-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J6UQSNbB3rDcj8sHewJouGfQ7euJGKIvJiWnmftl8KGeFiD/HoIcCS5iIhHuyXPH bxaFEaB3ie9G3A6zYaRpLw== 0001038838-02-000500.txt : 20020701 0001038838-02-000500.hdr.sgml : 20020701 20020701145329 ACCESSION NUMBER: 0001038838-02-000500 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20020614 ITEM INFORMATION: Changes in control of registrant ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020701 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MID POWER SERVICE CORP CENTRAL INDEX KEY: 0000725395 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 870398403 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 002-85602-D FILM NUMBER: 02693436 BUSINESS ADDRESS: STREET 1: 3800 HOWARD HUGHES PARKWAY, SUITE 860A CITY: LAS VEGAS STATE: NV ZIP: 89109 BUSINESS PHONE: 702-319-7153 MAIL ADDRESS: STREET 1: 3800 HOWARD HUGHES PARKWAY, SUITE 860A CITY: LAS VEGAS STATE: NV ZIP: 89109 FORMER COMPANY: FORMER CONFORMED NAME: CAPLAN CORP DATE OF NAME CHANGE: 19920703 8-K 1 form8k061402.txt 8-K DATED JUNE 14, 2002 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (date of earliest event reported): June 14, 2002 MID-POWER SERVICE CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Nevada 2-85602-D 87-0398403 - ------------------------ ---------------------- ----------------------- (State or other (Commission (IRS Employer jurisdiction of File Number) Identification No.) incorporation) 3800 Howard Hughes Parkway Suite 860A Las Vegas, Nevada 89109 - -------------------------------------------- ---------------------- (Address of principal executive offices) (Zip Code) (702) 214-3615 ---------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- ITEMS 1 AND 2. CHANGES IN CONTROL OF REGISTRANT AND ACQUISITION OR DISPOSITION OF ASSETS - -------------------------------------------------------------------------------- Acquisition of Clear Creek Unit On June 14, 2002, Mid-Power Service Corporation (the "Corporation") completed the acquisition of Red Star, Inc. ("Red Star"), which resulted in a change of control of the Corporation and the acquisition by the Corporation of oil and gas rights located on approximately 17,000 gross acres comprising the Clear Creek Unit in Utah's Carbon and Emery Counties. Red Star is a privately-held company that owns and operates the Clear Creek Unit. In the acquisition, the Corporation paid $5,500,000 in cash, agreed to pay $10,000,000 in January 2003, and issued 17.1 million shares of the Corporation's common stock to the sole stockholder of Red Star, Edward Mike Davis, who, as a result, now owns approximately 60% of the Corporation's common stock after giving effect to the exercise of outstanding options and the conversion of outstanding indebtedness to common stock. Under the terms of the acquisition agreement, the Corporation is precluded from issuing additional shares to reduce Mr. Davis's ownership below 60% on a fully-diluted basis until the $10,000,000 note is paid. Thereafter, the Corporation cannot issue shares that would dilute Mr. Davis's interests below 51% before July 20, 2003, or below 36% before June 20, 2007. On June 14, 2002, the market price for the Corporation's common stock was approximately $1.50 per share. The amount of consideration paid and the other terms of the acquisition were determined by arm's-length negotiations. The board of directors of the Corporation considered engineering, geological and geophysical data provided by Red Star and other publicly available data as well as technical overviews by consultants engaged by the Corporation. As part of the acquisition, the Corporation has agreed to file a registration statement under the Securities Act of 1933 covering the resale of Mr. Davis's 17.1 million shares of the Corporation's common stock within 30 days of the completion of required audited financial statements for the acquired business. To the knowledge of the Corporation, Mr. Davis has not entered into any agreements with any other stockholders, including those who formerly held control, with respect to the election of directors or other matters. Mr. Davis has not entered into any agreement with any other person, such as a pledge agreement or an option, that may result in a change of control at a later date. Credit Facility In order to finance the costs of the acquisition and obtain access to capital needed for initial exploration activities, the Corporation established a credit facility with SCRS Investors, LLC, under which the Corporation may borrow up to $25,000,000. As consideration for entering into the agreement for the credit facility, the Corporation issued 340,000 shares of its common stock to SCRS Investors. Repayment of the loan is secured by the assets acquired through the acquisition of Red Star. The loan is repayable over 10 years, commencing on December 31, 2003, and is convertible into the Corporation's common stock at $1.50 per share, subject to the limitations on issuing additional shares that would reduce Mr. Davis's ownership percentage below agreed amounts as noted 2 above. James W. Scott, the Corporation's president and a director, is a principal member of SCRS, and Mark T. Davis, the Corporation's general counsel, is a member of SCRS. The Corporation's $5,500,000 payment to Mr. Davis was drawn on the credit facility and the $5,500,000 of indebtedness has been converted to 3,666,667 shares of the Corporation's common stock. The Clear Creek Field The Clear Creek field was originally discovered and developed during the mid-1950s. One of the 16 wells initially completed remains in production to maintain the leases in the approved unit. To date, approximately 136 billion cubic feet of gas have been produced from the field. The gas gathering and transmission system used to transport and market previous production remains in place. During the 2002 field season, the Corporation plans to rework, log and test up to three previously drilled wells and, if warranted, complete them for production. Gas would be delivered to the pipeline on the property for sale to an unrelated purchaser. The Corporation is initiating an engineering, geological and geophysical evaluation of the approximately 10 previously productive wells in the field to determine whether to reenter any of those wells or implement enhanced recovery measures. In addition, the Corporation will evaluate the coalbeds at depths of from 800 to 3,000 feet to determine their potential for coalbed methane gas. The Corporation has budgeted approximately $500,000 of its own funds for planned 2002 field work and technical evaluation of the Clear Creek Field. Further planned activities during succeeding years will require substantial amounts of additional capital. Under its credit facility with SCRS Investors, the Corporation can draw up to $10,000,000 in loan proceeds during 2003 to fund these activities. Alternatively, the Corporation intends to seek funding for Clear Creek expenditures through arrangements with industry or financial participants. The Corporation has no commitment or arrangement to obtain any such financing. Amended Articles and Bylaws Prior to completing the Red Star acquisition, the Corporation adopted amended and restated articles of incorporation and bylaws that provided for the Corporation's directors to serve three-year terms, staggered such that no more than one-third of the Corporation's directors' terms shall expire in any one year, as well as requiring a two-thirds majority for the removal of any director. At the same time, the Corporation's bylaws were amended to establish procedural requirements for the nomination of directors and the consideration of matters at meetings of stockholders. Stock Option and Bonus Grants The Corporation has granted to certain directors, executive officers and other key employees options to purchase an aggregate of 130,000 shares at $1.50 per share at any time on or before June 25, 2003. The Corporation also granted an aggregate of 40,000 shares as stock bonuses to three executives. On the date of these awards, the market price for the common stock was approximately $1.50 per share. 3 - -------------------------------------------------------------------------------- ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS - -------------------------------------------------------------------------------- (a) Financial Statements of Business Acquired. Pursuant to the requirements of Item 7 of Form 8-K, the Corporation shall file audited financial statements for the business acquired on or before the 28th day of August, 2002. (b) Pro Forma Financial Information. See subparagraph (a) above. (c) Exhibits. The following exhibits are filed with this report on Form 8-K: SEC Exhibit Reference Number Number Title of Document Location ------ ------ ----------------- -------- Plan of Acquisition, Reorganization, Arrangement, Item 2 Liquidation, or Succession - --------- --------- ------------------------------------------------ ----------- 2.01 2 Acquisition Agreement and Plan of Merger among This filing Mid-Power Service Corporation, Red Star, Inc., and Mid-Power Resource Corporation, dated June 13, 2002 Item 3 Articles of Incorporation and Bylaws - --------- --------- ------------------------------------------------ ----------- 3.01 3 Amended and Restated Articles of Incorporation This filing dated June 4, 2002 3.02 3 Bylaws dated June 4, 2002 This filing Item 10 Material Contracts - --------- --------- ------------------------------------------------ ----------- 10.01 10 Promissory Note in the amount of $10,000,000 This filing dated June 13, 2002 10.02 10 Registration Rights Agreement between This filing Mid-Power Service Corporation and Edward Mike Davis dated June 13, 2002 10.03 10 Loan Agreement by and among Mid-Power Service This filing Corporation and Mid-Power Resource Corporation, borrowers, and SCRS Investors, LLC, lender, dated as of May 9, 2002 10.04 10 Promissory Note among Mid-Power Service This filing Corporation and Mid-Power Resource Corporation, as makers, and SCRS Investors, LLC, as holder, as of May 9, 2002 10.05 10 Security Agreement between Mid-Power Resource This filing Corporation and SCRS Investors, LLC as of May 9, 2002 10.06 10 Deed of Trust and Security Agreement as of This filing May 9, 2002, between Mid-Power Resource Corporation, trustor, Bruce Lemons, trustee, and SCRS Investors, LLC, beneficiary 4 SEC Exhibit Reference Number Number Title of Document Location ------ ------ ----------------- -------- 10.07 10 2002 Stock Option and Purchase Rights Plan This filing adopted June 25, 2002 10.08 10 Notice of Grant (with related Stock Option This filing Agreement and Notice of Exercise) and Stock and Option Grant Schedule - -------------------------------------------------------------------------------- SIGNATURES - -------------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. MID-POWER SERVICE CORPORATION Dated: July 1, 2002 By: /s/ Kenneth M. Emter ------------------------------------- Kenneth M. Emter, Secretary/Treasurer 5 EX-2.01 3 ex2form8k061402.txt ACQUISITION AGREEMENT AND PLAN OF MERGER Exhibit 2.01 ACQUISITION AGREEMENT AND PLAN OF MERGER This Acquisition Agreement and Plan of Merger ("Agreement"), dated as of this 13th day of June, 2002, is made by and among Mid-Power Service Corporation, a Nevada corporation ("Mid-Power"), Red Star, Inc., a Nevada corporation ("Red Star"), and Mid-Power Resource Corporation, a Nevada corporation ("MergerCo"), sometimes collectively referred to as the "Parties", with reference to the following: RECITALS: A. Mid-Power is a corporation duly organized and validly existing under the laws of the State of Nevada engaged in oil and gas production, development and exploration in the United States. Mid-Power is required to file reports pursuant to Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Mid-Power's common stock is traded in the over-the-counter market and is quoted on the OTC Bulletin Board administered by the Nasdaq Stock Market. B. Red Star is a corporation duly organized and validly existing under the laws of the State of Nevada engaged in natural gas production in Utah, all of the issued and outstanding shares of which are owned by Edward Mike Davis ("Davis"). C. The directors of Mid-Power and Red Star believe that the combination of Red Star's assets with Mid-Power's capital and access to capital will result in more profitable and utilized assets. D. Red Star desires to be acquired by Mid-Power, so that all of the shares of Red Star owned by the sole shareholder of Red Star, Davis, shall be converted into cash, a promissory note and shares of common stock of Mid-Power as hereinafter set forth. E. In order to effect Mid-Power's acquisition of Red Star, Mid-Power's wholly-owned subsidiary organized under the laws of the State of Nevada, MergerCo, shall serve as the merger company, which, upon the terms and subject to the conditions of this Agreement and in accordance with the laws governing private corporations of the State of Nevada ("Nevada Law"), shall merge with and into Red Star (the "Merger"), and Red Star shall survive the Merger (the "Surviving Corporation"), for the purpose of making Red Star a wholly-owned subsidiary of Mid-Power. Pursuant to the terms of the Merger, the shares of common stock of Red Star ("Red Star Stock") issued and outstanding or existing immediately prior to the "Effective Time" (as defined below) of the Merger, will be converted at the Effective Time into the right to receive cash, a promissory note and newly-issued shares of common stock of Mid-Power, par value $0.001 per share ("New Mid-Power Stock"), subject to certain restrictions on transfer as hereinafter provided. The shares of common stock of MergerCo issued and outstanding immediately prior to the Effective Time shall be converted to stock of the Surviving Corporation. The shares of common stock of Mid-Power, par value Page 1 $0.001 per share ("Mid-Power Stock"), issued and outstanding immediately prior to the Effective Time will remain issued and outstanding. F. The respective boards of directors of Mid-Power and Red Star deem it advisable to enter into this Agreement and have, by resolutions duly adopted, approved this Agreement and determined that the Merger is consistent with and in furtherance of the long-term business strategies of each of them, and is fair to and in the best interests of each of them and each of their respective stockholders, and have approved the issuance of New Mid-Power Stock, and the other transactions contemplated hereby. G. For federal income tax purposes, the Parties intend that the Merger shall qualify as a reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the "Code"), and that each Party will take all actions requested by the other and reasonably necessary to so qualify the Merger, although neither Party has obtained or will be required to obtain or provide an opinion of counsel to the foregoing effect. H. In order to expedite the consummation of the transaction contemplated hereby and to meet the requirements of Red Star and Davis, on May 10, 2002, Davis and James W. Scott ("Scott"), acting for himself and in anticipation of a possible assignment to and assumption by Mid-Power, entered into an "Option Agreement" and those certain "Addendum to the Option Agreement Dated May 10, 2002, between the Parties Hereinafter Named Below", dated as of May 10, 11, 12 and June 10, 2002 (the "Option"), relating to the transaction described in the Option and contemplated by this Agreement. I. On the execution of the Option, Scott caused the initial $5,500,000 payment due under the Option to be made to Davis. Contemporaneous with the execution of this Agreement, Scott is conveying to Mid-Power all of Scott's right, title and interest under the Option, which is thereby accepted by Mid-Power and acknowledged by Davis, who thereby releases and discharges Scott from any further liability or obligation under the Option and agrees to look solely to Mid-Power for any further performance thereunder with the same force and effect as if such assignment and assumption had been effected May 10, 2002. NOW, THEREFORE, in consideration of the premises and the representations, covenants and agreements herein contained, the Parties hereto hereby agree as follows: ARTICLE I PLAN OF MERGER OF MERGERCO INTO RED STAR Section 1.01. Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with Nevada Law, at the Effective Time, MergerCo shall be merged with and into Red Star, the separate corporate existence of Red Star and MergerCo shall cease, Red Star shall continue as the Surviving Corporation of the Merger, and the capital stock of Red Star issued and outstanding immediately prior to such Merger shall be converted at the Effective Time into the right to receive cash, a promissory note, and New Page 2 Mid-Power Stock as herein provided. The shares of MergerCo issued and outstanding immediately prior to the Effective Time shall be converted into stock of the Surviving Corporation. The form of the Articles of Merger to be filed with the Secretary of State of the State of Nevada is attached hereto as Exhibit "A". Section 1.02. Terms of Merger. The terms of the Merger are: (a) MergerCo shall be merged into Red Star in accordance with the statutory procedure set forth in Nevada Revised Statutes ss. 92A, et seq. (b) At the Effective Time, to the full extent provided under Nevada Law, Red Star, as the Surviving Corporation, shall possess all the rights, privileges, powers and franchises of a public, as well as of a private, nature and be subject to all the restrictions, disabilities and duties of each of such merged entities; and any and all rights, privileges, powers and franchises of each of such merged entities, and all property, real, personal and mixed, and all debts due to either of such merged entities on whatever account, as well as stock subscriptions and all other things in action belonging to each of such merged entities, shall be vested in Red Star, as the Surviving Corporation; and all property, rights, privileges, powers and franchises, and all and every other interest shall be thereafter as effectively the property of the Surviving Corporation as they were of the respective corporation, and the title to any real estate vested by deed or otherwise, in either constituent entity, shall not revert or be in any way impaired; but all rights of creditors and all liens upon any property of either constituent entity shall be preserved unimpaired, and all debts, liabilities and duties of the constituent entities shall thenceforth attach to Surviving Corporation and may be enforced against it to the same extent as if said debts, liabilities and duties had been incurred or contracted by it. The Articles of Incorporation and the Bylaws of MergerCo shall become the Articles of Incorporation and the Bylaws of the Surviving Corporation. A copy of the form of the Articles of Incorporation and Bylaws of MergerCo are attached hereto as Exhibit "B". (c) The directors and officers of the Surviving Corporation shall be the duly qualified and acting directors and officers of MergerCo immediately prior to the Effective Time of the Merger. (d) The corporate identity, existence, purposes, powers, franchises, rights and immunities of MergerCo shall be merged into the Surviving Corporation, and the Surviving Corporation shall be fully vested therewith. (e) The name of the Surviving Corporation shall be Mid-Power Resource Corporation. Section 1.03. Basis of Exchange. At the Effective Time, the 1,000 common shares of Red Star owned by Davis, which shall constitute all the issued and outstanding shares of Red Star, shall be surrendered to Mid-Power and Davis shall be entitled to receive: Page 3 (a) FIVE MILLION, FIVE HUNDRED THOUSAND DOLLARS ($5,500,000) in cash, payable by crediting the payment of that amount on May 10, 2002, pursuant to the Option; (b) TEN MILLION DOLLARS ($10,000,000) payable pursuant to a promissory note in the form attached hereto as Exhibit "C", bearing interest and payable as provided therein (the "Note"), together with a duly executed and acknowledged Judgment By Confession in the form of Exhibit "D" attached hereto, to be held by Davis pending payment in full of the Note; and (c) 17,125,365 shares of New Mid-Power Stock, (together, the "Acquisition Consideration"). Section 1.04. Stock of Mid-Power after Merger. At the Effective Time and after giving effect to the Merger, the total issued and outstanding shares of Mid-Power shall be, and the number and manner by which the issued and outstanding shares are held will be, including those shares reserved for issuance, as follows: STOCKHOLDER NUMBER OF SHARES (%) ----------- -------------------- Davis 17,125,365 (60%) Others 11,416,910 (40%) The 11,416,910 shares attributed to "Others" includes 7,180,244 shares issued and outstanding at the Effective Time and 4,236,666 shares reserved for issuance upon the exercise of options and conversion rights. Section 1.05. Valuation of Red Star Assets. The Parties agree and acknowledge that Red Star is now and at the Effective Time will be possessed of certain oil and gas leases, wells and personal property assets, as more particularly described in the Red Star Schedules attached pursuant to Article II (the "Assets"). The Parties agree that for purposes of this Agreement, the value of Red Star as of the Effective Time is and will be FORTY MILLION, THREE HUNDRED THIRTY-ONE THOUSAND, SEVEN HUNDRED SEVENTY-NINE AND 25/100 DOLLARS ($40,331,779.25) (the "Agreed Value"). Assets shall include, except as otherwise provided herein, all right, title and interest owned, controlled or otherwise legal or equitable to Red Star in the interests reflected in Red Star's "Current Balance Sheet" (as defined below) or used by it in its present business as specified in Red Star Schedule 1.05 attached hereto. Such Assets include all contract and lease rights of Red Star. The Parties acknowledge and agree that there will be no tangible or intangible, real or personal, properties or assets of Red Star not included with this transaction. Section 1.06. Accounting Treatment for Acquisition. The acquisition contemplated by this Agreement will be accounted for by Mid-Power in such form and manner as it, upon the advice of its regular firm of certified public accountants, may deem appropriate. Page 4 Section 1.07. Closing; Effective Time. Unless this Agreement shall have been terminated pursuant to section 4.01, and subject to the satisfaction or, if permissible, waiver of the conditions set forth in Article VIII, the consummation of the Merger and the closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Kolesar & Leatham, Chtd., 3320 West Sahara Avenue, Suite 380, Las Vegas, Nevada 89102, as soon as practicable (but in any event within two business days) after the satisfaction or, if permissible, waiver of the conditions set forth in Article VIII, but in any event on or before 11:59:59 p.m., local time, June 13, 2002, or at such other date, time and place as the Parties may agree. The date on which the Closing takes place is referred to herein as the "Closing Date." As promptly as practicable following the Closing Date, the parties hereto shall cause the Merger to be consummated by filing the Articles of Merger with the Secretary of State of the State of Nevada (the date and time of such filing, or such later date or time agreed upon by the Parties and set forth therein, being the "Effective Time"). For accounting purposes, upon consummation of the Merger, the results of operations of Red Star from and after May 10, 2002, shall be attributable to Mid-Power. Section 1.08. Further Instruments. From time to time, as and when reasonably requested by the Surviving Corporation, Mid-Power, MergerCo and Red Star shall execute deliver, or cause to be executed and delivered, all such other instruments, and will take or cause to be taken such further or other action as the Surviving Corporation may deem necessary or desirable in order to vest in and confirm to the Surviving Corporation title to and possession of all property, rights, privileges, powers and franchises and otherwise to carry out the intent and purposes of this Agreement. ARTICLE II REPRESENTATIONS AND WARRANTIES OF RED STAR Red Star hereby represents and warrants to Mid-Power that as of the date of this Agreement and at the Effective Time: Section 2.01. Organization and Good Standing. Red Star is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, and has full corporate power and authority to own and hold the properties and Assets owned and leased by it, to conduct its business as presently conducted, and to carry out the transactions described in this Agreement. Red Star will attempt to become duly qualified and in good standing to do business in Utah and in each other jurisdiction in which the nature of the business conducted by it or the ownership or leasing of its properties makes such qualification necessary, other than where the failure to be so duly qualified and in good standing would not have a "Red Star Material Adverse Effect" (as defined below). The term "Red Star Material Adverse Effect" as used in this Agreement shall mean any change or effect that, individually or when taken together with all such other changes or effects, would be reasonably likely to be materially adverse to the assets, liabilities, financial condition, results of operations or current or future business of Red Star. The Articles of Incorporation and Bylaws of Red Star as currently in effect are attached hereto as Red Star Schedule 2.01. Page 5 Section 2.02. Capitalization. All shares of Red Star are owned by Davis, free and clear of all liens, claims and encumbrances, and there are no outstanding subscriptions, calls, commitments, warrants or options for the purchase of any capital stock or other securities of Red Star or any securities convertible into or exchangeable for shares of capital stock or other securities of Red Star. The aggregate number of shares that Red Star is authorized to issue is 1,000, consisting of 1,000 common shares with a par value $0.01 per share. Section 2.03. Authority. Red Star has the requisite corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by Red Star's board of directors and, by the execution hereof by Davis, its sole stockholder, and no other corporate proceedings on the part of Red Star are necessary to authorize this Agreement and the transactions contemplated hereby, except as set forth herein. This Agreement has been duly executed and delivered by Red Star. Section 2.04. Noncontravention. Red Star is not subject to or obligated under any charter, bylaw or contract provision, or any license, franchise or permit, or any order or decree, that would be breached or violated, or in respect of which a right of acceleration would be created, by its executing and carrying out this Agreement. Section 2.05. Absence of Undisclosed Liabilities. Except as and to the extent reflected in Red Star's "Current Balance Sheet" (as defined below) attached hereto, Red Star has no known liabilities, claims, suits or obligations and Red Star is not subject to any pending action, order, injunction, judgment, litigation, proceeding, arbitration action, governmental audit or investigation, nor is Red Star or any of its directors, officers or agents, or any of them, aware of any threatened action, litigation, proceeding, arbitration action, governmental audit or investigation. Section 2.06. Freedom from Encumbrance. Consummation of the transactions herein contemplated and the fulfillment of the terms of this Agreement will not conflict with, or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any of the Assets of Red Star pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which Red Star is a party or by which it may be bound or to which any of the Assets is subject. Section 2.07. Financial Statements. Included in Schedule 2.07 of the Red Star Schedules are the unaudited balance sheet of Red Star and the Assets and operations acquired as of December 31, 2001, and the related statements of operations of Red Star and the Assets and operations acquired for the year ended December 31, 2001, including the notes thereto. Such schedule also includes the unaudited balance sheet of Red Star and the Assets and operations acquired as of May 31, 2002 ("Red Star's Current Balance Sheet"), together with the notes thereto as of the dates indicated. All of the financial records of Red Star are auditable in accordance with generally accepted accounting principles and generally accepted auditing standards for publicly traded entities without unreasonable effort or expense. Page 6 Section 2.08. Merchantable Title. Red Star is informed and believes that Red Star Schedule 2.08 attached hereto contains a complete description of all oil and gas or mineral leases or other rights included in the Assets it owns or uses in its business or purports to own, including, without limitation, those reflected in Red Star's Current Balance Sheet. Also included in Red Star Schedule 2.08 is that certain acquisition title opinion dated July 16, 2001, by the law firm of VanCott, Bagley, Cornwall & McCarthy, as prepared for Davis, relating to the oil and gas interests set forth therein (the "Original Title Opinion"), which are being assigned to Red Star by Davis. To the best knowledge of Red Star and Davis, except as reflected in that certain Assignment, Bill of Sale, and Conveyance, of even date herewith, between Davis and Red Star (a copy of which has been reviewed and approved by Mid-Power), no changes to the status of title will have occurred between that status shown in the Original Title Opinion and the "New Title Opinion" (as defined below). Further, to the best knowledge of Red Star and Davis, except as and to the extent reflected in Red Star Schedule 2.08 attached hereto, none of such properties and Assets of Red Star is subject to, except as reflected in the Original Title Opinion, any known mortgage, pledge, lien, charge, security interest, encumbrance, restriction, lease, license, easement, liability or adverse claim. All buildings and all fixtures, equipment and other property and assets that are included in Red Star's Current Balance Sheet or are material to Red Star's business that are held under leases by Red Star are held under valid instruments enforceable by Red Star in accordance with their respective terms. Substantially all of Red Star's equipment in regular use has been well maintained and is in good and serviceable condition, reasonable wear and tear excepted. Section 2.09. Business Activity of Red Star. Red Star's principal executive offices are located at 200 Rancho Circle, Las Vegas, Nevada, and the sole business conducted by Red Star is ownership and development of oil and gas assets located in Carbon and Emery Counties, Utah. Section 2.10. Compliance Permits. Except as disclosed on Red Star Schedule 2.10 and to the best knowledge of Red Star, Red Star has not violated and is in compliance with all laws, statutes, ordinances, regulations, rules and orders of any federal, state or local government and any other governmental department or agency, and any judgment, decision, decree or order of any court of governmental agency, department or authority, including without limitation, environmental laws, relating to the Assets of Red Star, except where the violation or failure to comply, individually or in the aggregate, would not have a material adverse effect on Red Star. Except as disclosed on Red Star Schedule 2.10, Red Star has not received any notice to the effect that, or otherwise been advised that, Red Star is not in compliance with any such statutes, regulations, rules, judgments, decrees, orders, ordinances or other laws, and Red Star has no reason to anticipate that any existing circumstances are likely to result in violations of any of the foregoing, which failure or violation could, in any one case or in the aggregate, have a material adverse effect on Red Star. Red Star and, to Red Star's knowledge, each third-party operator of any of Red Star's properties, is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its business in all material respects as it is now being conducted or as presently foreseeable. Section 2.11. Governmental Authorizations. Except as disclosed on Red Star Schedule 2.11, Red Star has all licenses, franchises, permits and other Page 7 governmental authorizations that are legally required to enable it to conduct its business in all material respects as conducted at the Effective Time. Except for compliance with federal and state securities and corporation laws, as herein provided, no authorization, approval, consent or order of, or registration, declaration, or filing with, any court or other governmental body is required in connection with the execution and delivery by Red Star of this Agreement and the consummation by Red Star of the transactions contemplated hereby. Davis will assist Mid-Power in the pursuit of the qualification of Red Star by the Federal government and the State of Utah as an "operator" of the oil and gas leases included in the Assets, which qualification shall be diligently pursued by Mid-Power. Section 2.12. No Agreements To Sell the Assets. Red Star has no commitment or legal obligation, absolute or contingent, to any other person or firm to, directly or indirectly, sell, assign, transfer or effect a sale of the property and Assets of Red Star or to enter into any agreement or cause the entering into of an agreement with respect to any of the foregoing. Section 2.13. Books and Records. None of the books, records and workpapers of Red Star and relating to the Assets that have been presented to Mid-Power for review contain information that Red Star knows to be untrue or materially incorrect or misleading. The books and records, financial and otherwise, of Red Star and relating to the Assets are in all material respects complete and correct and have been made and maintained in accordance with sound business and bookkeeping practices and, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Red Star. Section 2.14. Tax Matters. Neither Red Star nor, to the knowledge of Red Star, any of its affiliates has taken agreed to take or failed to take any action that would prevent the Merger from constituting a tax-free reorganization qualifying under the provisions of Section 368(a)(1)(A) and Section 368(a)(2)(E) of the Code. Section 2.15. Taxes. Except as set forth in Red Star Schedule 2.15 and except as such failure of any representation or warranty made in this Section 2.15 to be true and correct that would not have a Red Star Material Adverse Effect: (a) Except to the extent that the applicable statute of limitations has expired, all returns required to be filed by or on behalf of Red Star have been (i) duly filed on a timely basis with the appropriate governmental authorities and such returns are true, correct and complete, and (ii) duly paid in full or made a provision in accordance with generally accepted accounting principles for the payment of all Taxes for all periods covered by such returns or with respect to any period prior to the Effective Time. (b) Red Star has complied in all respects with all applicable laws, rules and regulations relating to the payment and withholding of taxes (including any estimated taxes and the withholding of taxes pursuant to Sections 1441 and 1442 of the Code or similar provisions under any foreign laws) and has, within the time and the manner prescribed by law, withheld from employee wages and paid over all amounts withheld under applicable laws. (c) Red Star (i) has not been a member of an affiliated group filing a consolidated federal income tax return other than a group the common parent of Page 8 which was Red Star, (ii) does not have any liability under Treas. Reg. ss. 1.1502-6 or any analogous state, local or foreign law by reason of having been a member of any consolidated, combined or unitary group, and (iii) is not a party to any tax-sharing agreement with any person. (d) There is no material dispute or claim concerning any liabilities for Taxes of Red Star either raised or reasonably expected to be raised by any taxing authority. (e) Red Star has made available to Mid-Power complete copies of (i) all federal income tax returns of Red Star for all periods since the formation of Red Star for all periods open under the statute of limitations for assessments, and (ii) examination reports and statements of deficiencies assessed by Red Star. (f) No consent under Section 341(f) of the Code has been filed with respect to Red Star. (g) Red Star has not entered into any compensatory agreements with respect to the performance of services under which payment would result in a nondeductible expense pursuant to Section 280G of the Code. (h) Red Star has not agreed, nor is it required to make, prior to the Effective Time, any adjustment under Code Section 481(a) by reason of a change in accounting method or otherwise. (i) Red Star has not issued or assumed any corporate acquisition indebtedness that is subject to Sections 279(a) and (b) of the Code. (j) The amount of liability for unpaid taxes of Red Star for all periods ending on or before the Effective Time will not, in the aggregate, materially exceed the amount of the liability accruals for taxes reflected on Red Star's Current Balance Sheet as of the Effective Time. (k) Red Star has not disposed of any property in a transaction that is presently accounted for under the installment method. (l) Red Star is not required to treat any of its assets as owned by another person for federal income tax purposes or as tax-exempt bond property or as tax-exempt use property within the meaning of Section 168 of the Code. (m) Red Star elected to be treated as a "S" corporation from and after April 22, 1997. Section 2.16. Employment Matters. There are no material controversies pending or threatened between Red Star and any of its employees. Section 2.17. Disclosure of Tangible Personal Property. Included in Red Star Schedule 2.17 are descriptions of all items of tangible personal property included in the Assets of Red Star as of the date hereof. In the case of any asset leased to or by Red Star or assigned to or by Red Star, the disclosure also includes the current name and address of the lessor/lessee or assignor/assignee and a copy of the lease and/or assignment agreement. Page 9 Section 2.18. Information Supplied. Without limiting any of the representations and warranties contained herein, no representation or warranty of Red Star and no statement by Red Star or other information contained in documents referred to in this Agreement or the exhibits hereto, as of the date of such representation, warranty, statement or document, contains or contained any untrue statement of material fact, or, at the date thereof, omits or omitted to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which such statements are or were made, not misleading. Section 2.19. Certain Contracts and Restrictions. Red Star Schedule 2.19 to this Agreement lists, as of the date hereof, each agreement, contract or commitment (including any amendments thereto), other than the property interests described in Schedule 2.08, to which Red Star is a party or by which Red Star is bound involving consideration during the next 12 months in excess of $10,000 or that is otherwise material to the Assets, liabilities, financial condition, results of operations or current or future business of Red Star, taken as a whole. As of the date of this Agreement and except as indicated on Red Star Schedule 2.19, Red Star has fully complied with all material terms and conditions of all agreements, contracts and commitments listed in Red Star Schedule 2.19 and all such agreements, contracts and commitments are in full force and effect, Red Star has no knowledge of any defaults thereunder or any cancellations or modifications thereof, and such agreements, contracts and commitments are not subject to any memorandum or other written document or understanding permitting cancellation. Section 2.20. Technical Information. The information provided by Red Star to the engineering firm(s) engaged to evaluate the properties and Assets of Red Star is, or will be, at the time provided, complete and accurate in all respects and has not been modified or withdrawn. Red Star has no knowledge or reason to believe that the quantities, sales prices, operating costs or estimated future results of production of reserves from Red Star's data provided or to be provided are or will be inaccurate in any material respect, based on the assumptions set forth therein. Except for future price adjustments and production curtailments, Red Star knows of no fact, event or circumstance materially or adversely affecting the value of the properties as described in such data. Section 2.21. Brokers. