Exhibit 10.1
NOTE PURCHASE AGREEMENT
THIS NOTE
PURCHASE AGREEMENT (this "AGREEMENT") is made as of May __,
2004
by and between United Heritage Corporation,
a Utah corporation (the "COMPANY"),
and the purchaser whose name and address is
set forth on the signature page
hereto ("PURCHASER").
WHEREAS,
pursuant to that certain Subscription Application of the
Purchaser, substantially in the form of
EXHIBIT A, the Company desires to sell
to the Purchaser and the Purchaser desires
to purchase from the Company a
convertible promissory note in the
aggregate principal amount set forth on the
signature page hereto, which shall be
convertible into shares of the Company's
common stock, $.001 par value per share
(the "COMMON STOCK"), on the terms and
subject to the conditions set forth in this
Agreement and the other documents or
instruments contemplated hereby.
NOW,
THEREFORE, the parties hereto hereby agree as follows:
Section 1.
SALE AND ISSUANCE OF THE NOTE.
Upon the terms and subject to the conditions contained in this
Agreement, the Company has authorized the
sale and issuance (the "ISSUANCE") of
convertible promissory notes. At the
Closing (as defined in SECTION 2.1), the
Company shall sell to the Purchaser, and
the Purchaser shall purchase from the
Company, upon the terms set forth in this
Agreement, one such convertible
promissory note, substantially in the form
of EXHIBIT B attached hereto (the
"NOTE"), in the aggregate principal amount
set forth on the signature page
hereto. The Company intends to enter into
this same form of purchase agreement
with certain other investors and expects to
complete sales of its convertible
promissory notes to them. The Purchaser's
obligations hereunder are expressly
not subject to or conditioned on the
purchase of notes by any or all of such
other investors.
The Purchaser shall have the right and option, exercisable in
its
sole discretion to convert the outstanding
principal amount due hereunder into
that number of shares of Common Stock equal
to the quotient obtained by dividing
(A) the outstanding principal amount of
this Note by (B) $0.50. Additionally,
upon conversion, the Purchaser shall
receive a warrant substantially in the form
of EXHIBIT C attached hereto (the
"WARRANT") to purchase two shares of the
Company's Common Stock for every one share
of Common Stock converted pursuant to
SECTION 2 of the Note, such Warrant
providing for exercise prices of $0.75 per
share for half of the shares underlying the
Warrant and $1.00 per share for the
remaining shares underlying the Warrant.
The Purchaser shall only have the right
to convert, if the Company's shareholders
approve, at the Company's Annual
Meeting to be held on March 23, 2004, or
such other date determined by the
Company's Board of Directors, the issuance
by the Company of Common Stock equal
to 20% or more of the Common Stock
outstanding before the issuance for less than
the greater of book or market value of the
stock.
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Section 2.
THE CLOSING.
2.1. The closing of the Issuance to the Purchaser (the
"CLOSING")
shall take place, simultaneously with the
execution and delivery of this
Agreement at the offices of Richardson
& Patel, LLP, 10900 Wilshire Blvd., Suite
500, Los Angeles, CA 90024.
2.2 At the Closing, the Company shall deliver to the Purchaser
a
Note registered in the name of such
Purchaser in the aggregate principal amount
to be purchased by such Purchaser pursuant
to SECTION 1, against receipt by the
Company of a certified bank check or wire
transfer in an aggregate amount equal
to the purchase price therefor as set forth
on the signature page hereto. The
wire transfer shall be sent pursuant to the
following instructions:
Bank:
Comerica Bank of California
10900 Wilshire Blvd.
Los Angeles, CA 90024
(800) 888-3595
ABA No.:
121137522
Account No.:
1891937581
Account Name:
Richardson & Patel, LLP Client Trust Account
Section 3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The
Company hereby represents and warrants to the Purchaser as
follows:
3.1. ORGANIZATION.
The
Company is duly organized, validly existing and in good standing
under
the laws of the State of Utah and is
qualified to conduct its business as a
foreign corporation in each jurisdiction
where the failure to be so qualified
would have a material adverse effect on the
Company.
3.2. AUTHORIZATION OF AGREEMENT, ETC.
The
execution, delivery and performance by the Company of this
Agreement
and the Note and each other document or
instrument contemplated hereby or
thereby (collectively, the "FINANCING
DOCUMENTS") have been duly authorized by
all requisite corporate action by the
Company; and this Agreement and Note have
been duly executed and delivered by the
Company. Each of the Financing
Documents, when executed and delivered by
the Company, constitutes the valid and
binding obligation of the Company,
enforceable against the Company in accordance
with its terms, subject to applicable
bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other
similar laws affecting creditors'
rights and remedies generally, and subject
as to enforceability to general
principles of equity (regardless of whether
enforcement is sought in a
proceeding at law or in equity).
