SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of acceptance set
forth below, is entered into by and between URANIUIM POWER CORPORATION, a
Colorado corporation, with headquarters located at ▇▇▇-▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇ (the "Company"), and each individual
or entity (other than the Company) named on a signature page hereto (as used
herein, each such signatory is referred to as the "Lender" or a "Lender") (each
agreement with a Lender being deemed a separate and independent agreement
between the Company and such Lender, except that each Lender acknowledges and
consents to the rights granted to each other Lender [each, an "Other Lender"]
under such agreement and the Transaction Agreements, as defined below, referred
to therein).
W I T N E S S E T H:
WHEREAS, the Company and the Lender are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration for offers and sales to accredited investors afforded, inter alia,
by Rule 506 under Regulation D ("Regulation D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act"), and/or Section 4(2) of the 1933 Act; and
WHEREAS, the Lender wishes to lend funds to the Company, subject to and
upon the terms and conditions of this Agreement and acceptance of this Agreement
by the Company, the repayment of which will be represented by 6% Secured
Convertible Debentures Series 2004B of the Company (the "Convertible
Debentures"), which Convertible Debentures will be convertible into shares of
Common Stock, $.001 par value per share, of the Company (the "Common Stock"),
upon the terms and subject to the conditions of such Convertible Debentures,
together with the Warrants (as defined below) exercisable for the purchase of
shares of Common Stock;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. Purchase.
(i) Subject to the terms and conditions of this Agreement and the
other Transaction Agreements, the undersigned hereby agrees to loan to the
Company the principal amount set forth on the Lender's signature page of this
Agreement (the "Purchase Price"), out of the aggregate amount being loaned by
all Lenders of a minimum of $1,500,000.00 (the Minimum Purchase Price) and a
maximum of $2,000,000 (the "Maximum Purchase Price"). The obligation to repay
the loan from the Lender shall be evidenced by the Company's issuance of one or
more Convertible Debentures to the Lender in such principal amount (the
Convertible Debentures issued to the Lender, the "Debentures"). Each Debenture
(i) shall provide for a conversion price (the "Conversion Price"), which price
may be adjusted from time to as provided in the Debenture or in the other
Transaction Agreements, (ii) shall have the terms and conditions of, and be
substantially in the form attached hereto as, Annex I and (iii) shall have a
Warrant attached, as provided below. The loan to be made by the Lender and the
issuance of the Debentures and Warrants to the Lender are sometimes referred to
herein and in the other Transaction Agreements as the purchase and sale of the
Debentures and Warrants.
(ii) The Purchase Price to be paid by the Lender shall be equal to
the face amount of the Debentures being purchased on the Closing Date (as
defined below) and shall be payable in United States Dollars.
(iii) The actual total Purchase Price of all Lenders, which shall be
the Maximum Purchase Price, is hereinafter referred to as the "Aggregate
Purchase Price."
b. Certain Definitions. As used herein, each of the following terms
has the meaning set forth below, unless the context otherwise requires:
"Affiliate" means, with respect to a specific Person referred to in
the relevant provision, another Person who or which controls or is
controlled by or is under common control with such specified Person.
"Certificates" means the Debentures and the Warrants, each duly
executed by the Company and issued on the Closing Date in the name of the
Lender.
"Closing Date" means the date of the closing of one or more
purchases and sales of the Debentures and Warrants, as provided herein.
"Closing Price" means the closing bid price during regular trading
hours of the Common Stock (in U.S. Dollars) on the Principal Trading
Market, as reported by the Reporting Service.
(v) "Company Control Person" means each director, executive officer,
promoter, and such other Persons as may be deemed in control of the Company
pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act (as
defined below).
(vi) "Conversion Shares" means the shares of Common Stock issuable
upon conversion of the Debentures (including, if relevant, accrued interest on
the Debentures so converted).
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(vii) "Effective Date" means the effective date of the Registration
Statement covering the Registrable Securities.
(viii) "Escrow Agent" means the escrow agent identified in the Joint
Escrow Instructions attached hereto as Annex II (the "Joint Escrow
Instructions").
(ix) "Escrow Funds" means the Purchase Price delivered to the Escrow
Agent as contemplated by Sections 1(c) and (d) hereof.
(x) "Escrow Property" means the Escrow Funds and the Certificates
delivered to the Escrow Agent as contemplated by Section 1(c) hereof.
(xi) "Finder" means Viscount Investments Ltd.
(xii) [INTENTIONALLY OMITTED]
(xiii) "Holder" means the Person holding the relevant Securities at
the relevant time.
(xiv) [INTENTIONALLY OMITTED]
(xv) "Last Audited Date" means April 30, 2004.
(xvii) "Lender Control Person" means each director, executive
officer, promoter, and such other Persons as may be deemed in control of the
Lender pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act.
(xviii) "Material Adverse Effect" means an event or combination of
events, which individually or in the aggregate, would reasonably be expected to
(w) adversely affect the legality, validity or enforceability of the Securities
or any of the Transaction Agreements, (x) have or result in a material adverse
effect on the results of operations, assets, prospects, or condition (financial
or otherwise) of the Company and the it subsidiaries, taken as a whole, (y)
adversely impair the Company's ability to perform fully on a timely basis its
obligations under any of the Transaction Agreements or the transactions
contemplated thereby, or (z) materially and adversely affect the value of the
rights granted to the Lender in the Transaction Agreements.
t 12 (xix) "Person" means any living person or any entity, such as, but
not necessarily limited to, a corporation, partnership or trust.
(xx) "Principal Trading Market" means The Over the Counter Bulletin
Board.
3
(xxi) "Registrable Securities" has the meaning set forth in the
Registration Rights Agreement.
(xxii) "Registration Rights Agreement" means the Registration Rights
Agreement in the form annexed hereto as Annex IV, as executed by the Lender and
the Company simultaneously with the execution of this Agreement.
(xxiii) "Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
(xxiv) "Reporting Service" means Bloomberg LP or if that service is
not then reporting the relevant information regarding the Common Stock, a
comparable reporting service of national reputation selected by the Holders of
the Debentures and reasonably acceptable to the Company.
(xxv) "Securities" means the Debentures, the Warrants, and the
Shares.
(xxvi) "Shares" means the shares of Common Stock representing any or
all of the Conversion Shares and the Warrant Shares.
(xxvii) "State of Incorporation" means Colorado.
(xxviii) "Trading Day" means any day during which the Principal
Trading Market shall be open for business.
(xxix) "Transaction Agreements" means the Securities Purchase
Agreement, the Debentures, the Joint Escrow Instructions, the Registration
Rights Agreement, and the Warrants and includes all ancillary documents referred
to in those agreements.
(xxx) "Warrant Shares" means the shares of Common Stock issuable
upon exercise of the Warrants.
c. Form of Payment; Delivery of Certificates.
(i) The Lender shall pay the Purchase Price by delivering
immediately available good funds in United States Dollars to the Escrow Agent no
later than the date prior to the Closing Date.
(ii) No later than the Closing Date, but in any event promptly
following payment by the Lender to the Escrow Agent of the Purchase Price, the
Company shall deliver the Certificates, each duly executed on behalf of the
Company and issued in the name of the Lender, to the Escrow Agent.