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Red Star. Section 2.22. Absence of Certain Changes or Events. Except as contemplated by this Agreement or as set forth in Red Star Schedule 2.22, since the date of Red Star's Current Balance Sheet, Red Star has conducted its business in the ordinary course of business consistent with past practice. Since the date of Red Star's Current Balance Sheet, there has not been (i) any event, change or effect (including the occurrence of any liabilities of any nature, whether or not accrued, contingent or otherwise) having or that would be reasonably likely to have, individually or in the aggregate, a Red Star Material Adverse Effect; (ii) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to the equity interests of Red Star or any redemption, purchase or other acquisition by Red Star of any of Red Star's capital stock; (iii) any revaluation by Red Star Page 10 of its Assets, including the writing down of the value of inventory or the writing down or off of notes or accounts receivable, other than in the ordinary course of business and consistent with past practices; (iv) any change by Red Star in accounting principles or methods, except insofar as may be required by a change in generally accepted accounting principles; (v) a fundamental change in the nature of Red Star's business; (vi) any arrangement for the disposition of any material property or assets of Red Star; (vii) any accrual or arrangement for or payment of bonuses or special compensation of any kind or any severance or termination pay to any present or former officer, employee or stockholder; (viii) any increase in any profit sharing, bonus, deferred compensation, insurance, pension, retirement or other employee benefit plan, payment or arrangement made to, for or with its officers, directors or employees, or (ix) a Red Star Material Adverse Effect. Section 2.23. Environmental Matters. Except as and to the extent reflected in Red Star Schedule 2.23 attached hereto: (a) To the best of Red Star's and Davis' knowledge, Red Star's Assets are, and at all times have been (except as set forth in Red Star Schedule 2.23(a)), operated in accordance with all applicable environmental laws, and to the best of Red Star's and Davis' knowledge, no condition exists with respect to Red Star's Assets that would or could reasonably be expected to subject Red Star or Mid-Power to any damages (including without limitation actual, consequential, exemplary and punitive damages), liability (absolute or contingent, determined or determinable), penalties, injunctive relief or cleanup costs under any applicable environmental laws, or that require or could reasonably be expected to require cleanup, removal, remedial action or other response by either Red Star or Mid-Power. (b) To the best of Red Star's and Davis' knowledge, Red Star and Davis have not received and, none of their predecessors in title to Red Star's Assets has received, any notice from a governmental agency asserting or alleging a violation of any environmental laws as they relate to Red Star's Assets, except as set forth in Red Star Schedule 2.23(b). (c) To the best of Red Star's and Davis' knowledge, there are no pending or threatened suits, actions, claims or proceedings against Red Star or Davis or, to the best of Red Star's and Davis' knowledge, against any predecessors in title to Red Star's Assets, arising from or related to, directly or indirectly, any environmental laws as they relate to Red Star's Assets. (d) To the best of Red Star's and Davis' knowledge, neither Red Star, Davis nor any predecessor in title to Red Star's Assets is subject to any judgment, decree, order or citation related to or arising out of any environmental laws, and, to the best of Red Star's and Davis' knowledge, neither Red Star nor Davis has been named or listed as a potentially responsible party by any governmental or other entity in a matter arising under or relating, directly or indirectly, to any environmental laws. (e) To the best of Red Star's and Davis' knowledge, Red Star or Davis has obtained or caused to be obtained all permits, licenses and approvals related to Red Star's Assets required under any environmental laws, except as otherwise disclosed in this Agreement. Page 11 (f) To the best of Red Star's and Davis' knowledge, there are not now, nor have there ever been (except as set forth on Red Star Schedule 2.23(f)), hazardous materials discharged, leaked, spilled or released in, on, to, from or at any properties owned, leased or operated by Red Star or stored, treated, recycled at or in tanks or other facilities thereon or related thereto that could give rise or could reasonably be expected to give rise to liability under any environmental laws. (g) To the best of Red Star's and Davis' knowledge, excluding well bunkers, pipelines and surface equipment associated with all the drilling and producing for gas from wells in the Clear Creek Unit, there are no underground storage tanks, surface impoundments, or wastewater injection wells located on or in any of Red Star's Assets. ARTICLE III REPRESENTATIONS AND WARRANTIES OF MID-POWER Mid-Power represents and warrants to Red Star and Davis that as of the date of this Agreement and at the Effective Time: Section 3.01. Organization and Good Standing. Mid-Power is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, and has full corporate power and authority to own and hold the properties and assets owned and leased by it, and to conduct its business as presently conducted. Mid-Power is duly qualified, validly existing and in good standing under the laws of each other jurisdiction in which the nature of the business conducted by it or the ownership or leasing of its properties makes such qualification necessary, other than where the failure to be so duly qualified and in good standing would not have a "Mid-Power Material Adverse Effect" (as defined below). The term "Mid-Power Material Adverse Effect" as used in this Agreement shall mean any change or effect that, individually or when taken together with all such other changes or effects, would be reasonably likely to be materially adverse to the assets, liabilities, financial condition, results of operations or current or future business of Mid-Power.. Section 3.02. Authority. Mid-Power has the requisite corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by Mid-Power's board of directors, and no other corporate proceedings on the part of Mid-Power are necessary to authorize this Agreement and the transactions contemplated hereby. This Agreement has been duly executed and delivered by Mid-Power. Section 3.03. Noncontravention. Mid-Power is not subject to or obligated under any charter, bylaw, contract provision, license, franchise, permit, order or decree that would be breached or violated, or in respect of which a right of acceleration would be created by, its executing and carrying out this Agreement. Section 3.04. Reports; Financial Statements. Page 12 (a) Except as set forth in Schedule 3.04(a), since September 30, 1999, Mid-Power (then known as Caplan Corporation) and its subsidiaries have filed all forms, reports, statements and other documents required to be filed with (i) the Securities and Exchange Commission (the "SEC") including, without limitation, (1) all Annual Reports on Form 10-K or 10-KSB, (2) all Quarterly Reports on Form 10-Q or 10-QSB (the balance sheet contained in the Quarterly Report for March 31, 2002 is referred to herein as the "Mid-Power Current Balance Sheet"), (3) all Current Reports on Form 8-K, and (4) all other reports, schedules, registration statements or other documents (collectively referred to as the "Mid-Power SEC Reports"); (ii) any applicable state securities authorities; and (iii) any other applicable federal or state regulatory authorities, except where the failure to file any such forms, reports, statements or other documents would not have a Mid-Power Adverse Effect (all such forms, reports, statements and other documents in clauses (i), (ii) and (iii) of this section 3.05(a) being referred to herein collectively as the "Mid-Power Reports"). The Mid-Power Reports, including any Mid-Power Reports filed after the date of this Agreement and prior to the Effective Time, (x) were or will be prepared in accordance with the requirements of applicable law (including, with respect to Mid-Power SEC Reports, the Securities Act of 1933 ("Securities Act") and the Exchange Act, as the case may be, and the rules and regulations of the SEC thereunder applicable to such Mid-Power SEC Reports) and (y) did not at the time they were filed, or will not at the time they are filed, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. (b) Each of the consolidated financial statements (including in each case any related notes thereto) contained in Mid-Power SEC Reports filed prior to the Effective Time has been or will be prepared in accordance with the published rules and regulations of the SEC and generally accepted accounting principles applied on a consistent basis throughout the periods involved (except (i) to the extent required by changes in generally accepted accounting principles; (ii) with respect to Mid-Power SEC Reports filed prior to the date of this Agreement, as may be indicated in the notes thereto; and (iii) with respect to interim financial statements as may be permitted by Item 310 of Regulation S-B) and fairly present or will fairly present the consolidated financial position of Mid-Power and its subsidiaries as of the respective dates thereof and the consolidated results of operations and cash flows for the periods indicated (including reasonable estimates of normal and recurring year-end adjustments), except that any unaudited interim financial statements were or will be subject to normal and recurring year-end adjustments and any pro forma financial statements contained in such consolidated financial statements are not necessarily indicative of the consolidated financial position of Mid-Power and its subsidiaries as of the respective dates thereof and the consolidated results of operations and cash flows for the periods indicated. Section 3.05. Compliance Permits. Except as disclosed on Mid-Power Schedule 3.05 and to the best knowledge of Mid-Power, Mid-Power has not violated and is in compliance with all laws, statutes, ordinances, regulations, rules and orders of any federal, state or local government and any other governmental department or agency, and any judgment, decision, decree or order of any court of governmental agency, department or authority, including without limitation, Page 13 environmental laws, relating to the Assets of Mid-Power, except where the violation or failure to comply, individually or in the aggregate, would not have a Mid-Power Adverse Effect on Mid-Power. Except as disclosed on Mid-Power Schedule 3.05, Mid-Power has not received any notice to the effect that, or otherwise been advised that, Mid-Power is not in compliance with any such statutes, regulations, rules, judgments, decrees, orders, ordinances or other laws, and Mid-Power has no reason to anticipate that any existing circumstances are likely to result in violations of any of the foregoing, which failure or violation could, in any one case or in the aggregate, have a Mid-Power Adverse Effect on Mid-Power. Mid-Power and, to Mid-Power's knowledge, each third-party operator of any of Mid-Power's properties, is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its business in all material respects as it is now being conducted or as presently foreseeable. Section 3.06. Governmental Authorizations. Mid-Power has all licenses, franchises, permits and other governmental authorizations that are legally required to enable it to conduct its business in all material respects as conducted at the Effective Time. Except for compliance with federal and state securities and corporation laws, as herein provided, no authorization, approval, consent or order of, or registration, declaration, or filing with, any court or other governmental body is required in connection with the execution and delivery by Mid-Power of this Agreement and the consummation by Mid-Power of the transactions contemplated hereby. Section 3.07. No Agreements To Sell the Assets. Mid-Power has no commitment or legal obligation, absolute or contingent, to any other person or firm to, directly or indirectly, sell, assign, transfer or effect a sale of the property and assets of Mid-Power or to enter into any agreement or cause the entering into of an agreement with respect to any of the foregoing. Section 3.08. Books and Records. None of the books, records and workpapers of Mid-Power that have been presented to Red Star for review contain information that Mid-Power knows to be untrue or materially incorrect or misleading. The books and records, financial and otherwise, of Mid-Power are in all material respects complete and correct and have been made and maintained in accordance with sound business and bookkeeping practices and, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Mid-Power. Section 3.09. Tax Matters. Neither Mid-Power nor any of its affiliates has taken, agreed to take or failed to take any action that would prevent the Merger from constituting a tax-free reorganization qualifying under the provisions of Section 368(a)(1)(A) and Section 368(a)(3)(E) of the Code. Section 3.10. Taxes. Except as set forth in Mid-Power Schedule 3.10 and except as such failure of any representation or warranty made in this Section 3.10 to be true and correct that would not have a "Mid-Power Material Adverse Effect" (as defined below): (a) Except to the extent that the applicable statute of limitations has expired, all returns required to be filed by or on behalf of Mid-Power have been Page 14 (i) duly filed on a timely basis with the appropriate governmental authorities and such returns are true, correct and complete, and (ii) duly paid in full or made a provision in accordance with generally accepted accounting principles for the payment of all Taxes for all periods covered by such returns or with respect to any period prior to the Effective Time. (b) Mid-Power has complied in all respects with all applicable laws, rules and regulations relating to the payment and withholding of taxes (including any estimated taxes and the withholding of taxes pursuant to Sections 1441 and 1443 of the Code or similar provisions under any foreign laws) and has, within the time and the manner prescribed by law, withheld from employee wages and paid over all amounts withheld under applicable laws. (c) Mid-Power (i) has not been a member of an affiliated group filing a consolidated federal income tax return other than a group the common parent of which was Mid-Power, (ii) does not have any liability under Treas. Reg. ss. 1.1503-6 or any analogous state, local or foreign law by reason of having been a member of any consolidated, combined or unitary group, and (iii) is not a party to any tax-sharing agreement with any person. (d) There is no material dispute or claim concerning any liabilities for Taxes of Mid-Power either raised or reasonably expected to be raised by any taxing authority. (e) Mid-Power has made available to Red Star complete copies of (i) all federal income tax returns of Mid-Power for all periods since the formation of Mid-Power for all periods open under the statute of limitations for assessments, and (ii) examination reports and statements of deficiencies assessed by Mid-Power. (f) No consent under Section 341(f) of the Code has been filed with respect to Mid-Power. (g) Mid-Power has not entered into any compensatory agreements with respect to the performance of services under which payment would result in a nondeductible expense pursuant to Section 380G of the Code. (h) Mid-Power has not agreed, nor is it required to make, prior to the Effective Time, any adjustment under Code Section 481(a) by reason of a change in accounting method or otherwise. (i) Mid-Power has not issued or assumed any corporate acquisition indebtedness that is subject to Sections 379(a) and (b) of the Code. (j) The amount of liability for unpaid taxes of Mid-Power for all periods ending on or before the Effective Time will not, in the aggregate, materially exceed the amount of the liability accruals for taxes reflected on Mid-Power's Current Balance Sheet as of the Effective Time. (k) Mid-Power has not disposed of any property in a transaction that is presently accounted for under the installment method. Page 15 (l) Mid-Power is not required to treat any of its assets as owned by another person for federal income tax purposes or as tax-exempt bond property or as tax-exempt use property within the meaning of Section 168 of the Code. Section 3.11. Employment Matters. There are no material controversies pending or threatened between Mid-Power and any of its employees. Section 3.12. Information Supplied. Without limiting any of the representations and warranties contained herein, no representation or warranty of Mid-Power and no statement by Mid-Power or other information contained in documents referred to in this Agreement or the exhibits hereto, as of the date of such representation, warranty, statement or document, contains or contained any untrue statement of material fact, or, at the date thereof, omits or omitted to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which such statements are or were made, not misleading. Section 3.13. Certain Contracts and Restrictions. Mid-Power Schedule 3.13 to this Agreement lists, as of the date hereof, each agreement, contract or commitment (including any amendments thereto), to which Mid-Power is a party or by which Mid-Power is bound involving consideration during the next 12 months in excess of $10,000 or that is otherwise material to the Assets, liabilities, financial condition, results of operations or current or future business of Mid-Power, taken as a whole. As of the date of this Agreement and except as indicated on Mid-Power Schedule 3.13, Mid-Power has fully complied with all material terms and conditions of all agreements, contracts and commitments listed in Mid-Power Schedule 3.13 and all such agreements, contracts and commitments are in full force and effect, Mid-Power has no knowledge of any defaults thereunder or any cancellations or modifications thereof, and such agreements, contracts and commitments are not subject to any memorandum or other written document or understanding permitting cancellation. Section 3.14. Brokers. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Mid-Power. Section 3.15. Absence of Certain Changes or Events. Except as contemplated by this Agreement, as disclosed in the Mid-Power SEC Reports, or as set forth in Mid-Power Schedule 3.15, since the date of Mid-Power's Current Balance Sheet, Mid-Power has conducted its business in the ordinary course of business consistent with past practice. Since the date of Mid-Power's Current Balance Sheet, there has not been (i) any event, change or effect (including the occurrence of any liabilities of any nature, whether or not accrued, contingent or otherwise) having or that would be reasonably likely to have, individually or in the aggregate, a Mid-Power Material Adverse Effect; (ii) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to the equity interests of Mid-Power or any redemption, purchase or other acquisition by Mid-Power of any of Mid-Power's capital stock; (iii) any revaluation by Mid-Power of its Assets, including the writing down of the value of inventory or the writing down or off of notes or accounts receivable, other than in the ordinary course of business and consistent with past practices; (iv) any change by Mid-Power in accounting principles or methods, except insofar as may be required by a change in Page 16 generally accepted accounting principles; (v) a fundamental change in the nature of Mid-Power's business; (vi) any arrangement for the disposition of any material property or assets of Mid-Power; (vii) any accrual or arrangement for or payment of bonuses or special compensation of any kind or any severance or termination pay to any present or former officer, employee or stockholder; (viii) any increase in any profit sharing, bonus, deferred compensation, insurance, pension, retirement or other employee benefit plan, payment or arrangement made to, for or with its officers, directors or employees, or (ix) a Mid-Power Material Adverse Effect. Section 3.16 New Mid-Power Stock. The New Mid-Power Stock will, when issued, be fully paid and non-assessable. ARTICLE IV TERMINATION, AMENDMENT AND WAIVER Section 4.01. Termination. This Agreement may be terminated at any time prior to the Effective Time, whether before or after approval of this Agreement and the Merger by the stockholders in such case where approval is required: (a) by mutual consent of MergerCo and Red Star; (b) by either Party, if there shall be any order, which is final and nonappealable, preventing the consummation of the Merger, except if the Party relying on such order to terminate this Agreement has not complied with its obligations under this Agreement; or (c) by either Party, if the Merger shall not have been consummated on or before 11:59:59 p.m., local time, June 13, 2002. The right of the Parties hereto to terminate this Agreement pursuant to this section 4.01 shall remain operative and in full force and effect regardless of any investigation made by or on behalf of either Party hereto, any person controlling such Party or any of its officers, directors, managers, partners, representatives or agents, whether prior to or after the execution of this Agreement. Section 4.02. Effect of Termination. Except as provided in section 7.02 of this Agreement, in the event of the termination of this Agreement pursuant to section 4.01 this Agreement shall forthwith become void, there shall be no liability on the part of one Party to the other Party to consummate the transaction contemplated by this Agreement, and all rights and obligations of either Party hereto shall cease, except that nothing herein shall relieve the other Party of any liability for any breach of such Party's covenants or agreements contained in this Agreement or any willful breach of such Party's representations or warranties contained in this Agreement. Section 4.03. Amendment. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the Parties hereto. Page 17 ARTICLE V INDEMNIFICATION Section 5.01. Indemnification of Davis. In addition to any other indemnification provided in this Agreement or in any other documents executed in connection herewith, Mid-Power shall protect, defend, indemnify and save harmless Davis for, from and against all liabilities, obligations, claims, demands, damages, penalties, causes of action, losses, fines, costs and expenses (including without limitation out-of-pocket attorneys' fees and expenses), imposed upon or incurred by or asserted against Davis by reason of: (a) ownership, development, management and operation of the Assets or any interest therein or receipt of any income therefrom from and after the Effective Time; (b) any failure on the part of Mid-Power to perform or comply with any of the terms of this Agreement; (c) the presence, disposal, escape, seepage, leakage, spillage, discharge, emission, release, or threatened release of any "Hazardous Materials" (as defined in Nevada Revised Statutes, Section 40.504) on, from, or affecting the Assets or any other property from and after the Effective Time; (d) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to such Hazardous Materials from and after the Effective Time; (e) any lawsuit brought or threatened, settlement reached, or government order relating to such Hazardous Materials arising out of activities occurring from and after the Effective Time; (f) any failure of Mid-Power to comply with any applicable laws; (g) any representation or warranty made in this Agreement or any other documents executed in connection herewith being false or misleading in any respect as of the date such representation or warranty was made or as of the Effective Time; and (h) any claim by brokers, finders or similar persons claiming to be entitled to a commission in connection with any transaction involving the Assets or any part thereof under any legal requirement or any liability asserted against Davis with respect thereto. Any amounts payable to Davis by reason of the application of this Section shall be immediately due and payable and shall bear interest at the Default Rate (as defined in the Note) from the date loss or damage is sustained by Davis until paid. The obligations and liabilities of Mid-Power under this Section shall survive any termination, satisfaction or assignment of this Agreement and any closing hereunder. Section 5.02. Indemnification of Mid-Power. In addition to any other indemnification provided in this Agreement or in any other documents executed in connection herewith, Davis shall protect, defend, indemnify and save harmless Mid-Power for, from and against all liabilities, obligations, claims, demands, damages, penalties, causes of action, losses, fines, costs and expenses (including without limitation out-of-pocket attorneys' fees and expenses), imposed upon or incurred by or asserted against Mid-Power by reason of: (a) to the extent Davis has actual knowledge of the subject thereof any known liability that comes from the ownership, development, management and operation of the Assets or any interest therein or receipt of any income therefrom prior to the Effective Time, except as otherwise provided in this Agreement; (b) any failure on the part of Red Star or Davis to perform or comply with any of the terms of this Agreement; (c) to the extent Davis has actual knowledge of the subject thereof the presence, disposal, escape, seepage, leakage, spillage, discharge, emission, release, or threatened release of any "Hazardous Materials" (as defined in Nevada Revised Statutes, Section 40.504) on, from, or affecting the Assets or any other property prior to the Effective Time; (d) to the extent Page 18 Davis has actual knowledge of the subject thereof any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to such Hazardous Materials prior to the Effective Time; (e) any lawsuit brought or threatened, settlement reached, or government order relating to such Hazardous Materials arising out of activities occurring prior to the Effective Time; (f) any failure of Red Star or Davis to comply with any applicable laws; and (g) any representation or warranty made in this Agreement or any other documents executed in connection herewith being false or misleading in any respect as of the date such representation or warranty was made or as of the Effective Time. Any amounts payable to Mid-Power by reason of the application of this Section shall be immediately due and payable and shall bear interest at the Default Rate (as defined in the Note) from the date loss or damage is sustained by Mid-Power until paid. The obligations and liabilities of Davis under this Section shall survive any termination, satisfaction or assignment of this Agreement and any closing hereunder. Section 5.03. Claims for Indemnification. Whenever any claim shall arise for indemnification hereunder, the Party seeking indemnification (the "Indemnified Party"), shall promptly notify, in writing, the Party from whom indemnification is sought (the "Indemnifying Party") of the claim and, when known, the facts constituting the basis for such claim. In the event of any such claim for indemnification hereunder resulting from or in connection with any claim or legal proceedings by any Party, the notice to the Indemnifying Party shall specify, if known, the amount or an estimate of the amount of the liability arising therefrom. The Indemnified Party shall not settle or compromise any claim by a third party for which it is entitled to indemnification hereunder without the prior written consent of the Indemnifying Party, which shall not be unreasonably withheld, unless suit shall have been instituted against it and the Indemnifying Party shall not have taken control of such suit after notification thereof as provided in section 5.04 hereof. Section 5.04. Defense by Indemnifying Party. In connection with any claim giving rise to indemnity hereunder resulting from or arising out any claim or legal proceeding by a person who is not a Party to this Agreement, the Indemnifying Party, at its sole cost and expense may, upon written notice to the Indemnified Party, assume the defense of any such claim or legal proceeding if it acknowledges to the Indemnified Party in writing its obligations to indemnify the Indemnified Party with respect to all elements of such claim. The Indemnified Party shall be entitled to participate (but not control) the defense of any such action, with its counsel and at its own expense. If the Indemnifying Party does not assume the defense of any such claim or litigation resulting therefrom within 30 days after the date such claim is made: (a) the Indemnified Party may defend against such claim or litigation in such manner as it may deem appropriate, including, but not limited to, settling such claim or litigation, after giving notice of the same to the Indemnifying Party, on such terms as the Indemnified Party may deem appropriate; and (b) the Indemnifying Party shall be entitled to participate in (but not control) the defense of such action, with its counsel and at its own expense. If the Indemnifying Party thereafter seeks to question the manner in which the Indemnified Party defended such third-party claim or the amount or nature of any such settlement, the Indemnifying Party shall have the burden to prove by a preponderance of the evidence Page 19 that the Indemnified Party did not defend or settle such third-party claim in a reasonably prudent manner. ARTICLE VI ADDITIONAL AGREEMENTS Section 6.01. Acquisition of New Mid-Power Stock and Restrictions on Transfer. The consummation of this Agreement and the transactions contemplated herein, including the issuance of the New Mid-Power Stock to Davis as contemplated hereby, constitutes the offer and sale of securities under the Securities Act and applicable state securities laws. Such transactions shall be consummated in reliance on exemptions from the registration and prospectus delivery requirements of such statutes that depend, among other items, on the circumstances under which Davis acquires such securities. (a) In order to provide documentation for reliance upon exemptions from the registration and prospectus delivery requirements for such transactions, the approval of the Merger and this Agreement by Davis indicates his acceptance of, and concurrence in, the following representations and warranties: (i) Davis confirms his status as an "accredited investor," as defined under Rule 501 of Regulation D promulgated under the Securities Act, on the basis that he is a natural person whose individual net worth as of the Effective Time, exceeds $1,000,000. (ii) Davis acknowledges that neither the SEC nor the securities commission of any state or other federal agency has made any determination as to the merits of acquiring the New Mid-Power Stock and that the transactions contemplated herein involve certain risks. (iii) Davis has received and read this Agreement and understands the risk related to the consummation of the transactions herein contemplated. (iv) Davis has such knowledge and experience in business and financial matters that he is capable of evaluating the Merger and Mid-Power and its business operations. (v) Davis has been provided with a copy of the Agreement plus all materials and information requested by his representative, including any information requested to verify any information furnished (to the extent such information is available or can be obtained without unreasonable effort or expense), and he has been provided the opportunity for direct communication with Mid-Power and its representatives regarding the transactions contemplated hereby. (vi) All information that Davis has provided to Mid-Power or its agents or Representatives concerning his suitability to hold shares in Mid-Power following the transactions contemplated hereby is complete, accurate and correct. (vii) Davis has not offered or sold any interest in this Agreement and has no present intention of dividing the New Mid-Power Stock to be received or the rights under this Agreement with others or of reselling or otherwise disposing of any portion of such stock or rights, either currently or after the passage of a fixed or determinable period of time or on the occurrence or nonoccurrence of any predetermined event or circumstance. Page 20 (viii) Davis was at no time solicited by any leaflet, public promotional meeting, circular, newspaper or magazine article, radio or television advertisement, or any other form of general advertising or solicitation in connection with the offer, sale or purchase of the New Mid-Power Stock through this Agreement. (ix) Davis anticipates no need in the foreseeable future to sell the New Mid-Power Stock to be acquired pursuant hereto. Davis is able to bear the economic risks of this investment, and consequently, without limiting the generality of the foregoing, is able to hold the New Mid-Power Stock to be received for an indefinite period. (x) Davis understands that the New Mid-Power Stock has not been registered, but is being acquired by reason of a specific exemption under the Securities Act as well as under certain state securities laws for transactions by an issuer not involving any public offering and that any disposition of the New Mid-Power Stock may, under certain circumstances, be inconsistent with this exemption and may make the holder who disposes of such stock an "underwriter" within the meaning of the Securities Act. It is understood that the definition of "underwriter" focuses upon the concept of "distribution" and that any subsequent disposition of the New Mid-Power Stock can only be effected in transactions that are not considered distributions. (xi) Davis acknowledges that the New Mid-Power Stock must be held and may not be sold, transferred or otherwise disposed of for value unless it is subsequently registered under the Securities Act or an exemption from such registration is available. Except as provided herein, Mid-Power is under no obligation to register the New Mid-Power Stock under the Securities Act. If Rule 144 is available (and no assurance is given that it will be except as expressly set forth in this Agreement), after one year and prior to two years following the Effective Time, only routine sales of such New Mid-Power Stock in limited amounts can be made in reliance upon Rule 144 in accordance with the terms and conditions of that rule. Mid-Power is under no obligation to Davis to make Rule 144 available, except as may be expressly agreed to by it in writing in this Agreement, and in the event Rule 144 is not available, compliance with Regulation A or some other disclosure exemption may be required before such persons can sell, transfer or otherwise dispose of such New Mid-Power Stock without registration under the Securities Act. Mid-Power's registrar and transfer agent will maintain a stop transfer order against the registration or transfer of the New Mid-Power Stock, and the certificate representing the New Mid-Power Stock will bear a legend in substantially the following form so restricting the sale of such securities: Page 21 The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and are "restricted securities" within the meaning of Rule 144 promulgated under the Securities Act. The securities have been acquired for investment and may not be sold or transferred without complying with Rule 144 in the absence of an effective registration or other compliance under the Securities Act. (xii) Davis acknowledges that Mid-Power may refuse to register transfer of the shares of the New Mid-Power Stock in the absence of compliance with Rule 144 unless the holder furnishes the issuer with a "no-action" or interpretive letter from the SEC or an opinion of counsel reasonably acceptable to Mid-Power stating that the transfer is proper. Further, unless such letter or opinion states that the New Mid-Power Stock is free of any restrictions under the Securities Act, the issuer may refuse to transfer the New Mid-Power Stock to any transferee who does not furnish in writing to the issuer the same representations and agree to the same conditions with respect to such New Mid-Power Stock as set forth herein. The issuer may also refuse to transfer the New Mid-Power Stock if any circumstances are present reasonably indicating that the transferee's representations are not accurate. (b) Each Party acknowledges that the basis for relying on exemptions from registration or qualifications are factual, depending on the conduct of the various Parties, and that no legal opinion or other assurance will be required or given to the effect that the transactions contemplated hereby are in fact exempt from registration or qualification. Section 6.02. Registration Procedures and Expenses. Mid-Power shall register the resale of all of the New Mid-Power Stock owned by Davis pursuant to the terms of a Registration Rights Agreement, in the form attached hereto as Exhibit "E" and incorporated herein by this reference, to be executed and delivered at the Closing. Section 6.03. No Representation Regarding Tax Treatment. No representation or warranty is being made or legal opinion given by any Party to any other regarding the treatment of this transaction for federal or state income taxation. Although this transaction has been structured in an effort to qualify for treatment under Section 368(a)(1)(A) and Section 368(a)(2)(E) of the Code, there is no assurance that any part of this transaction in fact meets the requirements for such qualification. Each Party has relied exclusively on its own legal, accounting and other tax advisers regarding the treatment of this transaction for federal and state income taxes and on no representation, warranty or assurance from any other party or such other party's legal, accounting or other advisor(s). Section 6.04. Public Announcements. Neither Party shall issue any press release or otherwise make any public statements with respect to the Merger without the approval of the other Party. Section 6.05. Updated Title Opinion. Within thirty (30) days after the Effective Time, Davis shall deliver to Mid-Power, at Mid-Power's expense, an updated acquisition title opinion, dated as of the Effective Time, performed by Page 22 the law offices of VanCott, Bagley, Cornwall & McCarthy confirming the ownership by Red Star of the property interests described in and the conclusions set forth in the Old Title Opinion, except as permitted by this Agreement (the "New Title Opinion"). Section 6.06. Obligations after Closing. For a period of three years following the Effective Time, Davis shall have access to and the right to copy all of the records of Mid-Power relative to Red Star as may be necessary for preparation of employee or corporate tax returns, employee tax reports, and customary accounting functions. Additionally, Mid-Power and Davis shall each make available to the other, at reasonable times and upon reasonable advance notice, relevant records and personnel in connection with the preparation of a defense or the participation in a defense, participation in the prosecution of claim or litigation, and negotiation of a settlement relating to any pending, future or threatened litigation, or government agency proceeding (including a tax audit), or in the preparation of financial statements and reports involving the conduct of Red Star's business before or after the Closing. Section 6.07. Anti-Dilution. From and after the Effective Time and until such time as the Note has been fully paid, Mid-Power shall not issue any capital stock or options therein, whether common or preferred, that would cause the ownership of Davis to become less than sixty percent (60%) of the ownership, beneficial or legal, of Mid-Power. Following payment in full of the Note and until one (1) year and one (1) month following the Effective Time, Mid-Power shall not issue any capital stock or options therein, whether common or preferred, that would cause the ownership of Davis to become less than fifty-one percent (51%) of the ownership, beneficial or legal, of Mid-Power. Until five (5) years following the Effective Time, Mid-Power shall not issue any capital stock or options therein, whether common or preferred, that would cause the ownership of Davis to become less than thirty-six percent (36%) of the ownership, beneficial or legal, of Mid-Power. The obligations and liabilities of Mid-Power under this Section shall survive any termination, satisfaction or assignment of this Agreement and any closing hereunder. Nothing contained herein shall be construed as requiring Davis to surrender any of the shares of the New Mid-Power Stock received pursuant to this Agreement. Section 6.08. Release of Liabilities. Mid-Power acknowledges that Davis is a co-obligor with Red Star of those certain Conditional Sales Contracts with General Motors Acceptance Corporation for the two (2) GMC pick-up trucks more particularly described on Schedule 2.17. Mid-Power will use its best efforts within a reasonable period of time following the Effective Time to cause Davis to be released from such liability. Section 6.09 Settlement Proceeds. Notwithstanding anything else contained herein to the contrary, Mid-Power acknowledges and agrees that the proceeds of any settlement reached with Petroleum Development Corporation ("PDC") regarding a contractual dispute between Davis and PDC shall be payable solely to Davis. Davis believes that the amount of such settlement proceeds may be $287,500.00 and Mid-Power agrees that all negotiations are to be conducted at the sole and absolute discretion of Davis without any direction by or from Mid-Power. In the event a settlement with PDC is not reached, Davis, on the same basis as set forth above, may pursue any and all causes of action or claims against PDC arising from the agreements between PDC and Davis, including mediation, arbitration and/or suits at law and the like, all at Davis' cost and Page 23 expense. Mid-Power agrees to cooperate with Davis to effect the intent of this Section 6.09. Davis agrees to indemnify Mid-Power as related to acts/actions covered within this Section 6.09. Section 6.10 Bonds and Refundable Deposits. As a bond to guarantee performance in favor of the State of Utah, Division of Oil, Gas and Mining (the "Division") of Davis' obligation with regard to certain wells pursuant to the Division's Request for Agency Action, presently pending before the State of Utah Board of Oil, Gas and Mining, Davis has heretofore deposited cash in the amount of $80,000.00 (the "Collateral") to enable the issuance of a surety bond (the "Old Bond"). Scott has prior hereto provided financial assets which are to replace such Old Bond. Upon release of the Old Bond, the Collateral shall be paid to Davis. All other surety or financial bonds and refundable deposits as shall have been posted and/or made by Red Star or Davis prior to the Effective Time shall be and remain the property of Davis after the Effective Time, and upon the designation of Mid-Power as the operator, the bonds shall be replaced by Mid-Power. All refunds of the original bonds and deposits shall be paid to Davis. Until such time that Mid-Power Resource is approved as the operator, Davis shall continue to be Operator and Davis shall continue to operate the Clear Creek Unit as a reasonably prudent operator. Subject to the representations of Davis, once Mid-Power is the Operator, Davis is released of all liability for the bonds or the subject matter thereof, including the plugging, abandoning and reclamation of wells on the Clear Creek Unit. Davis shall negotiate using his sole and absolute discretion without any direction by or from Mid-Power with the Division to a satisfactory conclusion the final form of the stipulated Order and Settlement Agreement, which will result in the Division's Request for Agency Action currently pending before the Board of Oil Gas and Mining being dismissed with prejudice. Section 6.11. Additional Financial Statements of Red Star and the Assets and Operations Acquired. (a) Pursuant to the requirements of Section 15(d) of the Exchange Act, Mid-power is required to file with the SEC, within 75 days after the Effective Time, a current report on Form 8-K containing specified audited and unaudited historical financial information respecting any business acquired in accordance with the requirements of Item 310 of Regulation S-B. In order to meet this requirement, promptly following the Effective