AGENCY AGREEMENT
THIS AGREEMENT dated for reference November 26 2003, is made
BETWEEN:
InterUnion Financial Corporation, (to be renamed "BMB
Munai, Inc" on or about November 30 , 2003)
000 Xxxx 00xx Xxxxxx,
Xxxxx 00X, Xxx Xxxx, XX 00000.
(the "Issuer");
AND
Credifinance Securities Limited, 00X Xxxxxx Xxxx,
Xxxxxxx, Xxxxxxx X0X 0X0
(the "Agent")
WHEREAS:
A. BMB Holding, Inc. ("BMB") has completed the reverse take-over of InterUnion
Financial Corporation ("IUFC") pursuant to a plan and agreement to merger
("Merger Agreement") between BMB and IUFC dated November 26, 2003 ("Merger").
Upon completion of the Merger, IUFC will be renamed as "BMB Munai, Inc." (the
"Issuer").
B. The Issuer acknowledges the financial advisory services provided by Agent
relating to the Merger. Such services included, without limitation, the analysis
and structuring of the Merger and the preparation of the Issuer for future
financing. In consideration for such services, the Issuer paid a fee of $150,000
to the Agent on closing of the Merger as outlined in the Merger Agreement and
granted to the Agent upon the signing of the Merger Agreement (i) an option to
purchase 2,000,000 (pre-consolidation) common shares of the Issuer exercisable
at $0.10 per (pre-consolidation) common share expiring 5 years from the date of
closing of the Merger, and (ii) an option to purchase $500,000
(pre-consolidation) common shares of the Company exercisable at $0.35 per
(pre-consolidation) common share expiring 5 years from the date of closing the
Merger (i.e. 1,428,571 shares).
C. The Issuer wishes to privately place with purchasers up to $10,000,000 in
Shares (hereinafter defined) on a best efforts agency basis, without giving
effect to any proceeds raised under the exercise of the Over-Allotment Option
(hereinafter defined) (the "Offering");
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D. The Issuer wishes to appoint the Agent to distribute the Shares on an
exclusive basis, and the Agent is willing to accept such appointment on the
terms and conditions of this Agreement;
E. It is hereby agreed and understood that the Agent shall act as agent only and
shall not at any time be obligated to purchase or arrange for the purchase of
any Shares but may subscribe for and purchase Shares if it so chooses.
THE PARTIES to this Agreement therefore agree:
1. DEFINITIONS
In this Agreement and the Recitals hereto:
(a) "Agent's Fee" has the meaning defined in section 4.1;
(b) "Agent's Warrants" means the share purchase warrants of the
Issuer, form of which is set forth in "Schedule B", which will be
issued to the Agent and which have the terms provided in this
Agreement and the certificates representing such share purchase
warrants;
(c) "Agent's Warrant Shares" means the previously unissued common
shares in the capital of the Issuer, as presently constituted,
which will be issued upon the exercise of the Agent's Warrants;
(d) "Applicable Legislation" means collectively (i) the applicable
securities laws of the Selling Jurisdictions and the regulations
rules, rulings and orders made thereunder, and (ii) the U.S.
Securities Act together with the regulations and rules made and
promulgated thereunder and all administrative policy statements,
blanket orders and rulings, notices, and other administrative
directions issued by the Regulatory Authorities;
(e) "Audited Financial Statements" has the meaning defined in
subsection 12.1(l);
(f) "Claims" has the meaning defined in section 16;
(g) "Closing" means a day or days when Shares are issued to the
Purchasers;
(h) "Commission" means the United States Securities and Exchange
Commission;
(i) "Emir Oil" means Emir Oil, LLC, registered in Kazakhstan with the
Almaty Justice Department on March 20, 2002;
(j) "Exemptions" means the statutory exemptions whereby the
distribution of the Securities may be effected without the
requirement of compliance with the registration or prospectus
requirements of the Applicable Legislation and where the placement
takes place in accordance with Regulation S or another applicable
exemption from registration under the U.S. Securities Act;
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(k) "Interim Financial Statements" has the meaning defined in
subsection 12.1(m);
(l) "Letter Agreement" means the letter of engagement dated August 26,
2003 between BMB and the Agent;
(m) "Material Change" has the meaning defined in the Applicable
Legislation;
(n) "Material Fact" has the meaning defined in the Applicable
Legislation;
(o) "NASD" means the National Association of Securities Dealers;
(p) "NASD Policies" means the rules and policies of the NASD;
(q) "Offering" as the meaning set forth in the recitals hereof;
(r) "Over-Allotment Option" has the meaning set forth in section 4.9
hereof;
(s) "Private Placement" means the offering of the Securities on the
terms and conditions of this Agreement;
(t) "Public Record" means all documents filed by the Issuer with
the Commission pursuant to the prospectus, continuous
disclosure and proxy solicitation requirements of the
Applicable Legislation, including without limitation all press
releases, material change reports, annual reports,
prospectuses and financial statements;
(u) "Purchasers" means the purchasers of Shares pursuant to the
Private Placement;
(v) "Regulation M" means Regulation M promulgated under the U.S.
Securities Act;
(w) "Regulation S" means Regulation S promulgated under the U.S.
Securities Act;
(x) "Regulatory Authorities" means the Commission and the NASD;
(y) "Rules" means the rules made under the Applicable Legislation;
(z) "SEC" means the United States Securities and Exchange
Commission;
(aa) "Securities" means the Shares, the Agent's Warrants and the
Agent's Warrant Shares;
(bb) "Selling Jurisdictions" means the Province of Ontario and certain
offshore jurisdictions outside of Canada and the United States;
(cc) "Shares" means the Shares (post-consolidation) of the Issuer to be
offered by the Issuer pursuant to this Agreement having the terms
provided in this Agreement;
(dd) "Subscription Agreement" means a subscription agreement executed
by Purchaser in respect of the Shares;
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(ee) "Subsidiaries" means Emir Oil and InterUnion Merchant Group Inc.
(BVI);
(ff) "U.S. Exchange Act" means the United States Securities Exchange
Act of 1934, as amended;
(gg) "U.S. Person" has the meaning defined in Regulation S;
(hh) "U.S. Securities Act" means the United States Securities Act of
1933, as amended; and
(ii) "United States" has the meaning defined in Regulation S.
2. APPOINTMENT OF AGENT
2.1 The Issuer appoints the Agent as its exclusive agent and the Agent
accepts the appointment and agrees to act as the exclusive agent of the
Issuer to use its commercially reasonable efforts to find and introduce
to the Issuer Purchasers to purchase up to $10,000,000 in Shares
(without giving effect to any proceeds raised under the exercise of the
Over-Allotment Option (as hereinafter defined)), at a varying prices
per Share, by way of Private Placement under the Exemptions.
2.2 The Offering will be marketed on a best efforts basis to qualified
investors in those jurisdictions where the Shares may be legally sold,
as determined by the Agent and the Issuer.
3. THE SHARES
3.1 The Shares will be issued and registered in the names of the Purchasers
or their nominees.