4
(iii) By signing this Agreement, each of the Lender and the Company,
subject to acceptance by the Escrow Agent, agrees to all of the terms and
conditions of, and becomes a party to, the Joint Escrow Instructions, all of the
provisions of which are incorporated herein by this reference as if set forth in
full.
d. Method of Payment. Payment into escrow of the Purchase Price
shall be made by wire transfer of funds to:
Bank of New York
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
ABA# ▇▇▇▇▇▇▇▇▇
For credit to the account of ▇▇▇▇▇▇▇ & Prager LLP
Account No.: 630-▇▇▇▇▇▇▇
Re: UPC Transaction [Investor Name]
2. LENDER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Lender represents and warrants to, and covenants and agrees
with, the Company as follows:
a. Without limiting Lender's right to sell the Shares pursuant to
the Registration Statement or otherwise to sell any of the Securities in
compliance with the 1933 Act, the Lender is purchasing the Securities and will
be acquiring the Shares for its own account for investment only and not with a
view towards the public sale or distribution thereof and not with a view to or
for sale in connection with any distribution thereof.
b. The Lender is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3), (ii) experienced in making investments of the kind
described in this Agreement and the related documents, (iii) able, by reason of
the business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its Affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the loss of the entire Purchase
Price.
c. All subsequent offers and sales of the Securities by the Lender
shall be made pursuant to registration of the Shares under the 1933 Act or
pursuant to an exemption from registration.
d. The Lender understands that the Securities are being offered and
sold to it in reliance on specific exemptions from the registration requirements
of the 1933 Act and state securities laws and that the Company is relying upon
the truth and accuracy of, and the Lender's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Lender set forth herein in order to determine the availability of such
exemptions and the eligibility of the Lender to acquire the Securities.
5
e. The Lender and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Securities and the offer of the
Shares which have been requested by the Lender, including those set forth on
Annex V hereto. The Lender and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries. Without limiting the generality of
the foregoing, the Lender has also had the opportunity to obtain and to review
the Company's filings on ▇▇▇▇▇ listed on Annex VII hereto (the documents listed
on such Annex VII, to the extent available on ▇▇▇▇▇ or otherwise provided to the
Lender as indicated on said Annex VII, collectively, the "Company's SEC
Documents").
f. The Lender understands that its investment in the Securities
involves a high degree of risk. The Lender also acknowledges that the Company
has sustained significant operating losses in the past and expects to do so for
the foreseeable future, including the term of the Convertible Debenture.
g. The Lender hereby represents that, in connection with its
purchase of the Securities, it has not relied on any statement or representation
by the Company or the Finder or any of their respective officers, directors and
employees or any of their respective attorneys or agents or the Finder, except
as specifically set forth herein. The Finder is a third party beneficiary of
this provision.
h. The Lender understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities.
i. This Agreement and the other Transaction Agreements to which the
Lender is a party, and the transactions contemplated thereby, have been duly and
validly authorized, executed and delivered on behalf of the Lender and are valid
and binding agreements of the Lender enforceable in accordance with their
respective terms, subject as to enforceability to general principles of equity
and to bankruptcy, insolvency, moratorium and other similar laws affecting the
enforcement of creditors' rights generally.
j. Except for payment of fees to the Finder, payment of which is the
sole responsibility of the Company, the Lender has taken no action which would
give rise to any claim by any Person for brokerage commission, finder's fees or
similar payments by the Company relating to this Agreement or the transactions
contemplated hereby. The Company shall have no obligation with respect to such
fees or with respect to any claims made by or on behalf of other Persons for
fees of a type contemplated in this paragraph that may be due in connection with
the transactions contemplated hereby. The Lender shall indemnify and hold
harmless each of the Company, its employees, officers, directors, agents, and
partners, and their respective Affiliates, from and against all claims, losses,
damages, costs (including the costs of preparation and attorney's fees) and
expenses suffered in respect of any such claimed or existing fees, as and when
incurred.
6
3. COMPANY REPRESENTATIONS, ETC. The Company represents and warrants
to the Lender as of the date hereof and as of the Closing Date that, except as
otherwise provided in the Annex V hereto or in the Company's SEC Documents:
a. Rights of Others Affecting the Transactions. There are no
preemptive rights of any shareholder of the Company, as such, to acquire the
Debentures, the Warrants or the Shares. No party has a currently exercisable
right of first refusal which would be applicable to any or all of the
transactions contemplated by the Transaction Agreements.
b. Status. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Incorporation and
has the requisite corporate power to own its properties and to carry on its
business as now being conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in each jurisdiction where
the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have or result in a Material Adverse Effect. The Company
has registered its stock and is obligated to file reports pursuant to Section 12
or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "1934
Act"). The Common Stock is listed and quoted on the Principal Trading Market.
The Company has received no notice, either oral or written, with respect to the
continued eligibility of the Common Stock for such listing and quotation on the
Principal Trading Market, and the Company has maintained all requirements on its
part for the continuation of such listing and quotation.
c. Authorized Shares. The authorized capital stock of the Company
consists of (i) 40,000,000 shares of Common Stock, $.001 par value per share, of
which approximately 30,017,906 shares are outstanding as of the date hereof, and
(ii) 10,000,000 shares of Preferred Stock, $.001 par value per share of which
none have been issued. All issued and outstanding shares of Common Stock have
been duly authorized and validly issued and are fully paid. The Company has
covenanted to hold a shareholders meeting in respect of an increase to not less
than 60,000,000 authorized Shares not later than November 1, 2004. Thereafter,
the Shares will have been duly authorized and, when issued upon conversion of,
or as interest on, the Debentures or upon exercise of the Warrants, each in
accordance with its respective terms, will be duly and validly issued, fully
paid and non-assessable and, except to the extent, if any, provided by the law
of the State of Incorporation, will not subject the Holder thereof to personal
liability by reason of being such Holder.
7
d. Transaction Agreements and Stock. This Agreement and each of the
other Transaction Agreements, and the transactions contemplated thereby, have
been duly and validly authorized by the Company, this Agreement has been duly
executed and delivered by the Company and this Agreement is, and the Debentures,
the Warrants and each of the other Transaction Agreements, when executed and
delivered by the Company, will be, valid and binding agreements of the Company
enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors'
rights generally.
e. Non-contravention. The execution and delivery of this Agreement
and each of the other Transaction Agreements by the Company, the issuance of the
Securities, and the consummation by the Company of the other transactions
contemplated by this Agreement, the Debentures, the Warrants and the other
Transaction Agreements do not and will not conflict with or result in a breach
by the Company of any of the terms or provisions of, or constitute a default
under (i) the articles of incorporation or by-laws of the Company, each as
currently in effect, (ii) any indenture, mortgage, deed of trust, or other
material agreement or instrument to which the Company is a party or by which it
or any of its properties or assets are bound, including any listing agreement
for the Common Stock and the 6% Secured Convertible Debenture issued in January
2004 and March 2004, except as herein set forth, or (iii) to its knowledge, any
existing applicable law, rule, or regulation or any applicable decree, judgment,
or order of any court, United States federal or state regulatory body,
administrative agency, or other governmental body having jurisdiction over the
Company or any of its properties or assets, except such conflict, breach or
default which would not have or result in a Material Adverse Effect.
f. Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the shareholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Lender as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
g. Filings. None of the Company's SEC Documents contained, at the
time they were filed, any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements made therein in light of the circumstances under which they were
made, not misleading. Since April 30, 2004, the Company has filed all requisite
forms, reports and exhibits thereto required to be filed by the Company with the
SEC.
