SECURED LOAN AGREEMENT Between: TAPIMMUNE INC. And: TapImmune Inc. Unit 2, 3590 West 41st Avenue, Vancouver, British Columbia, Canada, V6N 3E6 -- Share/Asset Purchase and Management Services Agreement -- -- Azco Mining Inc. --
EXHIBIT 10.4
__________
Between:
And:
[------------------------]
Xxxx 0,
0000 Xxxx 00xx Xxxxxx,
Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx, X0X 0X0
__________
-- Share/Asset Purchase and
Management Services Agreement --
-- Azco Mining
Inc. --
2745023.1
THIS
SECURED LOAN AGREEMENT is dated and made for reference as fully executed
effective on this [----] day of [------------] 2009 (the “Execution Date”
herein).
BETWEEN:
TAPIMMUNE
INC., a company incorporated under the laws of the State of Nevada,
U.S.A., , and having an address for notice and delivery located at Unit 2, 3590 West
41st Avenue, Vancouver,
British Columbia, Canada, V6N 3E6
(the
“Borrower”);
OF THE FIRST
PART
AND:
[----------------------]
(each, a
“Lender”, and together, the “Lenders”);
OF THE SECOND
PART
(the
Borrower and the Lenders being hereinafter singularly also referred to as a
“Party” and collectively
referred to as the “Parties” as the context so
requires).
WHEREAS:
A. The
Parties hereto have now reached an agreement whereby the Lenders have agreed to
advance, by way of loan or loans to the Borrower (collectively, the “Loan”), the aggregate
principal sum of up to one hundred and seventy five thousand dollars (U.S.
$175,000) in lawful money of the United States (collectively, the
“Principal
Sum”),
on the basis of certain security for such Loan Principal Sum monies (collectively, the
“Security”) having been and
to be provided by the Borrower on the following terms and conditions, with
interest accruing on
the Principal Sum at the rate of thirty percent (30%) per annum, calculated
daily and payable in full quarterly during the continuance of any portion of the
Loan hereunder (the “Interest”) and prior to
maturity; and
B.The
Parties hereby acknowledge and agree that there have been various discussions,
negotiations, understandings and agreements between them relating to the
principle terms and conditions of the proposed Loan of the Principal Sum monies
and the Security therefore as contemplated therein and, correspondingly, that it
is their intention by the terms and conditions of this “Secured Loan Agreement”
(the “Agreement”) to
clarify their respective duties and obligations with respect to the within Loan
and Security to be provided hereunder, all in accordance with the terms and
conditions of this Agreement;
NOW
THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the proposed
advancement by the Lenders to the Borrower of up to the entire and aggregate
Principal Sum by way of the within Loan, the receipt and sufficiency of which is
hereby acknowledged by the Borrower, and in consideration of the mutual
agreements herein contained, THE
PARTIES HERETO MUTUALLY COVENANT AND AGREE AS FOLLOWS:
Article
I
GENERAL PROVISIONS, SCHEDULES AND
INTERPRETATION
1.1Entire
agreement. This Agreement constitutes the entire
agreement to date between the Parties hereto and supersedes every previous
agreement, communication, expectation, negotiation, representation or
understanding, whether oral or written, express or implied, statutory or
otherwise, between the Parties hereto with respect to the subject matter of this
Agreement.
1.2Enurement. This
Agreement will enure to the benefit of and will be binding upon the Parties
hereto, their respective heirs, executors, administrators and
assigns.
1.3Schedules. The
Schedules to this Agreement are hereby incorporated by reference into this
Agreement in its entirety.
1.4Time of
the essence. Time will be of the essence of this
Agreement.
1.5Representation
and costs. It is hereby acknowledged by each of the
Parties hereto that Lang Xxxxxxxx LLP, Lawyers – Patent & Trademark Agents,
acts solely for the Borrower, and, correspondingly, that the Lenders have been
required by each of Lang Xxxxxxxx LLP and the Borrower to obtain independent
legal advice with respect to its review and execution of this
Agreement. In addition, it is hereby further acknowledged and
agreed by the Parties hereto that Lang Xxxxxxxx LLP, and certain or all of its
principal owners or associates, from time to time, may have both an economic or
shareholding interest in and to the Borrower and/or a fiduciary duty to the same
arising from either a directorship, officership or similar relationship arising
out of the request of the Borrower for certain of such persons to act in a
similar capacity while previously acting for the Borrower as
counsel. Correspondingly, and even where, as a result of this
Agreement, the consent of each Party hereto to the role and capacity of Lang
Xxxxxxxx LLP, and its principal owners and associates, as the case may be, is
deemed to have been received, where any conflict or perceived conflict may
arise, or be seen to arise, as a result of any such capacity or representation,
each Party hereto acknowledges and agrees to, once more, obtain independent
legal advice in respect of any such conflict or perceived conflict and,
consequent thereon, Lang Xxxxxxxx LLP, together with any such principal owners
or associates, as the case may be, shall be at liberty at any time to resign any
such position if it or any Party hereto is in any way affected or uncomfortable
with any such capacity or representation. Each Party to this
Agreement will also bear and pay its own costs, legal and otherwise, in
connection with its respective preparation, review and execution of this
Agreement and, in particular, that the costs involved in the preparation of this
Agreement, and all documentation necessarily incidental thereto, by Lang
Xxxxxxxx LLP, shall be at the cost of the Borrower.