Time, Davis shall, with diligence and dispatch, provide or otherwise make available to Mid-Power all of the books, records and financial information, including all books and records of original entry, in the care, custody or control of Davis or Red Star, as the case may be, relating to Red Star and the Assets and operations acquired for all periods during which they were owned by either Davis or Red Star and, to the extent available without unreasonable effort or expense, for such period subsequent to December 31, 1999, that they were owned or operated by any third party. Promptly following receipt of or access to such information, Mid-Power shall engage, authorize and instruct its certified public accountants to undertake an audit of such financial information, at Mid-Power's cost, and to issue an unqualified opinion meeting the requirements of Article 2 of Regulation S-X promulgated by the SEC with respect thereto in order to enable Mid-Power to satisfy its reporting requirements under Section 15(d) of the Exchange Act. Page 24 (b) If Davis is able to provide to provide financial information for that portion of 2000 that precedes his acquisition of the Assets on or about December 15, 2000, in form and substance sufficient to enable Mid-Power's certified public accountants to issue an unqualified opinion meeting the requirements of Article 2 of Regulation S-X promulgated by the SEC with respect thereto, on or before the date on which such financial information is required to be included in a current report on Form 8-K, Davis shall be deemed to have satisfied his obligations respecting the completion of audited historical financial information respecting the Assets and operations acquired, and Mid-Power shall include the audited financial information for 2000 and 2001 together with the other required interim and pro forma financial information in a report on Form 8-K and timely file such report (a "Financial Statement Filing Date"). (c) If Davis is unable to provide financial information for that portion of 2000 that precedes his acquisition of the Assets on or about December 15, 2000, in form and substance sufficient to enable Mid-Power's certified public accountants to issue an unqualified opinion meeting the requirements of Article 2 of Regulation S-X promulgated by the SEC with respect thereto, Mid-Power shall use its best efforts, with the cooperation and assistance of Davis, to seek a waiver or other relief from the requirement to provide audited financial statements respecting the full fiscal year ended December 31, 2000. If such waiver or other relief is obtained, Davis shall be deemed to have satisfied his obligations respecting the completion of audited historical financial information respecting the Assets and operations acquired, and Mid-Power shall include the audited financial information for 2001 together with the other required interim and pro forma financial information in a report on Form 8-K and timely file such report (a "Financial Statement Filing Date"). (d) If a waiver or other relief from providing audited historical financial information for Red Star and the Assets and operations acquired for the year ended December 31, 2000, is not obtained, Mid-Power shall change its fiscal year to a calendar year. Davis shall not be deemed to have satisfied its obligations respecting the completion of audited historical financial information on Red Star and the Assets and operations acquired until Mid-Power has filed audited financial statements for the two full fiscal years ended December 31, 2001 and 2002, on or before the date they are due under Mid-Power's reporting obligations pursuant to Section 15(d) of the Exchange Act (a "Financial Statement Filing Date"). (e) Pursuant to the terms of the Registration Rights Agreement, in substantially the form attached hereto as Exhibit "E" and incorporated herein by reference, to be executed and delivered at the Closing, Mid-Power shall be obligated to file a registration statement under the Securities Act within 30 days after the first Financial Statement Filing Date to occur, as provided above. Page 25 ARTICLE VII CONFIDENTIAL INFORMATION Section 7.01. Confidential Information. (a) Red Star shall (i) afford Mid-Power and its officers, directors, employees, accountants, consultants, legal counsel, agents and other representatives (collectively, the "Mid-Power Representatives") reasonable access at reasonable times, upon reasonable prior notice, to the officers, directors, employees, agents, properties, offices and other facilities of Red Star and to the books and records thereof; and (ii) furnish promptly to Mid-Power and the Mid-Power Representatives such information concerning the business, properties, contracts, records and personnel of Red Star (including, without limitation, financial, operating and other data and information) as may be reasonably requested, from time to time, by Mid-Power or such Mid-Power Representatives. (b) Mid-Power shall (i) afford to Red Star and its officers, directors, employees, accountants, consultants, legal counsel, agents and other representatives (collectively, the "Red Star Representatives"), reasonable access at reasonable times, upon reasonable prior notice, to the officers, directors, employees, accountants, agents, properties, offices and other facilities of Mid-Power (including any subsidiary) and to the books and records thereof; and (ii) furnish promptly to Red Star and the Red Star Representatives such information concerning the business, properties, contracts, records and personnel of Mid-Power (including any subsidiary) (including, without limitation, financial, operating and other data and information) as may be reasonably requested, from time to time, by Red Star or such Red Star Representatives. (c) Notwithstanding the foregoing provisions of this section, no Party shall be required to grant access or furnish information to the other Party to the extent that such access to or the furnishing of such information is prohibited by Law. No investigation by the Parties hereto made heretofore or hereafter shall affect the representations and warranties of the Parties that are herein contained and each such representation and warranty shall survive such investigation. (d) The information received pursuant to this section shall be deemed to be "Confidential Information." Each Party hereto agrees that it will treat in confidence all documents, materials and other Confidential Information that it shall have obtained regarding the other Party during the course of the negotiations leading to the consummation of the transactions contemplated hereby (whether obtained before or after the date of this Agreement), the investigation provided for herein and the preparation of this Agreement and other related documents. Such documents, materials and other Confidential Information shall not be communicated to any third Person (other than to their respective counsel, accountants, financial advisors or lenders) and shall not be used for any purpose to the detriment of the other Party. No Party shall use any Confidential Information in any manner whatsoever except solely for the purpose of evaluating a possible business relationship with the other Party. No Party and no Mid-Power or Red Star Representative will, during the term of this Agreement or at any time during the two years thereafter, irrespective of the time, manner or cause Page 26 of termination of this Agreement, use, disclose, copy or assist any other person or firm in the use, disclosure or copying of any documents, materials or other Confidential Information of the other Party hereto. ARTICLE VIII CONDITIONS TO OBLIGATIONS Section 8.01. Conditions to Mid-Power's Obligations. The obligations of Mid-Power under this Agreement are subject to the fulfillment of the following conditions on or prior to the Effective Time to the satisfaction of Mid-Power and their advisors: (a) The transaction documents referenced in this Agreement and the exhibits hereto shall have been duly drafted, authorized, executed and delivered and shall be in full force and effect, or will have been fully and completely performed, at the Effective Time. (b) Mid-Power shall have received certified copies of the appropriate proceedings of the board of directors of Red Star with respect to the authorization of this Agreement and all transactions contemplated herein to which Red Star is a Party. (c) Mid-Power shall have received a certificate as to the good standing of Red Star. (d) The representation and warranties of Red Star and Davis contained in this Agreement and in other instruments contemplated herein and any certificate, document or other agreement delivered pursuant thereto shall be true and correct as of the Effective Time as though made at the Effective Time. (e) Red Star shall have performed and complied in all material respects with all agreements, obligations and conditions required by this Agreement or any instrument contemplated herein to be performed or complied with by it or them on or prior to the Effective Time. (f) Mid-Power shall have received a certificate dated the Closing Date and signed by the duly authorized chief executive officer and principal accounting or financial officer or officers of Red Star to the effect that the representations and warranties of Red Star set forth in this Agreement are true and correct as of the date of the certificate; there has been no material adverse change to the financial condition, business or operations of Red Star nor has any event occurred that, with the lapse of time or giving of notice of both, may cause or create any material adverse change in the financial condition, business or operations of Red Star up to and including the date of the certificate; all conditions required by this Agreement to have been met, satisfied or performed by Red Star have been met; and all authorizations, consents, approvals, registrations and/or filings with any third party, governmental body, agency or court required in connection with the execution and delivery of the documents by Red Star have been obtained and are in full force and effect or, if not required to have been obtained, will be in full force and effect by such time as may be required. Page 27 (g) Mid-Power shall receive, within a reasonable time after the Effective Date, a certificate from the Secretary of State of the State of Nevada and a Utah Uniform Commercial Code certificate from the Division of Corporations and Commercial Code to the effect that there are no encumbrances of record on the Assets of Red Star, other than those disclosed in the Red Star Schedules. (h) Mid-Power shall have received further documents, certificates or instruments relating to the transactions contemplated hereby as Mid-Power may reasonably request. Section 8.02. Conditions to Red Star's Obligations. The obligations of Red Star under this Agreement are subject to the fulfillment of the following conditions on or prior to the Effective Time to the satisfaction of Red Star and its advisors: (a) The transaction documents referenced in this Agreement and the exhibits hereto shall have been duly drafted, authorized, executed and delivered and shall be in full force and effect, or will have been fully and completely performed, at the Effective Time. (b) Red Star shall have received certified copies of the appropriate proceedings of the board of directors of Mid-Power with respect to the authorization of this Agreement and all transactions contemplated herein to which Mid-Power is a Party. (c) Red Star shall have received a certificate as to the good standing of Mid-Power and MergerCo. (d) The representation and warranties of Mid-Power contained in this Agreement and in other instruments contemplated herein and any certificate, document or other agreement delivered pursuant thereto shall be true and correct as of the Effective Time as though made at the Effective Time. (e) Mid-Power shall have performed and complied in all material respects with all agreements, obligations and conditions required by this Agreement or any instrument contemplated herein to be performed or complied with by it or them on or prior to the Effective Time. (f) Red Star shall have received a certificate dated the Closing Date and signed by the duly authorized chief executive officer and principal accounting or financial officer or officers of Mid-Power to the effect that the representations and warranties of Mid-Power set forth in this Agreement are true and correct as of the date of the certificate; there has been no material adverse change to the financial condition, business or operations of Mid-Power nor has any event occurred that, with the lapse of time or giving of notice of both, may cause or create any material adverse change in the financial condition, business or operations of Mid-Power up to and including the date of the certificate; all conditions required by this Agreement to have been met, satisfied or performed by Mid-Power have been met; and all authorizations, consents, approvals, registrations and/or filings with any third party, governmental body, agency or court required in connection with the execution and Page 28 delivery of the documents by Mid-Power have been obtained and are in full force and effect or, if not required to have been obtained, will be in full force and effect by such time as may be required. (g) Red Star shall receive, within a reasonable time after the Effective Date, a certificate from the Secretary of State of the State of Nevada to the effect that there are no encumbrances of record on the Assets of Mid-Power, other than those disclosed in the Mid-Power Schedules. (h) Red Star shall have received further documents, certificates or instruments relating to the transactions contemplated hereby as Red Star may reasonably request. ARTICLE IX GENERAL PROVISIONS Section 9.01. Survival of Representations, Warranties and Agreements. The representations, warranties and agreements in this Agreement or any document delivered pursuant hereto on or prior to the Effective Time shall survive the Closing of the transactions to be consummated on the Effective Time. Section 9.02. Notices to Parties. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied or mailed by registered or certified mail (return receipt requested) to the persons at the following addresses (or at such other address for a Party as shall be specified by like notice): (a) If to Mid-Power, to: Mid-Power Service Corporation 3800 Howard Hughes Parkway Suite 860 Las Vegas, Nevada 89109 (b) If to Red Star, to: Red Star, Inc. 200 Rancho Circle Las Vegas, Nevada 89107-4601 Section 9.03. Notice to Third Parties. All notices to Mid-Power's customers, suppliers and other third parties and all other publicity or releases relating to the transactions contemplated hereby and issued between the date of this Agreement and the Effective Time will be approved by all Parties hereto prior to release or dissemination. Section 9.04. Interpretation. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. Terms such as "herein," "hereof" and "hereinafter" refer to this Agreement as a whole and not to the particular Page 29 sentence or paragraph where they appear, unless the context otherwise requires. Terms used in the plural include the singular, and vice versa, unless the context otherwise requires. Section 9.05. Drafting Party. The provisions of this Agreement and the documents and instruments referred to herein have been examined, negotiated, drafted and revised by counsel for each Party hereto and no implication shall be drawn nor made against any Party hereto by virtue of the drafting of this Agreement. Section 9.06. Attorney Fees. If any action is brought by any Party against another Party or Parties to enforce this Agreement or any provision contained herein, the prevailing Party shall be entitled to recover from the other Party or Parties reasonable attorneys' fees, costs and expenses incurred in connection with the prosecution or defense of such action. Section 9.07. Severability. The invalidity or unenforceability of any provision of this Agreement in any jurisdiction shall not affect the validity or enforceability or any other provisions of this Agreement, which shall remain in full force and effect in such jurisdiction, or the validity or enforceability of such provision in any other jurisdiction. Section 9.08. Specific Performance. The Parties hereto agree that if any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached, irreparable damage would occur, no adequate remedy at law would exist, and damages would be difficult to determine, and that the Parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity. Section 9.09. Miscellaneous. This Agreement, including the exhibits and related documents mentioned herein: (a) except as otherwise set forth hereinabove, constitutes the entire agreement and supersedes all other prior agreements and understandings, both written and oral, among the Parties, or any of them, with respect to the subject matter hereof; (b) is not intended to and shall not confer upon any other person any rights or remedies hereunder or otherwise with respect to the subject matter hereof; (c) shall not be transferred or assigned by any Party without the prior written consent of all other Parties; (d) shall be governed in all respects, including validity, interpretation and effect by the laws of the state of nevada; (e) may be executed in two or more counterparts, each of which shall be deemed an original, but which together shall constitute a single agreement; and (f) shall be binding upon and inure to the benefit of each of the Parties hereto and to their respective transferees, successors and assigns. Page 30 IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by and through their respective presidents, hereunto duly authorized, all as of the date first above written. MID-POWER SERVICE CORPORATION, RED STAR, INC., a Nevada corporation a Nevada corporation By: /s/ James W. Scott By: /s/ Edward Mike Davis ----------------------------------------- ------------------------- JAMES W. SCOTT EDWARD MIKE DAVIS President President MID-POWER RESOURCE CORPORATION, a Nevada corporation By: /s/ James W. Scott ----------------------------------------- JAMES W. SCOTT President Solely as to the provisions of Sections 2.08, 2.11, 2.23, 5.02 and Article VI of the foregoing agreement, /s/ Edward Mike Davis - --------------------------------- Edward Mike Davis Page 31 EX-3.01 4 ex301form8k061402.txt AMENDED AND RESTATED ARTICLES OF INCORPORATION Exhibit 3.01 AMENDED AND RESTATED ARTICLES OF INCORPORATION OF MID-POWER SERVICE CORPORATION Mid-Power Service Corporation, a corporation organized and existing under the laws of the State of Nevada (the "Corporation"), certifies that: A. The name of the Corporation is Mid-Power Service Corporation. The Corporation's original Articles of Incorporation were filed with the state of Nevada on September 15, 2000. B. These Amended and Restated Articles of Incorporation was duly adopted in accordance with Section 78.403 of the Nevada Revised Statutes, and restate, integrate and further amend the provisions of the Corporation's Articles of Incorporation. C. The text of the Articles of Incorporation is amended and restated to read as set forth in EXHIBIT A attached hereto. IN WITNESS WHEREOF, Mid-Power Service Corporation has caused these Amended and Restated Articles of Incorporation to be signed by Kenneth M. Emter, a duly authorized officer of the Corporation, on this 4th day of June, 2002. /s/ Kenneth M. Emter ------------------------------ Kenneth M. Emter, Secretary EXHIBIT A AMENDED AND RESTATED ARTICLES OF INCORPORATION OF MID-POWER SERVICE CORPORATION These amended and restated articles of incorporation for Mid-Power Service Corporation (the "Corporation") have been duly adopted in accordance with Section 78.403 of the Nevada Revised Statutes. ARTICLE I NAME The name of the Corporation shall be: Mid-Power Service Corporation ARTICLE II PERIOD OF DURATION The Corporation shall continue in existence perpetually unless sooner dissolved according to law. ARTICLE III PURPOSE The Corporation is organized to engage in any lawful act or activity for which a corporation may be organized under the Nevada Revised Statutes. ARTICLE IV AUTHORIZED SHARES The Corporation shall have the authority to issue 100,000,000 shares of common stock, par value $0.001, ("Common Stock") of which 6,800,244 are currently issued and outstanding, furthermore, the Corporation has the authority to issue 10,000,000 of preferred stock, par value $0.001, ("Preferred Stock") none of which are issued and outstanding. Shares of any class of stock may be issued, without stockholder action, from time to time in one or more series as may from time to time be determined by the Board of Directors. The Board of Directors of this Corporation is hereby expressly granted authority, without stockholder action, and within the limits set forth in the Nevada Revised Statutes, to: (a) designate in whole or in part, the voting powers, preferences, limitations, restrictions, and relative rights, of any class of shares before the issuance of any shares of that class; (b) create one or more series within a class of shares, fix the number of shares of each such series, and designate, in whole or part, the voting powers, preferences, limitations, restrictions, and relative rights of the series, all before the issuance of any shares of that series; or (c) alter or revoke the preferences, limitations, and relative rights granted to or imposed upon any wholly unissued class of shares or any wholly unissued series of any class of shares. The allocation between the classes, or among the series of each class, of unlimited voting rights and the right to receive the net assets of the Corporation upon dissolution, shall be as designated by the Board of Directors. All rights accruing to the outstanding shares of the Corporation not expressly provided for to the contrary herein or in the Corporation's bylaws or in any amendment hereto or thereto shall be vested in the Common Stock. Accordingly, unless and until otherwise designated by the Board of Directors of the Corporation, and subject to any superior rights as so designated, the Common Stock shall have unlimited voting rights and be entitled to receive the net assets of the Corporation upon dissolution. ARTICLE V BOARD OF DIRECTORS Subject to such limitations as provided by the Nevada Revised Statutes or these articles, the Board of Directors has full control over the affairs of the Corporation. The Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law or by these Articles of Incorporation directed or required to be exercised or done by the stockholders of the Corporation. (a) Number. The number of directors constituting the entire Board of Directors shall be not less than three nor more than nine. The specific number of directors constituting the entire Board of Directors shall be authorized from time to time exclusively by the affirmative vote of a majority of the entire Board of Directors. No decrease in the number of directors shall shorten the term of any incumbent director. As used in these articles of incorporation, the term "entire Board of Directors" means the total authorized number of directors that the corporation would have if there were no vacancies. Notwithstanding the provisions of the foregoing paragraph, whenever the holders of any class or series of Preferred Stock shall have the right, voting as a class or series or otherwise, to elect directors, the then authorized number of directors of the Corporation shall be increased by the number of the additional directors so to be elected, and the holders of such Preferred Stock shall be entitled, as a class or series or otherwise, to elect such additional directors. Any directors so elected shall hold office until their rights to hold such office terminate pursuant to the provisions of such Preferred Stock. The provisions of this paragraph shall apply notwithstanding the maximum number of directors hereinabove set forth. (b) Qualifications. The Board of Directors may, by the vote of a majority of the entire board, prescribe qualifications of candidates for the office of director of the Corporation, but no director then in office shall be disqualified from office as a result of the adoption of such qualifications. (c) Classified Board; Tenure. The directors shall be divided into three classes: class A, class B, and class C. The term of office of directors shall be three years, staggered by class so that one class is elected each year. Such classes shall be as nearly equal in number as possible. Directors chosen to succeed those who have been removed or whose terms have expired shall be identified as being of the same class as the directors they succeed and shall be elected for a term expiring at the expiration date of such class or thereafter when their respective successors are elected and have been qualified. If the number of directors is changed, any increase or decrease in directors shall be apportioned among the classes so as to maintain all classes as nearly equal in number as possible, and any individual director elected to any class shall hold office for a term which shall coincide with the term of such class. In no case will a decrease in the number of directors shorten the term of any incumbent director. 2 (d) Nominations. Advance written notice of nominations for the election of directors, other than by the Board of Directors or a committee thereof, shall be given at least 30 days prior to the date of the meeting at which directors are to be elected in the manner provided in the bylaws of the Corporation. (e) Removal of Directors. Subject to the rights of the holders of any Preferred Stock then outstanding, the stockholders may remove one or more directors at a meeting of stockholders called expressly for the purpose of removing directors, as stated in the notice of meeting, with or without cause, on the affirmative vote of two-thirds of the Common Stock or other securities of the Corporation entitled to vote generally for the election of directors. In the event that cumulative voting for directors is permitted pursuant to these articles of incorporation, then no director may be removed except upon the vote of stockholders owning sufficient shares to have prevented such director's election to office in the first instance. (f) Vacancies. Subject to the rights of the holders of any Preferred Stock then outstanding, any vacancies in the Board of Directors for any reason, including by reason of any increase in the number of directors or any removal of an incumbent director, shall, if occurring prior to the expiration of the term of office of the class in which such vacancy occurs, be filled only by the Board of Directors, acting by the affirmative vote of a majority of the remaining directors, whether or not constituting a quorum. A director elected to fill a vacancy shall be elected for the unexpired term of such director's predecessor in office and until his or her successor is elected and qualified or, if such vacancy is the result of an increase in the number of directors, until the next meeting of stockholders at which directors are elected. If there are no directors in office, then an election of directors may be held in the manner provided by law. (g) Cumulative Voting for Election of Directors in Certain Circumstances. (i) Except as and to the extent otherwise provided in this paragraph (g), stockholders of the Corporation shall not be entitled to cumulative voting rights in any election of directors of the Corporation. (ii) There shall be cumulative voting in any election of directors of the Corporation on or after the occurrence of both of the following events: (A) the public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to section 13(d) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) by the Corporation or any Person (which in these articles shall mean any individual, firm, corporation, or other entity, and shall include any successor, by merger or otherwise, of such entity) who or which, together with all Affiliates and Associates (as such terms are defined in rule 12b-2 of the General Rules and Regulations under the Exchange Act as in effect on the date of the adoption of these provisions by the stockholders of the Corporation) of such Person, shall be the Beneficial Owner (as defined in rule 13d-3 and rule 13d-5 of the General Rules and Regulations under the Exchange Act as in effect on the date of the adoption of these provisions by the stockholders of the Corporation) of 30% or more of the Common Stock and any other securities of the Corporation entitled to vote generally for the election of directors (the 3 "Voting Stock"), including any security convertible into or exchangeable for or exercisable for the purchase of Voting Stock (any such person referred to herein as a "30% Stockholder") that such Person has become a 30% Stockholder; and (B) such 30% Stockholder makes, or in any way participates in, directly or indirectly, any "solicitation" of "proxies" (as such terms are defined or used in regulation 14A under the Exchange Act) or becomes a "participant" in any "election contest" (as such terms are defined or used in rule 14a-11 of the Exchange Act) with respect to the Corporation; seeks to advise or influence any person (within the meaning of section 13(d)(3) of the Exchange Act) with respect to the voting of any securities of the Corporation; or executes any written consent in lieu of a meeting of holders of the Voting Stock, provided, however, that such written consents are then permitted under these articles. (iii) Notwithstanding the foregoing, no Person shall become a "30% Stockholder" as the result of an acquisition of Common Stock by the Corporation which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 30% or more of the Voting Stock; provided, however, that if a Person who would otherwise be a 30% Stockholder but for the provisions of this sentence shall, after such share purchases by the Corporation, become the Beneficial Owner of any additional Voting Stock, then such Person shall be deemed to be a "30% Stockholder." Further, the term "30% Stockholder" shall not include (A) the Corporation, (B) any wholly-owned subsidiary of the Corporation, (C) any employee benefit plan of the Corporation or of any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interests is owned, directly or indirectly, by the Corporation (a "Subsidiary"), or (D) any Person holding securities of the Corporation for or pursuant to the terms of any such plan. (h) Amendment or Repeal. Notwithstanding anything to the contrary contained in these articles, no amendment or repeal of the provisions of this Article or related provision in the bylaws of the Corporation shall be adopted unless it is approved by the vote of two-thirds of the Common Stock or other securities of the Corporation entitled to vote generally for the election of directors. ARTICLE VI LIMITATION ON LIABILITY OF DIRECTORS AND OFFICERS To the fullest extent permitted by the Nevada Revised Statutes or any other applicable law as now in effect or as it may hereafter be amended, a director or officer of the Corporation shall have no personal liability to the Corporation or its stockholders for damages for breach of fiduciary duty as a director or officer, except for damages resulting from (a) acts or omissions which involve intentional misconduct, fraud, or a knowing violation of law, or (b) the payment of dividends in violation of the provisions of section 78.300 of the Nevada Revised Statutes, as it may be amended from time to time, or any successor statute thereto. ARTICLE VII INDEMNIFICATION OF OFFICERS, DIRECTORS, AND OTHERS To the fullest extent permitted by the Nevada Revised Statutes or any other applicable law as now in effect or as it may hereafter be amended, the Corporation shall indemnify directors and may indemnify officers, employees, or agents of the Corporation to the extent authorized by the Board of Directors and 4 in the manner set forth in the bylaws of the Corporation. Notwithstanding anything to the contrary contained in these articles, no amendment or repeal of the provisions of this Article or related provisions in the bylaws of the Corporation shall be adopted unless it is approved by the vote of two-thirds of the Common Stock or other securities of the Corporation entitled to vote generally for the election of directors. ARTICLE VIII STOCKHOLDER ACTION Any action which may be taken at any annual or special meeting of stockholders may be taken only upon the vote of the stockholders at an annual or special meeting duly called and may not be taken without a meeting and without prior notice by written consent of the stockholders. Notwithstanding anything to the contrary contained in these articles, no amendment or repeal of the provisions of this Article or related provisions in the bylaws of the Corporation shall be adopted unless it is approved by the vote of holders of two-thirds of the Common Stock or other securities of the Corporation entitled to vote generally for the election of directors. ARTICLE IX MEETINGS OF STOCKHOLDERS Subject to the rights of the holders of any series of Preferred Stock, special meetings of stockholders of the Corporation may be called only by the Board of Directors pursuant to a resolution duly adopted by a majority of the total number of directors which the Corporation would have if there were no vacancies. ARTICLE X BUSINESS AT ANNUAL MEETING At an annual meeting of stockholders, only such business shall be conducted, and only such proposals shall be acted upon, as shall have been brought before the annual meeting (a) by, or at the direction of, a majority of the directors, or (b) by any stockholder of the Corporation who provides at least 30 days advance written notice in compliance with the notice procedures set forth in the bylaws of the Corporation. Notwithstanding anything to the contrary contained in these articles, no amendment or repeal of the provisions of this Article or related provisions in the bylaws of the Corporation shall be adopted unless it is approved by the vote of two-thirds of the Common Stock or other securities of the Corporation entitled to vote generally for the election of directors . ARTICLE XI ACQUISITION OF CONTROLLING INTEREST The provisions of the Nevada Revised Statutes pertaining to the acquisition of a controlling interest of the issued and outstanding shares of the Corporation, section 78.378 et seq., of the Nevada Revised Statutes, shall not be applicable to the acquisition of a controlling interest of the securities of the Corporation. This election is made in accordance with the provisions of section 78.378 of the Nevada Revised Statutes. ARTICLE XII STOCK REPURCHASES FROM INTERESTED STOCKHOLDERS (a) Vote Required for Certain Acquisitions of Securities. Except as set forth in paragraph (b) of this Article, in addition to any affirmative vote of stockholders required by any provision of law, the articles of incorporation, or bylaws of the Corporation, or any 5 policy adopted by the Board of Directors, neither the Corporation nor any Subsidiary (as defined above) shall knowingly effect any direct or indirect purchase or other acquisition of any equity security of a class of securities which is registered pursuant to section 12 of the Exchange Act issued by the Corporation at a price which is in excess of the Market Price (as defined below) of such equity security on the date that the understanding to effect such transaction is entered into by the Corporation (whether or not such transaction is concluded or a written agreement relating to such transaction is executed on such date, and such date to be conclusively established by determination of the Board of Directors), from any Interested Stockholder (as defined below) who has beneficially owned such securities for less than three years prior to the date of such purchase, without the affirmative vote of the holders of the Voting Stock which represent at least two-thirds of the outstanding Common Stock and any other securities of the Corporation entitled to vote generally for the election of directors ("Voting Stock"), excluding Voting Stock beneficially owned by such Interested Stockholder. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or any agreement with any national securities exchange, or otherwise. (b) When a Vote is Not Required. The provisions of paragraph (a) of this Article shall not be applicable with respect to: (i) any purchase, acquisition, redemption, or exchange of such equity securities, the purchase, acquisition, redemption, or exchange of which is provided for in the Corporation's articles of incorporation; (ii) any purchase or other acquisition of equity securities made as part of a tender or exchange offer by the Corporation to purchase securities of the same class made on the same terms to all holders of such securities and complying with the applicable requirements of the Exchange Act and the rules and regulations thereunder (or any successor provisions to such Act, rules, or regulations); (iii) an open market stock purchase program approved by a majority of those members of the Board of Directors who were duly elected and acting members of the Board of Directors prior to the time such Interested Stockholder became such; or (iv) any purchase, acquisition, redemption, or exchange of such equity securities, the purchase, acquisition, redemption, or exchange of which is provided by an executive compensation plan, including any employment agreement or stock option agreement, approved by the Board of Directors or a committee of non-employee directors. (c) Certain Definitions. For purposes of this Article, the following terms shall have the following meanings: (i) "Interested Stockholder" shall mean any Person (other than the Corporation or any Subsidiary) that is the direct or indirect Beneficial Owner (as defined in rule 13d-3 and rule 13d-5 of the General Rules and Regulations under the Exchange Act as in effect on the date of the adoption of these provisions by the stockholders of the Corporation) of more than 10% of the aggregate Voting Stock, and any Affiliate or Associate (as such terms are defined in rule 12b-2 of the 6 General Rules and Regulations under the Exchange Act as in effect on the date of the adoption of these provisions by the stockholders of the Corporation) of any such Person. For the purpose of determining whether a Person is an Interested Stockholder, the outstanding Voting Stock shall include unissued shares of voting stock of the corporation of which the Interested Stockholder is the Beneficial Owner, but shall not include any other shares of Voting Stock of the Corporation which may be issuable pursuant to any agreement, arrangement, or understanding, or upon exercise of conversion rights, warrants, or options, or otherwise, to any Person who is not the Interested Stockholder. (ii) "Market Price" of shares of a class of an equity security of the Corporation on any day shall mean the highest closing sale price (regular way) of shares of such class of such equity security during the 30 day period immediately preceding such day, on the largest principal national securities exchange on which such class of stock is then listed or admitted to trading, or if not listed or admitted to trading on any national securities exchange, then the highest reported closing sale price for such shares in the over-the-counter market as reported on the Nasdaq Stock Market, or if such sale prices shall not be reported thereon, the highest closing bid price so reported, or, if such price shall not be reported thereon, as the same shall be reported by the National Quotation Bureau Incorporated, or if the price is not determinable as set forth above, as determined in good faith by the Board of Directors. (d) Amendment or Repeal. Notwithstanding anything to the contrary contained in these articles, no amendment or repeal of the provisions of this Article or related provisions in the bylaws of the Corporation shall be adopted unless it is approved by the vote of two-thirds of the Common Stock or other securities of the Corporation entitled to vote generally for the election of directors. ARTICLE XIII POWER OF BOARD TO OPPOSE CERTAIN TRANSACTIONS (a) Factors to Consider. The Board of Directors may oppose a tender or other offer for the Corporation's securities, whether the offer is in cash or in the securities of a corporation or otherwise, or any other Business Combination (as defined below) if the directors, by a majority vote of a quorum, determine that the offer or Business Combination is opposed to or not in the best interests of the Corporation. When considering whether to oppose an offer or Business Combination, the Board of Directors may, but is not legally obligated to, consider any relevant factors, including those factors specifically enumerated under section 78.138 of the Nevada Revised Statutes. By way of illustration, but not limitation, the Board of Directors may, but shall not be legally obligated to, consider any and all of the following: (i) whether the offer price is acceptable based on the historical and present operating results or financial condition of the Corporation, or based on the current value of the Corporation in a freely negotiated transaction; whether a more favorable price could be obtained for the Corporation's securities in the future; (ii) the social, legal and economic impact which an acquisition of the Corporation would have on the employees, suppliers, creditors, and customers of the Corporation and any Subsidiary (as defined above) and on the community or communities in which the Corporation and its Subsidiaries do business; (iii) the economy of the states and of the nations in which the Company and its Subsidiaries do business; (iv) the reputation, character, integrity, business philosophy, financial status 7 and business practices of the offeror and its management and affiliates and as they would affect the employees, suppliers, creditors, and customers of the Corporation and its Subsidiaries and the future value of the Corporation's stock; (v) the value of the securities, if any, which the offeror is offering in exchange for the Corporation's securities, based on an analysis of the worth of the Corporation as compared to the corporation or other entity whose securities are being offered; (vi) any antitrust or other legal and regulatory issues that are raised by the offer; (vii) the possibility that the interests of the Corporation's stockholders may be best served by the continued independence of the Corporation; (viii) the possible effects of the Business Combination on the Corporation's then existing relationships with any foreign government or nation in which the Corporation and its Subsidiaries do business or hold property interests and rights; (ix) whether the amount or nature of indebtedness or other obligations to which the Corporation may become subject in connection with the Business Combination provides reasonable grounds to believe that within a reasonable time: (A) the assets of the Corporation or any successor would be or become less than its liabilities, (B) the Corporation or any successor would be or become insolvent; or (C) any voluntary or involuntary proceeding under the federal bankruptcy laws concerning the Corporation or any successor corporation would be commenced by any person; and (x) any other relevant factors, including the long-term as well as the short-term interests of the Corporation and its stockholders, whether or not such other factors are monetary or non-monetary in nature, or are stockholder or non-stockholder considerations. (b) Permitted Action. If the Board of Directors determines that an offer should be rejected, it may take any lawful action to accomplish its purpose, including, but not limited to, any or all of the following: advising stockholders not to accept the offer; litigation against the offeror; filing complaints with all governmental and regulatory authorities; acquiring the Corporation's securities; selling or otherwise issuing authorized but unissued securities or treasury stock or granting options with respect thereto including, without limitation, creating a so-called "poison pill" defense (including both put and call poison pills), "rights plan" or any other anti-takeover defense permitted under the articles of incorporation and under state law; refusing to redeem any outstanding "poison pill" right or option or refusing to remove any other barriers to the offer; acquiring a company to create an antitrust or other regulatory problem for the offeror; establishing employee stock ownership plans; and obtaining a more favorable offer from another individual or entity. (c) Certain Definitions. For purposes of this Article, the following terms shall have the following meanings: (i) "Interested Stockholder" shall mean any Person (other than the Corporation or any Subsidiary) that is the direct or indirect Beneficial Owner (as defined in rule 13d-3 and rule 13d-5 of the General Rules and Regulations under the Exchange Act as in effect on the date of the adoption of these provisions by the stockholders of the Corporation) of more than 10% of the aggregate voting power of the Common Stock or other securities of the Corporation entitled to vote generally for the election of directors ("Voting Stock"), and any Affiliate or Associate (as such terms are defined in rule 12b-2 of the General Rules and Regulations under the Exchange Act as in effect on the date of the adoption of these provisions by the stockholders of the Corporation) of any such Person. For the purpose of determining whether a Person is an Interested Stockholder, the outstanding Voting Stock shall include unissued shares of Voting Stock of the Corporation of which the Interested Stockholder is the Beneficial Owner, but shall not include any other shares of Voting Stock of the Corporation which may be issuable pursuant to any agreement, arrangement, or understanding, or upon exercise of conversion rights, warrants, or options, or otherwise, to any Person who is not the Interested Stockholder. 