h. Absence of Certain Changes. Since the Last Audited Date, there
has been no material adverse change and no Material Adverse Effect, except as
disclosed in the Company's SEC Documents. Since the Last Audited Date, except as
provided in the Company's SEC Documents, the Company has not (i) incurred or
become subject to any material liabilities (absolute or contingent) except
liabilities incurred in the ordinary course of business consistent with past
practices; (ii) discharged or satisfied any material lien or encumbrance or paid
any material obligation or liability (absolute or contingent), other than
current liabilities paid in the ordinary course of business consistent with past
practices; (iii) declared or made any payment or distribution of cash or other
property to shareholders with respect to its capital stock, or purchased or
redeemed, or made any agreements to purchase or redeem, any shares of its
capital stock; (iv) sold, assigned or transferred any other tangible assets, or
canceled any debts or claims, except in the ordinary course of business
consistent with past practices; (v) suffered any substantial losses or waived
any rights of material value, whether or not in the ordinary course of business,
or suffered the loss of any material amount of existing business; (vi) made any
changes in employee compensation, except in the ordinary course of business
consistent with past practices; or (vii) experienced any material problems with
labor or management in connection with the terms and conditions of their
employment.
8
i. Full Disclosure. There is no fact known to the Company (other
than general economic conditions known to the public generally or as disclosed
in the Company's SEC Documents) that has not been disclosed in writing to the
Lender that would reasonably be expected to have or result in a Material Adverse
Effect.
j. Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board or body pending
or, to the knowledge of the Company, threatened against or affecting the Company
before or by any governmental authority or nongovernmental department,
commission, board, bureau, agency or instrumentality or any other person,
wherein an unfavorable decision, ruling or finding would have a Material Adverse
Effect or which would adversely affect the validity or enforceability of, or the
authority or ability of the Company to perform its obligations under, any of the
Transaction Agreements. The Company is not aware of any valid basis for any such
claim that (either individually or in the aggregate with all other such events
and circumstances) could reasonably be expected to have a Material Adverse
Effect. There are no outstanding or unsatisfied judgments, orders, decrees,
writs, injunctions or stipulations to which the Company is a party or by which
it or any of its properties is bound, that involve the transaction contemplated
herein or that, alone or in the aggregate, could reasonably be expect to have a
Material Adverse Effect. Except as provided for in SEC Documents, the Company is
not obligated, directly or indirectly, for the obligation of Anhydride Petroleum
(Canada) Ltd. or of any other subsidiary or affiliate.
k. Absence of Events of Default. Except as set forth in Section 3(e)
hereof, no Event of Default (or its equivalent term), as defined in the
respective agreement to which the Company is a party, and no event which, with
the giving of notice or the passage of time or both, would become an Event of
Default (or its equivalent term) (as so defined in such agreement), has occurred
and is continuing, which would have a Material Adverse Effect.
9
l. Absence of Certain Company Control Person Actions or Events. To
the best of the Company's knowledge, after due inquiry, none of the following
has occurred during the past ten (10) years with respect to a Company Control
Person:
(1) A petition under the federal bankruptcy laws or any state insolvency
law was filed by or against, or a receiver, fiscal agent or similar
officer was appointed by a court for the business or property of such
Company Control Person, or any partnership in which he was a general
partner at or within two years before the time of such filing, or any
corporation or business association of which he was an executive officer
at or within two years before the time of such filing;
(2) Such Company Control Person was convicted in a criminal proceeding or
is a named subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses);
(3) Such Company Control Person was 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 from, or
otherwise limiting, the following activities:
(i) acting, as an investment advisor, 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, as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool operator, floor
broker, any other Person regulated by the Commodity Futures Trading
Commission ("CFTC") or engaging in or continuing any conduct or
practice in connection with 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 federal or state securities laws or federal commodities
laws;
(4) Such Company Control Person was the subject of any order, judgment or
decree, not subsequently reversed, suspended or vacated, of any federal or
state authority barring, suspending or otherwise limiting for more than 60
days the right of such Company Control Person to engage in any activity
described in paragraph (3) of this item, or to be associated with Persons
engaged in any such activity; or
(5) Such Company Control Person was found by a court of competent
jurisdiction in a civil action or by the CFTC or SEC to have violated any
federal or state securities law, and the judgment in such civil action or
finding by the CFTC or SEC has not been subsequently reversed, suspended,
or vacated.
10
m. Prior Issues. Since April 30,, 2004 the Company has not issued
any stock option grants, convertible securities or any shares of its Common
Stock, except as set forth in SEC Documents and on Schedule 3(m).
n. No Undisclosed Liabilities or Events. The Company has no
liabilities or obligations other than those disclosed in the Transaction
Agreements or the Company's SEC Documents or those incurred in the ordinary
course of the Company's business since the Last Audited Date, or which
individually or in the aggregate, do not or would not have a Material Adverse
Effect. No event or circumstances has occurred or exists with respect to the
Company or its properties, business, operations, condition (financial or
otherwise), or results of operations, which, under applicable law, rule or
regulation, requires public disclosure or announcement prior to the date hereof
by the Company but which has not been so publicly announced or disclosed. There
are no proposals currently under consideration or currently anticipated to be
under consideration by the Board of Directors or the executive officers of the
Company which proposal would (X) change the certificate of incorporation or
other charter document or by-laws of the Company, each as currently in effect,
with or without shareholder approval, which change would reduce or otherwise
adversely affect the rights and powers of the shareholders of the Common Stock
or (Y) materially or substantially change the business, assets or capital of the
Company, including its interests in subsidiaries.
o. No Default. Except as disclosed in the Company's SEC filings,
neither the Company nor any of its subsidiaries is in default in the performance
or observance of any material obligation, agreement, covenant or condition
contained in any material indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it or its property is
bound. The Company is not obligated, directly or indirectly, for the liabilities
of Anhydride Petroleum (Canada) Ltd. or of any other subsidiary or affiliate.
p. No Integrated Offering. Neither the Company nor any of its
Affiliates nor any person acting on its or their behalf has, directly or
indirectly, at any time since April 30, 2004, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under
Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.
q. Dilution. The number of Shares issuable upon conversion of the
Debentures may have a dilutive effect on the ownership interests of the other
shareholders (and Persons having the right to become shareholders) of the
Company. The Company's executive officers and directors have studied and fully
understand the nature of the Securities being sold hereby and recognize that
they have such a potential dilutive effect. The board of directors of the
Company has concluded, in its good faith business judgment, that such issuance
is in the best interests of the Company. The Company specifically acknowledges
that its obligation to issue the Shares upon conversion of the Debentures and
upon exercise of the Warrants is binding upon the Company and enforceable
regardless of the dilution such issuance may have on the ownership interests of
other shareholders of the Company, and the Company will honor every Notice of
Conversion (as defined in the Debentures) relating to the conversion of the
Debentures, and every Notice of Exercise (as contemplated by the Warrants),
unless the Company is subject to an injunction (which injunction was not sought
by the Company) prohibiting the Company from doing so.