1.6Applicable
law. The situs of this Agreement is Vancouver, British
Columbia, Canada, and for all purposes this Agreement will be governed
exclusively by and construed and enforced in accordance with the laws and Courts
prevailing in the Province of British Columbia.
1.7Further
assurances. The Parties hereto hereby, jointly and
severally, covenant and agree to forthwith, upon request, execute and deliver,
or cause to be executed and delivered, such further and other deeds, documents,
assurances and instructions as may be required by the Parties hereto or their
respective counsel in order to carry out the true nature and intent of this
Agreement.
1.8Invalid
provisions. If any provision of this Agreement is at any
time unenforceable or invalid for any reason it will be severable from the
remainder of this Agreement and, in its application at that time, this Agreement
will be construed as though such provision was not contained herein and the
remainder will continue in full force and effect and be construed as if this
Agreement had been executed without the invalid or unenforceable
provision.
1.9Currency. Unless
otherwise stipulated, all payments required to be made pursuant to the
provisions of this Agreement and all money amount references contained herein
are in lawful currency of the United States of America.
1.10Severability
and construction. Each Article, section, paragraph, term
and provision of this Agreement, and any portion thereof, shall be considered
severable, and if, for any reason, any portion of this Agreement is determined
to be invalid, contrary to or in conflict with any applicable present or future
law, rule or regulation in a final unappealable ruling issued by any court,
agency or tribunal with valid jurisdiction in a proceeding to any of the Parties
hereto is a party, that ruling shall not impair the operation of, or have any
other effect upon, such other portions of this Agreement as may remain otherwise
intelligible (all of which shall remain binding on the Parties and continue to
be given full force and agreement as of the date upon which the ruling becomes
final).
1.11Captions. The
captions, section numbers and Article numbers appearing in this Agreement are
inserted for convenience of reference only and shall in no way define, limit,
construe or describe the scope or intent of this Agreement nor in any way affect
this Agreement.
1.12Counterparts. This
Agreement may be signed by the Parties hereto in as many counterparts as may be
necessary and, if required, by facsimile, each of which so signed being deemed
to be an original, and such counterparts together shall constitute one and the
same instrument and notwithstanding the date of execution will be deemed to bear
the Execution Date as set forth on the front page of this
Agreement.
1.13No
partnership or agency. The Parties hereto have not
created a partnership and nothing contained in this Agreement shall in any
manner whatsoever constitute any Party the partner, agent or legal
representative of any other Party, nor create any fiduciary relationship between
them for any purpose whatsoever. No Party shall have any authority to
act for, or to assume any obligations or responsibility on behalf of, any other
party except as may be, from time to time, agreed upon in writing between the
Parties or as otherwise expressly provided.
1.14Consents
and waivers. No consent or waiver expressed or implied
by either Party hereto in respect of any breach or default by any other Party in
the performance by such other of its obligations hereunder shall:
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(a)be
valid unless it is in writing and stated to be a consent or waiver
pursuant to this section;
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(b)be
relied upon as a consent to or waiver of any other breach or default of
the same or any other obligation;
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(c)constitute
a general waiver under this Agreement;
or
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(d)eliminate
or modify the need for a specific consent or waiver pursuant to this
section in any other or subsequent
instance.
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1.15 Remedies
non-exclusive. No
remedy herein and any and all supporting documents which are conferred on the
Lenders is intended to be exclusive. Each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or
under law, equity or by statute or otherwise. Commencement of
exercising any remedy by the Lenders shall not preclude the simultaneous or
later exercise by the Lenders of any and all other remedies.
1.16 Notices. Any
notice, direction or other document or instrument required or permitted to be
given under this Agreement shall be in writing and may be given by delivering or
mailing by registered mail or sending by telegram, telex, facsimile transmission
or by any other similar form of electronic communication to the addresses set
forth first above for each of the Parties hereto. All such notices,
directions or documents aforesaid shall:
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(a)
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if
delivered be deemed to have been given or made at the time of
delivery;
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(b)
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if
mailed by registered mail within the Province of British Columbia and
properly addressed be deemed to have been given or made on the fifth day
following the day on which it was so mailed or posted provided that if
there shall be a strike amongst the personnel of the Post Office or other
labour strike or dispute which would affect delivery of such mail in the
normal course, then any such notices or materials shall only be effective
if actually delivered; and
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(c)
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if
sent by telegram, telex, facsimile transmission or by other similar form
of electronic communication be deemed to have been given or made on the
date following the day on which it was so
transmitted.