8 (ii) "Business Combination" shall mean (A) any merger, consolidation, or share exchange of the Corporation or any of its Subsidiaries within or into an Interested Stockholder, in each case irrespective of which corporation or company is to be the surviving entity; (B) any sale, lease, exchange, mortgage, pledge, transfer, or other disposition to or with an Interested Stockholder (in a single transaction or a series of related transactions) of all or a substantial part of the assets of the Corporation (including, without limitation, any securities of a Subsidiary of the Corporation) or all or a substantial part of the assets of any of its Subsidiaries; (C) any sale, lease, exchange, mortgage or pledge, transfer, or other disposition to or with the Corporation, or to or with any of its Subsidiaries (in a single transaction or series of related transactions) of all or a substantial part of the assets of an Interested Stockholder; (D) the issuance or transfer by the Corporation or any of its Subsidiaries of any securities of the Corporation or any of its Subsidiaries to an Interested Stockholder (other than an issuance or transfer of securities which is effected on a pro rata basis to all stockholders of the Corporation); (E) any acquisition by the Corporation or any of its Subsidiaries of any securities issued by an Interested Stockholder; (F) any recapitalization or reclassification of shares of any class of voting stock of the Corporation or any merger or consolidation of the Corporation with any of its Subsidiaries which would have the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of capital stock of the Corporation (or any securities convertible into any class of such capital stock) owned by any Interested Stockholder; (G) any merger or consolidation of the Corporation with any of its Subsidiaries after which the provisions of this Article shall not appear in the articles of incorporation (or the equivalent charter documents) of the surviving entity; (H) any plan or proposal for the liquidation or dissolution of the Corporation; and (I) any agreement, contract or other arrangement providing for any of the transactions described in this definition of Business Combination. Whether or not any proposed sale, lease, exchange, mortgage, pledge, transfer, or other disposition of part of the assets of any entity involves a "substantial part" of the assets of such entity shall be conclusively determined by a two-thirds vote of the Board of Directors; provided, however, that assets involved in any single transaction or series of related transactions having an aggregate fair market value, as determined by the Board of Directors, of more than 15% of the total consolidated assets of an entity and its subsidiaries as at the end of such entity's last full fiscal year prior to such determination shall always be deemed to constitute a "substantial part." (d) Effect on Directors' Power and Liability. Nothing contained herein shall be deemed to limit or restrict the powers of the Board of Directors, or to enlarge the duties of the Board of Directors, as provided in Nevada law, or to create director liability for taking any action authorized hereunder. (e) Amendment or Repeal. Notwithstanding anything to the contrary contained in these articles, no amendment or repeal of the provisions of this Article or related provisions in the bylaws of the Corporation shall be adopted unless it is approved by the vote of two-thirds of the Common Stock or other securities of the Corporation entitled to vote generally for the election of directors. ARTICLE XIV FAIR PRICE ON BUSINESS COMBINATIONS 9 (a) Vote Required. No Business Combination (as defined below) shall be consummated or effected unless such Business Combination shall have been approved by the affirmative vote of the holders of not less than two-thirds of the total voting power of all outstanding shares of Common Stock or other securities of the Corporation entitled to vote generally for the election of directors. Such vote shall be required notwithstanding the fact that no vote for such a transaction may be required by law or that approval by some other percentage of stockholders may be specified by law or in any agreement with any national securities exchange or otherwise. This Article shall not be deemed to affect the provisions of any such law or agreement requiring any vote or approval by the stockholders or directors respecting a proposed Business Combination. (b) Vote Not Required. The vote required pursuant to paragraph (a) above shall not be required if either of the following conditions is satisfied, or if, in the case of a Business Combination not involving the receipt of consideration by the holders of the Corporation's outstanding capital stock, the condition specified in subparagraph (i) is met: (i) The Continuing Directors (as defined below) shall have expressly approved such Business Combination by a two-thirds vote either in advance of or subsequent to the acquisition of outstanding shares of capital stock of the Corporation that caused the Interested Stockholder involved to become an Interested Stockholder. In determining whether or not to approve any such Business Combination, the Continuing Directors may give due consideration to all factors they consider relevant, including without limitation, those identified in these articles; or (ii) All of the following conditions shall have been met: (A) The cash, or fair market value of other consideration, to be received per share by the stockholders of the Corporation in such Business Combination bears the same or a greater percentage relationship to the Market Price of the Corporation's capital stock immediately prior to the announcement of such Business Combination as the highest per share price (including brokerage commissions and/or soliciting dealers' fees) which the Interested Stockholder has theretofore paid for any of the shares of the Corporation's capital stock already owned by it bears to the Market Price of the Common Stock of the Corporation immediately prior to the commencement of acquisition of the Corporation's capital stock by the Interested Stockholder; and (B) The cash, or fair market value of other consideration, to be received per share by the stockholders of the Corporation in such Business Combination (1) is not less than the highest per share price (including brokerage commissions and/or soliciting dealers' fees) paid by the Interested Stockholder in acquiring any of its holdings of the Corporation's capital stock, (2) is not less than the per share Market Price (defined below) of the Common Stock on the date of the announcement of the Combination, and (3) is not less than the earnings per share of capital stock of the Corporation for the four full consecutive fiscal quarters, or the last fiscal year reported, whichever is higher, immediately preceding the record date for solicitation of votes on such Business Combination, multiplied by the higher of either the highest price/earnings multiple of the Corporation during the two years prior to the announcement of such Business Combination or the then price/earnings multiple (if 10 any) of the Interested Stockholder as customarily computed and reported in the financial community; and (C) The per share price to be received by the stockholders must include an additional premium over the value determined in accordance with (a) and (b) above that is equal to the total of (i) the per share equivalent of the value of the Corporation's oil reserves classified as "possible" under the then current criteria of the Society of Petroleum Engineers of the American Institute of Mining Engineers, as of a reasonably practicable date not more than 180 days prior to the record date for solicitation of votes on such Business Combination, as evaluated by a reputable and qualified petroleum engineer as determined by the Company's continuing directors; and (ii) the per share equivalent of 20% of the highest consolidated balance of domestic and foreign cash, cash equivalents, and marketable securities held by the Company at any time during the period commencing on the date the Interested Stockholder first acquired any shares of the Company's capital stock and terminating on the 15th day prior to the date on which the proxy statement referred to in (E) below is scheduled to be mailed to the public stockholders of the Corporation; and (D) After the Interested Stockholder has acquired a 10% interest and prior to the consummation of such Business Combination: (1) the Interested Stockholder shall have taken steps to ensure that the Corporation's Board of Directors includes at all times representation by Continuing Directors proportionate to the shareholdings of the Corporation's public stockholders not affiliated with the Interested Stockholder (with a Continuing Director to occupy any resulting fractional board position); (2) there shall have been no change in the amount per share payable or paid as dividends on the Corporation's capital stock, except as may have been approved by a unanimous vote of the directors; (3) the Interested Stockholder shall not have acquired any newly issued shares of stock, directly or indirectly, from the Corporation (except upon conversion of convertible securities acquired by it prior to obtaining a 10% interest or as a result of a pro rata stock dividend or stock split); and (4) the Interested Stockholder shall not have acquired any additional shares of the Corporation's outstanding capital stock or securities convertible into capital stock, except as a part of the transaction which results in the Interested Stockholder acquiring its 10% interest; and (E) The Interested Stockholder shall not have (1) received the benefit, directly or indirectly (except proportionately as a stockholder), of any loans, advances, guarantees, pledges, or other financial assistance or tax credits provided by the Corporation, or (2) made any major change in the Corporation's business or equity capital structure without the unanimous approval of the directors, in either case prior to the consummation of such Business Combination; and 11 (F) Prior to the consummation of any Business Combination and prior to any vote of the Corporation's stockholders under paragraph (a) of this Article, a proxy statement or information statement complying with the requirements of the Exchange Act shall have been mailed to all stockholders of the Corporation for the purpose of informing the Corporation's stockholders about such proposed Business Combination and, if their approval is required by paragraph (a) of this Article, for the purpose of soliciting stockholder approval of such Business Combination. Such proxy statement or information statement shall contain at the front thereof, in a prominent place, a statement by the Continuing Directors of their position on the advisability (or inadvisability) of the proposed Business Combination and, if deemed advisable by a majority of the Continuing Directors, an opinion of a reputable investment banking firm as to the fairness (or not) of the terms of such Business Combination, from the point of view of the remaining stockholders of the Corporation (such investment banking firm to be selected by a majority of the Continuing Directors and to be paid a reasonable fee for their services by the Corporation). (c) Certain Definitions. For purposes of this Article, the following terms shall have the following meanings: (i) The term "Continuing Director" shall mean any director of the Corporation who was a director prior to the time the Interested Stockholder became such, and any other director whose election as a director was recommended or approved by a majority of Continuing Directors. Any action required to be taken by vote of the Continuing Directors shall be effective only if taken at a meeting at which two-thirds of the Continuing Directors capable of exercising the powers conferred upon them under the provisions of these articles of incorporation or the bylaws of the Corporation or by law are present. (ii) "Interested Stockholder" shall mean any Person (other than the Corporation or any Subsidiary) that is the direct or indirect Beneficial Owner (as defined in rule 13d-3 and rule 13d-5 of the General Rules and Regulations under the Exchange Act as in effect on the date of the adoption of these provisions by the stockholders of the Corporation) of more than 10% of the aggregate voting power of the Common Stock or other securities of the Corporation entitled to vote generally for the election of directors ("Voting Stock"), and any Affiliate or Associate (as such terms are defined in rule 12b-2 of the General Rules and Regulations under the Exchange Act as in effect on the date of the adoption of these provisions by the stockholders of the Corporation) of any such Person. For the purpose of determining whether a Person is an Interested Stockholder, the outstanding Voting Stock shall include unissued shares of voting stock of the corporation of which the Interested Stockholder is the Beneficial Owner, but shall not include any other shares of Voting Stock of the Corporation which may be issuable pursuant to any agreement, arrangement, or understanding, or upon exercise of conversion rights, warrants, or options, or otherwise, to any Person who is not the Interested Stockholder. An Interested Stockholder shall be deemed to have acquired a share of the capital stock of the Corporation at the time when such Interested Stockholder became the Beneficial Owner thereof. With respect to shares owned by Affiliates or Associates of an Interested Stockholder or other person whose ownership is attributed to an Interested Stockholder, for purposes of subparagraph (ii) of this 12 paragraph (c), such Interested Stockholder shall be deemed to have purchased such shares at the higher of (A) the price paid upon the acquisition thereof by the Affiliate, Associate, or other person who owns such shares, or (B) the Market Price of the shares in question at the time when the Interested Stockholder became the Beneficial Owner thereof. (iii) "Business Combination" shall mean (A) any merger, consolidation, or share exchange of the Corporation or any of its Subsidiaries within or into an Interested Stockholder, in each case irrespective of which corporation or company is to be the surviving entity; (B) any sale, lease, exchange, mortgage, pledge, transfer, or other disposition to or with an Interested Stockholder (in a single transaction or a series of related transactions) of all or a substantial part of the assets of the Corporation (including, without limitation, any securities of a Subsidiary of the Corporation) or all or a substantial part of the assets of any of its Subsidiaries; (C) any sale, lease, exchange, mortgage, or pledge, transfer, or other disposition to or with the Corporation, or to or with any of its Subsidiaries (in a single transaction or series of related transactions) of all or a substantial part of the assets of an Interested Stockholder; (D) the issuance or transfer by the Corporation or any of its Subsidiaries of any securities of the Corporation or any of its Subsidiaries to an Interested Stockholder (other than an issuance or transfer of securities which is effected on a pro rata basis to all stockholders of the Corporation); (E) any acquisition by the Corporation or any of its Subsidiaries of any securities issued by an Interested Stockholder; (F) any recapitalization or reclassification of shares of any class of voting stock of the Corporation or any merger or consolidation of the Corporation with any of its Subsidiaries which would have the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of capital stock of the Corporation (or any securities convertible into any class of such capital stock) owned by any Interested Stockholder; (G) any merger or consolidation of the Corporation with any of its Subsidiaries after which the provisions of this Article shall not appear in the articles of incorporation (or the equivalent charter documents) of the surviving entity; (H) any plan or proposal for the liquidation or dissolution of the Corporation; and (I) any agreement, contract or other arrangement providing for any of the transactions described in this definition of Business Combination. Whether or not any proposed sale, lease, exchange, mortgage, pledge, transfer, or other disposition of part of the assets of any entity involves a "substantial part" of the assets of such entity shall be conclusively determined by a two-thirds vote of the Board of Directors; provided, however, that assets involved in any single transaction or series of related transactions having an aggregate fair market value, as determined by the Board of Directors, of more than 15% of the total consolidated assets of an entity and its subsidiaries as at the end of such entity's last full fiscal year prior to such determination shall always be deemed to constitute a "substantial part." (iv) "Market Price" of shares of a class of an equity security of the Corporation on any day shall mean the highest closing sale price (regular way) of shares of such class of such equity security during the 30 day period immediately preceding such day, on the largest principal national securities exchange on which such class of stock is then listed or admitted to trading, or if not listed or admitted to trading on any national securities exchange, then the highest reported closing sale price for such shares in the 13 over-the-counter market as reported on the Nasdaq Stock Market, or if such sale prices shall not be reported thereon, the highest closing bid price so reported, or, if such price shall not be reported thereon, as the same shall be reported by the National Quotation Bureau Incorporated, or if the price is not determinable as set forth above, as determined in good faith by the Board of Directors. (d) No proposal to amend or repeal this Article may be authorized and approved except by the affirmative vote of the holders of voting stock entitling them to exercise two-thirds of the voting power of the Corporation voting together as a class, unless required to vote separately by law or by other provisions of these articles of incorporation or by the terms of the stock entitling them to vote and, if a proposal upon which holders of shares of a particular class or classes are so required to vote separately, then by the affirmative vote of the holders of shares entitling them to exercise two-thirds of the voting power of each such class or classes; provided, however, that the provisions of this paragraph (d) shall not apply to any such amendment or repeal of this Article that has been favorably recommended to the stockholders by resolution of the Board of Directors adopted by a two-thirds vote of the Continuing Directors, in which case any such amendment or repeal of this Article may be authorized and approved by the affirmative vote of such number of the holders of voting stock as may be required by law. (e) Amendment or Repeal. Notwithstanding anything to the contrary contained in these articles, no amendment or repeal of the provisions of this Article or related provisions in the bylaws of the Corporation shall be adopted unless it is approved by the vote of two-thirds of the Common Stock or other securities of the Corporation entitled to vote generally for the election of directors (the "Voting Stock"). ARTICLE XV PRINCIPAL OFFICE The address of the Corporation's principal office in the state of Nevada is as follows: 3800 Howard Hughes Parkway, Suite 860A Las Vegas, Nevada 89109 ARTICLE XVI AMENDMENTS The Corporation reserves the right to amend, alter, change, or repeal all or any portion of the provisions contained in these articles of incorporation from time to time in accordance with the laws of the state of Nevada, and all rights conferred on stockholders herein are granted subject to this reservation. Notwithstanding anything to the contrary contained in these articles or in the concurrent bylaws, no amendment or repeal of the provisions of the Articles listed below shall be adopted unless it is approved by the vote of two-thirds of the Common Stock or other securities of the Corporation entitled to vote generally for the election of directors. The aforementioned stockholder supermajority will be required for the amendment or repeal of the provision set forth in Article V paragraphs (c) and (g), the issues of a classified board and cumulative voting for the election of directors in certain circumstances, respectively, Article VIII regarding stockholder action, Article XII, covering stock repurchases from interested stockholders, Article XIII, the power of the board to oppose certain transactions and Article XIV, the mandate regarding fair prices on business combinations. 14 ARTICLE XVII ADOPTION OR AMENDMENT OF BYLAWS The bylaws of the Corporation shall be adopted by the Board of Directors. The power to alter, amend, or repeal the bylaws or adopt new bylaws shall be vested in the Board of Directors, but the stockholders of the Corporation may also alter, amend, or repeal the bylaws or adopt new bylaws. The bylaws may contain any provisions for the regulation or management of the affairs of the Corporation not inconsistent with the laws of the state of Nevada now or hereafter existing. ARTICLE XVII REDEMPTION OF SHAREHOLDER RIGHTS Rights issued pursuant to any shareholders' rights plan(s) may only be redeemed by the Board of Directors' Rights Redemption Committee, a subcommittee of the Board of Directors that is appointed by the Board of Directors and is constituted entirely of at least three Continuing Directors, at least a majority of whom are not employees of the Corporation. For purposes of this Article, the term "Continuing Director" means any duly constituted director of the Corporation who was a director prior to the time the Interested Stockholder became such, and any other director whose election or appointment as a director was recommended for approval by a majority of Continuing Directors. For the purposes of this definition, the term "employee" means any person who is currently or who has been during the preceding 12 months a full-time employee of the Company. In the event of the failure or refusal of the Board of Directors to duly appoint a Rights Redemption Committee, then the persons constituting the Audit Committee of the Board of Directors shall also constitute the Rights Redemption Committee. Any action required to be taken by vote of the Continuing Directors shall be effective only if taken at a meeting at which two-thirds of the Continuing Directors capable of exercising the powers conferred upon them under the provisions of these articles of incorporation or the bylaws of the Corporation or by law are present. Any bylaw subsequently adopted by the shareholders requiring the Board of Directors, or a subcommittee thereof, to redeem rights issued pursuant to any shareholders' rights plans then outstanding must be adopted by the vote of stockholders representing not less than two-thirds of the Common Stock or other securities of the Corporation entitled to vote generally for the election of directors. Notwithstanding anything to the contrary contained in these articles, no amendment or repeal of the provisions of this Article or related provisions in the bylaws of the Corporation shall be adopted unless it is approved by the vote of two-thirds of the Common Stock or other securities of the Corporation entitled to vote generally for the election of directors. -------------------- The undersigned, being the duly authorized officer of the Corporation herein before named, makes this certificate, hereby declaring and certifying that these Amended and Restated Articles of Incorporation have been adopted by the majority vote of the Corporation's stockholders. DATED this 4th day of June, 2002. /s/ Kenneth M. Emter ----------------------------- Kenneth M. Emter, Secretary 15 EX-3.02 5 ex302form8k061402.txt BYLAWS DATED JUNE 4, 2002 Exhibit 3.02 BYLAWS OF MID-POWER SERVICE CORPORATION ARTICLE I OFFICES Section 1.01 Principal Office. The principal office shall be in the city of Las Vegas, Nevada. Section 1.02 Locations of Offices. The corporation may also have offices at such other places both within and without the state of Nevada as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II STOCKHOLDERS Section 2.01 Annual Meeting. The annual meeting of the stockholders shall be held within 180 days after the end of the corporation's fiscal year at such time as is designated by the board of directors and as is provided for in the notice of the meeting. If the election of directors shall not be held on the day designated herein for the annual meeting of the stockholders or at any adjournment thereof, the board of directors shall cause the election to be held at a special meeting of the stockholders as soon thereafter as may be convenient. Section 2.02 Special Meetings. Special meetings of the stockholders may be called at any time in the manner provided in the articles of incorporation. At any special meeting of the stockholders, only such business shall be conducted as shall have been stated in the notice of such special meeting. Section 2.03 Place of Meetings. The board of directors may designate any place, either within or without the state of incorporation, as the place of meeting for any annual meeting or for any special meeting called by the board of directors. A waiver of notice signed by all stockholders entitled to vote at a meeting may designate any place, either within or without the state of incorporation, as the place for the holding of such meeting. If no designation is made, the place of meeting shall be at the principal office of the corporation. Section 2.04 Notice of Meetings. The secretary or assistant secretary, if any, shall cause notice of the time, place, and purpose or purposes of all meetings of the stockholders (whether annual or special), to be mailed at least 10 but not more than 60 days prior to the meeting, to each stockholder of record entitled to vote. Section 2.05 Waiver of Notice. Any stockholder may waive notice of any meeting of stockholders (however called or noticed, whether or not called or noticed, and whether before, during, or after the meeting) by signing a written waiver of notice or a consent to the holding of such meeting or an approval of the minutes thereof. Attendance at a meeting, in person or by proxy, shall constitute waiver of all defects of notice regardless of whether a waiver, consent, or approval is signed or any objections are made, unless attendance is solely for the purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. All such waivers, consents, or approvals shall be made a part of the minutes of the meeting. Section 2.06 Fixing Record Date. For the purpose of determining (i) stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting; (ii) stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect to any change, conversion, or exchange of stock; or (iii) stockholders of the corporation for any other lawful purpose, the board of directors may fix in advance a date as the record date for any such determination of stockholders, such date in any case to be not more than 60 days and, in case of a meeting of stockholders, not less than 10 days prior to the date on which the particular action requiring such determination of stockholders is to be taken. If no record date is fixed for the determination of stockholders entitled to notice of or to vote at a meeting, the day preceding the date on which notice of the meeting is mailed shall be the record date. For any other purpose, the record date shall be the close of business on the date on which the resolution of the board of directors pertaining thereto is adopted. When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this section, such determination shall apply to any adjournment thereof. Failure to comply with this section shall not affect the validity of any action taken at a meeting of stockholders. Section 2.07 Voting Lists. The officers of the corporation shall cause to be prepared from the stock ledger at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the principal executive office of the corporation. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. The original stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section, or the books of the corporation, or to vote in person or by proxy at any meeting of stockholders. Section 2.08 Quorum. Stock representing a majority of the voting power of all outstanding stock of the corporation entitled to vote, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business, except as otherwise provided by statute or by the articles of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such reconvened meeting at which a quorum is present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than 30 days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 2.09 Vote Required. When a quorum is present at any meeting, the vote of the holders of stock having a majority of the voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one on which by express provision of the statutes of the state of Nevada or of the articles of incorporation a different vote is required, in which case such express provision shall govern and control the decision of such question. Section 2.10 Voting of Stock. Unless otherwise provided in the articles of incorporation, each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, subject to the modification of such voting rights of any class or classes of the corporation's capital stock by the articles of incorporation. Section 2.11 Proxies. At each meeting of the stockholders, each stockholder entitled to vote shall be entitled to vote in person or by proxy; provided, however, that the right to vote by proxy shall exist only in case the instrument authorizing such proxy to act shall have been executed in writing by the registered holder or holders of such stock, as the case may be, as shown on 2 the stock ledger of the corporation or by his attorney thereunto duly authorized in writing. Such instrument authorizing a proxy to act shall be delivered at the beginning of such meeting to the secretary of the corporation or to such other officer or person who may, in the absence of the secretary, be acting as secretary of the meeting. In the event that any such instrument shall designate two or more persons to act as proxy, a majority of such persons present at the meeting, or if only one be present, that one shall (unless the instrument shall otherwise provide) have all of the powers conferred by the instrument on all persons so designated. Persons holding stock in a fiduciary capacity shall be entitled to vote the stock so held, and the persons whose shares are pledged shall be entitled to vote, unless the transfer by the pledgor in the books and records of the corporation shall have expressly empowered the pledgee to vote thereon, in which case the pledgee, or his proxy, may represent such stock and vote thereon. No proxy shall be voted or acted on after six months from its date, unless the proxy is coupled with an interest, or unless the proxy provides for a longer period not to exceed seven years. Section 2.12 Nomination of Directors. Nominations for the election of directors may be made by the board of directors or by any shareholder entitled to vote for the election of directors. Any shareholder entitled to vote for the election of directors at a meeting may nominate persons for election as directors only if written notice of such shareholder's intent to make such nomination is delivered or mailed to and received at the principal executive offices of the corporation not later than (i) with respect to an election to be held at an annual meeting of shareholders, not less than 30 days prior to such meeting, provided, in the event that less than 40 days' notice of the date of the meeting is given or made to shareholders, to be timely, a shareholder's notice shall be so received not later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed, and (ii) with respect to an election to be held at a special meeting of shareholders for the election of directors, the close of business on the seventh day following the date on which notice of such meeting is first given to shareholders. Each such notice shall set forth: (a) the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that such shareholder is a holder of record of stock of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between such shareholder and each nominee and nay other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by such shareholder; (d) such other information regarding each nominee proposed by such shareholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had each nominee been nominated, or intended to be nominated by the board of directors; and (e) the consent of each nominee to serve as a director of the corporation if elected. The chairman of a shareholder meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure. Section 2.13 Inspectors of Election. There shall be appointed at least one inspector of the vote for each stockholders' meeting. Such inspector(s) shall first take and subscribe an oath or affirmation faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of their ability. Unless appointed in advance of any such meeting by the board of directors, such inspector(s) shall be appointed for the meeting by the presiding officer. No director or candidate for the office of director shall be appointed as such inspector. Such inspector(s) shall be responsible for tallying and certifying each vote required to be tallied and certified by them 3 as provided in the resolution of the board of directors appointing them or in their appointment by the person presiding at such meeting, as the case may be. Section 2.14 Election of Directors. At all meetings of the stockholders at which directors are to be elected, except as otherwise set forth in any preferred stock designation (as defined in the articles of incorporation) with respect to the right of the holders of any class or series of preferred stock to elect additional directors under specified circumstances, directors shall be elected by a plurality of the votes cast at the meeting. The election need not be by ballot unless any stockholder so demands before the voting begins. Except as otherwise provided by law, the articles of incorporation, any preferred stock designation, or these bylaws, all matters other than the election of directors submitted to the stockholders at any meeting shall be decided by a majority of the votes cast with respect thereto. Section 2.15 Business at Annual Meeting. At any annual meeting of the shareholders, only such business shall be conducted as shall have been brought before the meeting (a) by or at the direction of the board of directors or (b) by any shareholder of record of the corporation who is entitled to vote with respect thereto and who complies with the notice procedures set forth in this section. For business to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the secretary of the corporation. To be timely, a shareholder's notice shall be received at the principal executive offices of the corporation not less than 120 calendar days in advance of the date in the current fiscal year that corresponds to the date in the preceding fiscal year on which the corporation's notice of meeting and related proxy or information statement were released to shareholders in connection with the previous year's annual meeting of shareholders, except that if no meeting was held in the immediately preceding year or if the date of the annual meeting in the current fiscal year has been changed by more than 30 calendar days from the corresponding date of such meeting in the preceding fiscal year, such notice by the shareholder proposing business to be brought before the shareholders' meeting must be received not less than 30 days prior to the date of the current year's annual meeting; provided, that in the event that less than 40 days' notice of the date of the meeting is given to shareholders, to be timely, a shareholder's notice of business to be brought before the meeting shall be so received not later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed. A shareholder's notice to the secretary shall set forth as to each matter such shareholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the corporation's books, of the shareholder of record proposing such business, (c) the class and number of shares of the corporation's capital stock that are beneficially owned by such shareholder, and (d) any material interest of such shareholder in such business. Notwithstanding anything in these bylaws to the contrary, no business shall be brought before or conducted at an annual meeting except in accordance with the provisions of this section. The officer of the corporation or other person presiding at the annual meeting shall, if the facts so warrant, determine that business was not properly brought before the meeting in accordance with the provisions of this section, and if such presiding officer shall so determine, such presiding officer shall so declare to the meeting, and any such business so determined to be not properly brought before the meeting shall not be transacted. Section 2.16 Business at Special Meeting. At any annual or special meeting of the stockholders, only such business shall be conducted as shall have been stated in the notice of such annual or special meeting. Section 2.17 Written Consent to Action by Stockholders. Unless otherwise provided in the articles of incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice, and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. 4 Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Section 2.18 Procedure for Meetings. The board of directors of the corporation shall be entitled to make such rules or regulations for the conduct of meetings of shareholders as it shall deem necessary, appropriate, or convenient. Subject to such rules and regulations of the board of directors, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations, and procedures and do all such acts as, in the judgment of such chairman, are necessary, appropriate, or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to shareholders of record of the corporation and their duly authorized and constituted proxies, and such other persons as the chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants, regulation of the opening and closing of the polls for balloting on matters which are to be voted on by ballot. Unless, and to the extent, determined by the board of directors or the chairman of the meeting, meetings of shareholders shall not be required to be held in accordance with rules of parliamentary procedure. ... ARTICLE III DIRECTORS Section 3.01 General Powers. The business of the corporation shall be managed under the direction of its board of directors, which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the articles of incorporation or by these bylaws directed or required to be exercised or done by the stockholders. Section 3.02 Number, Term, and Qualifications. The number of directors which shall constitute the board, subject to the limitations set forth in the articles of incorporation, shall be determined by resolution of a majority of the total number of directors if there were no vacancies (the "Whole Board") or, if there are fewer directors than a majority of the Whole Board, by the unanimous consent of the remaining directors or by the stockholders at the annual meeting of the stockholders or a special meeting called for such purpose, except as provided in section 3.03 of this article, which such resolution shall be incorporated by this reference into and shall be a part of these bylaws. Each director elected shall hold office until his successor is elected and qualified. Directors need not be residents of the state of incorporation or stockholders of the corporation. Section 3.03 Vacancies and Newly Created Directorships. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum of the Whole Board, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and qualified. If there are no directors in office, then an election of directors may be held in the manner provided by statute. Section 3.04 Regular Meetings. A regular meeting of the board of directors shall be held without other notice than this bylaw immediately following and at the same place as the annual meeting of stockholders. The board of directors may provide by resolution the time and place, either within or without the state of incorporation, for the holding of additional regular meetings without other notice than such resolution. Section 3.05 Special Meetings. Special meetings of the board of directors may be called by or at the request of the chairman of the board, president, or any two directors or, in the absence or disability of the 5 president, by any vice-president. The person or persons authorized to call special meetings of the board of directors may fix any place, either within or without the state of incorporation, as the place for holding any special meeting of the board of directors called by them. Section 3.06 Meetings by Telephone Conference Call. Members of the board of directors may participate in a meeting of the board of directors or a committee of the board of directors by means of conference telephone or similar communication equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this section shall constitute presence in person at such meeting. Section 3.07 Notice. Notice of any special meeting can be given at least 72 hours prior thereto by written notice delivered personally or sent by facsimile transmission confirmed by registered mail or certified mail, postage prepaid, or by overnight courier to each director. Any such notice shall be deemed to have been given as of the date so personally delivered or sent by facsimile transmission or as of the day following dispatch by overnight courier. Each director shall register his or her address and telephone number(s) with the secretary for purpose of receiving notices. Any director may waive notice of any meeting. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting solely for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. An entry of the service of notice given in the manner and at the time provided for in this section may be made in the minutes of the proceedings of the board of directors, and such entry, if read and approved at a subsequent meeting of the board of directors, shall be conclusive on the issue of notice. Section 3.08 Quorum. A majority of the Whole Board shall constitute a quorum for the transaction of business at any meeting of the board of directors, provided, that the directors present at a meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors if any action taken is approved by a majority of the required quorum for such meeting. If less than a majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice. Section 3.09 Manner of Acting. The act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors, and individual directors shall have no power as such. Section 3.10 Compensation. By resolution of the board of directors, the directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Section 3.11 Presumption of Assent. A director of the corporation who is present at a meeting of the board of directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting, unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof, or unless he shall forward such dissent by registered or certified mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. Section 3.12 Resignations. A director may resign at any time by delivering a written resignation to either the president, a vice president, the secretary, or assistant secretary, if any. The resignation shall become effective on giving of such notice, unless such notice specifies a later time for the effectiveness of such resignation. 6 Section 3.13 Written Consent to Action by Directors. Any action required to be taken at a meeting of the directors of the corporation or any other action which may be taken at a meeting of the directors or of a committee, may be taken without a meeting, if a consent in writing, setting forth the action so taken, shall be signed by all of the directors, or all of the members of the committee, as the case may be. Such consent shall have the same legal effect as a unanimous vote of all the directors or members of the committee. Section 3.14 Removal. Subject to any limitations set forth in the articles of incorporation or the corporate statutes of the state of Nevada, at a meeting expressly called for that purpose, one or more directors may be removed by a vote of a majority of the shares of outstanding stock of the corporation entitled to vote at an election of directors. ARTICLE IV OFFICERS Section 4.01 Number. The officers of the corporation shall be a president, a secretary, a treasurer, and such other officers as may be appointed by the board of directors. The board of directors may elect, but shall not be required to elect, a chairman of the board and one or more vice-presidents, and the board of directors may appoint a general manager. Section 4.02 Election, Term of Office, and Qualifications. The officers shall be chosen by the board of directors annually at its annual meeting. In the event of failure to choose officers at an annual meeting of the board of directors, officers may be chosen at any regular or special meeting of the board of directors. Each such officer (whether chosen at an annual meeting of the board of directors) shall hold his office until the next ensuing annual meeting of the board of directors and until his successor shall have been chosen and qualified, or until his death or until his resignation or removal in the manner provided in these bylaws. Any one person may hold any two or more of such offices, except that the president shall not also be the secretary. No person holding two or more offices shall execute any instrument in the capacity of more than one office. The chairman of the board, if any, shall be and remain director of the corporation during the term of his office. No other officer need be a director. Section 4.03 Subordinate Officers, Etc. The board of directors from time to time may appoint such other officers or agents as it may deem advisable, each of whom shall have such title, hold office for such period, have such authority, and perform such duties as the board of directors from time to time may determine. The board of directors from time to time may delegate to any officer or agent the power to appoint any such subordinate officer or agents and to prescribe their respective titles, terms of office, authorities, and duties. Subordinate officers need not be stockholders or directors. Section 4.04 Resignations. Any officer may resign at any time by delivering a written resignation to the board of directors, the president, or the secretary. Unless otherwise specified therein, such resignation shall take effect on delivery. Section 4.05 Removal. Any officer may be removed from office at any special meeting of the board of directors called for that purpose or at a regular meeting, by the vote of a majority of the directors, with or without cause. Any officer or agent appointed in accordance with the provisions of section 4.03 hereof may also be removed, either with or without cause, by any officer on whom such power of removal shall have been conferred by the board of directors. Section 4.06 Vacancies and Newly Created Offices. If any vacancy shall occur in any office by reason of death, resignation, removal, disqualification, or any other cause or if a new office shall be created, then such vacancies or newly created offices may be filled by the board of directors at any regular or special meeting. 7 Section 4.07 The Chairman of the Board. The chairman of the board, if there be such an officer, shall have the following powers and duties: (a) To preside at all stockholders' meetings; (b) To preside at all meetings of the board of directors; and (c) To be a member of the executive committee, if any. Section 4.08 The President. The president shall have the following powers and duties: (a) To be the chief executive officer of the corporation and, subject to the direction of the board of directors, to have general charge of the business, affairs, and property of the corporation and general supervision over its officers, employees, and agents; (b) If no chairman of the board has been chosen or if such officer is absent or disabled, to preside at meetings of the stockholders and board of directors; (c) To be a member of the executive committee, if any; (d) To be empowered to sign certificates representing stock of the corporation, the issuance of which shall have been authorized by the board of directors; and (e) To have all power and perform all duties normally incident to the office of a president of a corporation and shall exercise such other powers and perform such other duties as from time to time may be assigned to him by the board of directors. Section 4.09 The Vice-Presidents. The board of directors may, from time to time, designate and elect one or more vice-presidents, one of whom may be designated to serve as executive vice-president. Each vice-president shall have such powers and perform such duties as from time to time may be assigned to him by the board of directors or the president. At the request or in the absence or disability of the president, the executive vice-president or, in the absence or disability of the executive vice-president, the vice-president designated by the board of directors or (in the absence of such designation by the board of directors) by the president, as senior vice-president, may perform all the duties of the president, and when so acting, shall have all the powers of, and be subject to all the restrictions on, the president. Section 4.10 The Secretary. The secretary shall have the following powers and duties: (a) To keep or cause to be kept a record of all of the proceedings of the meetings of the stockholders and of the board of directors in books provided for that purpose; (b) To cause all notices to be duly given in accordance with the provisions of these bylaws and as required by statute; (c) To be the custodian of the records and of the seal of the corporation, and to cause such seal (or a facsimile thereof) to be affixed to all certificates representing stock of the corporation prior to the issuance thereof and to all instruments, the execution of which on behalf of the corporation under its seal shall have been duly authorized in accordance with these bylaws, and when so affixed, to attest the same; (d) To see that the books, reports, statements, certificates, and other documents and records required by statute are properly kept and filed; 8 (e) To have charge of the stock ledger and books of the corporation and cause such books to be kept in such manner as to show at any time the amount of the stock of the corporation of each class issued and outstanding, the manner in which and the time when such stock was paid for, the names alphabetically arranged and the addresses of the holders of record thereof, the amount of stock held by each holder and time when each became such holder of record; and he shall exhibit at all reasonable times to any director, on application, the original or duplicate stock ledger. He shall cause the stock ledger referred to in section 6.04 hereof to be kept and exhibited at the principal office of the corporation, or at such other place as the board of directors shall determine, in the manner and for the purpose provided in such section; (f) To be empowered to sign certificates representing stock of the corporation, the issuance of which shall have been authorized by the board of directors; and (g) To perform in general all duties incident to the office of secretary and such other duties as are given to him by these bylaws or as from time to time may be assigned to him by the board of directors or the president. Section 4.11 The Treasurer. The treasurer shall have the following powers and duties: (a) To have charge and supervision over and be responsible for the monies, securities, receipts, and disbursements of the corporation; (b) To cause the monies and other valuable effects of the corporation to be deposited in the name and to the credit of the corporation in such banks or trust companies or with such banks or other depositories as shall be selected in accordance with section 5.03 hereof; (c) To cause the monies of the corporation to be disbursed by checks or drafts (signed as provided in section 5.04 hereof) drawn on the authorized depositories of the corporation, and to cause to be taken and preserved property vouchers for all monies disbursed; (d) To render to the board of directors or the president, whenever requested, a statement of the financial condition of the corporation and of all of his transactions as treasurer, and render a full financial report at the annual meeting of the stockholders, if called on to do so; (e) To cause to be kept correct books of account of all the business and transactions of the corporation and exhibit such books to any directors on request during business hours; (f) To be empowered from time to time to require from all officers or agents of the corporation reports or statements giving such information as he may desire with respect to any and all financial transactions of the corporation; (g) To perform in general all duties incident to the office of treasurer and such other duties as are given to him by these bylaws or as from time to time may be assigned to him by the board of directors or the president; and (h) To, in the absence of the designation to the contrary by the board of directors, to act as the chief financial officer and/or principal accounting officer of the corporation. 9 Section 4.12 Salaries. The salaries or other compensation of the officers of the corporation shall be fixed from time to time by the board of directors, except that the board of directors may delegate to any person or group of persons the power to fix the salaries or other compensation of any subordinate officers or agents appointed in accordance with the provisions of section 4.03 hereof. No officer shall be prevented from receiving any such salary or compensation by reason of the fact that he is also a director of the corporation. Section 4.13 Surety Bonds. In case the board of directors shall so require, any officer or agent of the corporation shall execute to the corporation a bond in such sums and with such surety or sureties as the board of directors may direct, conditioned on the faithful performance of his duties to the corporation, including responsibility for negligence and for the proper accounting of all property, monies, or securities of the corporation which may come into his hands. ARTICLE V EXECUTION OF INSTRUMENTS, BORROWING OF MONEY, AND DEPOSIT OF CORPORATE FUNDS Section 5.01 Execution of Instruments. Subject to any limitation contained in the articles of incorporation or these bylaws, the president or any vice-president may, in the name and on behalf of the corporation, execute and deliver any contract or other instrument authorized in writing by the board of directors. The board of directors may, subject to any limitation contained in the articles of incorporation or in these bylaws, authorize in writing any officer or agent to execute and deliver any contract or other instrument in the name and on behalf of the corporation; any such authorization may be general or confined to specific instances. Section 5.02 Loans. No loan or advance shall be contracted on behalf of the corporation, no negotiable paper or other evidence of its obligation under any loan or advance shall be issued in its name, and no property of the corporation shall be mortgaged, pledged, hypothecated, transferred, or conveyed as security for the payment of any loan, advance, indebtedness, or liability of the corporation, unless and except as authorized by the board of directors. Any such authorization may be general or confined to specific instances. Section 5.03 Deposits. All monies of the corporation not otherwise employed shall be deposited from time to time to its credit in such banks or trust companies or with such bankers or other depositories as the board of directors may select or as from time to time may be selected by any officer or agent authorized to do so by the board of directors. Section 5.04 Checks, Drafts, Etc. All notes, drafts, acceptances, checks, endorsements, and, subject to the provisions of these bylaws, evidences of indebtedness of the corporation shall be signed by such officer or officers or such agent or agents of the corporation and in such manner as the board of directors from time to time may determine. Endorsements for deposit to the credit of the corporation in any of its duly authorized depositories shall be in such manner as the board of directors from time to time may determine. Section 5.05 Bonds and Debentures. Every bond or debenture issued by the corporation shall be evidenced by an appropriate instrument which shall be signed by the president or a vice president and by the secretary and sealed with the seal of the corporation. The seal may be a facsimile, engraved or printed. Where such bond or debenture is authenticated with the manual signature of an authorized officer of the corporation, or other trustee designated by an indenture of trust or other agreement under which such security is issued, the signature of any of the corporation's officers named thereon may be a facsimile. In case any officer who signed or whose facsimile signature has been used on any such bond or debenture shall cease to be an officer of the corporation for any reason before the same has been delivered by the corporation, such bond or 10 debenture may nevertheless be adopted by the corporation and issued and delivered as through the person who signed it or whose facsimile signature has been used thereon had not ceased to be such officer. Section 5.06 Sale, Transfer, Etc. of Securities. Sales, transfers, endorsements, and assignments of stocks, bonds, and other securities owned by or standing in the name of the corporation and the execution and delivery on behalf of the corporation of any and all instruments in writing incident to any such sale, transfer, endorsement, or assignment shall be effected by the president or by any vice-president and the secretary or assistant secretary, or by any officer or agent thereunto authorized by the board of directors. Section 5.07 Proxies. Proxies to vote with respect to stock of other corporations owned by or standing in the name of the corporation shall be executed and delivered on behalf of the corporation by the president or any vice-president and the secretary or assistant secretary of the corporation or by any officer or agent thereunder authorized by the board of directors. ARTICLE VI CAPITAL STOCK Section 6.01 Stock Certificates. Every holder of stock in the corporation shall be entitled to have a certificate, signed by the president or any vice-president and the secretary or assistant secretary, and sealed with the seal (which may be a facsimile, engraved or printed) of the corporation, certifying the number and kind, class, or series of stock owned by him in the corporation; provided, however, that where such a certificate is countersigned by (a) a transfer agent or an assistant transfer agent, or (b) registered by a registrar, the signature of any such president, vice-president, secretary, or assistant secretary may be a facsimile. In case any officer who shall have signed or whose facsimile signature or signatures shall have been used on any such certificate shall cease to be such officer of the corporation, for any reason, before the delivery of such certificate by the corporation, such certificate may nevertheless be adopted by the corporation and be issued and delivered as though the person who signed it or whose facsimile signature or signatures shall have been used thereon has not ceased to be such officer. Certificates representing stock of the corporation shall be in such form as provided by the statutes of the state of incorporation. There shall be entered on the stock books of the corporation at the time of issuance of each share, the number of the certificate issued, the name and address of the person owning the stock represented thereby, the number and kind, class, or series of such stock, and the date of issuance thereof. Every certificate exchanged or returned to the corporation shall be marked "canceled" with the date of cancellation. Section 6.02 Transfer of Stock. Transfers of stock of the corporation shall be made on the books of the corporation on authorization of the holder of record thereof or by his attorney thereunto duly authorized by a power of attorney duly executed in writing and filed with the secretary of the corporation or its transfer agent, and on surrender of the certificate or certificates, properly endorsed or accompanied by proper instruments of transfer, representing such stock. Except as provided by law, the corporation and its transfer agents and registrars, if any, shall be entitled to treat the holder of record of any stock as the absolute owner thereof for all purposes, and accordingly shall not be bound to recognize any legal, equitable, or other claim to or interest in such stock on the part of any other person whether or not it or they shall have express or other notice thereof. Section 6.03 Regulations. Subject to the provisions of the articles of incorporation, the board of directors may make such rules and regulations as they may deem expedient concerning the issuance, transfer, redemption, and registration of certificates for stock of the corporation. Section 6.04 Maintenance of Stock Ledger at Principal Place of Business. A stock ledger (or ledgers where more than one kind, class, or series of stock is outstanding) shall be kept at the principal place of business of the corporation, or at such other place as the board of directors shall determine, 11 containing the names alphabetically arranged of the stockholders of the corporation, their addresses, their interest, the amount paid on their shares, and all transfers thereof and the number and class of stock held by each. Such stock ledgers shall at all reasonable hours be subject to inspection by persons entitled by law to inspect the same. Section 6.05 Transfer Agents and Registrars. The board of directors may appoint one or more transfer agents and one or more registrars with respect to the certificates representing stock of the corporation and may require all such certificates to bear the signature of either or both. The board of directors may from time to time define the respective duties of such transfer agents and registrars. No certificate for stock shall be valid until countersigned by a transfer agent, if at the date appearing thereon the corporation had a transfer agent for such stock, and until registered by a registrar, if at such date the corporation had a registrar for such stock. Section 6.06 Closing of Transfer Books and Fixing of Record Date (a) The board of directors shall have power to close the stock ledgers of the corporation for a period of not to exceed 60 days preceding the date of any meeting of stockholders, the date for payment of any dividend, the date for the allotment of rights, the date when any change or conversion or exchange of capital stock shall go into effect, or a date in connection with obtaining the consent of stockholders for any purpose. (b) In lieu of closing the stock ledgers as aforesaid, the board of directors may fix in advance a date, not less than 10 days and not exceeding 60 days preceding the date of any meeting of stockholders, the date for the payment of any dividend, the date for the allotment of rights, the date when any change or conversion or exchange of capital stock shall go into effect, or the date for obtaining the consent of the stockholders for any purpose, as a record date for the determination of the stockholders entitled to a notice of, and to vote at, any such meeting and any adjournment thereof, entitled to receive payment of any such dividend, to any such allotment of rights, to exercise the rights in respect of any such change, conversion or exchange of capital stock, or to give such consent. (c) If the stock ledgers shall be closed or a record date set for the purpose of determining stockholders entitled to notice of, or to vote at, a meeting of stockholders, such books shall be closed for or such record date shall be set as of a date at least 10 days immediately preceding such meeting. Section 6.07 Lost or Destroyed Certificates. The corporation may issue a new certificate for stock of the corporation in place of any certificate theretofore issued by it, alleged to have been lost or destroyed, and the board of directors may, in its discretion, require the owner of the lost or destroyed certificate or his legal representatives to give the corporation a bond in such form and amount as the board of directors may direct and with such surety or sureties as may be satisfactory to the board, and to indemnify the corporation and its transfer agents and registrars, if any, against any claims that may be made against it or any such transfer agent or registrar on account of the issuance of the new certificate. A new certificate may be issued without requiring any bond when, in the judgment of the board of directors, it is proper to do so. ARTICLE VII EXECUTIVE COMMITTEE AND OTHER COMMITTEES Section 7.01 Executive Committee. The board of directors, by resolution adopted by a majority of the Whole Board, may appoint from its membership an executive committee of not less than three members (whose members shall include the chairman of the board, if any, and the president, one of whom shall act as chairman of the executive committee, as the board may designate). The board of directors shall have the power at any time to dissolve the executive committee, to change the membership thereof, and to fill vacancies thereon. When the board 12 of directors is not in session, the executive committee shall have and may exercise all of the powers delegated to it by the board of directors, except the following powers: to fill vacancies in the board of directors; to appoint, change membership of, or fill vacancies in any other committee appointed by the board of directors; to declare dividends or other distributions to stockholders; to adopt, amend, or repeal the articles of incorporation or these bylaws; to approve any action that also requires stockholder approval; to amend or repeal any resolution of the board of directors which by its express terms is not so amendable or repealable; to fix the compensation of directors for serving on the board of directors or on any committee; to adopt an agreement of merger or consolidation; to recommend to the stockholders the sale, lease, or exchange of all or substantially all of the corporation's property and assets; to recommend to the stockholders a dissolution of the corporation or a revocation of a dissolution; to recommend to stockholders an amendment of bylaws; or to authorize the issuance of stock (provided that the executive committee, if so directed by the board of directors, may determine the number of shares of stock to be issued to individuals and the amount of consideration for which such shares shall be issued not in excess of the number of shares authorized to be issued by the board of directors). Section 7.02 Other Committees. The board of directors, by resolution adopted by a majority of the Whole Board, may appoint such other committees as it may, from time to time, deem proper and may determine the number of members, frequency of meetings, and duties thereof. Section 7.03 Proceedings. The executive committee and such other committees as may be designated hereunder by the board of directors may fix their own presiding and recording officer or officers and may meet at such place or places, at such time or times, and on such notice (or without notice) as it shall determine from time to time. Each committee may make rules for the conduct of its business as it shall from time to time deem necessary. It will keep a record of its proceedings and shall report such proceedings to the board of directors at the meeting of the board of directors next following. Section 7.04 Quorum and Manner of Acting. At all meetings of the executive committee and of such other committees as may be designated hereunder by the board of directors, the presence of members constituting a majority of the total membership of the committee shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the members present at any meeting at which a quorum is present shall be the act of such committee. The members of the executive committee and of such other committees as may be designated hereunder by the board of directors shall act only as a committee, and the individual members thereof shall have no powers as such. Section 7.05 Resignations. Any member of the executive committee and of such other committees as may be designated hereunder by the board of directors may resign at any time by delivering a written resignation to either the board of directors, the president, the secretary, or assistant secretary, or to the presiding officer of the committee of which he is a member, if any shall have been appointed and shall be in office. Unless otherwise specified therein, such resignation shall take effect on delivery. Section 7.06 Removal. The board of directors may, by resolutions adopted by a majority of the Whole Board, at any time remove any member of the executive committee or of any other committee designated by it hereunder either for or without cause. Section 7.07 Vacancies. If any vacancy shall occur in the executive committee or of any other committee designated by the board of directors hereunder, by reason of disqualification, death, resignation, removal, or otherwise, the remaining members shall, until the filling of such vacancy, constitute the then total authorized membership of the committee and continue to act, unless such committee is left with only one member as a result thereof. Such vacancy may be filled at any meeting of the Whole Board or, if the authority to do so is delegated to the board of directors by the Whole Board, by action taken by a majority of the quorum of the board of directors. 13 Section 7.08 Compensation. The Whole Board may allow a fixed sum and expenses of attendance to any member of the executive committee or of any other committee designated by it hereunder who is not an active salaried employee of the corporation for attendance at each meeting of the said committee. ARTICLE VIII INDEMNIFICATION, INSURANCE AND OFFICER AND DIRECTOR CONTRACTS Section 8.01 Indemnification: Third-Party Actions. The corporation shall indemnify any officer or director who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (other than an action by or in the right of the corporation), by reason of the fact that he is or was a director or officer of the corporation (and, in the discretion of the board of directors, may so indemnify a person by reason of the fact that he is or was an employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise), against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with any such action, suit, or proceeding, if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, or, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful. Section 8.02 Indemnification: Corporate Actions. The corporation shall indemnify any director or officer who was or is a party or is threatened to be made a party to any threatened, pending, or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the corporation (and, in the discretion of the board of directors, may so indemnify a person by reason of the fact that he is or was an employee or agent of the corporation or is or was serving as an employee or agent of another corporation, partnership, joint venture, trust, or other enterprise), against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit, if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made in respect of any claim, issue, or matter as to which such person shall have been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which such action or suit was brought or other court of competent jurisdiction shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper. Section 8.03 Determination. To the extent that a director, officer, employee, or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit, or proceeding referred to in sections 8.01 and 8.02 hereof, or in defense of any claim, issue, or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. Any other indemnification under sections 8.01 or 8.02 hereof, unless ordered by a court, shall be made by the corporation only in a specific case in which a determination is made that indemnification of the director, officer, employee, or agent is proper in the circumstances because he has met the applicable standard or conduct set forth in sections 8.01 or 8.02 hereof. Such determination shall be made either (i) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit, or proceeding, (ii) if such a quorum is 14 not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the stockholders by a majority vote of a quorum of stockholders at any meeting duly called for such purpose. Section 8.04 Advances. Expenses incurred by an officer or director in defending a civil or criminal action, suit, or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit, or proceeding on receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized by this section. Such expenses incurred by other employees and agents may be so paid on such terms and conditions, if any, as the board of directors deems appropriate. Section 8.05 Scope of Indemnification. The indemnification and advancement of expenses provided by, or granted pursuant to, sections 8.01, 8.02, and 8.04: (a) Shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled, under any bylaw, agreement, vote of stockholders or disinterested directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office; and (b) Shall, unless otherwise provided when authorized or ratified, continue as to a person who ceases to be a director, officer, employee, or agent of the corporation and shall inure to the benefit of the heirs, executors, and administrators of such a person. Section 8.06 Insurance. The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against any liability asserted against him and incurred by him in any such capacity or arising out of his status as such, whether or not the corporation would have the power to indemnify him against any such liability. Section 8.07 Officer and Director Contracts. No contract or other transaction between the corporation and one or more of its directors or officers or between the corporation and any corporation, partnership, association, or other organization in which one or more of the corporation's directors or officers are directors, officers, or have a financial interest, is either void or voidable solely on the basis of such relationship or solely because any such director or officer is present at or participates in the meeting of the board of directors or a committee thereof which authorizes the contract or transaction or solely because the vote or votes of each director or officer are counted for such purpose, if: (a) The material facts of the relationship or interest are disclosed or known to the board of directors or committee and the board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors even though the disinterested directors be less than a quorum; (b) The material facts of the relationship or interest is disclosed or known to the stockholders and they approve or ratify the contract or transaction in good faith by a majority vote of the shares voted at a meeting of stockholders called for such purpose or written consent of stockholders holding a majority of the shares entitled to vote (the votes of the common or interested directors or officers shall be counted in any such vote of stockholders); or (c) The contract or transaction is fair as to the corporation at the time it is authorized, approved, or ratified by the board of directors, a committee thereof, or the stockholders. 15 ARTICLE IX FISCAL YEAR The fiscal year of the corporation shall be fixed by resolution of the Whole Board. ARTICLE X DIVIDENDS The board of directors may from time to time declare, and the corporation may pay, dividends on its outstanding stock in the manner and on the terms and conditions provided by the articles of incorporation and bylaws. ARTICLE XI AMENDMENTS All bylaws of the corporation, whether adopted by the board of directors or the stockholders, shall be subject to amendment, alteration, or repeal, and new bylaws may be made, except that: (a) No bylaw adopted or amended by the stockholders shall be altered or repealed by the board of directors; (b) No bylaw shall be adopted by the board of directors which shall require more than the stock representing a majority of the voting power for a quorum at a meeting of stockholders or more than a majority of the votes cast to constitute action by the stockholders, except where higher percentages are required by law; (c) If any bylaw regulating an impending election of directors is adopted or amended or repealed by the board of directors, there shall be set forth in the notice of the next meeting of the stockholders for the election of directors, the bylaws so adopted or amended or repealed, together with a concise statement of the changes made; and (d) No amendment, alteration, or repeal of this article XI shall be made except by the stockholders. 16 CERTIFICATE OF SECRETARY The undersigned does hereby certify that he is the secretary of Mid-Power Service Corporation, a corporation duly organized and existing under and by virtue of the laws of the state of Nevada; that the above and foregoing bylaws of said corporation were duly and regularly adopted as such by the board of directors of said corporation by unanimous consent dated June 4, 2002 and that the above and foregoing bylaws are now in full force and effect and supersede and replace any prior bylaws of the corporation. DATED EFFECTIVE the 4th day of June, 2002. /s/ Kenneth M. Emter ---------------------------- Kenneth M. Emter, Secretary 17 EX-10.01 6 ex101form8k061402.txt PROMISSORY NOTE IN THE AMOUNT OF $10,000,000 Exhibit 10.01 PROMISSORY NOTE $10,000,000.00 June 13, 2002 FOR VALUE RECEIVED, the undersigned ("Borrower"), promise(s) to pay to the order of EDWARD MIKE DAVIS ("Lender"), at 200 Rancho Circle, Las Vegas, Nevada 89107, or at such other place as Lender may direct, in lawful money of the United States of America, without grace or offset, the principal sum of TEN MILLION AND NO/100 DOLLARS ($10,000,000.00), with interest thereon at the rate provided below until fully paid. 1. PAYMENT TERMS The entire principal balance, with accrued interest thereon, shall be due and payable on January 3, 2003 (the "Maturity Date") and is subject to section 17 hereof. 2. INTEREST Interest on the outstanding principal amount of this Note shall accrue at a rate equal to one percent (1%) in excess of the "Reference Rate" in effect on the date of this Promissory Note, but in no event shall this be less than six percent (6%) per annum (the "Contract Rate"). As used herein, the term "Reference Rate" means the rate of interest from time to time publicly announced by Bank of America, N.A. ("Bank"), as its reference rate, even though Bank may lend to its customers at rates that are at, below or above the reference rate. Interest hereunder shall be calculated for the actual number of days elapsed on the basis of a 360-day year. 3. DEFAULT INTEREST If the entire unpaid principal balance of this Promissory Note, together with accrued and unpaid interest thereon, is not paid when due, whether on the Maturity Date or any earlier date as a result of acceleration of this Promissory Note after a default hereunder (after passage of any applicable grace or cure period), then the amount unpaid shall bear interest from the Maturity Date or such earlier date, as the case may be, at the per annum interest rate (the "Default Rate") equal to the sum of ten percent (10%) plus the Contract Rate. The Default Rate shall continue until payment in full of any sums due hereunder. 4. APPLICATION OF PAYMENTS Each payment received by Lender shall be applied in the following order: A. First, to attorney's fees, costs and expenses or any other amount due hereunder save for the amounts described in (B) and (C) immediately below; B. Next, to accrued interest due hereunder; and C. Finally, to the principal balance hereof. Notwithstanding the foregoing, in the event that Borrower does not pay the outstanding principal balance and accrued interest due under this Promissory Note, when due, whether on the Maturity Date or on any earlier date as a result of acceleration of this Promissory Note, the Lender at its option shall apply any payments it then receives in such order as Lender deems appropriate in its sole discretion. [Initials: JWS & KE] 5. DEFAULT AND ACCELERATION Upon the Borrower's failure to make any payment required under this Promissory Note, as and when due, or the failure of Borrower to comply with any term, covenant or condition of that certain Acquisition Agreement and Plan of Merger, of even date herewith between Borrower, Red Star, Inc. and Mid-Power Resources Corporation (the "Acquisition Agreement") within the time provided, Lender may, at any time thereafter, together or singly, (i) declare the entire outstanding principal balance due hereunder, together with all accrued and unpaid interest thereon, to be immediately due and payable, thereby accelerating this Promissory Note; and (ii) exercise immediately and without notice, any and all other rights and remedies available under this Note or the Acquisition Agreement or at law or in equity. 