11
r. Trading in Securities. The Company specifically acknowledges
that, except to the extent specifically provided herein or in any of the other
Transaction Agreements (but limited in each instance to the extent so
specified), the Lender retains the right (but is not otherwise obligated) to
buy, sell, engage in hedging transactions or otherwise trade in the securities
of the Company, including, but not necessarily limited to, the Securities, at
any time before, contemporaneous with or after the execution of this Agreement
or from time to time, but only, in each case, in any manner whatsoever permitted
by applicable federal and state securities laws.
s. Fees to Brokers, Finders and Others. Except for payment of fees
to the Finder, payment of which is the sole responsibility of the Company, the
Company has taken no action which would give rise to any claim by any Person for
brokerage commission, finder's fees or similar payments by Lender relating to
this Agreement or the transactions contemplated hereby. Lender shall have no
obligation with respect to such fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this paragraph that
may be due in connection with the transactions contemplated hereby. The Company
shall indemnify and hold harmless each of Lender, its employees, officers,
directors, agents, and partners, and their respective Affiliates, from and
against all claims, losses, damages, costs (including the costs of preparation
and attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as and when incurred.
t. Proxies Each of October Sun, a Nevada Corporation as to 2,974,967
shares, ▇▇▇▇▇▇▇ ▇▇▇▇▇ as to 800,000 shares, F. ▇▇▇▇▇▇ ▇▇▇ as to 800,000 shares,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ as to 706,000 shares, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ as to 225,000 shares,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ as to 375,000 shares and United Corporate Advisors Ltd. as to
780,000 shares has delivered irrevocable proxies in the form annexed as Exhibit
8 hereto,
12
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The Lender acknowledges that (1) the
Securities have not been and are not being registered under the provisions of
the 1933 Act and, except as provided in the Registration Rights Agreement or
otherwise included in an effective registration statement, the Shares have not
been and are not being registered under the 1933 Act, and may not be transferred
unless (A) subsequently registered thereunder or (B) the Lender shall have
delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company, to the effect that the Securities to be sold
or transferred may be sold or transferred pursuant to an exemption from such
registration; (2) any sale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such
Securities under circumstances in which the seller, or the Person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other Person is under any obligation to register the Securities
(other than pursuant to the Registration Rights Agreement) under the 1933 Act or
to comply with the terms and conditions of any exemption thereunder.
b. Restrictive Legend. The Lender acknowledges and agrees that,
until such time as the Common Stock has been registered under the 1933 Act as
contemplated by the Registration Rights Agreement and sold in accordance with an
effective Registration Statement or otherwise in accordance with another
effective registration statement, the certificates and other instruments
representing any of the Securities (including the Shares) shall bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of any such Securities):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD
OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE
TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
c. Filings. The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Securities to the Lender under any
United States laws and regulations applicable to the Company, or by any domestic
securities exchange or trading market, and to provide a copy thereof to the
Lender promptly after such filing.
13
d. Reporting Status. So long as the Lender beneficially owns any of
the Securities, the Company shall file all reports required to be filed with the
SEC pursuant to Section 13 or 15(d) of the 1934 Act, shall take all reasonable
action under its control to ensure that adequate current public information with
respect to the Company, as required in accordance with Rule 144(c)(2) of the
1933 Act, is publicly available, and shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would permit such termination. The Company will take
all reasonable action under its control to maintain the continued listing and
quotation and trading of its Common Stock (including, without limitation, all
Registrable Securities) on the Principal Trading Market or a listing on the
NASDAQ/Small Cap or National Markets and, to the extent applicable to it, will
comply in all material respects with the Company's reporting, filing and other
obligations under the by-laws or rules of the Principal Trading Market and/or
the National Association of Securities Dealers, Inc., as the case may be, at
least through the date which is thirty (30) days after the later of the date on
which all of the Debentures have been converted or all of the Warrants have been
exercised or have expired.
e. Use of Proceeds. The Company will use the proceeds received
hereunder (excluding amounts paid by the Company for legal fees, finder's fees
and escrow fees in connection with the sale of the Securities) for general
corporate purposes.
f. Warrants. The Company agrees to issue to the Lender on the
Closing Date transferable warrants (the "Warrants") as more specifically set
forth on the execution page hereof for the purchase of 3,333 common shares at
$.35 per share per $1,000 of Convertible Debenture subscribed for. The Warrants
will expire at 5:00 P.M. New York City Time on September 14, 2006. Each of the
Warrants shall be in the form annexed hereto as Annex VI, and shall have (x)
cashless exercise rights, (y) registration rights as to the shares underlying
the warrants as provided in the Registration Rights Agreement, and (z)
piggy-back registration rights after the effectiveness of the Registration
Statement expires, as contemplated by the Registration Rights Agreement.
g. Certain Agreements.
(i) The Company covenants and agrees that, except for the sale of
Debentures and Warrants to the Other Lenders, during the period (the "New
Transaction Period") from the Closing Date and continuing through and including
the Final Lock-up Date (as defined below), it will not, without the prior
written consent of the Lender in each instance, enter into any subsequent or
further offer or sale of Common Stock or securities convertible into and/or
other rights exercisable for the issuance of Common Stock (collectively, "New
Common Stock") to or with any third party (any such offer or sale of New Common
Stock, a "New Transaction"), except as noted in Annex XI. The term "Final
Lock-up Date" means the date which is the number of days after the Effective
Date equal to the sum of (X) one hundred and twenty (120) days, plus (Y) the
number of days, if any, during which sale of Registrable Securities was
suspended after the Effective Date.
14
(A) the Conversion Price on any Unconverted Debenture (as defined in the
Debenture) shall be adjusted to an amount (the "Adjusted Conversion
Price") equal to the lowest of (1) ninety percent (90%) of the then
existing Conversion Price, or (2) seventy-five percent (75%) of the of the
lower of (X) the lowest fixed purchase price of any shares of the New
Common Stock contemplated in the New Transaction or (Y) the lowest
conversion price which would be applicable under the terms of the New
Transaction;
(B) with respect to all portions of the principal and interest of the
Debenture converted prior to such date (or converted before the adjustment
referred to in the immediately preceding subparagraph (A) is effected),
the Company will issue to the Holder additional shares of Common Stock
("Additional Shares") equal to the excess, if any, of (1) (X) the
aggregate amount of the principal and accrued interest of the Debenture so
converted, divided by (Y) the Adjusted Conversion Price, over (2) the
number of Conversion Shares and Additional Shares, if any, previously
issued in connection with such conversion;
(C) the number of Warrants shall be adjusted to equal the higher of (1)
the number of Warrant Shares originally provided in the Warrants or (2)
the number of shares equal to (I) the Purchase Price divided by (II) the
Closing Price for the Trading Day immediately preceding the initial
closing date of the New Transaction; and
(D) the Exercise Price on the Warrants shall be adjusted to equal the
lower of (1) the then existing Warrant Price or (2) one percent (100%) of
the Adjusted Conversion Price; and
(E) the Holder will have the such other rights as provided in Debenture.