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Any Party may give written notice of
change of address in the same manner as provided above to the other Parties and
upon which such address shall be the address for the giving of notices
hereunder.
1.17 No merger
of judgment. The
taking of judgment by the Lenders on any covenant contained herein or on any
covenant set forth in this Agreement or other security agreements, for payment
of the indebtedness or performance of obligations thereby secured, does not
operate as a merger of any such covenant or affect the rights of the Lenders to
interest at the rate and times provided in this Agreement on any of the money
owing to the Lenders hereunder, and that judgment shall provide that the
interest thereon shall be calculated at the same rate and in the same manner as
herein provided until the judgment is fully paid and satisfied.
1.18Schedules. For the purposes of this
Agreement, except as otherwise expressly provided or unless the context
otherwise requires, the following shall represent the Schedules which are
attached to this Agreement and which form a material part hereof:
ScheduleDescription
Schedule
“A”:Debenture;
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Schedule
“B”:Warrant Certificate;
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Schedule
“C”:Security Agreement; and
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Schedule
“D”:Piggyback Registration Rights
Agreement.
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1.19Interpretation. For the purposes of this
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
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(a)the
words “herein”, “hereof” and “hereunder” and other words of similar import
refer to this Agreement as a whole and not to any particular Article,
section or other subdivision of this
Agreement;
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(b)the
headings are for convenience only and do not form a part of this Agreement
nor are they intended to interpret, define or limit the scope or extent of
this or any provision of this
Agreement;
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(c)any
reference to an entity shall include and shall be deemed to be a reference
to any entity that is a permitted successor to such entity;
and
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(d)words
in the singular include the plural and words in the masculine gender
include the feminine and neuter genders, and vice
versa.
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1.20Amendment.This
Agreement may only be amended with the prior written consent of all of the
parties hereto.
Article
2
REPRESENTATIONS, WARRANTIES AND
COVENANTS
2.1 General. The
Borrower hereby represents to, warrants to and covenants with each Lender, as
set forth in this Article, that all representations, covenants and warranties
made hereunder shall survive the execution and delivery of the security and
supporting documents to such Lender and any disbursements or advance of the Loan
monies, and no investigation at any time made by or on behalf of such Lender
shall diminish in any respect whatsoever that Lender’s right to rely
thereon. All statements contained in any certificate or other
instruction delivered by or on behalf of the Borrower pursuant to this Agreement
shall constitute representations and warranties made by the Borrower
hereunder.
2.2 Power of
the Borrower. The
Borrower has, and shall until repayment in full of the Principal Sum and any
Interest thereon, have all requisite power and authority to enter into this
Agreement and grant the Security and supporting documents as required by the
Lenders.
2.3 Binding
effect. This
Agreement and the Security and supporting documents have been or will be duly
and validly authorized, executed and delivered by the Borrower to the Lenders
upon the execution of this Agreement and are or will be valid obligations
legally binding on the Borrower and enforceable in accordance with their
respective terms.
2.5 Contravention
of law. Neither
the execution and delivery of this Agreement, nor the Security and supporting
documents, nor the performance of or compliance with any of their respective
terms, will contravene any provision of any law, regulation, order or permit
applicable to the Borrower, or result in a breach, or constitute a default
under, or require any consent under the terms or conditions of any agreement or
instrument to which the Borrower is a party.
2.6Organization.The
Borrower is a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada and has all requisite corporate power and
authority to carry on its business as presently conducted and as proposed to be
conducted. The Borrower is duly qualified to transact business and is
in good standing in each jurisdiction in which the failure to so qualify would
have a material adverse effect.
2.7Valid
Issuance. Each of (i) the Debentures, when issued, sold and
delivered in accordance with the terms and for the consideration set forth in
this Agreement, and (ii) the Warrants when issued, sold and delivered in
accordance with the terms and for the consideration set forth in the
corresponding Warrant Certificate will be validly issued, fully paid and
nonassessable and free of restrictions on transfer other than applicable
provincial, state and federal securities. The Debentures and the
Warrants will be issued in compliance with all applicable federal, state and
provincial securities laws
The
Warrant Shares have been duly reserved for issuance, and upon issuance in
accordance with the terms of the Warrant Certificate, will be validly issued,
fully paid and nonassessable and free of restrictions on transfer other than
restrictions on transfer under applicable federal, state and provincial
securities laws. The Warrant Shares issuable upon exercise of the
Warrants will be issued in compliance with all applicable federal, state and
provincial securities laws.
