms not available for registering capital stock for sale to
the public), then the Company shall give written notice of such proposed filing
to each of the Holders of Registrable Securities at least 30 days before the
anticipated filing date, and such notice shall describe in detail the proposed
registration and distribution (including those jurisdictions where registration
under the securities or blue sky laws is intended) and offer such Holders the
opportunity to register the number of Registrable Securities as each such Holder
may request. The Company shall use its best efforts (within ten days of the
notice provided for in the preceding sentence) to cause the managing underwriter
or underwriters of a proposed underwritten offering (the "Company Underwriter")
to permit the Holders of Registrable Securities who have requested
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to participate in the registration for such offering to include such Registrable
Securities in such offering on the same terms and conditions as the securities
of the Company included therein. Notwithstanding the foregoing, if the Company
Underwriter delivers a written opinion to the Holders of Registrable Securities
that the total amount or kind of securities which they, the Company and any
other persons or entities intend to include in such offering (the "Total
Securities") is sufficiently large so as to have a material adverse effect on
the distribution of the Total Securities, then the amount or kind of securities
to be offered for the account of such Holders and such other persons or entities
(other than the Company) shall be reduced pro rata to the extent necessary to
reduce the Total Securities to the amount recommended by the Company
Underwriter, provided that the Holders shall have first priority to participate
in the registration over all other holders of registration rights. Unless waived
by a Holder in writing, each Holder shall have the right to participate pro rata
based upon the proportion of the Registrable Securities held by them bears to
all Registrable Securities.
7.7 Indemnification; Contribution
-----------------------------
(a) Indemnification by the Company. The Company agrees to
------------------------------
indemnify, to the fullest extent permitted by law, each Holder, its officers,
directors, partners, employees, advisors and agents and each Person who controls
(within the meaning of the 1933 Act or the Exchange Act) such Holder from and
against any and all losses, claims, damages, liabilities and expenses (including
reasonable costs of investigation or defending such claim and any amounts paid
in any settlement effected with the Company's consent) arising out of or based
upon (i) any untrue, or allegedly untrue, statement of a material fact contained
in any registration statement, prospectus or preliminary prospectus or
notification or offering circular (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) or (ii) any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as the same are caused by or contained in any information furnished in
writing to the Company by such Holder expressly for use therein. The Company
shall also indemnify any underwriters of the Registrable Securities, their
officers, directors and employees and each Person who controls such underwriters
(within the meaning of the 1933 Act and the Exchange Act) to the same extent as
provided above with respect to the indemnification of the Holders of Registrable
Securities.
(b) Indemnification by Holders. In connection with any
--------------------------
registration statement in which a Holder is participating pursuant to Article 7
hereof, each such Holder shall furnish to the Company in writing such
information with respect to such Holder as the Company may reasonably request or
as may be required by law for use in connection with any such registration
statement or prospectus and each Holder agrees to indemnify, to the fullest
extent permitted by law, the Company, any underwriter retained by the Company
and their respective directors, officers, employees and each Person who controls
the Company or such underwriter (within the meaning of the 1933 Act and the
Exchange Act) to the same extent as the foregoing indemnity from the Company to
the Holders, but only with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement if such statement
or omission was made in reliance upon and in conformity with information
furnished in writing by such Holder; provided, however, that
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the total amount to be indemnified by such Holder pursuant to this Section
7.7(b) shall be limited to the net proceeds received by such Holder in the
offering to which the registration statement or prospectus relates.
(c) Conduct of Indemnification Proceedings. Any Person entitled
--------------------------------------
to indemnification hereunder (the "Indemnification Party") agrees to give prompt
written notice to the indemnifying party (the "Indemnifying Party") after the
receipt by the Indemnified Party of any written notice of the commencement of
any action, suit, proceeding or investigation or threat thereof made in writing
for which the Indemnified Party intends to claim indemnification or contribution
pursuant to this Agreement; provided, that the failure to notify the
Indemnifying Party shall not relieve the Indemnifying Party of any liability
that it may have to the Indemnified Party hereunder. If notice of commencement
of any such action is given to the Indemnifying Party as above provided, the
Indemnifying Party shall be entitled to participate in and, to the extent it may
wish, jointly with any other Indemnifying Party similarly notified, to assume
the defense of such action at its own expense, with counsel chosen by it and
satisfactory to such Indemnified Party. The Indemnified Party shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel (other than
reasonable costs of investigation) shall be paid by the Indemnified Party unless
(i) the Indemnifying Party agrees to pay the same, (ii) the Indemnifying Party
fails to assume the defense of such action with counsel satisfactory to the
Indemnified Party in its reasonable judgment, (iii) the named parties to any
such action (including any impleaded parties) have been advised by such counsel
that either (A) representation of such Indemnified Party and the Indemnifying
Party by the same counsel would be inappropriate under applicable standards of
professional conduct, (B) there may be one or more defenses available to it
which are different from or additional to those available to the Indemnifying
Party, or (C) in the reasonable judgment of the Indemnified Party, upon the
advice of counsel, a conflict of interest may exist between the Indemnified
Party and the Indemnifying Party. In any of such cases the Indemnifying Party
shall not have the right to assume the defense of such action on behalf of such
Indemnified Party. No Indemnifying Party shall be liable for any settlement
entered into without its written consent, which consent shall not be
unreasonably withheld.