h. Reimbursement. If (i) the Lender, other than by reason of its
gross negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by any shareholder of the Company,
in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Agreements, or if the Lender is impleaded in any
such action, proceeding or investigation by any Person, or (ii) the Lender,
other than by reason of its gross negligence or willful misconduct or by reason
of its trading of the Common Stock in a manner that is illegal under the federal
securities laws, becomes involved in any capacity in any action, proceeding or
investigation brought by the SEC against or involving the Company or in
connection with or as a result of the consummation of the transactions
contemplated by the Transaction Agreements, or if the Lender is impleaded in any
such action, proceeding or investigation by any Person, then in any such case,
the Company will reimburse the Lender for its reasonable legal and other
expenses (including the cost of any investigation and preparation) incurred in
connection therewith, as such expenses are incurred. In addition, other than
with respect to any matter in which Lender is a named party, the Company will
pay to the Lender the charges, as reasonably determined by Lender, for the time
of any officers or employees of the Lender devoted to appearing and preparing to
appear as witnesses, assisting in preparation for hearings, trials or pretrial
matters, or otherwise with respect to inquiries, hearing, trials, and other
proceedings relating to the subject matter of this Agreement. The reimbursement
obligations of the Company under this section shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same terms
and conditions to any Affiliates of the Lender who or which are actually named
in such action, proceeding or investigation, and partners, directors, agents,
employees and controlling persons (if any), as the case may be, of Lender and
any such affiliate, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Company, Lender
and any such affiliate and any such person. The Company also agrees that neither
the Lender nor any such affiliate, partner, director, agent, employee or
controlling person shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company in connection with or
as a result of the consummation of any of the Transaction Agreements, except as
may be expressly and specifically provided in or contemplated by this Agreement.
15
i. Shareholders Meetings; Available Shares. On or before November 1,
2004, the Company shall hold a shareholders meeting to authorize an increase in
the authorized shares to not less than 100,000,000 shares of Common Stock and
thereafter shall have reserved for issuance, free from preemptive rights, not
less than 20,000,000 common shares (the "Available Shares"). The amount of
Available Shares is to be reduced from time to time as shares are issued for the
Finders Fee, on the conversion of the Convertible Debentures or Warrants.
Additionally, the Company will not issue any securities convertible or
exercisable into Common Stock until 30 days after the Effective Date, except as
noted in Annex XI New Securities.
j. Publicity, Filings, Releases, Etc. Each of the parties agrees
that it will not disseminate any information relating to the Transaction
Agreements or the transactions contemplated thereby, including issuing any press
releases, holding any press conferences or other forums, or filing any reports
(collectively, "Publicity"), without giving the other party reasonable advance
notice and an opportunity to comment on the contents thereof. Neither party will
include in any such Publicity any statement or statements or other material to
which the other party reasonably objects, except as maybe required by applicable
regulatory authorities. In furtherance of the foregoing, the Company will
provide to the Lender drafts of the applicable text of any filing intended to be
made with the SEC which refers to the Transaction Agreements or the transactions
contemplated thereby as soon as practible (but at least three (3) business days
before such filing will be made and will not include in such filing any
statement or statements or other material to which the other party reasonably
objects. Notwithstanding the foregoing, each of the parties hereby consents to
the inclusion of the text of the Transaction Agreements in filings made with the
SEC (but any descriptive text accompanying or part of such filing shall be
subject to the other provisions of this paragraph).
16
k. Performance by the Company. The Company agrees that unless and
until (i) the Company has affirmatively demonstrated by the use of specific
clear and convincing evidence that the Lender has traded in securities of the
Company in violation of applicable federal securities laws and (ii) there has
been issued against the Lender a final non-appealable decision from a court of
competent jurisdiction to the effect that the Lender has violated applicable
federal securities laws with respect to its trading of the Company's securities,
the Lender shall be assumed to be in compliance with such laws and the Company
shall remain obligated to fulfill all of its obligations under each of the
Transaction Agreements; provided, further, that the Company shall under no
circumstances be entitled to request or demand that the Lender affirmatively
demonstrate that it has not engaged in any such violations as a condition to the
Company's fulfillment of its obligations under any of the Transaction Agreements
and shall not assert, whether as an affirmative claim or a defense to any claim
made against the Company, that the Lender's failure to demonstrate such absence
of such violations (including, but not limited to, its failure to provide any
trading or other records, it being specifically agreed that the Company,
directly or indirectly, will request the Lender or any of its agents, advisors,
brokers or representatives to provide such records in any forum) serves either
as a defense to any breach of the Company's obligations under any of the
Transaction Agreements or otherwise reflects adversely in any manner on the
legality of any action taken by the Lender.
l. Change In Control. The Company shall not enter into any agreement
or understanding which may, directly or indirectly, cause or effect the sale of
or substantially all of its assets or a change in "control" as defined in Rule
405 under the Securities Act of 1933, without the prior written consent of the
Lender.
5. TRANSFER AGENT INSTRUCTIONS.
The Company warrants that, with respect to the Securities, other
than the stop transfer instructions to give effect to Section 4(a) hereof, it
will give its transfer agent no instructions inconsistent with instructions to
issue Common Stock from time to time upon conversion of the Debentures in such
amounts as specified from time to time by the Company to the transfer agent,
bearing the restrictive legend specified in Section 4(b) of this Agreement prior
to registration of the Shares under the 1933 Act, registered in the name of the
Lender or its nominee and in such denominations to be specified by the Lender in
connection with each conversion of the Debentures. Except as so provided, the
Shares shall otherwise be freely transferable on the books and records of the
Company as and to the extent provided in this Agreement and the Registration
Rights Agreement. Nothing in this Section shall affect in any way the Lender's
obligations and agreement to comply with all applicable securities laws upon
resale of the Securities. If the Lender provides the Company with an opinion of
counsel reasonably satisfactory to the Company that registration of a resale by
the Lender of any of the Securities in accordance with clause (1)(B) of Section
4(a) of this Agreement is not required under the 1933 Act, the Company shall
(except as provided in clause (2) of Section 4(a) of this Agreement) permit the
transfer of the Securities and, in the case of the Conversion Shares, promptly
instruct the Company's transfer agent to issue one or more certificates for
Common Stock without legend in such name and in such denominations as specified
by the Lender.
17
Subject to the provisions of this Agreement, the Company will permit
the Lender to exercise its right to convert the Debentures in the manner
contemplated by the Debentures and to exercise the Warrants in the manner
contemplated by the Warrants.
The Company understands that a delay in the issuance of the Shares
of Common Stock beyond the Delivery Date (as defined in the Debentures) could
result in economic loss to the Lender. As compensation to the Lender for such
loss, the Company agrees to pay late payments to the Lender for late issuance of
Shares upon Conversion in accordance with the following schedule (where "No.
Business Days Late" refers to the number of business days which is beyond two
(2) business days after the Delivery Date):
Late Payment For Each $10,000
of Debenture Principal or Interest
No. Business Days Late Amount Being Converted
---------------------- ----------------------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 +$200 for each Business
Day Late beyond 10 days
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand as the Lender's exclusive remedy (other than the
following provisions of this Section 5(c) and the provisions of the immediately
following Section 5(d) of this Agreement) for such delay. Furthermore, in
addition to any other remedies which may be available to the Lender, in the
event that the Company fails for any reason to effect delivery of such shares of
Common Stock by close of business on the Delivery Date, the Lender will be
entitled to revoke the relevant Notice of Conversion by delivering a notice to
such effect to the Company, whereupon the Company and the Lender shall each be
restored to their respective positions immediately prior to delivery of such
Notice of Conversion; provided, however, that an amount equal to any payments
contemplated by this Section 5(c) which have accrued through the date of such
revocation notice shall remain due and owing to the Converting Holder
notwithstanding such revocation.