6. DEFINITIONS Any terms used in this Promissory Note requiring a definition shall have the definition given in this Section, unless elsewhere defined in this Promissory Note. The term "Business Day" as used herein shall mean any day other than a Saturday, Sunday or other day on which national banks in the State of Nevada are not open for business. 7. PREPAYMENT There are no full or partial prepayment privileges of the principal amount due under this Promissory Note. 8. WAIVERS AND EXTENSIONS Borrower and all endorsers and guarantors and any and all others who may at any time be or become liable for payment of all or any part of the loan evidenced hereby severally waive presentment for payment, demand, notice of dishonor or nonpayment, protest and notice of protest, notice of acceleration and of intention to accelerate the Maturity Date, and any and all lack of diligence or delays in collection or enforcement hereof, and agree that Lender from time to time may extend the time for payment of any sums due under this Promissory Note and grant releases to all endorsers and guarantors hereof, without in any way affecting the liability of such parties hereunder. 9. USURY No amounts under this Promissory Note shall be charged, paid or collected from Borrower if the result of such charge payment or collection would be to cause the loan evidenced hereby to be usurious under applicable law. If, however, an amount is paid or collected which would otherwise cause the loan to be usurious, such excess causing the Loan to be usurious shall be deemed a payment of principal and shall be applied against and shall reduce the then outstanding principal balance of the loan by a corresponding amount, and no Prepayment Premium shall be charged on any such excess amount applied to principal. 10. SEVERABILITY In the event any one or more of the provisions contained in this Promissory Note shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Promissory Note, but this Promissory Note [Initials: JWS & KE] Page 2 shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein or therein. 11. WAIVER OF TRIAL BY JURY BORROWER AND LENDER, BY ACCEPTANCE OF THIS PROMISSORY NOTE, HEREBY INTENTIONALLY, VOLUNTARILY AND KNOWINGLY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVE TRIAL BY JURY IN ANY COURT ACTION, PROCEEDING OR COUNTERCLAIM WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THIS PROMISSORY NOTE, THIS PROMISSORY NOTE, OR ANY ACTS OR OMISSIONS OF LENDER OR ITS AGENTS IN CONNECTION THEREWITH. 12. JOINT AND SEVERAL LIABILITY If there shall be more than one Borrower named in this Promissory Note, then the obligations and liabilities of such parties as Borrower shall be joint and several. 13. REMEDIES CUMULATIVE The rights, powers and remedies of Lender permitted by law, equity or contract or as set forth herein or in the Acquisition Agreement shall be cumulative and concurrent, and may be pursued singly, successively or together against Borrower or the Collateral, at the sole discretion of the Lender, and to the fullest extent permitted by law. Such rights, powers and remedies shall not be exhausted by any exercise thereof but may be exercised as often as occasion therefor shall occur. The failure to exercise any such right, power or remedy shall in no event be construed as a waiver or release of the same. Lender shall not by any act of omission or commission be deemed to have waived any of its rights, powers or remedies under this Promissory Note or the Acquisition Agreement unless such waiver be in writing and signed by Lender, and then only to the extent specifically set forth therein. A waiver of a right in one event shall not be construed as continuing or as a bar, or as a waiver of such right on a subsequent event. 14. FEES AND COSTS Borrower further promises to pay upon demand all reasonable attorney's fees, costs and expenses (including, without limitation, court costs and appraisal fees) incurred by Lender in connection with any default under this Promissory Note and in any proceeding brought to enforce any of the provisions of this Promissory Note or of the Acquisition Agreement (as applicable), including probate, appellate and bankruptcy proceedings, any post-judgment proceedings to collect or enforce any judgment or order relating to this Promissory Note or the Acquisition Agreement (as applicable). This provision is separate and several, and shall survive the merger of this provision into any judgment. 15. TIME OF THE ESSENCE Time shall be of the essence in performance of all obligations of Borrower under this Promissory Note including, without limitation, the time periods provided for the curing of defaults. [Initials: JWS & KE] Page 3 16. HEADINGS FOR CONVENIENCE Headings and captions used in this Promissory Note are inserted for convenience of reference only and neither constitute a part of this Promissory Note nor are to be used to construe or interpret any of the provisions hereof. 17. PAYMENT THROUGH ESCROW Escrow for the purposes of this Promissory Note shall mean Escrow # 02-06-0503-DTL at Nevada Title Company, 2500 North Buffalo, Las Vegas, Nevada Attention: Troy Lochhead (251-5280). The principal and interest due on this Promissory Note shall be paid in United States Treasury Obligations ("T-Bills"). On or before 12:00 noon on December 10, 2002, Borrower shall deposit T-Bills into the Escrow in an amount sufficient to pay the principal and interest hereon as of the Maturity Date. On such Maturity Date, Lender shall present this Promissory Note, accepting payment hereof by accepting the T-Bills on deposit in exchange for this Promissory Note marked "PAID IN FULL", with Nevada Title Company delivering this Promissory Note, marked "PAID IN FULL" to Borrower. 18. NO ORAL CHANGE This Promissory Note may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of the Borrower or Lender, but only by an agreement in writing, intended for that specific purpose and signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. 19. APPLICABLE STATE LAW This Promissory Note shall be governed, construed, applied and enforced in accordance with the laws of the State of Nevada. Federal Taxpayer I.D. No. Borrower: 03 98403 MID-POWER SERVICE CORPORATION, a Nevada corporation By: /s/ James W. Scott --------------------------- James W. Scott Its President By: /s/ Kenneth M. Emter --------------------------- Kenneth M. Emter Its Secretary [Initials: JWS & KE] Page 4 EX-10.02 7 ex102form8k061402.txt REGISTRATION RIGHTS AGREEMENT WITH EDWARD DAVIS Exhibit 10.02 REGISTRATION RIGHTS AGREEMENT This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into as of this 13th day of June 2002, by and among MID-POWER SERVICE CORPORATION, a Nevada corporation (the "Company") and EDWARD MIKE DAVIS, an individual residing in the State of Nevada ("Davis"). Recitals: A. Reference is herein made to that certain Acquisition Agreement dated as of June 13th, 2002 (the "Acquisition Agreement"), between and among the Company, Red Star, Inc., a Nevada corporation and Edward Mike Davis, an individual. B. In order to induce Davis to enter into and consummate the transactions contemplated by the Acquisition Agreement, the Company has agreed to immediately register for resale 17,125,365 shares of the common stock issued to Davis under the Acquisition Agreement (the "Mid-Power Stock") on the terms and conditions set forth herein. AGREEMENT: NOW, THEREFORE, for and in consideration of the foregoing recitals and the mutual covenants contained herein, the sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, do hereby agree as follows: Section 1. Definitions and References. (a) When used in this Agreement, the following terms shall have the respective meanings assigned to them in this section 1 or in the sections, subsections or other subdivisions referred to below: "Acquisition Agreement and Plan of Merger" shall mean certain Acquisition Agreement and Plan of Merger dated as of June 13, 2002 between and among the Company, Red Star, Inc., a Nevada corporation and Edward Mike Davis, an individual. "Agreement" shall mean this Agreement, as hereafter changed, modified or amended in accordance with the terms hereof. "Common Stock" shall mean the common stock of the Company, $0.001 par value per share. "Company" shall have the meaning assigned to it in the introductory paragraph hereof. "Company Indemnified Parties" shall have the meaning assigned to it in section 5(b). "Davis" shall have the meaning assigned to it in the introductory paragraph hereof. "Demand Registration" shall have the meaning assigned to it in section 2. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and all rules and regulations promulgated under such act. "Filing Date" shall have the meaning assigned to it in Section 2. "Holder Indemnified Parties" shall have the meaning assigned to it in section 5(a). "Mid-Power Stock" shall have the meaning assigned to such term in paragraph B of the Recitals hereto. "Person" shall mean any individual, corporation, partnership, joint venture, limited partnership, limited liability company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Registrable Securities" shall mean the Mid-Power Stock. "Registration Expenses" shall mean all expenses incident to the Company's performance of or compliance with the registration rights granted hereunder, including (without limitation) all registration, filing, listing and NASD fees, fees and expenses of compliance with securities and blue-sky laws, all word processing, duplicating, printing and engraving expenses, messenger, telephone and delivery expenses, and fees and disbursements of counsel for the Company, of its independent certified public accountants, and any of its independent reserve engineers, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, premiums and other costs of policies of insurance against liabilities arising out of the public offering of the Registrable Securities being registered, and fees and disbursements of underwriters (excluding discounts and commissions); provided, that Registration Expenses shall not include any Selling Expenses (except for any fees incurred by Davis in connection with legal fees incurred in order to dispose of the Registrable Securities). Without limiting the generality of any other provision hereof, no holder of Registrable Securities shall be responsible for any allocation of general and administrative (including all employee and compensation expenses) expenses incurred by the Company in connection with an offering. "SEC" shall mean the Securities and Exchange Commission (or any successor body thereto). "Securities Act" shall mean the Securities Act of 1933, as amended, and all rules and regulations under such act. "Selling Expenses" shall mean any selling commissions and stock transfer taxes attributable to sales of Registrable Securities and the fees and expenses of counsel for Davis. (b) All references in this Agreement to sections, subsections and other subdivisions refer to corresponding sections, subsections and other subdivisions of this Agreement unless expressly provided otherwise. Titles appearing at the beginning of any of such subdivisions are for convenience only and shall not constitute part of such subdivisions and shall be disregarded in construing the language contained herein. The words "this Agreement," "this instrument," "herein," "hereof," "hereby," "hereunder" and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. Words in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires. Pronouns in masculine, feminine and neuter genders shall be construed to include any other gender. Section 2. Demand Registration Rights. 2 (a) The Company agrees that within 30 days from the Financial Statement Filing Date, as set forth in Section 6.11 of the Acquisition Agreement (the "Filing Date"), that it will cause to be filed with the SEC a registration by the Company under the Securities Act of all the Registrable Securities (a "Demand Registration"). Section 3. Registration Procedures. (a) On or before the Filing Date, the Company will: (i) prepare and file with the SEC a registration statement on the appropriate form with respect to such Registrable Securities, and use its reasonable best efforts to cause such registration statement to become and remain effective as soon as reasonably practicable after the filing thereof (provided, that before filing a registration statement or prospectus or any amendments or supplements thereto, the Company will furnish copies of all such documents proposed to be filed to Davis covered by such registration statement for review by Davis, his attorney(s), accountant(s) or other professionals retained by Davis); (ii) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective until the earlier of (1) such time as all of such Registrable Securities covered by such registration statement have been sold (but not before the expiration of the applicable prospectus delivery period) or (2) 180 days after the effective date of such registration statement, except with respect to any registration statement filed pursuant to Rule 415 under the Securities Act, in which case the Company shall use its best efforts to keep such registration statement effective until such time as all of the Registrable Securities covered thereby cease to be Registrable Securities; and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement; (iii) notify Davis promptly after the Company causes such registration statement to be filed with the SEC; (iv) furnish to Davis, such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including, without limitation, each preliminary prospectus) and such other documents as such Davis may reasonably request in order to facilitate the disposition of the Registrable Securities owned by Davis (it being understood that the Company consents to the use of the prospectus and any amendment or supplement thereto by Davis); (v) use its reasonable best efforts to register or qualify such Registrable Securities under such other securities or blue-sky laws of such jurisdictions within the United States as Davis reasonably requests, to keep such registration or qualifications in effect for so long as such registration statement remains in effect, and do any and all other acts and things that may be reasonably necessary or advisable to enable such Seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by Davis (provided that the Company will not be required to qualify generally to do business or subject itself to any general service of process in any jurisdiction where it is otherwise not then so subject); 3 (vi) notify Davis, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event (including those set forth in clauses (1) through (6) of paragraph (vii) below) that requires the making of any change in the prospectus included in such registration statement, so that such document will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and at the request of Davis, the Company will promptly prepare and furnish to Davis, a reasonable number of copies of a supplement or amendment to such prospectus so that such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; (vii) The Company will also notify Davis promptly, and (if requested by Davis) confirm such notice in writing, (1) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and with respect to a registration statement or any post-effective amendment, when the same has become effective under the Securities Act and each applicable state law, (2) of any request by the SEC or any other federal or state governmental authority for amendments or supplements to a registration statement or related prospectus or for additional information, (3) of the issuance by the SEC of any stop order suspending the effectiveness of a registration statement or the initiation of any proceedings for that purpose, (4) if at any time the representations or warranties of the Company or any subsidiary contained in any agreement (including any underwriting agreement) contemplated hereby cease to be true and correct in any material respect, (5) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, or (6) of the Company's reasonable determination that a post-effective amendment to a registration statement would be appropriate; (viii) use its reasonable best efforts to immediately cause all such Registrable Securities to be listed on each securities exchange or exchanges, automated quotation system or over-the-counter market upon which securities of the Company of the same class are then listed; (ix) enter into such customary agreements (including, without limitation, underwriting agreements in customary form, substance and scope) and take all such other action as Davis reasonably requests in order to expedite or facilitate the disposition of such Registrable Securities; (x) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the SEC and applicable state securities authorities; (xi) in the event of the issuance of any stop order suspending the effectiveness of a registration statement, or of any order suspending or preventing the use of any related prospectus or suspending the qualification of any Registrable Securities included in such registration statement for sale in any jurisdiction, the Company will use its reasonable best efforts promptly to obtain the withdrawal of such order; (xii) use its reasonable best efforts to cause such Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable Davis thereof to consummate the disposition of such Registrable Securities; 4 (xiii) use its reasonable best efforts to obtain a signed counterpart of a comfort letter from the Company's public accountants in customary form and covering such matters of the type customarily covered by comfort letters with respect to offerings of the type being made pursuant to the registration statement as Davis shall reasonably request and an opinion of counsel for the Company covering such matters with respect to such registration statement as are customarily covered in opinions of issuer's counsel and delivered to the underwriters in underwritten public offerings of securities; (xiv) the Company shall make available for inspection by Davis and any attorney, accountant or other professional retained by the Davis (in this subsection collectively referred to as "inspectors"), all financial and other records, pertinent corporate documents and properties of the Company as shall be reasonable necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such inspectors in connection with such registration statement; (xv) provide and cause to be maintained a transfer agent and registrar (which, in each case, may be the Company) for all Registrable Securities covered by such registration agreement from and after a date not later than the effective date of such registration. (b) Davis will be deemed to have agreed as follows: (i) upon receipt of notice from the Company of the happening of any event of the kind described in section 3(a)(vi), Davis will forthwith discontinue disposition of any such Registrable Securities until Davis receives copies of the supplemented or amended prospectus contemplated by section 3(a)(vi), or until he is advised in writing by the Company that the use of the applicable prospectus may be resumed, and he has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such prospectus (it being the agreement of the parties hereto, however, that the obligation of the Company with respect to maintaining the subject registration statement current and effective shall be extended by a period of days equal to the period that Davis is required by this section 3(b)(i) to discontinue disposition of such Registrable Securities); and (ii) furnish to the Company such information regarding Davis, the Registrable Securities held by Davis, and the intended method of disposition thereof as the Company shall reasonably request and as shall be reasonably required in connection with the preparation of the applicable registration statement and other actions taken by the Company under this Agreement, and it shall be a condition precedent to the obligation of the Company to take any action pursuant to this Agreement in respect of the Registrable Securities owned by Davis that such information has been furnished to the Company by Davis. Section 4. Expenses of Registration. The Company shall pay all Registration Expenses in connection with each registration effected pursuant to sections 2. All Selling Expenses incurred by Davis in connection with a registration effected pursuant to the terms hereof shall be borne by such Seller, except for any and all opinions that Davis may be required to obtain in connection with the sale of the Registrable Securities which in such case shall be borne by the Company. Section 5. Indemnification. (a) The Company shall indemnify and hold harmless, with respect to any registration statement filed by it, to the full extent permitted by law, Davis and his agents, heirs and assigns, and each other Person, if any, who controls 5 Davis within the meaning of Section 15 of the Securities Act (collectively, "Holder Indemnified Parties") against all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation), joint or several, to which any such Holder Indemnified Party may become subject under the Securities Act, the Exchange Act, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement in which such Registrable Securities were included as contemplated hereby or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary, final or summary prospectus, together with the documents incorporated by reference therein (as amended or supplemented if the Company shall have filed with the SEC any amendment thereof or supplement thereto), or any omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or (iii) any violation by the Company of any federal, state or common law rule or regulation applicable to the Company and relating to action of or inaction by the Company in connection with any such registration, and in each such case, the Company shall reimburse each such Holder Indemnified Party for any reasonable legal or other expenses incurred by any of them in connection with investigating or defending any such loss, claim, damage, liability, expense, action or proceeding; provided, however, that the Company shall not be liable to any such Holder Indemnified Party in any such case to the extent, that any such loss, claim, damage, liability or expense (or action or proceeding, whether commenced or threatened, in respect thereof) arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement or amendment thereof or supplement thereto or in any such preliminary, final or summary prospectus in reliance upon and in conformity with written information furnished to the Company by or on behalf of any such Holder Indemnified Party for use in the preparation thereof. Such indemnity and reimbursement of expenses and other obligations shall remain in full force and effect regardless of any investigation made by or on behalf of the Holder Indemnified Parties and shall survive the transfer of such securities by such Holder Indemnified Parties. (b) Davis shall indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors, officers, employees and agents, and each Person who controls the Company (within the meaning of Section 15 of the Securities Act) (collectively, "Company Indemnified Parties") against all losses, claims, damages, liabilities and expenses to which any Company Indemnified Party may become subject under the Securities Act, the Exchange Act, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement in which such Registrable Securities were included or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary, final or summary prospectus, together with the documents incorporated by reference therein (as amended or supplemented if the Company shall have filed with the SEC any amendment thereof or supplement thereto), or the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading to the extent in the cases described in clauses (i) and (ii), that such untrue statement or omission was furnished in writing by such Holder for use in the preparation thereof, or (iii) any violation by Davis of any federal, state or common law rule or regulation applicable to Davis and relating to action of or inaction by Davis in connection with any such registration; provided, that each Davis' liability under such indemnification shall be limited to the sales proceeds from the sale of the Company's securities owned by Davis and sold by Davis pursuant to such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement, and in each such case, Davis shall reimburse each such Company Indemnified Party for any reasonable 6 legal or other expenses incurred by any of them in connection with investigating or defending any such loss, claim, damage, liability, expense, action or proceeding. Such indemnity obligation shall remain in full force and effect regardless of any investigation made by or on behalf of the Company Indemnified Parties (except as provided above) and shall survive the transfer of such securities by such Holder. (c) Promptly after receipt by an indemnified party under subsection (a) or (b) of written notice of the commencement of any action, suit, proceeding, investigation or threat thereof made in writing with respect to which a claim for indemnification may be made pursuant to this section 5, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the indemnifying party of the threat or commencement thereof; provided, however, that the failure to so notify the indemnifying party shall not relieve it from any liability that it may have to any indemnified party except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. If any such claim or action referred to under subsection (a) or (b) is brought against any indemnified party and it then notifies the indemnifying party of the threat or commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other indemnifying party similarly notified, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party. After notice from the indemnifying party to such indemnified party of its election so to assume the defense of any such claim or action, the indemnifying party shall not be liable to such indemnified party under this section 5 for any legal expenses of counsel or any other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation unless the indemnifying party has failed to assume the defense of such claim or action or to employ counsel reasonably satisfactory to such indemnified party. Under no circumstances will the indemnifying party be obligated to pay the fees and expenses of more than one law firm for all indemnified parties. The indemnifying party shall not be required to indemnify the indemnified party with respect to any amounts paid in settlement of any action, proceeding or investigation entered into without the written consent of the indemnifying party, which consent shall not be unreasonably withheld. No indemnifying party shall consent to the entry of any judgment or enter into any settlement without the consent of the indemnified party unless (i) such judgment or settlement does not impose any obligation or liability upon the indemnified party other than the execution, delivery or approval thereof, and (ii) such judgment or settlement includes as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a full release and discharge from all liability in respect of such claim for all Persons that may be entitled to or obligated to provide indemnification or contribution under this section 5. (d) Indemnification similar to that specified in the preceding subsections of this section 5 (with appropriate modifications) shall be given by the Company and Davis with respect to any required registration or qualification of securities under any state securities or blue-sky laws. (e) If the indemnification provided for in this section 5 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b), then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages, liabilities or expenses (or actions or proceedings in respect thereof) referred to in subsection (a) or (b) in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party on the other in connection with the statements, omissions, actions or inactions that resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state 7 a material fact relates to information supplied by the indemnifying party or the indemnified party, any action or inaction by any such party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement, omission, action or inaction. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or expenses (or actions or proceedings in respect thereof) pursuant to this subsection (e) shall be deemed to include, without limitation, any reasonable legal or other expenses incurred by such indemnified party in connection with investigating or defending any such action or claim (which shall be limited as provided in subsection (c) if the indemnifying party has assumed the defense of any such action in accordance with the provisions thereof), which is the subject of this subsection (e). No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. Promptly after receipt by an indemnified party under this subsection (e) of written notice of the commencement of any action, suit, proceeding, investigation or threat thereof made in writing with respect to which a claim for contribution may be made against an indemnifying party under this subsection (e), such indemnified party shall, if a claim for contribution in respect thereof is to be made against an indemnifying party, give written notice to the indemnifying party in writing of the commencement thereof (if the notice specified in subsection (c) has not been given with respect to such action); provided, however, that the failure to so notify the indemnifying party shall not relieve it from any obligation to provide contribution that it may have to any indemnified party under this subsection (e) except to the extent that the indemnifying party is actually prejudiced by the failure to give notice. The parties hereto agree that it would not be just and equitable if contribution pursuant to this section were determined by pro rata allocation or by any other method of allocation that does not take account the equitable considerations referred to in the immediately preceding paragraph. If indemnification is available under this section 5, the indemnifying parties shall indemnify each indemnified party to the fullest extent provided in subsections (a) and (b), without regard to the relative fault of said indemnifying party or any other equitable consideration provided for in this subsection. The provisions of this subsection shall be in addition to any other rights to indemnification or contribution that any indemnified party may have pursuant to law or contract, shall remain in full force and effect regardless of any investigation made by or on behalf of any indemnified party, and shall survive the transfer of securities by any such party. Section 7. Rule 144. The Company covenants to Davis that, to the extent that the Company shall be required to do so under the Exchange Act, the Company shall (a) timely file the reports required to be filed by it under the Exchange Act or the Securities Act (including, but not limited to, the reports under Sections 12, 13 and/or 15(d) of the Exchange Act referred to in subparagraph (c) (1) of Rule 144 adopted by the SEC under the Securities Act) and the rules and regulations adopted by the SEC thereunder. Upon the request of Davis, the Company shall deliver to Davis a written statement as to whether it has complied with such requirements. Section 9. Other Existing or Subsequent Registration Rights. (a) The Company represents and warrants that other than the registration rights granted under this Agreement and provided for in Attachment "A" to this Agreement, the Company is not currently a party to any other agreement whereby it accords any Person any demand or participatory registration rights with respect to such Person's Common Stock. (b) The Company will not agree to any amendment or other modification to any agreement granting registration rights to any other person without having first received the written consent of Davis. (c) The Company will not hereafter grant to any Person, Demand Registration rights without the prior written consent of Davis. The Company will not hereafter grant to any Person any participatory registration rights that are inconsistent with or violate the rights granted to Davis under this Agreement. 8 Section 10. Miscellaneous. (a) Mid-Power and Davis agree as follows: (i) if any Registrable Securities are being registered in any registration pursuant to this Agreement, Davis will comply with all anti-stabilization, manipulation and similar provisions of Section 10 of the Exchange Act, as amended, and any rules promulgated thereunder by the SEC and, at the request of the Company, will execute and deliver to the Company an appropriate agreement to such effect; and (ii) at the end of any period during which the Company is obligated to keep a registration statement current and effective as described herein, Davis shall discontinue sales thereof pursuant to such registration statement upon execution of an agreement with the Company (subject to the sole discretion Davis) provides Davis the proper method to continue to sell Davis' remaining Registrable Securities. (b) All questions concerning the construction, validity and interpretation of this Agreement shall be governed by the internal law, and not the law of conflicts, of the state of Nevada. (c) All covenants and agreements in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto. In addition, the rights and obligations under this Agreement shall automatically be transferred to and binding on any transferee or assignee of the Registrable Securities; provided, that (i) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the Registrable Securities with respect to which such registration rights are being transferred or assigned, (ii) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement, and (iii) the transfer and assignment of the subject Registrable Securities is in compliance with the Securities Act and applicable state securities laws or an exemption from the registration requirements of the Securities Act and applicable state securities laws. (d) This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter herein contained. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein, with respect to the registration rights granted by the Company to Davis for the Registrable Securities other than as provided for in the Acquisition Agreement. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. (e) All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally or sent by reputable express courier service (charges prepaid), or mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid, or sent by telefax, to the parties at the following address (or to such other address or to the attention of such other person as the recipient party has specified by prior like notice to the sending party): If to the Company, to: Mid-Power Service Corporation 3800 Howard Hughes Parkway Suite 860 Las Vegas, Nevada 89109 Attn: President 9 If to Davis, to: Edward Mike Davis 200 Rancho Circle Las Vegas, Nevada 89107-4601 (f) If any provision of this Agreement is held to be unenforceable, this Agreement shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed unenforceable, and in all other respects this Agreement shall remain in full force and effect; provided, however, that if any such provision may be made enforceable by limitation thereof, then such provision shall be deemed to be so limited and shall be enforceable to the maximum extent permitted by applicable law. (g) This Agreement may be executed by the parties hereto in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same agreement. Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all, the parties hereto. (h) Davis, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of his rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of breach by it of the provisions of this Agreement and hereby agrees to waive (to the extent permitted by law) the defense in any action for specific performance that a remedy of law would be adequate. (i) In any action or proceeding brought to enforce any provision of this Agreement, or where any provision hereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorneys' fees in addition to any other available remedy. (j) The Company agrees to remove any stop-transfer orders and similar instructions and any legends on certificates representing Registrable Securities describing transfer restrictions applicable to such securities upon the sale of such securities pursuant to an effective Registration Statement under the Securities Act or in accordance with the provisions of Rule 144 under the Securities Act. (k) This Agreement may be amended, modified, supplemented, restated or discharged (and provisions hereof may be waived) only by an instrument in writing signed by the Company and Davis. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. MID-POWER SERVICE CORPORATION /s/ James W. Scott -------------------------------- James W. Scott, President /s/ Edward Mike Davis -------------------------------- Edward Mike Davis 10 EX-10.03 8 ex103form8k061402.txt LOAN AGREEMENT Exhibit 10.03 LOAN AGREEMENT by and among Mid-Power Service Corporation ("MP Service") and Mid-Power Resource Corporation ("MP Resource"), together Borrowers, and SCRS Investors, LLC, as Lender, dated as of May 9, 2002 LOAN AGREEMENT THIS LOAN AGREEMENT ("Agreement") is made as of the ninth day of May, 2002, by and between Mid-Power Service Corporation, a Nevada corporation, and Mid-Power Resource Corporation, a Nevada corporation (each a Borrower and together "Borrowers") and SCRS Investors, LLC, a Delaware limited liability company ("Lender"). W I T N E S S E T H: WHEREAS, Borrowers have requested that Lender loan to Borrowers the principal amount of twenty-five million, five hundred thousand dollars ($25,500,000); and WHEREAS, Lender has agreed to loan such amount to Borrowers, subject to the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: ARTICLE I AMOUNT AND TERMS OF THE LOAN 1.1 Amount of Loan. Subject to the terms and conditions hereinafter set forth, Lender hereby agrees to loan to Borrowers an aggregate principal amount of $25,500,000 (the "Loan") on the terms and subject to the conditions hereinafter set forth. 1.2 Disbursement Schedule. Lender shall disburse the principal amount borrowed by Borrowers as follows: (a) five million, five hundred thousand dollars effective May 9, 2002; (b) ten million dollars effective December 9, 2002; and (c) ten million dollars effective June 1, 2003. 1.3 Interest. Borrowers shall pay interest on the outstanding and unpaid principal amount disbursed of the Loan at the rate of ten percent (10%) per annum. Interest on the Loan shall accrue on the monies disbursed from the issuance date of the Loan and shall be computed on the basis of a 365- or 366-day year, as the case may be, and the actual number of days elapsed (including the first day, but excluding the last day) during the period for which such interest is payable. 1.4 Promissory Note. The Loan to be made to Borrowers hereunder shall be evidenced by a promissory note, in substantially the form of Exhibit A hereto (the "Promissory Note"). 1 1.5 Repayment of the Loan. (a) The Loan shall be repayable, with interest at 10% per annum on the amount actually advanced from and after the date of such respective advances, in 20 consecutive equal quarterly payments of principal and interest, commencing on the last day of December 2007 and continuing on the last day of each calendar quarter thereafter, until December 31, 2012, at which time all unpaid principal and accrued but unpaid interest shall be paid in full, all as more particularly set forth in the Promissory Note. (b) Lender is hereby authorized at any time and from time to time, without notice to Borrowers, to set-off and apply any and all amounts at any time held and any indebtedness at any time owing by Lender to or for the account of Borrowers against any and all obligations of Borrowers now or hereafter existing under this Agreement or the Promissory Note. 1.6 Prepayments. Borrowers shall have the right to prepay from time to time, in whole or in part, and without premium or penalty, the outstanding principal balance of the Loan, together with accrued interest thereon to the date of such prepayment. 1.7 Additional Consideration for the Loan. As additional consideration for the Loan, within ten days after the execution of this Agreement MP Service shall issue and deliver to Lender 340,000 shares of restricted common stock of MP Service. Lender acknowledges that such shares constitute "restricted securities", as that term is defined under the Securities Act of 1933, as amended, and must be held for investment. Lender will execute and deliver to MP Service an investment letter confirming the foregoing and such additional representations as are usual and customary in order to provide MP Service with a reasonable factual basis for issuing such shares in reliance on exemptions from registration under the Securities Act. ARTICLE II CONDITIONS PRECEDENT TO LOAN The obligation of Lender to make the Loan to Borrowers is subject to the condition precedent that Lender shall have received, on or before the date of this Agreement, each of the following, in form and substance satisfactory to Lender: 2.1 The Promissory Note. The Promissory Note duly executed by Borrowers. 2.2 Security Agreement. As security for the repayment of Lender's Loan to Borrowers, execution and deliver to and in favor of Lender of: (a) a Security Agreement, substantially in the form of Exhibit B hereto, duly executed by Borrowers and granting to Lender a lien on and security interest in the personal property of MP Resources, including those associated with the gas properties located in Carbon and Emery Counties, Utah, and commonly referred to by the parties as the Clear Creek property, and any and all receivables by Borrowers from the Clear Creek property; (b) one or more UCC-1 Financing Statements, in form suitable for filing in the applicable jurisdictions, duly executed by MP Resources; and 2 (c) a Deed of Trust and Security Agreement, substantially in the form of Exhibit C hereto, duly executed by Borrowers and granting to Lender a lien on and security interest in the interests of MP Resources in the Clear Creek gas real property located in Carbon and Emery Counties, Utah, together with any and all accounts receivable of MP Resources from the Clear Creek property. 