2.8Governmental Consents and
Filings.
No
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any federal, state or local
governmental authority is required on the part of the Borrower in connection
with the consummation of the transactions contemplated by this Agreement except
for filings pursuant to Regulation D of the Securities Act, and applicable state
and provincial securities laws, which have been made or will be made in a timely
manner.
2.9Litigation.
There
is no claim, action, suit, proceeding, arbitration, complaint, charge or
investigation pending or to the Borrower’s knowledge, currently threatened (i)
against the Borrower or any officer, director or employee of the Borrower that
would reasonably be expected to have, either individually or in the aggregate, a
material adverse effect on the Borrower’s operations or
business. Neither the Borrower nor, to the Borrower’s knowledge, any
of its officers, directors or employees is a party or is named as subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality (in the case of officers, directors or
employees, such as would affect the Borrower). There is no action,
suit, proceeding or investigation by the Borrower pending or which the Borrower
intends to initiate. The foregoing includes, without limitation,
actions, suits, proceedings or investigations pending or threatened in writing
(or any basis therefor known to the Borrower) involving the prior employment of
any of the Borrower’s employees, their services provided in connection with the
Borrower’s business, or any information or techniques allegedly proprietary to
any of their former employers, or their obligations under any agreements with
prior employers.
2.10Intellectual
Property.
The
Borrower owns or possesses sufficient legal rights to all intellectual property
(including all patents, patent applications, trademarks, trademark applications,
service marks, tradenames, copyrights, trade secrets, licenses, domain names,
information and proprietary rights and processes as are necessary to the conduct
of the Borrower’s business as now conducted and as presently proposed to be
conducted) without any known conflict with, or infringement of, the rights
of others. To the
Borrower’s knowledge, no product or service marketed or sold (or proposed to be
marketed or sold) by the Borrower violates or will violate any license or
infringes or will infringe any intellectual property rights of any other
party. Other than with respect
to commercially available software products under standard end-user object code
license agreements, there are no outstanding options, licenses, agreements,
claims, encumbrances or shared ownership interests of any kind relating to the
intellectual property, nor is the Borrower bound by or a party to any options,
licenses or agreements of any kind with respect to the patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes of any other Person. The Borrower
has not received any communications alleging that the Borrower has violated or,
by conducting its business, would violate any of the patents, trademarks,
service marks, tradenames, copyrights, trade secrets, mask works or other
proprietary rights or processes of any other Person. The Borrower has
obtained and possesses valid licenses to use all of the software programs
present on the computers and other software-enabled electronic devices that it
owns or leases or that it has otherwise provided to its employees for their use
in connection with the Borrower’s business. To the Borrower’s
knowledge, it will not be necessary to use any inventions of any of its
employees or consultants (or Persons it currently intends to hire) made prior to
their employment by the Borrower. Each employee has assigned to the
Borrower all intellectual property rights he or she owns that are related to the
Borrower’s business as now conducted and as presently proposed to be conducted.
For purposes of this Section 2.10, the Borrower shall be deemed to have
knowledge of a patent right if the Borrower has actual knowledge of the patent
right or would be found to be on notice of such patent right as determined by
reference to United States patent laws.
2.11Tax Returns and
Payments.
To the Borrower’s knowledge, there are no
federal, state, county, local or foreign taxes dues and payable by the Borrower which have not been timely
paid. There are no accrued and unpaid federal, state, country, local
or foreign taxes of the Borrower which are
due, whether or not assessed or disputed. There have been no
examinations or audits of any tax returns or reports by any applicable federal,
state, local or foreign governmental agency. The Borrower intends in good faith to file as
soon as practicably possible all federal, state, county, local and foreign tax
returns that it is required to file and which are currently due.
2.12Prior
Security. There are no security interests currently existing
on the assets and collateral that are the subject of the Security
Agreement.
2.13Budget. The
Borrower shall use the funds from the Principal Sum as set out in Exhibit B attached
hereto. If the Principal Sum is less than the total amounts included on Exhibit B, the
Borrower must use the Principal Sum to satisfy the amount due on Exhibit B in the
following order (i) to UBC, (ii) to the Finder’s Fee, (iii) to MCSI and (iv)
thereafter to satisfy any of the other amounts set forth on Exhibit
B. If the Principal Sum exceeds the total amounts included on
Exhibit B, the
Borrower will consult with the Representative on the use of the
difference. Any change in the use of such funds must be approved by
the prior written consent of the Representative (as defined in the Security
Agreement).