Section 4.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The
Purchaser hereby represents and warrants to the Company as
follows:
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4.1. AUTHORIZATION OF THE DOCUMENTS.
Purchaser
has all requisite power and authority (corporate or otherwise)
to execute, deliver and perform the
Financing Documents to which it is a party
and the transactions contemplated thereby,
and the execution, delivery and
performance by such Purchaser of the
Financing Documents to which it is a party
have been duly authorized by all requisite
action by such Purchaser and each
such Financing Document, when executed and
delivered by the Purchaser,
constitutes a valid and binding obligation
of such Purchaser, enforceable
against such Purchaser in accordance with
its terms, subject to applicable
bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or
other similar laws affecting creditors'
rights and remedies generally, and
subject, as to enforceability, to general
principles of equity (regardless of
whether enforcement is sought in a
proceeding at law or in equity).
4.2.
INVESTMENT REPRESENTATIONS.
All of the
representations and warranties of the Purchaser contained in
Sections 2 and 3 of that certain United
Heritage Corporation Subscription
Application executed by the Purchaser, a
copy of which is attached hereto as
EXHIBIT A, are incorporated herein by this
reference and shall be true at the
Closing with the same effect as though made
at such time.
4.3 U.S.A.
PATRIOT ACT REPRESENTATIONS
(A)
Purchaser represents, warrants and covenants that Purchaser:
(i)(a) is subscribing for the Note for Purchaser's own account,
own
risk and own beneficial interest, (b) is
not acting as an agent, representative,
intermediary, nominee or in a similar
capacity for any other person or entity,
nominee account or beneficial owner,
whether a natural person or entity (each
such natural person or entity, an
"UNDERLYING BENEFICIAL OWNER") and no
Underlying Beneficial Owner will have a
beneficial or economic interest in the
Note, or the Common Stock, being purchased
by Purchaser (whether directly or
indirectly, including without limitation,
through any option, swap, forward or
any other hedging or derivative
transaction), (c) if it is an entity, including,
without limitation, a fund-of-funds, trust,
pension plan or any other entity
that is not a natural person (each, an
"ENTITY"), has carried out thorough due
diligence as to and established the
identities of such Entity's investors,
directors, officers, trustees,
beneficiaries and grantors (to the extent
applicable, each a "RELATED PERSON" of such
Entity), holds the evidence of such
identities, will maintain all such evidence
for at least five years from the
date of Purchaser's resale or other
disposition of the Note and all the Common
Stock, will request such additional
information as the Company may require to
verify such identities as may be required
by applicable law, and will make such
information available to the Company upon
its request, and (d) does not have the
intention or obligation to sell, pledge,
distribute, assign or transfer all or a
portion of the Note or the Common Stock to
any Underlying Beneficial Owner or
any other person; OR (CHECK AND INITIAL ONE
BOX)
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(ii)(a) is subscribing for the Note as a record owner and will
not
have a beneficial ownership interest in the
Note, (b) is acting as an agent,
representative, intermediary, nominee or in
a similar capacity for one or more
Underlying Beneficial Owners (as defined in
(A)(i)(a) above), and understands
and acknowledges that the representations,
warranties and agreements made in the
Financing Documents are made by Purchaser
with respect to both Purchaser and the
Underlying Beneficial Owner(s), (c) has all
requisite power and authority from
the Underlying Beneficial Owner(s) to
execute and perform the obligations under
the Subscription Agreement, (d) has carried
out thorough due diligence as to and
established the identities of all
Underlying Beneficial Owners (and, if an
Underlying Beneficial Owner is not a
natural person, the identities of such
Underlying Beneficial Owner's Related
Persons (to the extent applicable)), holds
the evidence of such identities, will
maintain all such evidence for at least
five years from the date of Purchaser's
resale or other disposition of all the
Note or Common Stock, and will make such
information available to the Company
upon its request and (e) does not have the
intention or obligation to sell,
pledge, distribute, assign or transfer all
or a portion of the Note or Common
Stock to any person other than the
Underlying Beneficial Owner(s).
(B)
Purchaser hereby represents and warrants that the proposed
investment
in the Company that is being made on its
own behalf or, if applicable, on behalf
of any Underlying Beneficial Owners does
not directly or indirectly contravene
United States federal, state, local or
international laws or regulations
applicable to Purchaser, including
anti-money laundering laws (a "PROHIBITED
INVESTMENT").
(C)
Federal regulations and Executive Orders administered by the
U.S.