4. AGENT'S FEE
4.1 In consideration of the services performed by the Agent under this
Agreement, the Issuer agrees to pay to the Agent on each Closing,
an Agent's Fee consisting of:
(a) a cash payment equal to 8.5% (2.5% if Section 4.1(c) is
applicable) of the gross proceeds received by the Issuer from the
sale of the Shares on such Closing, payable by certified cheque,
in lawful money of the United States;
(b) that number of Agent's Warrants which is equal to 10% of the
number of Shares sold on such Closing; and
(c) it is recognized that the Issuer has a list of investors disclosed
in Schedule "A" to this Agreement that have been referred to the
Agent by the Issuer and on such subscriptions, the Issuer will pay
the Agent a cash payment equal to 2.5% of the gross proceeds
received by the Issuer.
4.2 In the event that the Issuer completes the sale of additional equity or
debt securities to any person who either (i) subscribed in the Private
Placement or (ii) was introduced to the Issuer by the Agent but did not
subscribe in the initial Private Placement, from the date of this
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agreement until the 18th month anniversary of the date of this
agreement, the Issuer shall pay the Agent an agent's fee in accordance
with Section 4.1 above.
4.3 Each Agent's Warrant will entitle the holder, on exercise, to purchase
one Agent's Warrant Share at an exercise price that is identical to the
price per share for the Shares offered hereunder for a period of 18
months from Closing.
4.4 The Agent's Warrants will be non-transferable except as permitted by
the Applicable Legislation and any order granted by the Regulatory
Authorities.
4.5 The certificates representing the Agent's Warrants will, among other
things, include provisions for the appropriate adjustment in the class,
number and price of the Agent's Warrant Shares issued upon exercise of
the Agent's Warrants upon the occurrence of certain events, including
any subdivision, consolidation or reclassification of the Issuer's
common shares, the payment of stock dividends and the amalgamation of
the Issuer.
4.6 The issue of the Agent's Warrants will not restrict or prevent the
Issuer from obtaining any other financing, or from issuing additional
securities or rights, during the period within which the Agent's
Warrants may be exercised.
4.7 The Agent's Warrants may be exercised in whole or in part from time to
time by the Agent subject to the requirements, if any, of Applicable
Legislation.
4.8 Notwithstanding anything to the contrary herein, no commissions shall
be due or payable to the Agent for investments in Shares that are made
by the current stockholders or employees of BMB or its affiliates.
4.9 The Agent shall have the option (the "Over-Allotment Option"),
exercisable at its sole discretion, to subscribe for an additional
number of Shares equal to 10% of the original offering size to cover
over-allotments. These additional Shares will be issued from treasury.
5. OFFERING RESTRICTIONS
5.1 The Agent will only sell the Shares to persons who represent themselves
as being:
(a) resident in the Province of Ontario or a resident in jurisdictions
outside of Canada and the United States where the Shares may
lawfully be offered for sale provided that the Issuer is not
required to file a prospectus or disclosure document or become
subject to continuing obligations in such other jurisdictions, in
each case in accordance with the provisions of this Agreement;
(b) not a U.S. Person;
(c) persons purchasing as principal; and
(d) qualified to purchase the Shares under the Exemptions.
5.2 The Shares will only be sold to Purchasers who were outside the United
States at the time such person placed the order to purchase Shares and
at the time of execution and delivery of the Subscription Agreement.
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5.3 No offers to sell the Securities will made by a person to the Purchaser
while the Purchaser was in the United States.
5.4 The Shares will not be acquired, directly or indirectly, for the
account or benefit of a U.S. Person or a person in the United States.
5.5 The Private Placement has not been and will not be advertised.
5.6 No selling or promotional expenses will be paid or incurred in
connection with the Private Placement, except for professional services
or for services performed by a registered dealer.
5.7 Before each Closing, the Issuer and the Agent will take all reasonable
steps necessary to ensure compliance with the Exemptions.
5.8 The Agent will comply with all applicable laws of the jurisdictions of
which it assists in soliciting or procuring subscriptions for the
Shares and will not assist in soliciting or procuring subscriptions for
Shares so as to require the registration thereof or the filing of a
prospectus with respect thereto under the laws of any jurisdiction.
5.9 None of the restrictions set forth in this Section 5 shall prohibit the
Issuer from accepting subscriptions for Shares from US Persons
directly.
6. SUBSCRIPTIONS
6.1 The Agent will use its commercially reasonable efforts to obtain from
each Purchaser introduced by the Agent, and deliver to the Issuer, on
or before each Closing duly completed and signed subscriptions in the
form attached as Schedule "A" or in such other form consented to by the
Issuer and the Agent and executed by the Purchaser.
6.2 The Issuer will accept each properly completed subscription agreement
tendered by the Agent, unless:
(a) the subscriber thereunder would, by virtue of the issue of the
Shares subscribed for, become a "control person" of the Issuer,
with the meaning of the Applicable Legislation; or
(b) the Issuer's directors determine, acting reasonably, that it would
not be in the best interests of the Issuer to accept such
subscription.
7. FILINGS WITH THE REGULATORY AUTHORITIES
7.1 The Issuer will comply with all requirements of the NASD for notice of
the terms of this Agreement and the proposed Private Placement and all
other information required by the NASD Policies (the "Notice").
7.2 The Issuer will forthwith provide the Agent and its legal counsel with
a copy of the Notice, if any.
7.3 After the Closing, the Issuer will file all required documents with,
and pay all required filing fees of the NASD or the Commission, as the
case may be, and take all other actions required by the NASD Policies
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or by the Applicable Legislation to fulfil all conditions upon listing
imposed by the NASD, or to comply with the Exemptions, with all
possible dispatch.
7.4 The Issuer and the Agent will agree on the text of any press release
issued by the Issuer in connection with the Offering.
7.5 Should the Issuer be in a position to meet the "foreign" listing
requirements of the Toronto Stock Exchange ("TSX"), the Agent will
prepare a sponsorship letter for the Issuer to be provided to the TSX
should the Issuer undertake such a listing within 4 months of Closing.
8. CLOSINGS
8.1 In this Section:
(a) "Certificates" means certificates representing the Shares sold and
Agent's Warrants to be issued, on a Closing in the names and
denominations reasonably requested by the Agent or the Purchasers,
as the case may be; and
(b) "Proceeds" means the gross proceeds of the sale of Shares on a
Closing:
(i) less the balance of the portion of the Agent's Fee which is
payable in cash;
(ii) any amount due to the Agent pursuant to the provisions of the
Letter Agreement; and
(iii)the expenses of the Agent in connection with the Private
Placement which have not been paid by the Issuer.
8.2 It is intended that there will be an initial Closing once $3 million
has been arranged by the Agent, any subsequent amounts to be closed in
tranches thereafter. The initial Closing will take place on or about
November 26th, 2003, or such other date as reasonably agreed between
the Issuer and the Agent.
8.3 The Issuer will, on each Closing, issue and deliver the Certificates to
the Agent, or at the Agent's request, to the Purchasers, against
payment of the Proceeds.
8.4 If the Issuer has satisfied all of its material obligations under this
Agreement, the Agent will, on each Closing, pay the Proceeds to the
Issuer against delivery of the Certificates.
8.5 The Issuer will endorse the Certificates with the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S
PROMULGATED THEREUNDER, OR PURSUANT TO REGISTRATION UNDER THE ACT, OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION. HEDGING
TRANSACTIONS INVOLVING THESE AND ANY UNDERLYING SECURITIES MAY NOT BE
CONDUCTED UNLESS IN COMPLIANCE WITH THAT ACT.