Article
3
TERMS OF LOAN AND REPAYMENT THEREOF
3.1 Principal
Sum Loan by the Lenders to the Borrower. It
is hereby expressly acknowledged and agreed by the Parties hereto that the
Lenders will advance, by way of Loan or Loans to the Borrower under the terms
and conditions of this Agreement, up to the aforementioned Principal Sum of U.S.
$175,000 at such time or times, and in such amount or amounts, as may be agreed
upon in advance and in writing by each of the Parties hereto prior to the
advancement of any such Loan or Loans (each such date of advance of any Loan
hereunder being an “Effective
Date” of such Loan or Loans for the purposes of this
Agreement). In the event that a Lender advances or Lenders advance
Loans of less than $175,000, an additional Lender may advance a Loan of up to
the difference between $175,000 and the Loans advanced, provided that such
additional Lender is approved by all parties to this Agreement and that such
Lender becomes a Party to this Agreement and the Security
Agreement. The Borrower and each Lender agree that the Loan of any
Lender that becomes a party to this Agreement after the date into which it is
first entered shall rank pari
passu with the Loans of the Lenders under this Agreement. The
Borrower shall maintain and update Exhibit A to this Agreement each time that a
Loan is advanced hereunder.
3.2 Security
for the Loan. The
Parties hereto all acknowledge that up to the entire Principal Sum will be
advanced by a Lender to the Borrower by way of Loan and subject to the
fulfillment and/or the continuing fulfillment of the following conditions to the
satisfaction of the Lender in its sole and absolute discretion from time to
time:
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(a)
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the
execution by the Borrower of this
Agreement:
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(b)
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the
granting and delivery by the Borrower to such Lender of the Security and
all other supporting documents required under this
Agreement;
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(c)
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the
execution and delivery by the Borrower to such Lender of the form of
debenture (the “Debenture”) for the
portion of the Principal Sum advanced by such Lender and any Interest
thereon which is attached hereto as Schedule “A” and which forms a
material part hereof;
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(d)
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the
execution and delivery by the Borrower to such Lender of a warrant
certificate (the “Warrant
Certificate”) which is attached hereto as Schedule “B” and which
forms a material part hereof;
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(e)
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the
execution and delivery by the Borrower to such Lender of the form of
security agreement (the “Security Agreement”) for
the Principal Sum and any Interest thereon which is attached hereto as
Schedule “C” and which forms a material part
hereof;
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(f)
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no
default has occurred under any of the terms of the Agreement or the terms
of the Security;
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(g)
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the
Borrower has not made an assignment for the benefit of any of its
creditors, has not been declared bankrupt, has not made a proposal or
otherwise taken advantage of provisions for relief under the British
Columbia Bankruptcy
Act, the British Columbia Company’s Creditors
Arrangement Act or similar legislation in any jurisdiction, has not
made an authorized assignment or suffered an appointment of a receiver or
receiver-manager over all or any part of its assets and business, and an
order of execution or execution proceedings has not been taken as against
any of its assets that remains unsatisfied for a period of 10 calendar
days; and
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(h)
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without
the prior consent of Xxxxxxx X. Xxxxxxxxxx, who such Lender hereby grants
a power of attorney to act on its behalf in connection with this
subsection 3.2(h), the Borrower has not created or permitted to exist any
charge, encumbrance or lien or claim against or any security interest in
any of its assets and properties which rank or could in any event rank in
priority to or pari
passu with the Security of such Lender under this
Agreement.
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3.3 Interest
on the Loan. The portion of the
Principal Sum advanced by a Lender to the Borrower from time to time shall bear
interest commencing on the Effective Date of any such Loan at the rate of
thirty percent (30%) per annum (and if such rate is deemed usurious, the maximum non-usurious rate of interest that Lender
is permitted under the applicable law of the jurisdiction that found such rate
to be usurious to contract for, take, charge, or receive from Borrower),
calculated daily and payable in full quarterly during the continuance of any
portion of a Loan hereunder (herein, again, the “Interest”) prior to
maturity. Any change in
the interest rate due to usury laws shall not require an amendment to this
Agreement.
3.4 Repayment
of the Principal Sum portion of the Loan. The
Borrower hereby covenants to repay to the Lenders, as required under the
terms of this Agreement, all Principal Sum and monies which have heretofore been
advanced by the Lender to the Borrower under this Agreement, together with all
outstanding Interest and Loan Fees thereon, at or before 5:00 p.m. (Vancouver,
British Columbia, time) on the first business day which is one hundred and
eighty (180) days from the Effective Date of each such Loan advance hereunder
(the “Final Principal Sum
Payment Date” in each such instance); failing which the Lenders may
immediately realize upon any of the Security which has been provided by the
Borrower to the Lenders in accordance with the terms of this
Agreement.