2.3 Additional Documentation. Such other documents, instruments, certificates and opinions as Lender may reasonably request. ARTICLE III REPRESENTATIONS AND WARRANTIES OF BORROWERS In order to induce Lender to enter into this Agreement and to make the Loan contemplated hereunder, each Borrower represents and warrants to Lender as follows: 3.1 Due Organization; Authority of Borrowers. Each Borrower is a corporation duly organized, validly existing and in good standing under the laws of the state of Nevada, and each Borrower is qualified to do business and in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on the business, operations and financial condition of Borrowers and their subsidiaries, taken as a whole. Each Borrower has all requisite power and authority to own, operate and lease its properties and assets and to carry on its business as currently conducted, and to execute, deliver and perform this Agreement and each of the other documents, agreements and instruments to be executed and delivered by it in accordance with or pursuant to this Agreement (collectively, the "Borrower Related Agreements"). The execution, delivery and performance of this Agreement and the Borrower Related Agreements have been duly and validly authorized by all necessary corporate action on the part of each Borrower. This Agreement and the Borrower Related Agreements have been duly executed and delivered by each Borrower which is a party thereto and each constitutes the legal, valid and binding obligation of each Borrower, enforceable in accordance with its terms against each Borrower, subject to the laws of general application from time to time in effect affecting creditors' rights and to the exercise of judicial discretion in accordance with general equitable principles. 3.2 No Restrictions against Performance. Neither the execution, delivery nor performance of this Agreement or the Borrower Related Agreements, nor the consummation of the transactions contemplated hereby or thereby will, with or without the giving of notice or the passage of time, or both, violate any provisions of, conflict with, result in a breach of, constitute a default under, or result in the creation or imposition of any Lien (as defined below) or condition under (a) the articles of incorporation or bylaws of either Borrower; (b) any federal, state or local law, statute, ordinance, regulation or rule that is applicable to either Borrower; (c) any contract, indenture, instrument, agreement, mortgage, lease, right or other obligation or restriction to which either Borrower is a party or by which either Borrower is or may be bound; or (d) any order, judgment, writ, injunction, decree, license, franchise, permit or other authorization relating to or which affects the consummation of the transactions contemplated hereby of any governmental authority or by which either Borrower is or may be bound. The execution and delivery of this Agreement and the Borrower Related Agreements and the performance by each Borrower of the transactions contemplated hereby and thereby will not constitute an act of bankruptcy, preference, insolvency or fraudulent conveyance under any bankruptcy act or other law for the protection of debtors or creditors. As used herein, the term "Lien" means all liens, liabilities, claims, security interests, mortgages, pledges, agreements, obligations, restrictions or other encumbrances of any nature whatsoever, whether absolute, legal, equitable, accrued, contingent or 3 otherwise, including, without limitation, any rights of first refusal or any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership. 3.3 Third-Party and Governmental Consents. No approval, consent, waiver, order or authorization of, or registration, qualification, declaration or filing with, or notice to any governmental authority or other third party is required on the part of Borrowers, or either of them, in connection with the execution of this Agreement or the Borrower Related Agreements or the consummation of the transactions contemplated hereby or thereby. 3.4 Compliance with Laws. Each Borrower has conducted and currently is conducting its business in compliance, in all material respects, with all applicable federal and state domestic and foreign laws, rules, regulations, judgments, orders and other legal requirements (including, but not limited to, those relating to environmental, safety and labor matters). 3.5 Litigation. There are no claims, actions, suits, summonses, notices of violation, proceedings, investigations, or judicial or administrative actions, suits or proceedings pending or threatened against or relating to Borrowers, or either of them, this Agreement, or the transactions contemplated hereby, before any governmental authority, and neither Borrower has any knowledge of any facts or circumstances that may give rise to any of the foregoing nor any reason to believe there is a valid basis for any such claim, action, suit, summons, notice of violation, proceeding or investigation. Neither Borrower is the subject of any order, judgment, decree, injunction or stipulation of any governmental authority. 3.6 No Defaults. Neither Borrower is in breach or default under any contract, indenture, instrument, agreement, mortgage, lease, right or other obligation or restriction to which either Borrower is a party or by which either Borrower is or may be bound, nor have there been any assertions of such breach or default. No condition or event has occurred that, with the giving of notice or the passage of time, or both, would constitute a breach or default by Borrowers, or either of them, under any of the foregoing. 3.7 No Event of Default. After giving effect to the transactions contemplated by this Agreement, no condition or event exists or will exist that constitutes or would constitute, after the giving of notice or the passage of time, or both, an Event of Default (as hereinafter defined). 3.8 Location of Chief Executive Offices. The chief executive office and principal place of business of Borrowers are located at 3800 Howard Hughes Parkway, Suite 860, Las Vegas, Nevada 89109. 3.9 Title to Clear Creek Property. Borrowers have received representations that Borrowers will have good, valid, marketable, legal and beneficial title to, and will be the lawful owners of, the Clear Creek property, free and clear of all Liens. 3.10 Sufficiency of Assets. The properties and assets comprising the Clear Creek property include all machinery, equipment, tangible personal property, leases, rights-of-way and compliance with environmental regulations necessary for the production of gas reserves upon the completion of necessary additional drilling and related development, and the installation of required gas, production, gathering, processing and transportation facilities. 4 ARTICLE IV COVENANTS Each Borrower agrees to the following terms, so long as Borrowers shall be indebted to Lender pursuant to this Agreement and the Promissory Note. 4.1 Maintenance of Existence. Each Borrower shall preserve and maintain its existence and good standing in the state of Nevada and, if required, its qualification and good standing as a foreign corporation in the state of Utah. 4.2 Sale, Consolidation or Merger. Neither Borrower will, directly or indirectly, sell, assign, lease or otherwise dispose of all or any significant portion of its assets to, or merge or consolidate with or into, or enter into any similar transaction with, any person or entity other than Lender or an affiliate of Lender or Red Star, Inc. 4.3 No Transfer of or Liens on the Clear Creek Property. Except for a transfer to Lender or an affiliate of Lender, Mid-Power Resource Corporation will maintain good, valid, marketable, legal and beneficial title to, and will remain the lawful owner of, the Clear Creek property. Mid-Power Resource Corporation will not, directly or indirectly, sell, assign, transfer or otherwise dispose of, or create, incur, assume or suffer to exist any Lien on, all or any part of the Clear Creek property, all except (a) to Lender or an affiliate of Lender; (b) any sale, assignment, lease, transfer or other disposition or encumbrance of the Collateral (a "disposition"), other than (i) dispositions of property in the ordinary course of business (which does not include the disposition of major items of equipment, except to the extent such items of equipment are replaced by equivalent property), (ii) dispositions of property that is replaced by equivalent property, (iii) dispositions of property that is no longer useful in Debtor's operations; or (iv) for "Permitted Security Interests." When used herein, "Permitted Security Interest" means (w) any security interest arising by operation of law in the ordinary course of business and securing amounts not more than 90 days overdue; (x) security interests expressly permitted in writing by Lender; (y) easements, rights-of-way, servitudes, permits, surface leases and other rights affecting the surface that do not interfere with the use, operation, value or unrestricted alienability of the affected property and do not interfere with the ability of the Lender to enforce any rights under the Promissory Note or any Borrower Related Agreements nor in any way materially and adversely affecting the ongoing interests of Borrowers; and (z) purchase money security interests securing amounts no greater than $1,000,000 incurred in the ordinary course of business. 4.4 Impairment of Security Interest. Borrowers will not, directly or indirectly, take or fail to take any action that would in any manner impair the value or enforceability of Lender's security interest in the Clear Creek property. ARTICLE V EVENTS OF DEFAULT 5.1 Events of Default. The occurrence of any one or more of the following events shall constitute an "Event of Default" hereunder: (a) Borrowers shall fail to pay, as and when due, any principal of or accrued interest on the Loan within five days after the date on which such payment is due; (b) Borrowers shall fail to comply with any material provision of this Agreement, the Promissory Note, any of the security agreements 5 executed in connection herewith, or any of the other Borrower Related Agreements, which failure shall remain uncured for a period of 30 days or more after receipt by Borrowers of notice thereof; (c) any representation or warranty made by Borrowers in this Agreement, the Promissory Note, any of the security agreements executed in connection herewith, or any of the other Borrower Related Agreements, shall fail to be true and correct in all material respects; (d) Borrowers, or either of them, shall make an assignment for the benefit of creditors; (e) an order, judgment or decree shall be entered adjudicating Borrowers, or either of them, bankrupt or insolvent; or (f) Borrowers shall commence proceedings under any bankruptcy or insolvency laws, or a third party shall commence such proceedings against Borrowers, or either of them, and such proceedings shall not be dismissed within 90 days after commencement. 5.2 Remedies. Upon the occurrence of an Event of Default, or at any time thereafter that an Event of Default shall be continuing, Lender may, at its option (a) be relieved of any obligation to make further advances to Borrowers; (b) declare the unpaid principal balance of the Promissory Note, together with interest accrued thereon, to be immediately due and payable, and proceed to enforce payment of the same; (c) exercise any of the remedies provided for under this Agreement or any of the security agreements executed by Borrowers in connection herewith; or (d) exercise any remedies available to Lender under applicable law. ARTICLE VI GENERAL PROVISIONS 6.1 Expenses. Each party to this Agreement shall pay its own expenses (including, without limitation, the fees and expenses of its agents, representatives, counsel and accountants) incidental to the negotiation, drafting and performance of this Agreement. 6.2 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither this Agreement, the Promissory Note nor any of the other Borrower Related Agreements may be assigned without the prior written consent of Lender. 6.3 Waiver. No provision of this Agreement shall be deemed waived by course of conduct, including the act of closing, unless such waiver is made in a writing signed by Lender stating that it is intended specifically to modify this Agreement, nor shall any course of conduct operate or be construed as a waiver of any subsequent breach of this Agreement, whether of a similar or dissimilar nature. 6.4 Entire Agreement. This Agreement and the Borrower Related Agreements supersede any other agreement, whether written or oral, that may have been made or entered into by the parties hereto (or by any director, officer, agent or other representative of such parties) relating to the matters contemplated hereby or thereby. This Agreement and the Borrower Related Agreements constitute the entire agreement by and among the parties hereto and thereto and there are no agreements or commitments except as expressly set forth herein or therein. No party hereto has executed this Agreement in reliance upon any representations, warranties, covenants or agreements not expressly included herein or therein 6 6.5 Further Assurances. Each of the parties hereto agrees to execute all further documents and instruments and to take or cause to be taken all reasonable actions that are necessary or appropriate to complete the transactions contemplated by this Agreement and the Borrower Related Agreements. 6.6 Notices. All notices, demands, requests and other communications hereunder shall be in writing and shall be delivered by hand, or sent by certified or registered United States mail, postage prepaid and return receipt requested, or by prepaid nationally recognized overnight express service or by fax. Notices shall be sent to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice; provided that such notice shall be effective only upon receipt thereof): If to Borrowers: 3800 Howard Hughes Parkway, Suite 860 Las Vegas, Nevada 89109 If to Lender: 3800 Howard Hughes Parkway, Suite 860 Las Vegas, Nevada 89109 All such notices shall be deemed to have been received on the date of delivery if delivered by hand or by confirmed fax, one day after the date of mailing if given by overnight express service, and four days after the date of mailing if given by certified or registered U.S. mail. 6.7 Amendments, Supplements, etc. This Agreement may be amended or modified only by a written instrument executed by all parties hereto that states specifically that it is intended to amend or modify this Agreement. 6.8 Severability. In the event that any provision contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof and this Agreement shall be construed as if such invalid, illegal or unenforceable provisions had never been contained herein and, in lieu of each such illegal, invalid or unenforceable provision, there shall be added automatically, as a part of this Agreement, a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible but still be legal, valid and enforceable. 6.9 Applicable Law and Jurisdiction. This Agreement and the legal relations between the parties hereto shall be governed by and construed in accordance with the substantive laws of the state of Nevada, without giving effect to the principles of conflicts of law thereof. 6.10 Titles and Headings. Titles and headings to sections hereof are inserted for convenience of reference only and are not intended to be a part of, or to affect the meaning or interpretation of, this Agreement. 6.11 Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery of the executed signature pages by facsimile transmission shall constitute effective and binding execution and delivery of this Agreement. 6.12 No Third-Party Beneficiaries. Each party hereto intends that this Agreement shall not benefit or create any right or cause of action in or on behalf of any person other than the parties hereto. 7 6.13 Relationship of the Parties. Nothing in this Agreement or the Related Agreements shall be construed to create a joint venture, partnership or any other similar arrangement between or among the parties hereto. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. LENDER: SCRS Investors, LLC By: /s/ James W. Scott ------------------------------- Name: James W. Scott Title: Managing Member BORROWERS: Mid-Power Service Corporation By: /s/ James W. Scott ------------------------------- Name: James W. Scott Title: President Scrs.loan.agrmt.050902.2 8 STATE OF NEVADA ) : ss. COUNTY OF CLARK ) I, a notary of said county and state, do certify that James W. Scott, who signed the instrument above bearing the date of May 9, 2002, on behalf of Mid-Power Service Corporation, a Nevada corporation, has this day in my said county, before me, acknowledged the said instrument to be the act and deed of said company. IN WITNESS WHEREOF, I have hereunder set my hand and official seal in the City of Las Vegas, County of Clark, State of Nevada, this 25th day of June, 2002. /s/ Susana D. McGee ------------------------------- Notary Public Printed Name: Susana D. McGee Address of Notary Public: 3800 Howard Hughes Pkway Ste 860 Las Vegas, NV 89109 My Commission Expires: Nov. 15, 2005 Mid-Power Resource Corporation By: /s/ James W. Scott ---------------------------- Name: James W. Scott Title: President STATE OF NEVADA ) : ss. COUNTY OF CLARK ) I, a notary of said county and state, do certify that James W. Scott, who signed the instrument above bearing the date of May 9, 2002, on behalf of Mid-Power Resource Corporation, a Nevada corporation, has this day in my said county, before me, acknowledged the said instrument to be the act and deed of said company. IN WITNESS WHEREOF, I have hereunder set my hand and official seal in the City of Las Vegas, County of Clark, State of Nevada, this 25th day of June, 2002. /s/ Susana D. McGee ------------------------------- Notary Public Printed Name: Susana D. McGee Address of Notary Public: 3800 Howard Hughes Pkway Ste 860 Las Vegas, NV 89109 My Commission Expires: Nov. 15, 2005 9 EX-10.04 9 ex104form8k061402.txt PROMISSORY NOTE WITH SCRS INVESTORS, LLC Exhibit 10.04 PROMISSORY NOTE $25,500,000.00 May 9, 2002 FOR VALUE RECEIVED, the undersigned, Mid-Power Service Corporation, a Nevada corporation, and Mid-Power Resource Corporation, a Nevada corporation and wholly-owned subsidiary of Mid-Power Service Corporation (together, "Makers"), with their principal executive offices located at 3800 Howard Hughes Parkway, Suite 860, Las Vegas, Nevada 89109, jointly and severally, promise to pay to the order of SCRS Investors, LLC, a Delaware limited liability company ("Holder"), the principal sum of TWENTY-FIVE MILLION, FIVE HUNDRED THOUSAND DOLLARS ($25,500,000.00), or such lesser amount as has been advanced by Holder to Makers pursuant to the Loan Agreement of even date herewith (the "Loan Agreement") by and between Makers and Holder, together with interest on funds on the amount actually advanced from and after the date of such respective advances at 10% per annum. 1. Loan Agreement. This Note is being issued pursuant to, and is entitled to the benefits of, the Loan Agreement. All of the terms and conditions of the Loan Agreement are hereby incorporated by reference, including, without limitation, provisions with respect to prepayments, acceleration, defaults and remedies. 2. Security for Payment. In accordance with the Loan Agreement, Makers have provided certain security for payment of the Note and the obligation evidenced thereby. Reference is made to the security agreements executed by Makers for a description of the nature and extent of the liens, encumbrances and security interests provided thereby and the rights of Holder in respect thereto. 3. Payment. All amounts advanced by Maker to Holder under the Loan Agreement shall be repayable, with interest at 10% per annum on the amount actually advanced from and after the date of such respective advances, in 20 consecutive equal quarterly payments of principal and interest, commencing on the last day of December 2007 and continuing on the last day of each calendar quarter thereafter, until December 31, 2012, at which time all unpaid principal and accrued but unpaid interest shall be paid in full. 4. Time and Place of Payment. Payments of principal and interest due and payable hereunder shall be made to Holder at its offices at 3800 Howard Hughes Parkway, Suite 860, Las Vegas, Nevada 89109, or at such other place as Holder shall have designated to Makers in writing. 5. Prepayment. This Note may be prepaid, in whole or in part, at any time by Makers without premium or penalty. Simultaneously with any repayment in full of this Note, Holder shall deliver to Makers a receipt for such payment, together with the original executed copy of this Note, which shall be marked cancelled. 6. Events of Default. The occurrence of any one or more of the following events shall constitute an "Event of Default" hereunder: (a) Makers shall fail to pay, as and when due, any principal of or accrued interest under this Note within five days after the date on which such payment is due; (b) Makers shall fail to comply with any material provision of the Loan Agreement, this Note or any of the other security agreements executed in connection with the Loan Agreement, which failure shall remain uncured for a period of 30 days or more after Makers have received notice thereof; (c) any representation or warranty made by Makers in the Loan Agreement, this Note or any of the other security agreements executed in connection with the Loan Agreement shall fail to be true and correct in all material respects; (d) Makers shall make an assignment for the benefit of creditors; (e) an order, judgment or decree shall be entered adjudicating Makers, or either of them, bankrupt or insolvent; or (f) Makers, or either of them, shall commence proceedings under any bankruptcy or insolvency laws, or a third party shall commence such proceedings against Makers, or either of them, and such proceedings shall not be dismissed within 90 days after commencement. 7. Conversion. (a) Conversion of Note. At any time, Holder shall have the right, at Holder's option, to convert the principal and accrued interest on this Note, in whole or in part, into common stock, par value $0.001, of Mid-Power Service Corporation ("Conversion Stock"), at a price of $1.50 per share, subject to adjustment as provided below ("Note Conversion Price"). Conversion under this section shall occur only upon surrender of this Note for conversion at the principal offices of Mid-Power Service Corporation, accompanied by a written notice of election to convert, provided, however, that pursuant to the limitations set forth in that certain promissory note in the aggregate principal amount of $10,000,000 dated as of June 13, 2002, made and delivered by Makers, as makers, to Edward Mike Davis ("Davis"), as payee (the "Davis Note"), as part of the merger consideration under that certain "Acquisition Agreement and Plan of Merger" dated as of June 14, 2002, by and between Makers, Red Star, Inc., a Nevada corporation, and for the limited purposes set forth therein, Davis, a copy of which has been delivered to Payee and to which this Note is subject, Holder shall not have any right to convert any principal of or interest accrued under the Note if, upon such conversion: (i) at any time before the Davis Note is paid in full, Holder would have the right to receive any more than 3,666,667 shares of Conversion Stock hereunder; (ii) at any time after the Davis Note is paid in full and before June 13, 2003, the issuance of such Conversion Stock would cause the ownership of Davis to become less than fifty-one percent (51%) of the ownership, beneficial or legal, of Mid-Power Service Corporation; or (ii) at any time after June 13, 2003, and before the close of business on June 13, 2007, the issuance of such Conversion Stock would cause the ownership of Davis to become less than thirty-six percent (36%) of the ownership, beneficial or legal, of Mid-Power Service Corporation; save and except, in each case, such conversion has been consented to in writing by Davis, in his sole and absolute discretion. (b) Conversion in the Event of Prepayment or Payment of Note. At such time that Makers have funds immediately available and elect to pay the entire principal balance and accrued interest (whether as a prepayment or payment at or after maturity of this Note), Holder shall have the option to convert the Note into Conversion Stock at the Note Conversion Price on or before 15 days from the receipt of notice of Makers' election to pay off the Note. Holder shall have no obligation to accept any payment less than the entire principal balance, plus accrued interest. 2 (c) Certain Transactions. Makers shall give written notice to Holder of any "Change of Control Transaction" at least 20 business days prior to the date on which such Change of Control Transaction shall take place. Prior to the closing of such Change of Control Transaction, Makers shall, at Holder's election, either repay all unpaid principal and interest under this Note or convert this Note into Conversion Stock at the Note Conversion Price, subject to the limitations set forth herein. (d) Issuance of Conversion Stock. As soon as practicable after conversion of this Note, Mid-Power Service Corporation, at its expense, will cause to be issued in the name of and delivered to Holder of this Note, a certificate or certificates for the number of shares of Conversion Stock to which Holder shall be entitled upon such conversion (bearing such legends as may be required by applicable state and federal securities laws in the opinion of legal counsel of Mid-Power Service Corporation), together with any other securities and property to which Holder is entitled upon such conversion under the terms of this Note. Such conversion shall be deemed to have been made under this section 6 and immediately prior to the close of business on the date that the Note shall have been surrendered for conversion, accompanied by written notice of election to convert. No fractional shares will be issued upon conversion of this Note. If, upon any conversion of this Note, a fraction of a share would otherwise result, then, in lieu of such fractional share, Mid-Power Service Corporation will pay the cash value of that fractional share, calculated on the basis of the applicable Note Conversion Price. (e) Adjustment of Number of Shares. The number and character of shares of Conversion Stock issuable upon conversion of this Note (or any shares of stock or other securities or property at the time receivable or issuable upon conversion of this Note) are subject to adjustment upon the occurrence of any of the following events: (i) Adjustment for Stock Splits, Stock Dividends, Recapitalization, etc. In the event that Mid-Power Service Corporation shall fix a record date for the determination of holders of securities affected by any stock split, stock dividend, reclassification, recapitalization or other similar event that will, in the future, affect the number of outstanding shares of Mid-Power Service Corporation's capital stock, then, and in each such case, Holder, upon conversion of this Note at any time after Mid-Power Service Corporation shall fix the record date for such event, shall receive, in addition to the shares of Conversion Stock issuable upon conversion on the Conversion Date, the right to receive the securities of Mid-Power Service Corporation to which Holder would have been entitled if Holder had converted this Note immediately prior to such record date (all subject to further adjustment as provided in this Note). (ii) Adjustment for Dividends and Distributions. In the event that Mid-Power Service Corporation shall make or issue, or shall fix a record date for the determination of eligible holders of securities entitled to receive, a dividend or other distribution payable with respect to the Conversion Stock (or any shares of stock or other securities at the time issuable upon conversion of this Note) that is payable in securities of Mid-Power Service Corporation, other than 3 capital stock, or any other assets, then, and in each such case, Holder, upon conversion of this Note at any time after the consummation, effective date or record date of such event, shall receive, in addition to the shares of Conversion Stock (or such other stock or securities) issuable upon such conversion prior to such date, the securities or such other assets of Mid-Power Service Corporation to which Holder would have been entitled upon such date if Holder had converted this Note immediately prior thereto (all subject to further adjustment as provided in this Note). (iii) Adjustment for Reorganization, Consolidation, Merger. In the event of any reorganization not considered a Change of Control Transaction of Mid-Power Service Corporation (or any other corporation the stock or other securities of which are at the time receivable upon the conversion of this Note) after the date of this Note, or in the event, after such date, Mid-Power Service Corporation (or any such corporation) shall consolidate with or merge into another corporation or convey all or substantially all of its assets to another corporation and such transaction is not considered a Change of Control Transaction, then, and in each such case, Holder, upon the conversion of this Note (as provided in this section 6) at any time after the consummation of such reorganization, consolidation, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the conversion of this Note prior to such consummation, the stock or other securities or property to which Holder would have been entitled upon the consummation of such reorganization, consolidation, merger or conveyance if Holder had converted this Note immediately prior thereto, all subject to further adjustment as provided in this section 6, and the successor or purchasing corporation in such reorganization, consolidation, merger or conveyance (if other than Mid-Power Service Corporation) shall duly execute and deliver to Holder a supplement hereto acknowledging such corporation's obligations under this Note. In each such case, the terms of the Note shall be applicable to the shares of stock or other securities or property receivable upon the conversion of this Note after the consummation of such reorganization, consolidation, merger or conveyance. (iv) Conversion of Stock. In the event that all of the authorized Conversion Stock of Mid-Power Service Corporation is converted, pursuant to its articles of incorporation, into other capital stock or securities or property, or the Conversion Stock otherwise ceases to exist, then Holder, upon conversion of this Note at any time after the date on which the Conversion Stock is so converted or ceases to exist (the "Termination Date"), shall receive, in lieu of the number of shares of Conversion Stock that would have been issuable upon such conversion immediately prior to the Termination Date (the "Former Number of Shares of Conversion Stock"), the stock and other securities and property to which Holder would have been entitled to receive upon the Termination Date if Holder had converted this Note with respect to the Former Number of Shares of Conversion Stock immediately prior to the Termination Date (all subject to further adjustment as provided in this Note). (v) Notice of Adjustments. Mid-Power Service Corporation shall promptly give written notice of each adjustment or readjustment of the number of shares of Conversion Stock or other securities issuable upon conversion of 4 this Note, by first class mail, postage prepaid, to Holder of this Note at Holder's address as shown on Mid-Power Service Corporation's books. The notice shall describe the adjustment or readjustment and show in reasonable detail the facts on which the adjustment or readjustment is based. (vi) No Change Necessary. The form of this Note need not be changed because of any adjustment in the number of shares of Conversion Stock issuable upon its conversion. (vii) Reservation of Stock. Mid-Power Service Corporation has taken all necessary corporate action and obtained all necessary government consents and approvals to authorize the issuance of this Note and, prior to the conversion hereof, the shares of Conversion Stock issuable upon conversion of this Note. If at any time the number of authorized but unissued common stock or other securities shall not be sufficient to effect the conversion of this Note, then Mid-Power Service Corporation will take such corporate action as may, in the opinion of its legal counsel, be necessary to increase its authorized but unissued common stock or other securities as shall be sufficient for such purpose. (f) Fully Paid Shares. All shares of Conversion Stock issued upon the conversion of this Note shall be validly issued, fully paid, and nonassessable. (g) No Rights or Liabilities as Stockholder. This Note does not by itself entitle Holder to any voting rights or other rights as a stockholder of Mid-Power Service Corporation. In the absence of conversion of this Note, no provisions of this Note, and no enumeration herein of the rights or privileges of Holder, shall cause Holder to be a stockholder of Mid-Power Service Corporation for any purpose. (h) Corporate Action; No Impairment. Makers will not, by amendment of their articles of incorporation or bylaws, or through reorganization, consolidation, merger, dissolution, issuance or sale of securities, repurchase of securities, sale of assets or any other action, avoid or seek to avoid the observance or performance of any of the terms of this Note, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate, or as reasonably requested by Holder, in order to protect the rights of Holder under this Note against wrongful impairment. 8. Notice. Any notice, presentation or demand to or upon Makers in respect of this Note shall be given in writing and shall be deemed to be duly made (a) if personally delivered with receipt acknowledged, (b) if mailed by registered or certified mail, first class postage prepaid, and return receipt requested, (c) if delivered by a nationally recognized overnight courier service, or (d) if transmitted by confirmed fax, in each case, to the address set forth above or, if any other address shall be designated for this purpose by Makers in writing to Holder, to such other address. 9. Organization. Holder recognizes and acknowledges that each Maker is a corporation formed under the laws of the state of Nevada, and that no past, present or future directors, officers, employees, agents or representatives of Makers shall have any personal liability for any obligation whatsoever or howsoever arising (including, without limitation, under contract or in tort or equity) under or with respect to this Note or applicable law. Holder shall not (a) assert or seek to assert any claim against, (b) name in any civil action or proceeding or arbitration, or (c) seek or obtain any judgment, order or decree 5 against any director, officer, employee, agent or representative of Makers, their successors or assigns, or any of their respective properties or assets. 10. Governing Law. This Note shall be governed by and construed in accordance with the laws of the state of Nevada. IN WITNESS WHEREOF, Makers have duly executed this Note on the day and year first above written. Mid-Power Service Corporation By: /s/ James W. Scott ----------------------------------- Name: James W. Scott Title: President Scrs.promissorynote.050902.2 6 STATE OF NEVADA ) : ss. COUNTY OF CLARK ) I, a notary of said county and state, do certify that James W. Scott, who signed the instrument above bearing the date of May 9, 2002, on behalf of Mid-Power Service Corporation, a Nevada corporation, has this day in my said county, before me, acknowledged the said instrument to be the act and deed of said company. IN WITNESS WHEREOF, I have hereunder set my hand and official seal in the City of Las Vegas, County of Clark, State of Nevada, this 25th day of June, 2002. /s/ Susana D. McGee -------------------------------------------- Notary Public in and for the State of Nevada Printed Name: Susana D. McGee Address of Notary Public: 3800 Howard Hughes Pkway Ste 860 Las Vegas, NV 89109 My Commission Expires: Nov. 15, 2005 7 Mid-Power Resource Corporation By: /s/ James W. Scott --------------------------------- Name: James W. Scott Title: President STATE OF NEVADA ) : ss. COUNTY OF CLARK ) I, a notary of said county and state, do certify that James W. Scott, who signed the instrument above bearing the date of June 25, 2002, on behalf of Mid-Power Resource Corporation, a Nevada corporation, has this day in my said county, before me, acknowledged the said instrument to be the act and deed of said company. IN WITNESS WHEREOF, I have hereunder set my hand and official seal in the City of Las Vegas, County of Clark, State of Nevada, this 25th day of June, 2002. /s/ Susana D. McGee -------------------------------------------- Notary Public in and for the State of Nevada Printed Name: Susana D. McGee Address of Notary Public: 3800 Howard Hughes Pkway Ste 860 Las Vegas, NV 89109 My Commission Expires: Nov. 15, 2005 8 EX-10.05 10 ex105form8k061402.txt SECURITY AGREEMENT WITH SCRS INVESTORS, LLC Exhibit 10.05 SECURITY AGREEMENT THIS SECURITY AGREEMENT ("Agreement") is made as of May 9, 2002, by and between Mid-Power Resource Corporation, a Nevada corporation, with its principal executive offices at 3800 Howard Hughes Parkway, Suite 860, Las Vegas, Nevada 89109 ("Debtor"), and SCRS Investors, LLC, a Delaware limited liability company ("Secured Party"). RECITALS A. Pursuant to that certain "Acquisition Agreement and Plan of Merger" dated as of June 13, 2002, made by and among Mid-Power Service Corporation, a Nevada corporation and corporate parent of Debtor ("Parent"), Red Star, Inc., a Nevada corporation, and Debtor, Debtor has succeeded by a corporate merger to the tangible and intangible personal and real properties comprising certain producing, nonproducing and unexplored coalbed methane gas properties located in Carbon and Emery Counties, Utah, and commonly referred to by the parties as the Clear Creek property (the "Property"). B. B. In order to obtain funds for a portion of the acquisition consideration paid and payable under the Acquisition Agreement and Plan of Merger, as well as funds for contemplated further expenditures on or respecting the Property, Parent and Debtor have entered into a Loan Agreement dated effective as of May 9, 2002 (the "Loan Agreement"), under which Secured Party has agreed to loan up to $25,500,000 to Parent and Debtor, upon the terms and subject to the conditions set forth therein (the "Loan"). The obligation to repay the Loan is evidenced by a Promissory Note of even date with the Loan Agreement (the "Promissory Note"), executed by Parent and Debtor and delivered to Secured Party. C. As a condition to Secured Party's agreement to make the Loan to Parent and Debtor and to secure the payment of the obligations under the Loan Agreement and Promissory Note, Secured Party has requested that Debtor grant to Secured Party a security interest in the Clear Creek property and any and all inventory and receivables therefrom. D. Debtor, which has received and will receive good and valuable consideration as a result of Secured Party's Loan to Parent and Debtor, has agreed to grant a security interest in the Clear Creek property, subject to the terms and conditions set forth herein. NOW, THEREFORE, upon these premises, which are incorporated herein by reference, in consideration of the mutual covenants and agreements contained herein, the parties hereto agree as follows: 1. Collateral. Debtor hereby grants to Secured Party a first priority security interest (the "Security Interest") in all of Debtor's right, title and interest in and to (a) the Property, including all items of tangible personal property constituting a part of, or used or useful in connection with the operation of, the Clear Creek property, all as more specifically identified on Exhibit A hereto; and (b) any and all inventory and receivables of Debtor related to the Clear Creek property (collectively, the "Collateral"). 2. Obligations Secured. The Collateral shall secure (a) the full and prompt payment of all amounts due or to become due under the Promissory Note, together with all costs and expenses (including reasonable attorneys' fees) that may be reasonably incurred by Secured Party in the collection or enforcement of the Promissory Note; (b) all obligations of Debtor and Parent under the Loan Agreement and this Agreement; and (c) all amounts that are owed to Secured Party under any extension, renewal or modification of the foregoing (collectively, the "Obligations"). 3. Covenants. Debtor agrees that, so long as any Obligations remain unpaid, it will (a) join with Secured Party in executing such financing statements (including amendments thereto and continuation statements thereof), assignments or other documents, in form satisfactory to Secured Party, as Secured Party may reasonably specify to create, perfect, continue, protect or enforce the Security Interest or the priority of the Security Interest; (b) give Secured Party notice of any change in its name or its principal executive offices, or the establishment or change of any location where the Collateral or its records pertaining to the Collateral will be located, in each case, within 10 days of such change or establishment; (c) maintain the Collateral in good operating condition and repair and be responsible for any loss or damage to the Collateral; (d) pay when due all taxes, registration fees, license fees, permit fees, and other charges that may be assessed or become owing on or in connection with the Collateral, other than those being contested by Debtor in good faith; (e) not misuse, unlawfully use or conceal the Collateral; (f) allow Secured Party to inspect the Collateral during normal business hours and upon reasonable prior notice; (g) maintain insurance coverage with respect to the Collateral in such amounts and covering such risks as are customarily maintained by entities owning facilities that are comparable to the Property; (h) comply with all of the terms, conditions and covenants contained in the Loan Agreement (i) not sell, assign, lease, transfer, or otherwise dispose of or encumber the Collateral (a "disposition"), other than (A) dispositions in the ordinary course of business (which does not include the disposition of major items of equipment, except to the extent such items of equipment are replaced by equivalent property), (B) dispositions of property that is replaced by equivalent property, or (C) dispositions of property that is no longer useful in Debtor's operations; or (D) for "Permitted Security Interests." When used herein, "Permitted Security Interest" means (w) any security interest arising by operation of law in the ordinary course of business and securing amounts not more than 90 days overdue; (x) security interests expressly permitted in writing by Lender; (y) easements, rights-of-way, servitudes, permits, surface leases and other rights affecting the surface that do not interfere with the use, operation, value or unrestricted alienability of the affected property and do not interfere with the ability of the Lender to enforce any rights under the Promissory Note or any Borrower-Related Agreements nor in any way materially and adversely affect the ongoing interests of Borrowers; and (z) purchase money security interests securing amounts no greater than $1,000,000 incurred in the ordinary course of business. 