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9. CONDITIONS OF CLOSINGS
9.1 The obligations of the Agent on the Closing will be conditional upon
the following:
(a) the Issuer having taken all necessary corporate action to be able
to validly create, issue and sell the Shares and Agent's Warrants
to be issued at the Closing and, the Agent's Warrant Shares to be
issued pursuant to the Agent's Warrants;
(b) the Issuer having made all necessary filings, if any, and obtained
all necessary approvals, if any, in the Selling Jurisdictions,
required before such Closing in order to issue and sell the Shares
to the Purchasers and to ensure that such issuance and sale will
not be subject to the registration and prospectus requirements of
the Applicable Legislation;
(c) the Issuer's outstanding common shares being listed and posted for
trading on the NASD Over The Counter Bulletin Board;
(d) the Agent being satisfied, in its sole discretion, with the
results of its investigation of the business and affairs of the
Issuer and BMB;
(e) the Issuer having delivered to the Agent and its solicitors at
each Closing a favourable opinion of the Issuer's solicitors dated
as of the date of the Closing, as to all legal matters reasonably
requested by the Agent relating to the incorporation of the Issuer
and its business and the creation, issuance and sale of the
Securities, satisfactory in form and substance to the Agent;
(f) the Issuer having delivered to the Agent and its solicitors at
each Closing such certificates of its officers and other documents
relating to the Private Placement or the affairs of the Issuer as
the Agent or its solicitors may reasonably request, satisfactory
in form and substance to the Agent;
(g) each representation and warranty of the Issuer herein being true,
and the Issuer having performed or complied with all of its
covenants, agreements and obligations hereunder;
(h) receipt of all required regulatory approval for or acceptance of
the Private Placement;
(i) the removal or partial revocation of any cease trading order or
trading suspension made by any competent authority to the extent
necessary to complete the Private Placement; and
(j) the Agent being satisfied, in its sole discretion, that the
transactions contemplated by the Merger Agreement have been
completed.
9.2 The conditions set out in Subsection 9.1 are for the sole benefit of
the Agent and may be waived by the Agent in whole or in part.
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10. MATERIAL CHANGES
10.1 The Issuer agrees that if, between the date of this Agreement and any
subsequent Closing, a Material Change, or a change in a Material Fact
occurs, the Issuer will:
(a) as soon as practicable notify the Agent in writing, setting forth
the particulars of such change;
(b) as soon as practicable, issue and file with applicable Regulatory
Authorities a press release that is authorized by a senior officer
disclosing the nature and substance of the change;
(c) as soon as practicable file with the Commission any report
required by the applicable securities legislation and in any event
no later than 10 days after the date on which the change occurs;
and
(d) provide copies of that press release, when issued, and that
report, when filed, to the Agent and its solicitor.
10.2 If the Issuer is uncertain as to whether there has been a Material
Change, or a change in a Material Fact, it will promptly provide the
Agent with full particulars of the event giving rise to the
uncertainty, and will consult with the Agent as to whether such event
constitutes a Material Change, or a change in a Material Fact.
11. TERMINATION
11.1 The Agent may terminate its obligations under this Agreement by notice
in writing to the Issuer at any time before the Offering is fully
subscribed if:
(a) an adverse Material Change, or an adverse change in a Material
Fact relating to any of the Securities, occurs or is announced by
the Issuer;
(b) there is an event, accident, governmental law or regulation or
other occurrence of any nature which, in the opinion of the Agent,
seriously affects or will seriously affect the financial markets,
or the business of the Issuer or any of the its Subsidiaries or
the ability of the Agent to perform its obligations under this
Agreement, or a Purchaser's decision to purchase the Shares;
(c) following a consideration of the history, business, products,
property or affairs of the Issuer or its principals and promoters,
or of the state of the financial markets in general, or the state
of the market for the Issuer's securities in particular, the Agent
determines, in its sole discretion, that it is not in the interest
of the Purchasers to complete the purchase and sale of the Shares;
(d) the Securities cannot, in the opinion of the Agent, be marketed
due to the state of the financial markets, or the market for the
Shares in particular;
(e) an enquiry or investigation (whether formal or informal) in
relation to the Issuer, or the Issuer's directors, officers or
promoters, is commenced or threatened by an officer or official of
any competent authority;
(f) any order to cease, halt or suspend trading (including an order
prohibiting communications with persons in order to obtain
expressions of interest) in the securities of the Issuer
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prohibiting or restricting the Private Placement is made by a
competent regulatory authority and that order is still in effect;
(g) the Issuer is in breach of any material term of this Agreement; or
(h) the Agent determines that any of the representations or warranties
made by the Issuer in this Agreement is false or has become false.
11.2 The Issuer's obligations under sections 2, 12, 16 and 18 shall survive
termination of this Agreement.
12. WARRANTIES, REPRESENTATIONS AND COVENANTS
12.1 The Issuer warrants and represents to and covenants with the Agent
that:
(a) the Issuer beneficially owns free and clear of any security
interest, option, encumbrance or adverse interest of any kind in
70 per cent of the issued and outstanding share capital of Emir
Oil and wholly-owns InterUnion Merchant Group Inc. (BVI);
(b) the Issuer does not own any subsidiaries other than those defined
as Subsidiaries;
(c) the Issuer and the Subsidiaries are valid and subsisting
corporations duly incorporated and in good standing under the laws
of the jurisdiction in which they are incorporated, continued or
merged;
(d) the Issuer and the Subsidiaries are duly registered and licenced
to carry on business in the jurisdictions in which they carry on
business or own property where so required by the laws of that
jurisdiction except where the failure to be so licensed or
qualified would not have a material adverse effect on the business
of the Issuer or the Subsidiaries, as applicable, or the
operations of such entity;
(e) the Issuer and the Subsidiaries each have the corporate power and
capacity to own their assets and to carry on the business
presently carried on by them;
(f) the authorized and issued capital of the Issuer consists of the
number of common shares disclosed in the Public Record and all of
the Shares shown in the Public Record as issued are issued and
outstanding as fully paid and non-assessable as at the date
hereof;
(g) the Issuer will reserve or set aside sufficient shares in its
treasury to issue the Shares, and the Agent's Warrant Shares and
all such shares will be duly and validly issued as fully paid and
non-assessable;
(h) the minute books of the Issuer, and the Subsidiaries contain all
records of the proceedings of the meetings of the Issuer's or the
Subsidiaries' directors, shareholders and committees of directors
since incorporation;
(i) the Issuer is the beneficial owner of the material businesses and
assets or the interests in the businesses and assets referred to
in the Public Record as being owned by the Issuer or the
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Subsidiaries and all agreements by which the Issuer or the
Subsidiaries holds or may earn an interest in a business or asset
are in good standing according to their terms;
(j) the Public Record, taken as a whole, is true and complete in all
material respects and each document included in the Public Record
was prepared in accordance with the securities legislation and
rules applicable thereto and was true and correct and contained no
misrepresentation as at the date thereof;
(k) the Issuer is a reporting issuer under Section 13 of the U.S.