3.5 Prepayment
and Redemption of the Loan. The Borrower may prepay and
redeem any portion of the Principal Sum portion of the Loan in whole or in part
at any time prior to the Final Principal Sum Payment Date (the “Right
of Redemption”) and in the manner as
set forth immediately hereinbelow by providing each Lender with not less
than five calendar days’ prior written notice (the “Redemption Notice”) of its
Right of Redemption intention to redeem and repay all or any portion of the
Principal Sum and any Interest accrued thereon which would be due and owing by
the Borrower to the Lender at the end of such five-day period (collectively, the
“Redemption Amount”)
(such day at the end of such five-day period being the “Redemption Date” and, for
clarity, such Redemption Date would be the date to which such Principal Sum and
Interest would be calculated and due and payable to the Lender at the close of
business, in Vancouver, British Columbia, Canada, on such Redemption
Date). In the event that the Borrower partially prepays and redeems
outstanding Loans, the Borrower shall partially prepay and redeem each
outstanding Loan on a pro-rata basis according to the size of each Loan in
comparison to the size of all the Loans.
In order
to provide such Redemption Notice, the Borrower will be required, at the date of
its delivery to the Lenders of the Redemption Notice, to provide to the Lenders’
counsel, or to such other mutually agreeable holder (the “Escrow Holder”), a certified
cheque or bank draft representing the entire Redemption Amount and made payable
to the Lenders in
funds of the United States, or funds by way of wire transfer to such designation
as may be directed by the Lenders in their sole and absolute discretion, in the
amount of any such Redemption Amount. Thereupon, and should
the proposed Redemption Amount in fact represent all of the Principal Sum and
any Interest accrued thereon which would be due and owing by the Borrower to the
Lenders under this Agreement at the Redemption Date, then the Lenders will be
required to provide to the Escrow Holder, and as soon as reasonably possible
after its receipt of the Redemption Notice, all such registerable discharges as
may be necessary to relieve the Borrower of any obligation to the Lenders under
each of this Agreement and each and every other Security instrument already
provided by the Borrower to the Lender under the terms and conditions of this
Agreement (collectively, the “Discharges”).
On the second business day subsequent
to the Redemption Date the Escrow Holder, if applicable, shall deliver to the
Lenders the Redemption Amount and, only if also applicable, to the Borrower the
Discharges, and, unless otherwise directed in writing by the Parties prior
thereto, to the Parties’ respective addresses for notice and delivery as set
forth on the front page of this Agreement.
3.6Right of First
Refusal
(a) Grant. The
Borrower hereby unconditionally and irrevocably grants to the Lenders a Right of
First Refusal to purchase all or any portion of debentures, promissory notes or
other form of debt or loan that the Borrower may propose to sell, offer or issue
at the same price and on the same terms and conditions as those that the
Borrower proposes to sell to a third party (the “Prospective
Transferee”). If more than one Lender elects to exercise this right,
such Lenders may purchase such debenture, promissory note or other form of debt
or loan on a pro-rata basis determined by comparing the Loan of each
participating Lender against the aggregate Loans of the participating
Lenders. If any participating Lender elects to purchase less than its
pro-rata amount, the difference may be purchased by the participating
Lenders.
(b) Notice. The
Borrower must deliver a proposed issuance notice (the “Proposed Issuance
Notice”) to the Lenders not later than twenty (20) days prior to the
consummation of such issuance of debentures, promissory notes or other form of
debt or loan. Such Proposed Issuance Notice shall contain the
material terms and conditions (including price and form of
consideration). The Lenders shall have ten (10) days from receipt of
the Proposed Issuance Notice to notify the Borrower that it intends to exercise
it right of first refusal.
Article
4
SECURITY FOR THE LOAN
4.1 Initial
Security by way of Debenture. As
security to the Lenders for the due and punctual repayment of the Principal Sum
and any Interest thereon from time to time in accordance with the terms of this
Agreement, the Borrower shall provide the Lenders, upon the Execution Date of
this Agreement, with a duly executed Debenture, in the form of the Debenture
which is attached hereto as Schedule “A”, therein mortgaging, charging,
assigning and transferring to the Lenders, and granting to the Lenders a fixed
and floating charge and a security interest in all the Borrower’s right, title
and interest in and to all then presently owned or held and after acquired or
held personal property, assets and undertakings of whatsoever nature or kind and
wheresoever situate and all proceeds thereof and therefrom (collectively, the
“Collateral”), and such
other security as was granted to the Lenders therein.
4.2 Further
Security by way of Security Agreement. As
additional security to the Debenture and for the due and punctual repayment of
the Principal Sum and any Interest thereon from time to time in accordance with
the terms of this Agreement, the Borrower shall also provide the Lenders, also
upon the Effective Date of this Agreement, with a duly executed Security
Agreement under the provisions of the British Columbia Personal Property Security
Act, in the form of the Security Agreement which is attached hereto as
Schedule “C”.