18
If, by the relevant Delivery Date, the Company fails for any reason
to deliver the Shares to be issued upon conversion of a Debenture and after such
Delivery Date, the Holder of the Debentures being converted (a "Converting
Holder") purchases, in an arm's-length open market transaction or otherwise,
shares of Common Stock (the "Covering Shares") in order to make delivery in
satisfaction of a sale of Common Stock by the Converting Holder (the "Sold
Shares"), which delivery such Converting Holder anticipated to make using the
Shares to be issued upon such conversion (a "Buy-In"), the Converting Holder
shall have the right, to require the Company to pay to the Converting Holder, in
addition to and not in lieu of the amounts due under Section 5(c) hereof (but in
addition to all other amounts contemplated in other provisions of the
Transaction Agreements, and not in lieu of any such other amounts), the Buy-In
Adjustment Amount (as defined below). The "Buy-In Adjustment Amount" is the
amount equal to the excess, if any, of (x) the Converting Holder's total
purchase price (including brokerage commissions, if any) for the Covering Shares
over (y) the net proceeds (after brokerage commissions, if any) received by the
Converting Holder from the sale of the Sold Shares. The Company shall pay the
Buy-In Adjustment Amount to the Company in immediately available funds
immediately upon demand by the Converting Holder. By way of illustration and not
in limitation of the foregoing, if the Converting Holder purchases shares of
Common Stock having a total purchase price (including brokerage commissions) of
$11,000 to cover a Buy-In with respect to shares of Common Stock it sold for net
proceeds of $10,000, the Buy-In Adjustment Amount which Company will be required
to pay to the Converting Holder will be $1,000.
In lieu of delivering physical certificates representing the Common
Stock issuable upon conversion, provided the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, upon request of the Holder and its compliance with the
provisions contained in this paragraph, so long as the certificates therefor do
not bear a legend and the Holder thereof is not obligated to return such
certificate for the placement of a legend thereon, the Company shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Holder by crediting the account of
Holder's Prime Broker with DTC through its Deposit Withdrawal Agent Commission
system.
The holder of any Debentures shall be entitled to exercise its
conversion privilege with respect to the Debentures notwithstanding the
commencement of any case under 11 U.S.C. ss.101 et seq. (the "Bankruptcy Code").
In the event the Company is a debtor under the Bankruptcy Code, the Company
hereby waives, to the fullest extent permitted, any rights to relief it may have
under 11 U.S.C. ss.362 in respect of such holder's conversion privilege. The
Company hereby waives, to the fullest extent permitted, any rights to relief it
may have under 11 U.S.C. ss.362 in respect of the conversion of the Debentures.
The Company agrees, without cost or expense to such holder, to take or to
consent to any and all action reasonably necessary to effectuate relief under 11
U.S.C. ss.362.
19
The Company will authorize its transfer agent to give information
relating to the Company directly to the Lender or the Lender's representatives
upon the request of the Lender or any such representative, to the extent such
information relates to (i) the status of shares of Common Stock issued or
claimed to be issued to the Lender in connection with a Notice of Conversion or
exercise of a Warrant, or (ii) the number of outstanding shares of Common Stock
of all shareholders as of a current or other specified date. On the Closing
Date, the Company will provide the Lender with a copy of the authorization so
given to the transfer agent.
6. CLOSING DATE.
a. The Closing Date shall occur on the date which is the first
Trading Day after each of the conditions contemplated by Sections 7 and 8 hereof
shall have either been satisfied or been waived by the party in whose favor such
conditions run.
b. The closing of the purchase and issuance of Debentures and
Warrants shall occur on the Closing Date at the offices of the Escrow Agent and
shall take place no later than 3:00 P.M., New York time, on such day or such
other time as is mutually agreed upon by the Company and the Finder.
c. Notwithstanding anything to the contrary contained herein, the
Escrow Agent will be authorized to release the Escrow Funds to the Company and
to others and to release the other Escrow Property on the Closing Date upon
satisfaction of the conditions set forth in Sections 7 and 8 hereof and as
provided in the Joint Escrow Instructions.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
a. The Lender understands that the Company's obligation to sell the
Debentures and the Warrants to the Lender pursuant to this Agreement on the
relevant Closing Date is conditioned upon:
b. The execution and delivery of this Agreement and the Registration
Rights Agreement by the Lender;
c. Delivery by the Lender to the Escrow Agent of good funds as
payment in full of an amount equal to the Purchase Price for the Securities in
accordance with this Agreement;
20
d. The accuracy on such Closing Date of the representations and
warranties of the Lender contained in this Agreement, each as if made on such
date, and the performance by the Lender on or before such date of all covenants
and agreements of the Lender required to be performed on or before such date;
and
e. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
8. CONDITIONS TO THE LENDER'S OBLIGATION TO PURCHASE.
The Company understands that the Lender's obligation to purchase the
Debentures and the Warrants on the relevant Closing Date is conditioned upon:
The execution and delivery of this Agreement and the other
Transaction Agreements by the Company;
Delivery by the Company to the Escrow Agent of the Certificates in
accordance with this Agreement;
Delivery by the Company of irrevocable proxies from each of October
Sun, a Nevada Corporation as to 2,974,967 shares, ▇▇▇▇▇▇▇ ▇▇▇▇▇ as to 800,000
shares, F. ▇▇▇▇▇▇ ▇▇▇ as to 800,000 shares, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ as to 706,000 shares,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ as to 225,000 shares, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ as to 375,000 shares
and United Corporate Advisors Ltd. as to 780,000 shares in the form annexed as
Exhibit 8 hereto.
The accuracy in all material respects on such Closing Date of the
representations and warranties of the Company contained in this Agreement, each
as if made on such date, and the performance by the Company on or before such
date of all covenants and agreements of the Company required to be performed on
or before such date;
On such Closing Date, the Registration Rights Agreement shall be in
full force and effect and the Company shall not be in default thereunder;
On such Closing Date, the Lender shall have received (a) an opinion
of counsel for the Company, dated the Closing Date in form, scope and substance
reasonably satisfactory to the Lender, substantially to the effect set forth in
Annex III attached hereto (b) signed lock up agreements of the persons named on
Schedule 5(b) to the Registration Rights Agreement and (c) acknowledgement by
the Transfer Agent of "stop transfer" instructions in respect thereof .
There shall not be in effect any law, rule or regulation prohibiting
or restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained; and
21
From and after the date hereof to and including such Closing Date,
each of the following conditions will remain in effect: (i) the trading of the
Common Stock shall not have been suspended by the SEC or on the Principal
Trading Market; (ii) trading in securities generally on the Principal Trading
Market shall not have been suspended or limited; (iii), no minimum prices shall
been established for securities traded on the Principal Trading Market; and (iv)
there shall not have been any material adverse change in any financial market
that, in the reasonable judgment of the Lender, makes it impracticable or
inadvisable to purchase the Debentures.
9. INDEMNIFICATION
a. (i) The Company agrees to indemnify and hold harmless Lender and
its officers, directors, employees, and agents, and each Lender Control Person
from and against any losses, claims, damages, liabilities or expenses incurred
(collectively, "Damages"), joint or several, and any action in respect thereof
to which Lender, its partners, Affiliates, officers, directors, employees, and
duly authorized agents, and any such Lender Control Person becomes subject to,
resulting from, arising out of or relating to any misrepresentation, breach of
warranty or nonfulfillment of or failure to perform any covenant or agreement on
the part of Company contained in this Agreement, as such Damages are incurred,
except to the extent such Damages result primarily from Lender's failure to
perform any covenant or agreement contained in this Agreement or Lender's or its
officers, directors, employees, agents or Lender Control Persons negligence,
recklessness or bad faith in performing its obligations under this Agreement.