Exchange Act and is not in default of any of the requirements
thereof or the regulation and rules made thereunder;
(l) the Issuer's outstanding common shares are eligible for quotation
on the NASD Over The Counter Bulletin Board;
(m) the audited financial statements of the Issuer for its fiscal
years ended March 31, 2003 (the "Audited Financial Statements")
have been prepared in accordance with United States generally
accepted accounting principles, and accurately reflect the
financial position and all material liabilities (accrued,
absolute, contingent or otherwise) of the Issuer on a consolidated
basis as at the date thereof;
(n) the unaudited financial statements of the Issuer for the period
ended September 30, 2003 (the "Interim Financial Statements") have
been prepared in accordance with United States generally accepted
accounting principles and accurately reflect the financial
position and all material liabilities (accrued, absolute,
contingent or otherwise) of the Issuer as at the date thereof;
(o) there have been no adverse material changes in the financial
position of the Issuer since the date of the Audited Financial
Statements, except as recorded in the books of the Issuer and
fully and plainly disclosed in the Public Record;
(p) since the date of the Audited Financial Statements, there has been
no damage, loss or other change of any kind whatsoever in
circumstances materially affecting the business or assets of the
Issuer or the Subsidiaries or the right or capacity of the Issuer
or the Subsidiaries to carry on their business;
(q) all of the material transactions of the Issuer and the
Subsidiaries have been promptly and properly recorded or filed in
or with the Public Record or the books or records of the Issuer or
the Subsidiaries;
(r) all of the material contracts of the Issuer and the Subsidiaries
are described in the Public Record and are in good standing in all
material respects, and neither the Issuer nor any of the
Subsidiaries is in default in any material respect thereof, and
the Issuer is not aware of any default in any material respect by
any other party to such contracts;
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(s) the Issuer has complied and will comply fully with the
requirements of all applicable corporate and securities laws, and
all applicable Delaware corporate legislation in relation to the
issue of the Shares, and in all matters relating to the Private
Placement;
(t) the issue and sale of the Securities by the Issuer does not and
will not conflict with, and does not and will not result in a
material breach of, any of the terms of its incorporating
documents or any agreement or instrument to which the Issuer is a
party;
(u) neither the Issuer nor any of the Subsidiaries is party to any
actions, suits, proceedings or arbitrations which could materially
affect the business or financial condition of the Issuer, taken as
a whole, and, to the best of the knowledge of the Issuer, no such
actions, suits, proceedings or arbitrations are contemplated or
have been threatened.;
(v) there are no judgments against the Issuer or the Subsidiaries
which are unsatisfied, nor are there any consent decrees or
injunctions to which the Issuer or any of the Subsidiaries are
subject;
(w) to the best of the Issuer's knowledge, neither the Issuer nor any
of the Subsidiaries is in breach of any law, ordinance, statute,
regulation, bylaw, order or decree of any kind whatsoever which
breach would have a material adverse effect on the financial
position, business or prospects of the Issuer on a consolidated
basis;
(x) this Agreement has been duly authorized by all necessary corporate
action on the part of the Issuer and the Issuer has full corporate
power and authority to undertake the Private Placement and the
transactions contemplated by the Merger Agreement;
(y) there is not presently, and will not be until the Offering is
fully subscribed, any material change relating to the Issuer which
has not been or will not be fully disclosed in the Public Record;
(z) no order ceasing, halting or suspending trading in securities
of the Issuer or prohibiting the sale of such securities has
been issued to and is outstanding against the Issuer or, to
the best of the knowledge of the Issuer, its directors,
officers or promoters and, to the best of the knowledge of the
Issuer, no investigations or proceedings for such purposes are
pending or threatened;
(aa) except as disclosed in the Public Record, no person has any right,
agreement or option, present or future, contingent or absolute, or
any right capable of becoming such a right, agreement or option,
for the issue or allotment of any shares in the capital of the
Issuer or any other security convertible into or exchangeable for
any such shares, or to require the Issuer to purchase, redeem or
otherwise acquire any of the issued and outstanding shares in its
capital;
(bb) the Issuer and the Subsidiaries have filed all federal, state,
provincial, local and foreign tax returns which are required to be
filed, or have requested extensions thereof, and have paid all
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taxes required to be paid and any other assessment, fine or
penalty levied against them, to the extent that any of the
foregoing is due and payable, except for such assessments, fines
and penalties which are currently being contested in good faith;
(cc) there are no liens for taxes on the assets of the Issuer or any of
the Subsidiaries except for taxes not yet due, and there are no
audits of any of the tax returns of the Issuer or any of the
Subsidiaries which are known by the Issuer's management to be
pending, and there are no claims which have been or may be
asserted relating to any such tax returns which, if determined
adversely, would result in the assertion by any governmental
agency of any deficiency which would have a material adverse
effect on the properties, business or assets of the Issuer on a
consolidated basis;
(dd) this Agreement will be upon execution and delivery by the Issuer,
a legal, valid and binding agreement of the Issuer, enforceable
against the Issuer in accordance with its terms, subject only to
customary qualifications regarding the availability of equitable
remedies;
(ee) the Issuer or any of the Subsidiaries own or are entitled to use
all material patents, trademarks, service marks, trade names,
copyrights, trade secrets, information, proprietary rights and
processes necessary for the business of the Issuer and the
Subsidiaries as now conducted and as proposed to be conducted,
without any conflict with or infringement of the rights of others;
(ff) apart from the Agent, no person, firm or corporation acting or
purporting to act at the request of the Issuer is entitled to any
brokerage, agency or finder's fee in connection with the
transactions described herein;
(gg) if at any time the Issuer is required to file reports in
compliance with either Section 13 or Section 15(d) of the U.S.
Securities Exchange Act of 1934, as amended, the Issuer will (a)
fully comply with the reporting requirements of such Act and (b)
fully comply with all rules and regulations of the SEC applicable
to the use of SEC Rule 144; and
(hh) the Issuer has not engaged or will not engage in any "Directed
Selling Efforts" within the meaning of Regulation S with respect
to the Securities, has not made or will not make any offer to sell
or solicitation of an offer to buy any of the Shares to any person
and has not solicited or will not solicit offers for or has not
made or will not make offers to sell, the Securities by means of
any form of general solicitation or general advertising or in any
manner involving a public offering within the meaning of the U.S.
Securities Act.
(ii) With the Agent's guidance, the Issuer agrees to obtain all
requisite regulatory approvals and to complete the necessary
documentation with respect to the Offering in all Selling
Jurisdictions in which subscribers reside;
13
(jj) Given reasonable notice, management of the Issuer will be
available to meet with qualified investors in the Selling
Jurisdictions with respect to the Offering;
(kk) The Issuer has disclosed to the Agent all material facts in
relation to the business and affairs of the Issuer that any
prudent agent or investor would want to know prior to making any
investment in securities of the Issuer.
12.2 The Agent warrants and represents to the Issuer that:
(a) it is a valid and subsisting corporation under the law of the
jurisdiction in which it was incorporated;
(b) it will sell the Shares in compliance with the Applicable
Legislation;
(c) the Shares, the Agent's Warrants and all of the underlying Shares
issuable upon exercise of such Agent's Warrants have not been and
will not be registered in the United States under the U.S.