4.3 Further
Security by way of registration of Security. As further security to the
Debenture and the Security Agreement and for the due and punctual repayment of
the Principal Sum and any Interest thereon from time to time in accordance with
the terms of this Agreement, the Borrower shall also provide the Lenders, also
upon the Effective Date of this Agreement, with such other Security
documentation (and including, without limitation, promissory notes, security
instruments and United States Uniform Commercial Code
registration statements) as may be required by the Lenders and their counsel,
acting reasonably, in order to evidence the Loan, together with and all other
supporting documents required under any such Security documentation.
4.4 No
merger. The
Security, additional security and supporting documents shall not operate so as
to create any merger or discharge of any indebtedness or liability of the
Borrower, or of any assignment, transfer, guarantee, lien, contract, promissory
note, xxxx of exchange or security of any form held or which may hereafter be
held by the Lenders from the Borrower or from any other person
whomsoever.
4.5 Waiver. Each
Lender may waive any breach or default of the Borrower of this Agreement and no
failure or delay on the part of such Lender to exercise any right, power or
remedy given herein or by statute or at law or in equity or otherwise shall
operate as a waiver thereof, nor shall any such waiver be deemed to be a waive
of any subsequent similar default or other event.
Article
5
WARRANTS
5.1 Issuance
of Warrants. In consideration of the Lenders’ agreement
to advance up to all of the proposed Principal Sum by way of Loan to the
Borrower in accordance with the terms and conditions of this Agreement and its
related Security and supporting documents, the Borrower hereby agrees to issue
to the Lenders, on each Effective Date of any Principal Sum advance hereunder,
transferable common stock share purchase warrants (each of “Warrant”) exercisable at two
cents, U.S. $0.02 per warrant in an amount equal to the greater of (i) three
million, five hundred thousand (3,500,000) warrants or (ii) upon the completion
within the next twelve months of any share consolidation or debt settlement,
warrants exercisable into shares of common stock equal to four and three hundred
and seventy five thousandths of a percent (4.375%) of the outstanding shares of
common stock and shares of common stock underlying other outstanding convertible
securities (“Post-Consolidation Share Capitalization”). For each $1,000 advanced
in a Loan by a Lender, that Lender shall receive the greater of (i) 20,000
warrants (so that, by way of example, if the Principal Sum is $175,000, then
3,500,000 Warrants shall be issued) or (ii) 0.025% (so that, by way of example,
if the Principal Sum is $175,000, then 4.375%) of the Post-Consolidation Share
Capitalization. In the event that 0.025% of the Post-Consolidation
Share Capitalization is greater than 20,000 shares of common stock, then the
Borrower shall issue each Lender warrants to purchase shares of common stock on
materially the same terms as the Warrants in the amount of the difference
between the two amounts for each $1,000 advanced by such Lender.
5.2 Terms of
the Warrants. The
Warrants will be registered in the name of the applicable Lender as set out in
Exhibit A and will be transferable in compliance with the United States Securities Act of 1933, as
amended (the “U.S.
Act”). Each such Warrant will entitle the holder to purchase
one common share of the common stock of the Borrower (each a “Warrant Share”) for the period
commencing upon the date of issuance of the Warrants by the Borrower and ending
at 5:00 p.m. (Vancouver, British Columbia, time) on the day which is two years
from the date of issuance of the within Warrants (such time period being the
“Warrant Exercise
Period” herein), at an exercise price of U.S. $0.02 per Warrant Share
during the Warrant Exercise Period.
5.3 Warrant
certificates. The terms and conditions which govern the
Warrants will be referred to on the certificates representing the Warrants and
will contain, among other things, anti-dilution provisions, cashless exercise
provisions and provisions for the appropriate adjustment in the class, number
and price of the Warrant Shares issuable on the exercise of the Warrants upon
the occurrence of certain events including any subdivision, consolidation or
reclassification of the common shares, the payment of stock dividends and the
amalgamation of the Borrower.
5.4 Other
financings. The issue and terms of the Warrants will not
restrict or prevent the Borrower from obtaining any other financing or from
issuing additional securities or rights during the period within which the
Warrants are exercisable.
5.5 Replacement
Warrant certificates. If a warrant holder exercises any
Warrants, the Borrower will promptly issue to the Lender the number of Warrant
Shares equal to the number of Warrants exercised and deliver to the Lender a
certificate representing the Warrant Shares.