(ii) If (x) the Lender becomes involved in any capacity in any
action, proceeding or investigation brought by any stockholder of the Company,
in connection with or as a result of the consummation of the transactions
contemplated by this Agreement or the other Transaction Agreements, or if the
Lender is impleaded in any such action, proceeding or investigation by any
Person, or (y) the Lender becomes involved in any capacity in any action,
proceeding or investigation brought by the SEC, any self-regulatory organization
or other body having jurisdiction, against or involving the Company or in
connection with or as a result of the consummation of the transactions
contemplated by this Agreement or the other Transaction Agreements, or if the
Lender is impleaded in any such action, proceeding or investigation by any
Person, then in any such case, other than by reason of the Lender's actions
(other than the Lender's execution of the Transaction Agreements to which it is
a signatory, the payment of the Purchase Price, and/or the exercise of any of
the Lender's rights under any one or more of the Transaction Agreements), the
Company hereby agrees to indemnify, defend and hold harmless the Lender from and
against and in respect of all losses, claims, liabilities, damages or expenses
resulting from, imposed upon or incurred by the Lender, directly or indirectly,
and reimburse such Lender for its reasonable legal and other expenses (including
the cost of any investigation and preparation) for a single firm of counsel
22
incurred in connection therewith, as such expenses are incurred. In addition,
the Company will reimburse the Lender for reasonable internal and overhead costs
for the time of any officers or employees of the Lender devoted to appearing and
preparing to appear as witnesses, assisting in preparation for hearings, trials
or pretrial matters, or otherwise with respect to inquiries, hearing, trials,
and other proceedings relating to the subject matter of this Agreement or the
other Transaction Agreements, other than by reason of the Lender's actions
(other than the Lender's execution of the Transaction Agreements to which it is
a signatory, the payment of the Purchase Price, and/or the exercise of any of
the Lender's rights under any one or more of the Transaction Agreements). The
indemnification and reimbursement obligations of the Company under this
paragraph shall be in addition to any liability which the Company may otherwise
have (other than matters specifically addressed in the Registration Rights
Agreement, which shall be governed solely by that agreement), shall extend upon
the same terms and conditions to any Affiliates of the Lender who are actually
named in such action, proceeding or investigation, and partners, directors,
agents, employees and Lender Control Persons (if any), as the case may be, of
the Lender and any such Affiliate, and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Company, the Lender, any such Affiliate and any such Person. The Company also
agrees that neither the Lender nor any such Affiliate, partner, director, agent,
employee or Lender Control Person shall have any liability to the Company or any
Person asserting claims on behalf of or in right of the Company in connection
with or as a result of the consummation of this Agreement or the other
Transaction Agreements, other than by reason of the Lender's actions (other than
the Lender's execution of the Transaction Agreements to which it is a signatory,
the payment of the Purchase Price, and/or the exercise of any of the Lender's
rights under any one or more of the Transaction Agreements)
All claims for indemnification by any Indemnified Party (as defined
below) under this Section 9 shall be asserted and resolved as follows:
(i) In the event any claim or demand in respect of which any Person
claiming indemnification under any provision of this Section 9 (an "Indemnified
Party") might seek indemnity under Section 9(a) is asserted against or sought to
be collected from such Indemnified Party by a Person other than a party hereto
or an Affiliate thereof (a "Third Party Claim"), the Indemnified Party shall
deliver a written notification, enclosing a copy of all papers served, if any,
and specifying the nature of and basis for such Third Party Claim and for the
Indemnified Party's claim for indemnification that is being asserted under any
provision of this Section 9 against any Person (the "Indemnifying Party"),
together with the amount or, if not then reasonably ascertainable, the estimated
amount, determined in good faith, of such Third Party Claim (a "Claim Notice")
with reasonable promptness to the Indemnifying Party. If the Indemnified Party
fails to provide the Claim Notice with reasonable promptness after the
Indemnified Party receives notice of such Third Party Claim, the Indemnifying
Party shall not be obligated to indemnify the Indemnified Party with respect to
such Third Party Claim to the extent that the Indemnifying Party's ability to
defend has been prejudiced by such failure of the Indemnified Party. The
Indemnifying Party shall notify the Indemnified Party as soon as practicable
within the period ending thirty (30) calendar days following receipt by the
Indemnifying Party of either a Claim Notice or an Indemnity Notice (as defined
below) (the "Dispute Period") whether the Indemnifying Party disputes its
liability or the amount of its liability to the Indemnified Party under this
Section 9 and whether the Indemnifying Party desires, at its sole cost and
expense, to defend the Indemnified Party against such Third Party Claim. The
following provisions shall also apply.
23
(x) If the Indemnifying Party notifies the Indemnified Party within the
Dispute Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to this
Section 9(b), then the Indemnifying Party shall have the right to defend,
with counsel reasonably satisfactory to the Indemnified Party, at the sole
cost and expense of the Indemnifying Party, such Third Party Claim by all
appropriate proceedings, which proceedings shall be vigorously and
diligently prosecuted by the Indemnifying Party to a final conclusion or
will be settled at the discretion of the Indemnifying Party (but only with
the consent of the Indemnified Party in the case of any settlement that
provides for any relief other than the payment of monetary damages or that
provides for the payment of monetary damages as to which the Indemnified
Party shall not be indemnified in full pursuant to Section 9(a)). The
Indemnifying Party shall have full control of such defense and
proceedings, including any compromise or settlement thereof; provided,
however, that the Indemnified Party may, at the sole cost and expense of
the Indemnified Party, at any time prior to the Indemnifying Party's
delivery of the notice referred to in the first sentence of this
subparagraph (x), file any motion, answer or other pleadings or take any
other action that the Indemnified Party reasonably believes to be
necessary or appropriate protect its interests; and provided further, that
if requested by the Indemnifying Party, the Indemnified Party will, at the
sole cost and expense of the Indemnifying Party, provide reasonable
cooperation to the Indemnifying Party in contesting any Third Party Claim
that the Indemnifying Party elects to contest. The Indemnified Party may
participate in, but not control, any defense or settlement of any Third
Party Claim controlled by the Indemnifying Party pursuant to this
subparagraph (x), and except as provided in the preceding sentence, the
Indemnified Party shall bear its own costs and expenses with respect to
such participation. Notwithstanding the foregoing, the Indemnified Party
may take over the control of the defense or settlement of a Third Party
Claim at any time if it irrevocably waives its right to indemnity under
Section 9(a) with respect to such Third Party Claim.