Securities Act or in any other jurisdiction and that the
Securities are being offered and sold in reliance upon Exemptions
from registration provided by Regulation S and other Applicable
Legislation;
(d) the Agent, any selected dealer of the Agent, if applicable, or any
of their respective affiliates (i) have not engaged or will not
engage in any "Directed Selling Efforts" within the meaning of
Regulation S with respect to the Securities, (ii) have not made or
will not make (A) any offer to sell or solicitation of an offer to
buy any of the Shares to any person or (B) any sale of the Shares
to any person unless (1) the offer is made to such person outside
the United States, (2) the seller of such Shares and any person
acting on its behalf reasonably believes that at the time such
person placed the order to purchase Shares, such person was
outside the United States and (3) such sale is otherwise in
compliance with the applicable requirements of Regulation S, (iii)
have not taken or will not take any action which would constitute
a violation of Regulation M, or (iv) have not solicited or will
not solicit offers for, or have not made or will not make offers
to sell, the Securities by means of any form of general
solicitation or general advertising or in any manner involving a
public offering within the meaning of the U.S. Securities Act;
(e) the Agent has caused or will promptly cause each selected dealer
of the Agent to acknowledge in writing its awareness of and
agreement to be bound by and shall use its commercially reasonable
efforts to ensure that each selected dealer complies with the
representations and warranties contained in this Agreement in
connection with all offers and sale of the Securities; and
(f) the Agent has not entered, and will not enter, into any
contractual arrangement without the prior written consent of the
Company with respect to the placement of the Securities, except
with its affiliates.
(g) Obtain from each Purchaser an executed Subscription Agreement in a
form reasonably acceptable to the Issuer and to the Agent relating
to the transactions contemplated, together with all documentation
as may be necessary in connection with subscriptions for Shares.
14
(h) The Agent hereby represents that it is an "accredited investor" as
defined under Applicable Legislation by virtue of being a company
registered under the Securities Act (Ontario) as an adviser or
dealer (other than a limited market dealer) and is acquiring its
portion of the Agent's Warrants as principal for its own account
and not for the benefit of any other person.
12.3 All representations and warranties contained in this Agreement on part
of each of the parties shall survive Closing for a period of three (3)
years from the initial Closing of the Offering, after which time, if no
Claim shall have been made against a party with respect to any
incorrectness or breach of any representation and warranty, that party
shall have no further liability under this Agreement with respect to
the representation or warranty.
13. EXPENSES OF AGENT
13.1 Whether or not Closing takes place, the Issuer will be responsible for
all expenses related to the Offering. The Issuer will be responsible of
all reasonable fees and disbursements of the Agent. Agent's invoices
will be payable by the Issuer immediately upon receipt therefor. The
Issuer will be responsible for the payment of all reasonable fees and
disbursements of the Agent's legal counsel. Furthermore, the Issuer
will be billed directly for costs related to marketing, engineering
reports and the Issuer financial statements (including pro-forma
statements).
14. Intentionally deleted
15. STANDSTILL
The Issuer hereby agrees that it will not issue any securities (or securities
convertible into common shares), except in the normal course relating to
compensation of employees and other compensation related matters, for a period
of 4 months following the completion of the Offering unless it has received the
consent of the Agent, such consent not to be unreasonably withheld; 16.
INDEMNITY
16.1 The Issuer agrees to indemnify and hold harmless the Agent under the
Private Placement and its affiliates, directors, officers and agents,
to the full extent lawful, from and against any actions or claims
(collectively "Claims"), including actions by the Issuer's
shareholders, and all related damages, liabilities and losses (other
than lost profits, remuneration or other costs of personnel and
consequential damages) including any reasonable amount paid with the
consent of the Issuer to settle a Claim, related to or arising out of
this Agreement or the Agent's role in connection therewith, and will
reimburse the Agent and any other party entitled to be indemnified
15
hereunder for all reasonable and necessary expenses reasonably incurred
by it or any such other indemnified party in connection with
investigating, preparing or defending any such Claim in connection with
pending or threatened litigation to which it is a party. The Issuer
will not be responsible for any Claims or expenses associated therewith
which are finally judicially determined to have resulted from the
willful misconduct, bad faith or negligence of any indemnified party
hereunder. The Issuer also agrees that neither the Agent nor any of its
affiliates, nor any officer, director, employee or agent of the Agent
or any of its affiliates, nor any person controlling the Agent nor any
of its affiliates, shall have any liability to the Issuer for or in
connection with such engagement except as a result of the Agent's
willful misconduct, bad faith or negligence. The foregoing agreement
shall be in addition to any rights that the Agent or any indemnified
party may have at common law or otherwise.
16.2 Promptly after receipt by the Agent or any other indemnified party of
notice of or the communication of any Claim or of any fact which
reasonably might give rise to any Claim, the Agent or such other party
shall notify the Issuer in writing of such Claim or facts and the
Issuer shall assume the investigation and defence or contestation
thereof and shall employ counsel satisfactory to the Agent, acting
reasonably, and neither the Agent nor such other party shall incur any
expense as regards such Claim or facts, including any investigation for
which the Issuer would be liable to indemnify without the Issuer's
prior written consent which shall not be unreasonably withheld.
Notwithstanding the preceding sentence the Agent will be entitled to
employ counsel separate from counsel to the Issuer or to any other
party in such action if the Agent, acting reasonably, determines that a
conflict of interest exists which makes representations by counsel
chosen by the Issuer not advisable or that it is likely that such a
conflict of interest will develop.
16.3 The Issuer shall not pursuant to this indemnity be obliged in any event
to pay, as regards any particular Claim or series of related Claims,
the fees and disbursements of more than one counsel in addition to
those of its own counsel.
16.4 The Agent covenants and agrees that it shall use its reasonable efforts
to co-operate fully with the Issuer in the investigation and defence of
any Claim or potential Claim and to cause any other indemnified party
to so cooperate.
16.5 To the extent that any party entitled to be indemnified hereunder is
not a party to this Agreement, the Agent shall obtain and hold the
rights and benefits of this agreement in trust for and on behalf of
such party.
16.6 For purposes of this section, "Claim" or "Claims" shall include,
without limitation:
(a) an untrue statement contained in the Public Record, subscription
agreement or other written or oral representation made by the
Issuer to a Purchaser or potential Purchaser in connection with
the Private Placement, or by reason of the omission to state any
fact necessary to make such statements or representations not
misleading (except for information and statements supplied by and
relating solely to the Agent);
16
(b) arising directly or indirectly out of any order made by any
regulatory authority based upon an allegation that any such untrue
statement or representation, or omission exists (except
information and statements supplied by and relating solely to the
Agent), that trading in or distribution of any of the Securities
is to cease;
(c) resulting from the failure by the Issuer to obtain the requisite
regulatory approval to the Private Placement unless the failure to
obtain such approval is the result of a breach of this Agreement
by the Agent;
(d) resulting from any failure by the Issuer to file an "offering
memorandum", if required by the Applicable Legislation, or an
amendment or supplement to it either of them;
(e) resulting from the breach by the Issuer of any of the terms of
this Agreement;
(f) resulting from the breach by IUFC or BMB of any of the terms of
the Merger Agreement or resulting from any representation or
warranty made by the IUFC or BMB in the Merger Agreement not being
true or ceasing to be true;
(g) resulting from any representation or warranty made by the Issuer
herein not being true or ceasing to be true;
(h) if the Issuer fails to issue and deliver the certificates
representing the Securities in the form and denominations
reasonably satisfactory to the Agent at the time and place
reasonably required by the Agent with the result that any
completion of a sale of the Securities does not take place; or
(i) if following the completion of a sale of any of the Securities, a
determination is made by any competent authority setting aside the
sale, unless that determination arises out of an act or omission
by the Agent.
16.7 If any Claim results in any adverse judgment or obligation by the
Issuer to issue securities in its capital to satisfy such judgment,
then the Issuer shall issue to the Agent and each subscriber under the
Private Placement sufficient additional securities so that there is no
dilutive impact on the Agent and/or the subscribers to the Private
Placement in respect of such Claim.