5.6 Lenders’
eligibility for Warrants. Each Lender acknowledges and
warrants (and has made diligent inquiries to so determine or has the
sophistication and knowledge to know the Lender’s status without concern of
error), on which the Borrower relies, that the Lender will be acquiring the
Warrants on a private basis and without infraction of or impedance by the
Lender’s domicile laws due to one or more of the following:
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(a)
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the
Lender is an eligible and exempt investor under the laws of the Lender’s
domicile by either being a person who complies with exemptions from
prospectus requirements or is otherwise exempt by virtue of the Lender’s
wealth, income and investment knowledge or capacity;
or
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(b)
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the
Lender is acquiring a value in Warrants constituting an exempt investment
under the laws of the Lender’s domicile;
or
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(c)
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the
Lender’s domicile laws do not restrict
investment.
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5.7 Risks of
subscription. Each Lender acknowledges that no party
independent of the Borrower has made or will make any opinion or representations
on the merits or risks of an investment in any of the Warrant Shares unless
sought out by the Lender; which the Lender is encouraged to do. Each Lender is
aware that an investment in the Warrant Shares is a speculative and risky
investment, the Lender warrants that it could tolerate the full loss of the
investment without significant or material impact on the Lender’s financial
condition and the Lender waives all claim or liability of the Borrower for any
loss in value of any investment in the Warrant Shares.
5.8 Registration
Rights. The
Borrower shall grant the Lenders “piggyback” registration rights as set out in
the Piggyback Registration Rights Agreement attached hereto as Schedule
D.
Article
6
DEFAULT
6.1 Default. Notwithstanding
any other provision of this Agreement, the occurrence of any of the following
events or conditions will also constitute a default (the “Default”) under this Agreement
by the Borrower:
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(a)
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the
Borrower does not observe or perform any of the Borrower’s obligations
under this Agreement and shall fail to cure such default within 10
calendar days after receipt of notice thereof in writing by the Borrower
from a Lender;
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(b)
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any
representation, warranty, covenant or statement made by or on behalf of
the Borrower to a Lender is untrue in any material respect at the time
when or as of which it was made;
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(c)
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the
Borrower ceases or threatens to cease to carry on in the normal course the
Borrower’s business or any material part
thereof;
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(d)
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a
proceeding shall have been instituted in a court having jurisdiction
seeking a decree or order for relief in respect of the Borrower in any
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or for the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Borrower for any substantial part of the
Borrower’s property, or for the winding-up or liquidation of the
Borrower’s affairs;
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(e)
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the
Borrower shall commence a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, shall consent
to the entry of any order for relief in an involuntary case under any such
law or shall consent to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Borrower or for any substantial part of the
Borrower’s property, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay the Borrower’s debts as they
become due, or shall take any action in furtherance of any of the
foregoing; or
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(f)
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the
Borrower defaults under any material contract to which it is a party or
under any loan or other financing contract or agreement to which it is a
party.
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6.2 Additional
remedies. Notwithstanding
any other provision of this Agreement, upon Default the Lenders will have, in
addition to the rights and Security specifically provided for in this Agreement,
all of the rights and remedies available to a secured party under the provisions
of the British Columbia Personal Property Security
Act, as well as the rights and remedies recognized at law and in equity,
and to this end upon Default the Borrower hereby appoints the
Representative, as the Borrower’s irrevocable, true and lawful
attorney-in-fact with all necessary power and authority to:
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(a)
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endorse
the name of the Borrower upon any cheques or other evidences of payment or
any document or instrument that may come into the possession of the
Lenders as proceeds of or relating to the
Collateral;
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(b)
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demand,
xxx for, collect, compromise and give acquittances for any and all
Collateral;
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(c)
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prosecute,
defend or compromise any action, claim or proceeding with respect to the
Collateral;
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(d)
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notify
any of the obligors with respect to the accounts or the assignment of the
accounts and direct such obligor to make payment to the Lenders;
and
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(e)
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take
such other action as the Lenders reasonably may deem appropriate,
including extending or modifying the terms of payment of the
accounts.
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No right will be exclusive of or
dependent upon or merge in any other right, and one or more of such rights may
be exercised independently or in combination from time to time.
6.3 Penalty
on Default. In addition to the Interest provided for
herein, after Default, maturity and judgment, a one percent (1%) penalty will be
due and payable by the Borrower to the Lenders for each case of Default which
has not been cured within 10 business days after
receipt of notice thereof in writing by the Borrower from a
Lender.
[SIGNATURE
PAGES TO FOLLOW]
IN
WITNESS WHEREOF each of the Parties hereto has set their respective hands
and seals in the presence of their duly authorized signatories as of the
Execution Date determined hereinabove.
The
COMMON SEAL of)
the
Borrower herein,)
was
hereunto affixed in the presence of:)(C/S)
)
)
)
Authorized
Signatory)
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[----------------------])
a
Lender herein,)
By:
[-----------------]
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__________