(y) If the Indemnifying Party fails to notify the Indemnified Party within
the Dispute Period that the Indemnifying Party desires to defend the Third
Party Claim pursuant to Section 9(b), or if the Indemnifying Party gives
such notice but fails to prosecute vigorously and diligently or settle the
Third Party Claim, or if the Indemnifying Party fails to give any notice
whatsoever within the Dispute Period, then the Indemnified Party shall
have the right to defend, at the sole cost and expense of the Indemnifying
Party, the Third Party Claim by all appropriate proceedings, which
proceedings shall be prosecuted by the Indemnified Party in a reasonable
manner and in good faith or will be settled at the discretion of the
24
Indemnified Party (with the consent of the Indemnifying Party, which
consent will not be unreasonably withheld). The Indemnified Party will
have full control of such defense and proceedings, including any
compromise or settlement thereof; provided, however, that if requested by
the Indemnified Party, the Indemnifying Party will, at the sole cost and
expense of the Indemnifying Party, provide reasonable cooperation to the
Indemnified Party and its counsel in contesting any Third Party Claim
which the Indemnified Party is contesting. Notwithstanding the foregoing
provisions of this subparagraph (y), if the Indemnifying Party has
notified the Indemnified Party within the Dispute Period that the
Indemnifying Party disputes its liability or the amount of its liability
hereunder to the Indemnified Party with respect to such Third Party Claim
and if such dispute is resolved in favor of the Indemnifying Party in the
manner provided in subparagraph(z) below, the Indemnifying Party will not
be required to bear the costs and expenses of the Indemnified Party's
defense pursuant to this subparagraph (y) or of the Indemnifying Party's
participation therein at the Indemnified Party's request, and the
Indemnified Party shall reimburse the Indemnifying Party in full for all
reasonable costs and expenses incurred by the Indemnifying Party in
connection with such litigation. The Indemnifying Party may participate
in, but not control, any defense or settlement controlled by the
Indemnified Party pursuant to this subparagraph (y), and the Indemnifying
Party shall bear its own costs and expenses with respect to such
participation.
(z) If the Indemnifying Party notifies the Indemnified Party that it does
not dispute its liability or the amount of its liability to the
Indemnified Party with respect to the Third Party Claim under Section 9(a)
or fails to notify the Indemnified Party within the Dispute Period whether
the Indemnifying Party disputes its liability or the amount of its
liability to the Indemnified Party with respect to such Third Party Claim,
the amount of Damages specified in the Claim Notice shall be conclusively
deemed a liability of the Indemnifying Party under Section 9(a) and the
Indemnifying Party shall pay the amount of such Damages to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its
liability or the amount of its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party shall proceed in good faith
to negotiate a resolution of such dispute; provided, however, that it the
dispute is not resolved within thirty (30) days after the Claim Notice,
the Indemnifying Party shall be enlisted to institute such legal action as
it deems appropriate.
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(ii) In the event any Indemnified Party should have a claim under
Section 9(a) against the Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall deliver a written notification of a claim for
indemnity under Section 9(a) specifying the nature of and basis for such claim,
together with the amount or, if not then reasonably ascertainable, the estimated
amount, determined in good faith, of such claim (an "Indemnity Notice") with
reasonable promptness to the Indemnifying Party. The failure by any Indemnified
Party to give the Indemnity Notice shall not impair such party's rights
hereunder except to the extent that the Indemnifying Party demonstrates that it
has been irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim or the amount of the claim
described in such Indemnity Notice or fails to notify the Indemnified Party
within the Dispute Period whether the Indemnifying Party disputes the claim or
the amount of the claim described in such Indemnity Notice, the amount of
Damages specified in the Indemnity Notice will be conclusively deemed a
liability of the Indemnifying Party under Section 9(a) and the Indemnifying
Party shall pay the amount of such Damages to the Indemnified Party on demand.
If the Indemnifying Party has timely disputed its liability or the amount of its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party shall proceed in good faith to negotiate a resolution of such dispute;
provided, however, that it the dispute is not resolved within thirty (30) days
after the Claim Notice, the Indemnifying Party shall be enlisted to institute
such legal action as it deems appropriate.
The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar rights of the indemnified party against the
indemnifying party or others, and (ii) any liabilities the indemnifying party
may be subject to.
10. JURY TRIAL WAIVER. The Company and the Lender hereby waive a
trial by jury in any action, proceeding or counterclaim brought by either of the
Parties hereto against the other in respect of any matter arising out or in
connection with the Transaction Agreements.
11. GOVERNING LAW: MISCELLANEOUS.
This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York for contracts to be wholly performed in
such state and without giving effect to the principles thereof regarding the
conflict of laws. Each of the parties consents to the exclusive jurisdiction of
the federal courts whose districts encompass any part of the City of New York or
the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement or any of the other
Transaction Agreements and hereby waives, to the maximum extent permitted by
law, any objection, including any objection based on forum non conveniens, to
the bringing of any such proceeding in such jurisdictions. To the extent
determined by such court, the Company shall reimburse the Lender for any
reasonable legal fees and disbursements incurred by the Lender in enforcement of
or protection of any of its rights under any of the Transaction Agreements.
26
Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.
All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
A facsimile transmission of this signed Agreement shall be legal and
binding on all parties hereto.
This Agreement may be signed in one or more counterparts, each of
which shall be deemed an original.
The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
If any provision of this Agreement shall be invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
This Agreement may be amended only by an instrument in writing
signed by the party to be charged with enforcement thereof.
This Agreement supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof.
12. NOTICES. Any notice required or permitted hereunder shall be
given in writing (unless otherwise specified herein) and shall be deemed
effectively given on the earliest of
(a) the date delivered, if delivered by personal delivery as against
written receipt therefor or by confirmed facsimile transmission, or
(b) the third business day after mailing by domestic or
international express courier, with delivery costs and fees prepaid, in each
case, addressed to each of the other parties thereunto entitled at the following
addresses (or at such other addresses as such party may designate by ten (10)
days' advance written notice similarly given to each of the other parties
hereto):
27
Company: URANIUM POWER CORPORATION
at its address at the head of this Agreement
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇
Suite 420 - ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇-▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Lender: At the address set forth on the signature page of this
Agreement.
with a copy to:
▇▇▇▇▇▇▇ & Prager LLP, Esqs.
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
Escrow Agent: ▇▇▇▇▇▇▇ & Prager LLP
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇.
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
28
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and the
Lender's representations and warranties herein shall survive the execution and
delivery of this Agreement and the delivery of the Certificates and the payment
of the Purchase Price, and shall inure to the benefit of the Lender and the
Company and their respective successors and assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]
29
IN WITNESS WHEREOF, this Agreement has been duly executed by the
Lender (if an entity, by one of its officers thereunto duly authorized) as of
the date set forth below.
PURCHASE PRICE: $
---------------------
NUMBER OF WARRANTS:
---------------------
SIGNATURES FOR LENDERS
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this day of , 2004.
----------------------------------- ----------------------------------------
Address Printed Name of Lender
By:
-------------------------------------
Telecopier No. _________________ (Signature of Authorized Person)
----------------------------------- ----------------------------------------
Jurisdiction of Incorporation Printed Name and Title
or Organization
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
URANIUM POWER CORPORATION
By:
--------------------------------
Title: President
------------------------------
Date: September 14, 2004
------------------------------
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ANNEX I FORM OF DEBENTURE
ANNEX II JOINT ESCROW INSTRUCTIONS
ANNEX III OPINION OF COUNSEL
ANNEX IV REGISTRATION RIGHTS AGREEMENT
ANNEX V COMPANY DISCLOSURE MATERIALS
ANNEX VI FORM OF WARRANT
ANNEX VII COMPANY'S SEC DOCUMENTS AVAILABLE ON ▇▇▇▇▇
ANNEX VIII FORM OR IRREVOCABLE PROXY
ANNEX IX DELETED
ANNEX X INVESTOR QUESTIONNAIRE
ANNEX XI NEW SECURITIES
31