Treasury Department's Office of Foreign
Assets Control ("OFAC") prohibit, among
other things, the engagement in
transactions with, and the provision of services
to, certain foreign countries, territories,
entities and individuals. The lists
of OFAC prohibited countries, territories,
persons and entities can be found on
the OFAC website at {www.treas.gov/ofac}.
Purchaser hereby represents and
warrants that neither Purchaser nor, if
applicable, any Underlying Beneficial
Owner or Related Person, is a country,
territory, person or entity named on an
OFAC list, nor is Purchaser nor, if
applicable, any Underlying Beneficial Owner
or Related Person, a natural person or
entity with whom dealings are prohibited
under any OFAC regulations.
(D)
Purchaser represents and warrants that neither Purchaser nor,
if
applicable, any Underlying Beneficial Owner
or Related Person, is a senior
foreign political figure, or any immediate
family member or close associate of a
senior foreign political figure within the
meaning of, and applicable guidance
issued by the Department of the Treasury
concerning, the U.S. Bank Secrecy Act
(31 U.S.C. ss.5311 et seq.), as amended,
and any regulations promulgated
thereunder.
(E)
Purchaser agrees promptly to notify the Company should
Purchaser
become aware of any change in the
information set forth in paragraphs (A)
through (D).
(F) Upon
the written request from the Company, Purchaser agrees to
provide
all information to the Company to enable
the Company to comply with all
applicable anti-money laundering statutes,
rules, regulations and policies,
including any policies applicable to a
portfolio investment held or proposed to
be held by the Company. Purchaser
understands and agrees that the Company may
release confidential information about
Purchaser and, if applicable, any
Underlying Beneficial Owner(s) or Related
Person(s) to any person, if the
Company, in its sole discretion, determines
that such disclosure is necessary to
comply with applicable statutes, rules,
regulations and policies.
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(G)
Purchaser agrees to indemnify and hold harmless the Company,
its
affiliates, their respective directors,
officers, shareholders, employees,
agents and representatives (each, an
"INDEMNITEE") from and against any and all
losses, liabilities, damages, penalties,
costs, fees and expenses (including
legal fees and disbursements)
(collectively, "DAMAGES") which may result,
directly or indirectly, from Purchaser's
misrepresentations or misstatements
contained herein or breaches hereof
relating to paragraphs (A) through (F).
(H)
Purchaser understands and agrees that, notwithstanding anything to
the
contrary contained in any document
(including any side letters or similar
agreements), if, following Purchaser's
investment in the Company, it is
discovered that the investment is or has
become a Prohibited Investment, such
investment may immediately be redeemed by
the Company or otherwise be subject to
the remedies required by law, and Purchaser
shall have no claim against any
Indemnitee for any form of Damages as a
result of such forced redemption or
other action.
4.4 RISK
FACTORS. Purchaser acknowledges having received and read the
Risk
Factors attached to the Subscription
Application as EXHIBIT C (the "RISK
FACTORS"). Purchaser understands and
accepts all of the risks set forth in the
Risk Factors.
4.5
RESTRICTED STOCK. Purchaser understands and acknowledges that
the
Common Stock and the Warrant Shares have
not been, and when issued will not be,
registered with the Securities and Exchange
Commission. Further, the Purchaser
understands and acknowledges that the
certificates representing the Common Stock
and the Warrant Shares, if and when issued,
shall bear a restrictive legend.
4.6 ESCROW AGENT.
Purchaser
understands that the Company has appointed the law firm
Richardson & Patel, LLP to serve as the
escrow agent (the "Escrow Agent") for
the transactions contemplated by this
Agreement. The Escrow Agent is
concurrently acting as the Company's legal
counsel and all fees and expenses
incurred by the Escrow Agent shall be paid
by the Company. Such Purchaser agrees
and acknowledges that the duties of the
Escrow Agent are only ministerial in
nature, and the Escrow Agent shall incur no
liability except for bad faith. The
Escrow Agent is hereby instructed to
receive (i) the purchase price of the
investment to be deposited by Purchaser at
the Closing and held in an attorney
trust account designated by the Escrow
Agent; and (ii) receive original or
copies of signature pages of this Agreement
and the other Financing Documents.
At the Closing, the Escrow Agent shall (x)
release the deposited funds along
with original or copies of the signature
pages to this Agreement and the other
Financing Documents to the Company; and (y)
copies of the signature pages to
this Agreement and the other Financing
Documents to Purchaser.
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4.7 LEGAL
COUNSEL.
Purchaser
understands that the law firm of Richardson and Patel, LLP and
its attorneys represent the Company and
Purchaser has had the opportunity to
retain its own legal counsel in connection
with transactions contemplated
herewith.
Section 5.