16.8 Notwithstanding anything in this Agreement to the contrary, the Issuer
shall indemnify the Agent from all Claims arising from the failure of
the shareholders of BMB (existing immediately prior to the closing of
the Merger) to disclose to IUFC, and therefore the Agent under this
Agreement, any material liabilities or obligations of BMB which existed
as of the date hereof or which were likely to accrue or fall due within
120 days from Closing.
17. ASSIGNMENT AND SELLING GROUP PARTICIPATION
17.1 The Agent will not assign this Agreement or any of their rights under
this Agreement or, with respect to the Securities, enter into any
agreement in the nature of an option or a sub-option unless and until,
17
for each intended transaction, the Agent has obtained the consent of
the Issuer, and any required notice has been given to and accepted by
the Regulatory Authorities.
17.2 Subject to sections 12.2(e) and 12.2(f), the Agent may offer selling
group participation in the normal course of the brokerage business to
selling groups of other licensed dealers, brokers and investments
dealers, who may or who may not be offered part of the Agent's Fee.
18. RIGHT OF FIRST REFUSAL
18.1 Subsequent to the Offering being fully subscribed, the Issuer will
notify the Agent of the terms of any further securities issues or
corporate finance advisory assignments that it requires or proposes to
obtain during the 18 months following the execution of this Agreement
and the Agent will have the right of first refusal to provide any such
equity financing or financial advisory services.
18.2 The right of first refusal must be exercised by the Agent within 7 days
following the receipt of written notice by notifying the Issuer that it
will provide such financing or financial advisory work on the terms set
out in the notice.
18.3 If the Agent fails to give notice within the 7 days that it will
provide such financing upon the terms set out in the notice, the Issuer
will then be free to make other arrangements to obtain financing from
another source on the same terms or on terms no less favourable to the
Issuer.
18.4 The right of first refusal will not terminate if, on receipt of any
notice from the Issuer under this Section, the Agent fails to exercise
the right.
18.5 Should the Agent believe that there may be an opportunity to introduce
a strategic partner to the Issuer to try to arrange a strategic
investment into the Issuer, any strategic partner introduced by the
Agent to the Issuer which makes an investment(s) for the benefit of the
Issuer, the Agent shall receive an advisory fee, payable in cash, to be
negotiated in good faith between the Agent and the Issuer of at least
1.5% of the gross strategic investment(s) made by such strategic
partner for a period of 18 months following the closing of the Merger.
19. NOTICE
19.1 Any notice under this Agreement will be given in writing and must be
delivered, sent by facsimile transmission addressed to the party to
which notice is to be given at the address indicated above, or at
another address designated by the party in writing.
19.2 If notice is sent by facsimile transmission or is delivered, it will be
deemed to have been given at the time of transmission or delivery, or
if not a business day, the next business day.
20. TIME
Time is of the essence of this Agreement.
18
21. LANGUAGE
This Agreement is to be read with all changes in gender or number as required by
the context.
22. ENUREMENT
This Agreement enures to the benefit of and is binding on the parties to this
Agreement and their successors and permitted assigns.
23. HEADINGS
The headings in this Agreement are for convenience of reference only and do not
affect the interpretation of this Agreement.
24. COUNTERPARTS
This Agreement may be executed in two or more counterparts and may be delivered
by facsimile transmission, each of which will be deemed to be an original and
all of which will constitute one agreement, effective as of the reference date
given above.
This agreement may be executed by facsimile and in counterparts, and when fully
executed, will constitute a valid and binding agreement in accordance with its
terms and will constitute the entire agreement among the parties hereto with
respect to the matters herein. This agreement shall not be amended, modified or
altered in any way except by written agreement among InterUnion and the Agent.
25. LAW
This Agreement is governed by the laws of the Province of Ontario, and the
parties hereto irrevocably attorn and submit to the exclusive jurisdiction of
the courts of Ontario with respect to any dispute related to this Agreement.
26. CURRENCY
Unless stated otherwise, all references to dollars herein shall be to United
States Dollars. This document was executed and delivered as of the date given
above:
[execution page over]
19
Executed by an authorized signatory of:
BMB MUNAI, INC.
/s/ Xxxxxxxxx Xxxxxx
------------------------------------
Xxxxxxxxx Xxxxxx
President & Chief Executive Officer
Executed by an authorized signatory of:
CREDIFINANCE SECURITIES LIMITED
/s/ Xxxxxxx Xxxxxxxxx
------------------------------------
Xxxxxxx Xxxxxxxxx
Authorized Signing Officer
20
SCHEDULE A
Protected List of Investors
List provided by the Issuer to evidence to the Agent the list of individuals and
corporate investors that were referred to the Agent by the Issuer:
Name: Contact Information:
1 Valkyries Petroleum Corp. 000 Xxxx Xxxxxxx Xxxxxx,
Xxxxxxxxx, X.X. X0X 0X0 Xxxxxx
2. UPETROM Trading co B.V.I Romania
Almaty Office: 000 Xxxxxx Xxxx Xx
Xxxxxx, Xxxxxxxxxx
3. Camer Oil und Gas Xxxxxxxxxxx 0,
XX-0000, XXX
Xxxxxxxxxxx
4. Korean National Oil Company Seoul, Korean
Almaty office: 000 Xxxxxxxxx Xxx.
Xxxxxx, 000000 Xxxxxxxxxx
21
SCHEDULE "B"
THIS SECURITY HAS NOT BEEN REGISTERED WITH THE U.S. SECURITIES AND EXCHANGE
COMMISSION UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") OR ANY OTHER SECURITIES AUTHORITIES. IT IS BEING OFFERED PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATIONS PROMULGATED UNDER THE SECURITIES
ACT. IT MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR AN EXEMPTION TO THE REGISTRATION REQUIREMENTS OF THOSE
SECURITIES LAWS.
THIS CERTIFICATE GIVES EFFECT TO A PLANNED TEN "OLD" FOR ONE "NEW" REVERSE SPLIT
(SHARE CONSOLIDATION) AND CHANGE OF NAME OF THE ISSUER TO BMB MUNAI, INC. TO BE
EFFECTED BY THE ISSUER ON OR ABOUT NOVEMBER 30, 2003.
AGENT WARRANTS TO PURCHASE COMMON SHARES OF
BMB MUNAI, INC.
(Existing under the laws of Delaware)
Void After
* , 2005
THIS CERTIFIES that, for value received, Credifinance Securities
Limited (the "Holder"), is the registered holder of o broker warrants (the
"Agent Warrants") each of which entitle the holder, subject to the terms and
conditions set forth in this Agent Warrant Certificate, to purchase from BMB
Munai, Inc. (the "Issuer"), one common share in the capital of the Issuer (a
"Share"), at any time until 5:00 p.m. (Toronto time) on *****, 2005 (the "Time
of Expiry") on payment of $***** per share (the "Exercise Price"). The number of
Shares which the Holder is entitled to acquire upon exercise of the Agent
Warrants and the Exercise Price are subject to adjustment as hereinafter
provided.
1. Exercise of Agent Warrants
--------------------------
(a) Election to Purchase. The rights evidenced by this certificate may
be exercised by the Holder in whole or in part and in accordance
with the provisions hereof by delivery of an Election to Purchase
in substantially the form attached hereto as Schedule 1, properly
completed and executed, together with payment by certified cheque
or bank draft of the Exercise Price for the number of Shares
specified in the Election to Purchase at the office of the Issuer
at *****, or such other address in the United States as may be
notified in writing by the Issuer (the "Issuer Office"). The
election to purchase must be executed outside the United States.