(d) Contribution. If the indemnification provided for in this
------------
Section 7.7 from the Indemnifying Party is unavailable to an Indemnified Party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party and Indemnified Party in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative faults of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
-24-
action. The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Sections 7.7(a), 7.7(b) and 7.7(c), any
legal or other fees, charges or expenses reasonably incurred by such party in
connection with any investigation or proceeding. The parties hereto agree that
it would not be just and equitable if contribution pursuant to this Section
7.7(d) were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the ▇▇▇▇ ▇▇▇) shall be
entitled to contribution from any person.
7.8 Rule 144. The Company covenants that, from and after the date
--------
that the Company has a class of equity securities registered under the Exchange
Act, it shall (i) file any reports required to be filed by it under the Exchange
Act and the rules and regulations adopted by the SEC thereunder; (ii) make and
keep public information available as those terms are understood and defined in
Rule 144; and (iii) take such further action as each Holder of Registrable
Securities may reasonably request (including providing any information necessary
to comply with Rules 144 and 144A), all to the extent required from time to time
to enable such Holder to sell Registrable Securities without registration under
the 1933 Act within the limitation of the exemptions provided by (a) Rule 144 or
Rule 144A, as such rules may be amended from time to time, or (b) any similar
rules or regulations hereafter adopted by the SEC. The Company shall, upon the
request of any Holder of Registrable Securities, deliver to such Holder a
written statement as to whether it has complied with such requirements.
8. Miscellaneous.
-------------
8.1 Arbitration. Any controversy or claim arising out of or relating
-----------
to this Agreement or the breach hereof, including the determination of any
disputed set-off amount, shall be settled by arbitration in accordance with the
rules of the American Arbitration Association then in effect. The decision of
the arbitrator shall, except for mistakes of law, be final and binding upon the
parties hereto, and judgment upon the award rendered by the arbitrator, which
shall, in the case of damages, be limited to actual damages proven in the
arbitration, may be entered in any court having jurisdiction thereof.
Enforcement of the decision of the arbitrator shall be governed by the
Convention on the Recognition and Enforcement of Foreign Arbitral Awards, to
which both the United States and Saudi Arabia are parties.
There shall be a single arbitrator who shall be an existing or former
judge of a court of record within the United States or an attorney in good
standing admitted to practice for a period of at least ten (10) years within the
United States. No arbitration shall involve parties other than the parties
hereto and their respective successors and assigns or be in any respect binding
with respect to any such other parties. The situs of the arbitration will be in
the County of San Diego, State of California. The language of the arbitration
shall be English.
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The parties to any arbitration arising hereunder shall have the right
to take depositions and to obtain discovery regarding the subject matter of the
arbitration and to use and exercise all of the same rights, remedies and
procedures, and be subject to all of the same duties, liabilities, and
obligations in the arbitration with respect to the subject matter thereof, as if
the subject matter of the arbitration were pending in a civil action before a
court of highest jurisdiction in California, U.S.A. The arbitrator shall have
the power to enforce said discovery by imposition of same terms, conditions,
consequences, liabilities, sanctions and penalties as can be or maybe imposed in
like circumstances in a civil action by a court of highest jurisdiction of the
state in which the arbitration is held, except the power to order the arrest or
imprisonment of a person.
If any party commences an action, either arbitration or court
proceedings, against any other party arising out of or in connection with this
Agreement, the prevailing party or parties shall be entitled from the losing
party or parties, both attorney's fees and costs of the arbitration and/or suit
as part of the judgment rendered.
Either party may, without inconsistency with this Agreement, seek from
a court any interim or provisional relief that may be necessary to protect the
rights or property of that party, pending the establishment of the arbitral
tribunal or pending the arbitral tribunal's determination of the merits of the
controversy.
8.2 Survival of Representations. All representations, warranties and
---------------------------
agreements contained herein or made in writing by the Company and the Purchaser
in connection with the transactions contemplated hereby except any
representation, warranty or agreement as to which compliance may have been
appropriately waived, shall survive the execution and delivery of this
Agreement.