In the event that the rights evidenced by this certificate are
exercised in part, the Issuer shall, contemporaneously with the
issuance of the Shares issuable on the exercise of the Agent
Warrants so exercised, issue to the Holder an Agent Warrant
Certificate on identical terms in respect of that number of Units
in respect of which the Holder has not exercised the rights
evidenced by this certificate.
22
(b) Exercise. The Issuer shall, within five business days after
receiving a duly executed Election to Purchase and the Exercise
Price for the number of Shares specified in the Election to
Purchase (the "Exercise Date"), issue that number of Shares
specified in the Election to Purchase.
(c) Certificates. As promptly as practicable after the Exercise Date,
the Issuer shall issue and deliver to the Holder, registered in
such name or names as the Holder may direct or if no such
direction has been given, in the name of the Holder, a certificate
for the number of Shares specified in the Election to Purchase. To
the extent permitted by law, such exercise shall be deemed to have
been effected as of the close of business on the Exercise Date,
and at such time the rights of the Holder with respect to the
number of Agent Warrants which have been exercised as such shall
cease, and the person or persons in whose name or names any
certificate for Shares shall then be issuable upon such exercise
shall be deemed to have become the holder or holders of record of
the Shares represented thereby.
(d) Fractional Shares. No fractional Shares shall be issued upon
exercise of any Agent Warrant and no payments or adjustment shall
be made upon any exercise on account of any cash dividends on the
Shares issued upon such exercise. If any factional interest in a
Share would, except for the provisions of the first sentence of
this Section 1(d), be deliverable upon the exercise of a Agent
Warrant, the Issuer shall, in lieu of delivering the fractional
unit therefore, pay to the Holder an amount in cash equal to the
Fair Market Value (as hereinafter defined) of such fractional
interest.
(e) Corporate Changes.
------------------
(i) Subject to paragraph 1(e)(ii) hereof, if, after November 26,
2003 and prior to the Time of Expiry, the Issuer shall be a
party to any reorganization, merger, dissolution or sale of
all or substantially all of its assets, whether or not the
Issuer is the surviving entity, the Agent Warrants evidenced
by this certificate shall be adjusted so that the holder
hereof shall be entitled to acquire the same number and type
of securities to which the holder of that number of Shares of
the Issuer subject to the unexercised Agent Warrants would
have been entitled by reason of such reorganization, merger,
dissolution or sale of all or substantially all of its assets
(the "Event"), and the Exercise Price shall be adjusted to be
the amount determined by multiplying the Exercise Price in
effect immediately prior to the Event by the number of Shares
subject to the unexercised Agent Warrants immediately prior
to the Event, and dividing the product thereof by the number
of securities to which the holder of that number of Shares
subject to the unexercised Agent Warrants would have been
entitled to by reason of such Event.
23
(ii) If the Issuer is unable to deliver securities to the Holder
pursuant to the proper exercise of an Agent Warrant, the
Corporation may satisfy such obligations to the Holder
hereunder by paying to the Holder in cash the difference
between the Exercise Price of all unexercised Agent Warrants
granted hereunder and the Fair Market Value of the securities
to which the Holder would be entitled to upon exercise of all
unexercised Agent Warrants. Adjustments under this
subparagraph (e) or (subject to subparagraph (o)) any
determinations as to the Fair Market Value of any securities
shall be made by the board of directors of the Corporation,
or any committee thereof specifically designated by the board
of directors to be responsible therefor, and any reasonable
determination made by such board or committee thereof shall
be binding and conclusive, subject only to any disputes being
resolved by the Issuer's auditors, whose determination shall
be binding and conclusive.
(f) Subdivision or Consolidation of Common Shares.
----------------------------------------------
(i) In the event that after the already planned ten "old" for one
"new" reverse split (share consolidation) to be effected by
the Issuer on or about November 30, 2003 but prior to the
Time of Expiry, the Corporation shall subdivide its
outstanding common shares ("Common Shares") into a greater
number of shares, the Exercise Price in effect immediately
prior to such subdivision shall be proportionately reduced,
and conversely, in case the outstanding Common Shares shall
be consolidated into a smaller number of shares, the Exercise
Price in effect immediately prior to such consolidation shall
be proportionately increased. For clarity, if there is such a
subdivision or consolidation of the Common Shares, there
shall also be a proportionate adjustment to the number of
warrants held.
(ii) Upon each adjustment of the Exercise Price as provided
herein, the Holder shall thereafter be entitled to acquire,
at the Exercise Price resulting from such adjustment, the
number of Shares (calculated to the nearest tenth of a Share)
obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of Shares
which may be acquired hereunder immediately prior to such
adjustment and dividing the product thereof by the Exercise
Price resulting from such adjustment.
(g) Change or Reclassification of Common Shares. In the event that,
after November 26, 2003 and prior to the Time of Expiry, the
Corporation shall change or reclassify its outstanding Common
24
Shares into a different class of securities, the rights evidenced
by the Agent Warrants shall be adjusted as follows so as to apply
to the successor class of securities:
(i) the number of the successor class of securities which the
Holder shall be entitled to acquire as part of the Shares
shall be that number of the successor class of securities
which a holder of that number of Shares subject to the
unexercised Agent Warrants immediately prior to the change or
reclassification would have been entitled to by reason of
such change or reclassification; and
(ii) the Exercise Price shall be determined by multiplying the
Exercise Price in effect immediately prior to the change or
reclassification by the number of Shares subject to the
unexercised Agent Warrants immediately prior to the change or
reclassification, and dividing the product thereof by the
number of shares determined in paragraph 1(g)(i) hereof.
(h) Offering to Shareholders. If and whenever at any time after
November 26, 2003 and prior to the Time of Expiry, the Issuer
shall fix a record date or if a date of entitlement to receive is
otherwise established (any such date being hereinafter referred to
in this subsection 1(h) as the "record date") for the issuance of
rights, options or warrants to all or substantially all the
holders or the outstanding Common Shares entitling them, for a
period expiring not more than 45 days after such record date, to
subscribe for or purchase Common Shares or securities convertible
into or exchangeable for Common Shares at a price per share or, as
the case may be, having a conversion or exchange price per share
less than 95% of the Fair Market Value (as hereinafter defined) on
such record date, the Exercise Price shall be adjusted immediately
after such record date so that it shall equal the price determined
by multiplying the Exercise Price in effect on such record date by
a fraction, of which the numerator shall be the total number of
Common Shares outstanding on such record date plus a number equal
to the number arrived at by dividing the aggregate subscription or
purchase price of the total number of additional Common Shares
offered for subscription or purchase or, as the case may be, the
aggregate conversion or exchange price of the convertible or
exchangeable securities so offered by such Fair Market Value, and
of which the denominator shall be the total number of Common
Shares outstanding on such record date plus the total number of
additional Common Shares so offered (or into which the convertible
or exchangeable securities so offered are convertible or
exchangeable); Common Shares owned by or held for the account of
the Issuer or any subsidiary of the Issuer shall be deemed not to
be outstanding for the purpose of any such computation; such
adjustment shall be made successively whenever such a record date
is fixed; to the extent that any rights or warrants are not so
issued or any such rights or warrants are not exercised prior to
the expiration thereof, the Exercise Price shall then be
25
readjusted to the Exercise Price which would then be in effect if
such record date had not been fixed or to the Exercise Price which
would then be in effect based upon the number of Common Shares or
conversion or exchange rights contained in convertible or
exchangeable securities actually issued upon the exercise of such
rights or warrants, as the case may be.
(i) Carry Over of Adjustments. No adjustment of the Exercise Price
shall be made if the amount of such adjustment shall be less than
1% of the Exercise Price in effect immediately prior to the event
giving rise to the adjustment, provided, however, that in such
case any adjustment that would otherwise be required then to be
made shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment which, together with
any adjustment so carried forward, shall amount to at least 1% of
the Exercise Price.
(j) Notice of Adjustment. Upon any adjustment of the number of Shares
and upon any adjustment of the Exercise Price, then and in each
such case the Issuer shall give written notice thereof to the
Holder, which notice shall state the Exercise Price and the number
of Shares and Warrants or other securities subject to the
unexercised Agent Warrants resulting from such adjustment, and
shall set forth in reasonable detail the method of calculation and
the facts upon which such calculation is based. Upon the request
of the Holder there shall be transmitted promptly to the Holder a
statement of the firm of independent chartered accountants
retained to audit the financial statements of the Issuer to the
effect that such firm concurs in the Issuer's calculation of the
change.
(k) Other Notices. In case at any time after November 26, 2003 and
prior to the Time of Expiry:
(i) the Issuer shall declare any dividend upon its Common Shares
payable in Common Shares;
(ii) the Issuer shall offer for subscription pro rata to the
holders of its Common Shares any additional shares of any
class or other rights;
(iii)there shall be any capital reorganization or
reclassification of the capital stock of the Issuer, or
consolidation, amalgamation or merger of the Issuer with, or
sale of all or substantially all of its assets to, another
corporation; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Issuer,
then, in any one or more of such cases, the Issuer shall give to
the Holder (A) at least 10 days' prior written notice of the date
on which a record date shall be taken for such dividend,
distribution or subscription rights or for determining rights to
26
vote in respect of any such reorganization, reclassification,
consolidation, merger, amalgamation, sale, dissolution,
liquidation or winding-up and (B) in the case of any such
reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding-up, at least 10 days' prior
written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause (A) shall also
specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Common
Shares shall be entitled thereto, and such notice in accordance
with the foregoing clause (B) shall also specify the date on which
the holders of Common Shares shall be entitled to exchange their
Common Shares for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger,
amalgamation, sale, dissolution, liquidation or winding-up, as the
case may be.
(l) Shares to be Reserved. The Issuer will at all times keep
available, and reserve if necessary under Delaware law, out of its
authorized Common Shares, solely for the purpose of issue upon the
exercise of the Agent Warrants, (i) such number of Shares as shall
then be issuable upon the exercise of the Agent Warrants, and (ii)
such number of Common Shares issuable upon the due exercise of the
Warrants issuable upon the due exercise of the Agent's Warrants.
The Issuer covenants and agrees that all such Shares and Common
Shares which shall be so issuable will, upon issuance, be duly
authorized and issued as fully paid and non-assessable. The Issuer
will take all such actions as may be necessary to ensure that all
such Shares and Common Shares may be so issued without violation
of any applicable requirements of any exchange upon which the
Common Shares may be listed or in respect of which the Common
Shares are qualified for unlisted trading privileges. The Issuer
will take all such actions are within its power to ensure that all
such Shares may be so issued without violation of any applicable
law.
(m) Issue Tax. The issuance of certificates for Shares and Warrants
upon the exercise of Agent Warrants shall be made without charge
to the Holder for any issuance tax in respect thereto, provided
that the Issuer shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the
Holder.
(n) Fair Market Value. For the purposes of any computation hereunder,
the "Fair Market Value" at any date shall be the weighted average
sale price per share for the Common Shares of the Issuer for the
20 consecutive trading days immediately before such date on the
most senior stock exchange in the USA on which the Common Shares
may then be listed and on which there is the greatest volume of
trading of the Common Shares for such 20 day period, or, if the
shares or any other security in respect of which a determination
of Fair Market Value is being made are not listed on any stock
exchange, the Fair Market Value shall be determined by the
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directors, which determination shall be conclusive. The weighted
average price shall be determined by dividing the aggregate sale
price of all such shares sold on the said exchange during the said
20 consecutive trading days by the total number of such shares so
sold.
2. Replacement.
------------
Upon receipt of evidence satisfactory to the Issuer of the loss, theft,
destruction or mutilation of this Agent Warrant Certificate and, if requested by
the Issuer, upon delivery of a bond of indemnity satisfactory to the Issuer (or,
in the case of mutilation, upon surrender of this Agent Warrant Certificate),
the Issuer will issue to the Holder a replacement certificate (containing the
same terms and conditions as this Agent Warrant Certificate).
3. Expiry Date.
------------
The Agent Warrants shall expire and all rights to purchase Units
hereunder shall cease and become null and void at 5:00 p.m. (Toronto time) on
May *, 2005.
4. Covenant.
---------
So long as any Agent Warrants remain outstanding the Issuer covenants
that it shall do or cause to be done all things necessary to maintain its status
as a reporting issuer not in default in the Offering Jurisdictions.
5. Inability to Deliver Units.
---------------------------
If for any reason, other than the failure or default of the Holder, the
Issuer is unable to issue and deliver the Units or other securities as
contemplated herein to the Holder upon the proper exercise by the Holder of the
right to purchase any of the Units covered by this Agent Warrant Certificate,
the Issuer may pay, at its option and in complete satisfaction of its
obligations hereunder, to the Holder, in cash, an amount equal to the difference
between the Exercise Price and the Fair Market Value of such Units or other
securities on the Exercise Date.
6. Defined Terms.
--------------
All capitalized terms used herein and not otherwise defined shall have
the meaning ascribed thereto in the agency agreement dated as of November 26,
2003 between the Issuer and Credifinance Securities Limited.
7. Governing Law
-------------
The laws of the State of Delaware shall govern the Agent Warrants.
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8. Successors
----------
This Agent Warrant Certificate shall enure to the benefit of the Holder and its
successors or assigns and shall be binding on the Issuer and its respective
successors.
IN WITNESS WHEREOF the Issuer has caused this Agent Warrant Certificate
to be signed by a duly authorized officers.
DATED as of November__________, 2003.
BMB MUNAI, INC.
Per:________________________________
Authorized Signing Officer
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Schedule "1"
------------
Election to Exercise
The undersigned hereby irrevocably elects to exercise the number of
Agent Warrants of BMB Munai, Inc. set out below for the number of Shares (or
other property or securities subject thereto) as set forth below:
(a) Number of Agent Warrants to be Exercised: ____________
(b) Number of Shares to be Acquired: ____________
(c) Exercise Price per Share: $____________
(d) Aggregate Purchase Price [(b) multiplied by (c)] $____________
and hereby tenders a certified cheque, bank draft or cash for such aggregate
purchase price, and directs such Shares to be registered and a certificate
therefor to be issued as directed below.
DATED this ______ day of ____________, 200__ .
[NAME OF HOLDER]
Per:_______________________________
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Name of Registered Holder:
----------------------------------
Address of Registered Holder:
----------------------------------
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