8.3 Expenses and Attorney Fees. The Company and the Purchaser shall
--------------------------
each pay all of their respective legal and due diligence expenses in connection
with the transactions contemplated by this Agreement, including, without
limiting the generality of the foregoing, legal and accounting fees.
8.4 Waiver of Conditions. At any time or times during the term
--------------------
hereof, the Company may waive fulfillment of any one or more of the conditions
to its obligations in whole or in part, and the Purchaser may waive fulfillment
of any one or more of the foregoing conditions to their obligation, in whole or
in part, by delivering to the other party a written waiver or waivers of
fulfillment thereof to the extent specified in such written waiver or waivers.
Any such waiver shall be validly and sufficiently authorized for the purposes of
this Agreement if, as to any party, it is authorized in writing by an authorized
representative of such party. The failure of any party hereto to enforce at any
time any provision of this Agreement shall not be construed to be a waiver of
such provision, nor in any way to affect the validity of this Agreement or any
part hereof or the right of any party thereafter to enforce each and every such
provision. No waiver of any breach of this Agreement shall be held to
constitute a waiver of any other or subsequent breach.
8.5 Partial Invalidity. If any term, covenant or condition of this
------------------
Agreement or the application thereof to any person or circumstance shall, to any
extent, be invalid or
-26-
unenforceable, the remainder of this Agreement, or the application of such term,
covenant or condition to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby and each
term, covenant or condition of this Agreement shall be valid and be enforced to
the fullest extent permitted by law.
8.6 Notices. Any notices relating to this Agreement of the Exhibits
-------
hereto shall be deemed sufficiently given and served for all purposes if given
in writing and delivered (a) personally, (b) by a telegram filed, charges
prepaid, (c) by facsimile with electronic confirmation of receipt, (d) by
registered or certified mail, postage prepaid, or (e) by international courier,
addressed as follows:
If to the Company or GDRIL:
Global Diamond Resources, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇
▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Purchaser:
International PCM Holdings Limited
▇.▇. ▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇
Kingdom of Saudi Arabia
Attention: ▇▇▇ ▇▇▇▇ Bin ▇▇▇ ▇▇▇▇▇▇ Mood
Facsimile: ______________________________
Such notice shall be deemed given: (a) if personally delivered, at the time of
delivery; (b) if sent by facsimile transmission with confirmation of receipt or
delivered by telegram, three (3) days after being sent or the time of actual
receipt, whichever is earlier; and (c) if sent by mail or international courier,
on the date of actual receipt. The address for the purpose of this Paragraph
8.6 may be changed by giving notice of such change in the manner provided herein
for giving notice.
8.7 Successors and Assigns. The terms, covenants and conditions
----------------------
contained herein shall be binding upon and inure to the benefit of the heirs,
successors and assigns of the parties hereto. The foregoing notwithstanding,
this Agreement may not be assigned by either party, in fact or by operation of
law, without the prior written consent of the other, and any such attempted
assignment shall be null and void; provided, however, that in the event of a
purported assignment by the Purchaser, the consent of the Company and GDRIL
shall not be unreasonably withheld.
8.8 Law Governing. This Agreement shall be construed and interpreted
-------------
in accordance with and governed and enforced in all respects by the laws of the
State of California.
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8.9 Headings. The section, subsection and paragraph headings
--------
throughout this Agreement are for convenience and reference only, and the words
contained therein shall not be held to expand, modify, amplify or aid in the
interpretation, construction or meaning of this Agreement.
8.10 Counterparts; Fax Signatures. This Agreement may be executed in
----------------------------
any number of counterparts, each signed by different persons and all of said
counterparts together shall constitute one and the same instrument, and such
instrument shall be deemed to have been made, executed and delivered on the date
first hereinabove written, irrespective of the time or times when the same or
any counterparts thereof actually may have been executed and delivered a
counterpart thereof to the Company and the Purchaser. The parties agree that
facsimile signatures may be relied upon by each of the parties hereto as
original signatures.
8.11 Entire Agreement. This Agreement and the Schedules contain the
----------------
entire agreement of the parties hereto and may not be modified, altered or
changed in any manner whatsoever, except by a written agreement signed by the
parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
GLOBAL DIAMOND RESOURCES, INC.,
a Nevada corporation
By:_________________________________
▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇,
Chief Executive Officer
INTERNATIONAL PCM HOLDINGS LIMITED,
a British Virgin Islands company
By:_________________________________
▇▇▇ ▇▇▇▇ Bin ▇▇▇ ▇▇▇▇▇▇ Mood,
Director
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