4. Events of Default. The occurrence of any one or more of the following events shall constitute an "Event of Default" hereunder: (a) Debtor and/or Parent shall fail to pay, as and when due, any principal of or accrued interest on the Promissory Note within five days after the date on which such payment is due; (b) Debtor and/or Parent shall fail to comply with any material provision of the Loan Agreement, this Agreement, the Promissory Note, or any of the other security agreements executed in connection with the Loan Agreement, which failure shall remain uncured for a period of 30 days or more after Debtor and Parent have received notice thereof; (c) any representation or warranty made by Debtor and/or Parent in the Loan Agreement, this Agreement, the Promissory Note, or any of the other security agreements executed in connection with the Loan Agreement shall fail to be true and correct in all material respects; (d) Debtor and/or Parent shall make an assignment for the benefit of creditors; (e) an order, judgment or decree shall be entered adjudicating Debtor and/or Parent bankrupt or insolvent; or (f) Debtor and/or Parent shall commence proceedings under any bankruptcy or insolvency laws, or a third party shall commence such proceedings against Debtor and/or Parent, and such proceedings shall not be dismissed within 90 days after commencement. 2 5. Remedies. Upon the occurrence of an Event of Default, or at any time thereafter that an Event of Default shall be continuing, Secured Party may, at its option (a) declare the unpaid principal balance of the Promissory Note, together with interest accrued thereon, to be immediately due and payable and proceed to enforce payment of the same; (b) take, retain and receive the payments, receipts, income and profits arising from the Collateral, and all proceeds of the Collateral, until the Obligations are paid and satisfied in full; or (c) sell the Collateral or exercise any other remedy available to it under the Uniform Commercial Code as enacted in the state of Nevada. 6. Deficiency. In the event that the proceeds of any sale, collection or realization of or upon the Collateral are insufficient to satisfy all of the Obligations, Debtor and Parent shall remain liable to Secured Party for any such deficiency. Notwithstanding the foregoing, Secured Party recognizes that Debtor and Parent are corporations and that no past, present or future directors, officers, employees, agents or representatives of Debtor and/or Parent shall have any personal liability for any obligation whatsoever or howsoever arising (including, without limitation, under contract or in tort or equity) under or with respect to the Promissory Note, the Loan Agreement, this Agreement, the Obligations, the transactions contemplated hereby or thereby, or applicable law. Secured Party shall not (a) assert or seek to assert any claim against; (b) name in any civil action or proceeding or arbitration; or (c) seek or obtain any judgment, order or decree against any director, officer, employee, agent or representative of Debtor and/or Parent or any of their respective properties or assets. 7. Remedies Cumulative. Each right, power and remedy of Secured Party as provided for in the Loan Agreement or this Agreement, or now or hereafter existing at law, in equity, by statute or otherwise, shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in the Loan Agreement and this Agreement, and the exercise by Secured Party of any one or more of such rights, powers or remedies shall not preclude the simultaneous or later exercise by Secured Party of any or all such other rights, powers or remedies. 8. Notices. All notices, demands, requests and other communications hereunder shall be in writing and shall be delivered by hand, or sent by certified or registered United States mail, postage prepaid and return receipt requested, or by prepaid nationally recognized overnight express service or by fax. Notices shall be sent to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice; provided that such notice shall be effective only upon receipt thereof): (a) If to Debtor: Mid-Power Resource Corporation 3800 Howard Hughes Parkway Suite 860 Las Vegas, Nevada, 89109 (b) If to Secured Party: SCRS Investors, LLC 3800 Howard Hughes Parkway Suite 860 Las Vegas, Nevada, 89109 All such notices shall be deemed to have been received on the date of delivery if delivered by hand or by confirmed fax, one day after the date of mailing if given by overnight express service, and four days after the date of mailing if given by certified or registered U.S. mail. 3 9. No Waiver. No failure or delay by Secured Party in demanding the strict performance of any term, condition, covenant or agreement herein, in the Loan Agreement or in the Promissory Note, or in exercising any right, power or remedy consequent upon a breach thereof, shall constitute a waiver of any such term, condition, covenant or agreement or of any such breach, or preclude Secured Party from exercising any such right, power or remedy at any later time or times. By accepting payment after the due date of any amount payable under the Promissory Note, Secured Party shall not be deemed to waive the right either to require prompt payment when due of all other amounts payable under the Promissory Note, or to declare a default for failure to effect prompt payment of any such other amount. 10. Release of Collateral. Upon payment in full of all of the Obligations, Secured Party shall release the Collateral to Debtor, or as Debtor may direct, and this Agreement and the Security Interest shall terminate. Upon such event, Secured Party shall execute and deliver to Debtor and Parent such documents as Debtor and/or Parent shall reasonably request to evidence such termination. 11. Limitation by Law; Severability. All rights, remedies and powers provided in this Agreement may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law, and all the provisions of this Agreement are intended to be subject to all applicable provisions of law that may be controlling and be limited to the extent necessary so that they will not render this Agreement invalid or unenforceable, in whole or in part, or not entitled to be recorded, registered or filed under the provisions of any applicable law. If any provision hereof is invalid and unenforceable in any jurisdiction then, to the fullest extent permitted by law (a) the other provisions hereof shall remain in full force and effect in such jurisdiction in order to carry out the intentions of the parties hereto as nearly as may be possible; and (b) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction. 12. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement may not be assigned without the written consent of the parties hereto. 13. Titles and Headings. Titles and headings to sections hereof are inserted for convenience of reference only and are not intended to be a part of, or to affect the meaning or interpretation of, this Agreement. 14. Amendments, Supplements, etc. Neither this Agreement nor any term, condition, covenant or agreement hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the parties hereto. 15. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the state of Nevada, except as required by mandatory provisions of law, and except to the extent that the perfection and the effect of perfection or nonperfection of the Security Interest are governed by the laws of a jurisdiction other than the state of Nevada. 16. No Third-Party Beneficiaries. Each party hereto intends that this Agreement shall not benefit or create any right or cause of action in, or on behalf of, any person other than the parties hereto. 17. Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery of the executed signature pages by facsimile transmission shall constitute effective and binding execution and delivery of this Agreement. 4 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. DEBTOR: Mid-Power Resource Corporation By: /s/ James W. Scott ----------------------------- Name: James W. Scott Title: President SECURED PARTY: SCRS Investors, LLC By: /s/ James W. Scott ----------------------------- Name: James W. Scott Title: Managing Member Scrs.securityagrmt.050902.2 5 STATE OF Nevada ) ss. COUNTY OF Clark ) I, a notary of said county and state, do certify that James W. Scott, who signed the instrument above bearing the date of May __, 2002, on behalf of Mid-Power Resource Corporation, a Nevada corporation, has this day in my said county, before me, acknowledged the said instrument to be the act and deed of said company. IN WITNESS WHEREOF, I have hereunder set my hand and official seal in the City of Las Vegas, County of Clark, State of Nevada, this 25th day of June, 2002. /s/ Susana D. McGee ----------------------------------- Notary Public in and for the State of Nevada /s/ Susana D. McGee ----------------------------------- Printed Name Address of Notary Public: 3800 Howard Hughes Pkwy Ste 860 Las Vegas, Neveda 89109 My Commission Expires: Nov. 15, 2005 6 Exhibit A to Security Agreement Description of Personal Property Constituting Clear Creek Property 7 EX-10.06 11 ex106form8k061402.txt DEED OF TRUST AND SECURITY AGREEMENT Exhibit 10.06 RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: SCRS Investors, LLC 3800 Howard Hughes Parkway Suite 860 Las Vegas, Nevada 89109 Attn: Mark Davis DEED OF TRUST AND SECURITY AGREEMENT DEED OF TRUST AND SECURITY AGREEMENT made as of this 9th day of May, 2002, by Mid-Power Resource Corporation, a Nevada corporation, having an office at 3800 Howard Hughes Parkway, Suite 860, Las Vegas, Nevada 89109, as trustor ("Trustor"), to Bruce Lemons, having an office at 2825 East Cottonwood Parkway, Suite 500, Salt Lake City, Utah, as trustee ("Trustee"), for the benefit of SCRS Investors, LLC, a Nevada limited liability company, having an office at 3800 Howard Hughes Parkway, Suite 860, Las Vegas, Nevada 89109. FOR THE PURPOSE OF SECURING (a) the payment and performance of all obligations of Trustor under each of those certain obligations made by Trustor pursuant to that certain Loan Agreement, Promissory Note and security agreements of even date herewith ("Loan Documents") in favor or SCRS Investors, LLC (hereinafter referred to as "Beneficiary"), and all modifications, extensions and/or renewals thereof executed and delivered by Trustor, (b) the payment and performance of all indebtedness and obligations of Trustor arising under this Deed of Trust and other documents executed by Trustor in connection herewith. Trustor has granted, mortgaged, bargained, sold, alienated, enfeoffed, released, conveyed and confirmed, and by these presents does grant, mortgage, bargain, sell, alienate, enfeoff, release, convey and confirm to and under any and all of the property described in Exhibit A attached hereto and made a part hereof, including all easements, rights, privileges, tenements, hereditaments and appurtenances thereunto belonging or in anywise appertaining, and all of the estate, right, title, interest, claim, demand, reversion or remainder whatsoever of Trustor therein or thereto, either at law or in equity, in possession or expectancy, now or hereafter acquired (collectively, the "Property"); TOGETHER WITH all ores, minerals and other substances (including without limitation oil and gas) removed or extracted from the ground in any manner as a result of any use of the Property, whether by Trustor or any other person or entity (collectively, the "Minerals"); TOGETHER WITH all sales agreements, deposit receipts, escrow agreements and other ancillary documents and agreements entered into with respect to the sale to any purchasers of any part of the Property or the Minerals, and all deposits and other proceeds thereof; TOGETHER WITH all rents, issues, profits, revenues, income and other benefits to which Trustor may now or hereafter be entitled from the Property or the Minerals; and TOGETHER WITH all proceeds of any of the foregoing, including, without limitation, proceeds of any voluntary or involuntary disposition or claim respecting any part thereof (pursuant to judgment, condemnation award or otherwise) and all goods, documents, general intangibles, chattel paper and accounts acquired, wherever located, and cash proceeds of any of the foregoing or proceeds thereof. All of the forgoing Property, Minerals, and other property and rights granted to the Trustee hereunder and referred to herein collectively as the "Mortgaged Property"; TO HAVE AND TO HOLD the Mortgaged Property unto the Trustee, its successors and assigns forever. ARTICLE I COVENANTS TO TRUSTEE AND BENEFICIARY Trustor further covenants with the Trustee and Beneficiary as follows: SECTION 1.01. Trustor has good and marketable title to the Property subject to no lien, charge or encumbrance, except such as are approved by Beneficiary. Trustor owns the Property free and clear of liens and claims, except such as are approved by Beneficiary. This Deed of Trust is and will remain a valid and enforceable prior and first lien on the Mortgaged Property, subject only to the exceptions referred to above. Neither the entry nor the performance of and compliance with this Deed of Trust or any guaranty has resulted or will result in any violation of, or be in conflict with, or result in the creation of any deed of trust, lien, encumbrance or charge (other than those created by the execution and delivery of, or permitted by, this Deed of Trust) upon any of the properties or assets of Trustor, or constitute a default under any deed of trust, indenture, contract, agreement, instrument, franchise, permit, judgment, decree, order, statute, rule or regulation applicable to Trustor. Trustor has full power and lawful authority to convey the Mortgaged Property in the manner and form herein done or intended hereafter to be done and will preserve such title, and will forever preserve, warrant and defend the same unto the Trustee and Beneficiary, and will forever preserve, warrant and defend the validity and priority of the lien hereof against the claims of all persons and parties whomsoever. SECTION 1.02. (a) Trustor will, at its sole cost and expense, and without expense to the Trustee or Beneficiary, do, execute, acknowledge and deliver all and every such further acts, deeds, conveyances, deeds of trust, assignments, notices of assignments, filings, transfers and assurances as the Trustee or Beneficiary shall from time to time require, for the purpose of better assuring, conveying, assigning, transferring, pledging, mortgaging, warranting and confirming unto the Trustee the property and rights hereby conveyed or assigned or intended now or hereafter so to be, or which Trustor may be or may hereafter become bound to convey or assign to the Trustee, or for carrying out the intention or facilitating the performance of the terms of this Deed of Trust, or for filing, registering or recording this Deed of Trust. (b) Trustor will pay all filing, registration or recording fees, all federal, state and county and municipal stamp taxes and other fees, taxes, duties, imposts, assessments and all other charges incident to, arising out of, or in connection with the preparation, execution, delivery and enforcement of this Deed of Trust, any deed of trust supplemental hereto, or any instrument of further assurance. (c) Trustor will promptly provide Beneficiary with all notices and other correspondence from and to the United States Bureau of Land Management or any other governmental agency with respect to or in connection with any of the Mortgaged Property. SECTION 1.03. Trustor will punctually pay all amounts that may become due in respect of the Loan Documents at the time and place and in the manner specified therein, all in any coin or currency of the United States of America, 2 which at the time of such payment shall be legal tender for the payment of public debts, and shall fully and timely pay all of its obligations under the Loan Documents. SECTION 1.04. Trustor will, so long as it is owner of the Mortgaged Property, do all things necessary to preserve and keep in full force and effect its existence, franchises, rights and privileges as a business or partnership, as the case may be, under the laws of the state of its formation, and will comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental authority or court applicable to Trustor or to the Mortgaged Property, or any part thereof. SECTION 1.05. (a) Trustor, from time to time when the same shall become due, will pay and discharge, or cause to be paid and discharged, all taxes and governmental charges of every kind and nature that may at any time be assessed or levied against or with respect to the indebtedness secured by, and any other amounts payable pursuant to, this Deed of Trust, or any part of such indebtedness or amounts, the Mortgaged Property, or any part thereof. Trustor will, upon the request of the Beneficiary, deliver to Beneficiary receipts evidencing the payment, before any penalties accrue thereon, of all such taxes, assessments, levies, fees, rents and other public charges imposed upon or assessed it, this Deed of Trust, or the Mortgaged Property or the revenues, rents, issues, income or profits thereof. (b) Trustor will pay from time to time, when the same shall become due, all lawful claims and demands of mechanics, materialmen, laborers and others that, if unpaid, might result in or permit the creation of a lien on the Mortgaged Property or any part thereof. SECTION 1.06. Trustor will not: (a) further encumber, sell, convey or transfer any interest in or any part of the Mortgaged Property (a "disposition"), other than (i) dispositions of property in the ordinary course of business (which does not include the disposition of major items of equipment, except to the extent such items of equipment are replaced by equivalent property), (ii) dispositions of property that is replaced by equivalent property, (iii) dispositions of property that is no longer useful in Trustor's operations; or (iv) for "Permitted Security Interests." When used herein, "Permitted Security Interest" means (w) any security interest arising by operation of law in the ordinary course of business and securing amounts not more than 90 days overdue; (x) security interests expressly permitted in writing by Lender; (y) easements, rights-of-way, servitudes, permits, surface leases and other rights affecting the surface that do not interfere with the use, operation, value or unrestricted alienability of the affected property and do not interfere with the ability of the Lender to enforce any rights under the Promissory Note or any Borrower Related Agreements nor in any way materially and adversely affecting the ongoing interests of Borrowers; and (z) purchase money security interests securing amounts no greater than $1,000,000 incurred in the ordinary course of business, or (b) transfer the presently existing ownership interests in Trustor (including, without limitation, partnership or stock ownership interest, as the case may be), so as to effectively transfer control of Trustor named herein to any other person, firm, corporation or other entity, without the prior written consent of Beneficiary, except for the consummation of the transaction contemplated by that certain "Acquisition Agreement and Plan of Merger" dated as of June 13, 2002, made by and among Mid-Power Service Corporation, a Nevada corporation and corporate parent of Debtor, Red Star, Inc., a Nevada corporation, and Trustor. Any such encumbrance, sale, conveyance or transfer made without Beneficiary's prior written consent shall be an Event of 3 Default hereunder. At Beneficiary's option, Beneficiary's consent to a further encumbrance or transfer shall be subject to an increase in interest rate, modification of loan terms, and/or the payment of a fee. SECTION 1.07. Beneficiary and the Trustee shall have access to and the right to inspect the Mortgaged Property at all reasonable times. SECTION 1.08. Trustor shall comply with all applicable restrictive covenants, all health and environmental laws and regulations, and all other applicable laws, rules, regulations, requirements, customs, directions, orders and notices of violations issued by any governmental agency, body or officer relating to of affecting the Mortgaged Property or the business or activity being conducted with respect thereto, whether by Trustor or by any other person or entity. Trustor shall take all action required or appropriate to maintain the validity and priority of the Property and Trustor's interest therein, including without limitation filing all documents or instruments (including assessment work filings) with the applicable federal, state, and other governmental agency (including without limitation the Bureau of Land Management and United States Forest Service), and pay all fees and other amounts (including federal rental fees) required by any federal, state or governmental agency to maintain the current validity of the Property and Trustor's interest therein. Trustor further agrees to provide to Beneficiary, as Beneficiary shall request from time to time, evidence of compliance with the above covenants. In all events, or before July 15 of each year or within 60 days after notice from Beneficiary, Trustor shall furnish to Beneficiary written evidence (including cancelled checks and receipts) that all federal and state rental fees that may be due have been paid and any related filings have been made. If Beneficiary shall not have received such evidence by such date of July 15 or request for notice date, then Beneficiary, without notice to Trustor, shall have the right to pay such fees and make such filings on behalf of Trustor and take all other such action as Beneficiary in its sole discretion believes may be necessary or appropriate to maintain the validity and priority of the Property, and all of the provisions of Section 1.09 shall apply thereto. SECTION 1.09. If Trustor shall fail to perform any of the covenants contained herein on its part to be performed, Beneficiary may, but shall not be required to, make advances to perform the same or cause the same to be performed on Trustor's behalf, and all sums so advanced shall bear interest, from and after the date advanced until repaid, at a rate (the "Default Rate") equal to the lower of (a) the maximum rate permitted by law or (b) seventeen percent (17%) per annum, and shall be a lien upon the Mortgage Property. Trustor will repay on demand all sums so advanced on its behalf with interest at the rate herein set forth. SECTION 1.10. Trustor shall not use Beneficiary's name or the name of any person, firm, corporation or other entity controlling, controlled by, or under common control with Beneficiary in connection with any of Trustor's activities, except as such use may be required by applicable law or regulation of any governmental body. SECTION 1.11. Trustor represents, warrants and covenants that neither Trustor nor any other user of the Property has used Hazardous Substances (as hereafter defined) at or affecting the Mortgaged Property in any manner that violates any Act (as hereafter defined) governing the use, storage, treatment, transportation, manufacture, refinement, handling, production or disposal of Hazardous Substances, or that may make the owner of the Mortgaged Property liable in tort under a common law public or private nuisance action. SECTION 1.12. Trustor covenants that it shall keep or cause the Mortgaged Property to be kept free of Hazardous Substances and not cause or permit the Mortgaged Property to be used to generate, manufacture, refine, transport, treat, store, handle, dispose, produce or process Hazardous Substances, except in compliance with all applicable Acts. 4 SECTION 1.13. Trustor covenants to ensure compliance by all operators and users of the Mortgaged Property with all applicable Acts and will ensure that all such operators and occupants obtain and comply with any and all required approvals, registration or permits. SECTION 1.14. Trustor shall, upon the reasonable request of Beneficiary, conduct and complete all investigations, studies, samplings and testings relative to Hazardous Substances at or affecting the Mortgaged Property. SECTION 1.15. The term "Act" shall include all present and future laws, regulations, statutes, common law rules, ordinances, codes, licenses, permits, orders, approvals, plans, authorizations, concessions, franchises and similar items of any federal, state or local government, instrumentality or body, as the same may be amended, modified or supplemented from time to time related to Hazardous Substances. SECTION 1.16. The term "Hazardous Substances" shall include: (a) those substances as defined as "hazardous substances," "hazardous materials," "toxic substances," or "solid waste" in the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.ss. 9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.ss. 6901 et seq. ("RCRA"), or the Hazardous Materials Transportation Act, 49 U.S.C.ss. 1801 et seq., and in the regulations promulgated pursuant thereto; (b) those substances designed as a "hazardous substance" under or pursuant to the Federal Water Pollution Control Act, 33 U.S.C.ss. 1257 et seq., or defined as a "hazardous waste," under or pursuant to RCRA; (c) those substances or substance defined or listed as "extremely hazardous waste," "hazardous waste," "infectious waste," "restricted hazardous waste," "waste," "recyclable materials," "solid waste," "hazardous substance," "hazardous material," "acutely hazardous material," "contamination," "nuisance," "discharge," "extremely hazardous material," and/or "special waste" pursuant to Utah laws and regulations; and (d) those substances listed in the United States Department of Transportation Table (40 CFR 172.101 and amendments thereto) or by the Environmental Protection Agency (or any successor agency) as hazardous substances (40 CFR Part 302 and amendments thereto); and (e) such other substances, materials and wastes that are regulated under any Act, or which are classified as hazardous or toxic under any Act. All of the statutes, acts, codes, sections and tables listed above shall include all amendments, modifications and supplements thereto, together with all regulations promulgated pursuant to such statutes, acts codes, sections and tables. ARTICLE II EVENTS OF DEFAULT AND REMEDIES SECTION 2.01. The occurrence of any one or more of the following events shall constitute an event of default ("Event of Default") hereunder: 5 (a) if Trustor fails to pay when due and payable, or when declared due and payable, any portion of the amounts due under any obligation due Beneficiary; (b) if Trustor fails or neglects to perform, keep or observe any term, provision, condition, covenant or agreement contained in this Deed of Trust or in any other present or future agreements between Trustor and Beneficiary; (c) if there is a material impairment of the prospect of repayment of any portion of the amounts due under the Loan Documents or a material impairment of the value or priority of Beneficiary's security interests in the Mortgaged Property; (d) if any material portion of Trustor's properties or assets are attached, seized, subjected to a writ or distress warrant, levied upon, or come into the possession of any party; (e) if an insolvency proceeding is commenced by or against Trustor; (f) if Trustor is enjoined, restrained or in any way prevented by court order from continuing to conduct all or any material part of its business affairs; (g) if a notice of lien, levy or assessment is filed of record with respect to any of Trustor's properties or assets by the United States Government or any department, agency or instrumentality thereof, or by any state, county, municipal or governmental agency, or if any taxes or debts owing at any time hereafter to any one or more of such entities becomes a lien, whether choate or otherwise, upon any of Trustor's properties or assets and the same is not paid on the payment date thereof; (h) if a judgment or other claim becomes a lien or encumbrance upon any material portion of Trustor's properties or assets; (i) if Trustor makes any payment on account of indebtedness that has been contractually subordinated in right of payment to the payment of the amounts owing under the Loan Documents; (j) if Trustor shall violate any of the covenants contained herein; (k) if Trustor revokes, attempts to revoke, or purports to revoke any obligation owing under the Loan Documents; (l) if any representation or warranty made by Trustor in this Deed of Trust or any deed of trust, security agreement, chattel mortgage or other document issued hereunder or in connection therewith or herewith prove to be untrue, the effect of which is to adversely affect Beneficiary's security hereunder; or (m) if any Event of Default shall occur under any permitted prior deed of trust, if any. SECTION 2.02. Upon the occurrence of an Event of Default, and in every such case: (a) During the continuance of any Event of Default, Beneficiary, acting through a court-appointed receiver, may enter into and upon all or any part of the Mortgaged Property, and each and every part thereof, and may exclude the party owning the beneficial interests in same, its agents and servants wholly 6 therefrom; and having and holding the same, may use, operate, manage and control the Mortgaged Property for any lawful purpose and conduct the business thereof, either personally or by its superintendents, managers, agents, servants, attorneys or receivers. Upon every such entry, Beneficiary, at the expense of Trustor, from time to time, either by purchase, repairs or construction, may maintain and restore the Mortgaged Property, whereof it shall become possessed as aforesaid and likewise, from time to time, at the expense of Trustor, Beneficiary may make all necessary or proper repairs, renewals, replacements, alterations, additions, betterments and improvements to the Mortgaged Property or any part thereof and thereon as it may deem advisable. In every such case, Beneficiary shall have the right to manage and operate the Mortgaged Property, possessed as aforesaid, and to carry on the business thereof and exercise all rights and powers of the party owning such property with respect thereto either in the name of such party or otherwise as it shall deem best. Beneficiary shall be entitled to collect and receive all earnings, revenues, rents, issues, profits and income of the Mortgaged Property and every part thereof, and after deducting the expenses of conducting the business thereof and of all maintenance, repairs, replacements, alterations, additions, betterments and improvements and all payments that may be made for rental fees, taxes, assessments, insurance, in payment of any prior deed of trust and prior or other proper charges upon the Mortgaged Property or any part thereof, as well as just and reasonable compensation of Beneficiary for the services of Beneficiary and for all attorneys, counsel, agents, clerks, servants and other employees by it properly engaged and employed, Beneficiary shall apply the moneys arising as aforesaid, first, to the payment of any sums (other than amounts owing on the Loan Documents) required to be paid by Trustor under this Deed of Trust. (b) Beneficiary, at its option, may declare the entire unpaid balance of the indebtedness secured hereby immediately due and payable by delivery to Trustee of written declaration of default and demand for sale and written notice of default and of election to cause the Mortgaged Property to be sold, which notice Trustee shall cause to be duly filed for record. Beneficiary shall also deposit with the Trustee this Deed of Trust and all documents evidencing the expenditures secured hereby. (c) After the lapse of such time as may then be required by law following the recordation of said notice of default, and notice of sale having been given as then required by law, Trustee, without demand on Trustor, shall sell the Mortgaged Property at the time and place fixed by it in said notice of sale. If the Mortgaged Property consists of several known lots or claims, Beneficiary may designate the order in which such claims shall be sold or offered for sale. Any person, including Trustor, Trustee or Beneficiary, may purchase at such sale. (d) Trustee may postpone sale of all or any portion of the Mortgaged Property by public announcement at such time and place of sale, and from time to time thereafter may postpone such sale by public announcement at the time fixed by the preceding postponement. (e) On and after the occurrence of an Event of Default, Trustor shall pay all issues and profits thereafter received by Trustor from the Mortgaged Property to Beneficiary, and to the extent not paid, shall hold such amounts as trust funds for the benefit of Beneficiary and such issues and profits shall be deemed "cash collateral" of Beneficiary under 11 U.S.C., as amended. SECTION 2.03. (a) Trustee, after making such sale and upon receipt of the purchase price, shall make, execute and deliver to the purchaser or purchasers its deed or deeds conveying the Mortgaged Property so sold, but without any covenant or warranty, express or implied, and without any representation, express or implied, as to the existence, or lack thereof, of Hazardous Substances on the Mortgaged Property, and shall apply the proceeds of sale thereof to payment, FIRST, of the expenses of such sale, together with the reasonable expenses of this trust, including Trustee's fees and cost of evidence of title in connection with sale and revenue stamps on Trustee's deed; SECOND, of all moneys paid, 7 advanced or expended by Beneficiary under the terms hereof, not then repaid, together with the interest thereon as herein provided; THIRD, of the amounts owing on the Loan Documents; and LAST, the balance or surplus, if any, of such proceeds of sale to the person or persons legally entitled thereto, upon satisfactory proof of such right. (b) In the event of a sale of the Mortgaged Property or any part thereof, and the execution of a deed or deeds therefor under these trusts, the recitals therein of any matters or facts shall be conclusive proof of the truthfulness thereof and of the fact that said sale was regularly and validly made in accordance with all requirements of the laws of the state of Utah and of this Deed of Trust. Any such deed or deeds, with such recitals therein, shall be effectual and conclusive against Trustor and all other persons, and the receipt for the purchase money recited or contained in any deed executed to the purchaser as aforesaid shall be sufficient discharge to such purchaser from all obligations to see to the proper application of the purchase money according to the trusts aforesaid. SECTION 2.04. After the happening of an Event of Default by Trustor under this Deed of Trust and immediately upon the commencement of any action, suit or other legal proceeding by Beneficiary to obtain judgment for the amounts owing on the Loan Documents and other sums required to be paid by Trustor pursuant to any provisions of this Deed of Trust, or any other nature in aid of the enforcement of this Deed of Trust, Trustor hereby consents to the appointment of a receiver or receivers by a court of competent jurisdiction of the Mortgaged Property and of all the earnings, revenues, issues, profits and income thereof. After the happening of any such default and during its continuance, or upon the commencement of any proceedings to foreclose this Deed of Trust or to enforce the specific performance hereof, or in aid thereof, or upon the commencement of any other judicial proceeding to enforce any right of the Trustee or Beneficiary hereunder, Beneficiary shall be entitled, as a matter of right, if it shall so elect, without the giving of notice to any other party and without regard to the adequacy or inadequacy of any security for the Deed of Trust indebtedness, to the appointment of such a receiver or receivers. SECTION 2.05. During the continuance of an Event of Default, Beneficiary shall have the following rights and remedies: (a) Beneficiary or its employees, acting through a court-appointed receiver, may (i) enter upon, possess, manage, operate, dispose of, and contract to dispose of the Mortgaged Property or any part thereof; (ii) take custody of all accounts; (iii) negotiate with governmental authorities with respect to the Mortgaged Property's environmental compliance and remedial measures; (iv) take any action necessary to enforce compliance with any Act, including but not limited to spending rents to abate the problem; (v) make, terminate, enforce or modify leases of the Mortgaged Property upon such terms and conditions as Beneficiary deems proper; (vi) contract for goods and services, hire agents, employees and counsel; (vii) make repairs, alterations, and improvements to the Mortgaged Property necessary, in Beneficiary's judgment, to protect or enhance the security hereof; (viii) incur the risks and obligations ordinarily incurred by owners of property (without any personal obligation on the part of the receiver); and/or (ix) take any and all other actions that may be necessary or desirable to comply with Trustor's obligations hereunder and under the Loan Documents. All sums realized by Beneficiary under this subparagraph, less all costs and expenses incurred by it under this subparagraph, including attorney's fees, and less such sums as Beneficiary deems appropriate as a reserve to meet future expenses under this subparagraph, shall be applied on any indebtedness secured hereby in such order as Beneficiary shall determine. Neither application of said sums to said indebtedness nor any other action taken by Beneficiary under this subparagraph shall cure or waive any Event of Default or notice of default hereunder, or nullify the effect of any such notice of default. Beneficiary, or any employee or agent of Beneficiary, or a receiver appointed by a court, may take any action or proceeding hereunder without regard to (x) the adequacy of the security for the indebtedness secured hereunder, (y) the existence of a declaration that the indebtedness secured hereby has been declared immediately due and payable, or (z) the filing of a notice of default. 8 (b) With or without notice, and without releasing Trustor from any obligation hereunder, to cure any default of Trustor and, in connection therewith, Beneficiary or its agents, acting by themselves or through a court-appointed receiver, may enter upon the Mortgaged Property or any part thereof and perform such acts and things as Beneficiary deems necessary or desirable to inspect, investigate, assess, and protect the security hereof. All costs and expenses incurred by the Trustee and Beneficiary pursuant to this subparagraph (including without limitation court costs, consultant fees and attorneys' fees, whether incurred in litigation or not and whether before or after judgment) shall bear interest at the highest legal rate set from the date they are incurred until said sums have been paid. (c) Nothing contained herein shall be construed to limit any and all rights that Beneficiary has at law or pursuant hereto. SECTION 2.06. No remedy herein conferred upon or reserved to the Trustee or Beneficiary is intended to be exclusively of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. No delay or omission of the Trustee or Beneficiary to exercise any right or power occurring upon the Event of Default shall impair any such right or power or shall be construed to be a waiver thereof or an acquiescence therein. Every power and remedy given by this Deed of Trust to the Trustee or Beneficiary may be exercised from time to time and as often as may be deemed expedient by the Trustee or Beneficiary. SECTION 2.07. To the extent permitted by law, Trustor will not at any time (a) insist upon or plead, or in any manner whatever claim or take any benefit or advantage of, any stay, extension or moratorium law, any exemption from execution or sale of the Mortgaged Property or any part thereof, wherever enacted, now or at any time hereafter in force, which may affect the covenants and terms of performance of this Deed of Trust; (b) claim, take or insist upon any benefit or advantage of any law now or hereafter in force providing for the marshalling of the Mortgaged Property or on the valuation or appraisal of the Mortgaged Property, or any part thereof, prior or subsequent to any sale or sales thereof that may be made pursuant to any provision herein, or pursuant to the decree, judgment or order of any court of competent jurisdiction; and (c) after any such final sale or sales, claim or exercise any right under any statute or otherwise, to redeem the property so sold or any part thereof. Trustor hereby expressly waives all benefit or advantage of any such law or laws, and covenants not to hinder, delay or impede the execution of any power herein granted or delegated to the Trustee or Beneficiary, but to suffer and permit the execution of every power as though no such law or laws had been made or enacted. Trustor hereby waives the right to require any sale to be made in parcels, or the right to select parcels to be so sold, and there shall be no requirement for marshalling of assets. Trustor hereby further waives any rights it may have under applicable law relating to the prohibition of the obtaining of a deficiency judgment by Beneficiary against Trustor. SECTION 2.08. Without affecting the personal liability of any person, firm, corporation or other entity, including Trustor (other than any person released pursuant hereto), for the payment of the indebtedness secured hereby, and without affecting the lien of this Deed of Trust for the full amount of the indebtedness remaining unpaid upon any property not reconveyed pursuant hereto, Beneficiary and Trustee are respectively authorized and empowered as follows: Beneficiary may, at any time and from time to time, and without notice: (a) release any person liable for the payment of any of the indebtedness, (b) make any agreement extending the time or otherwise altering the terms of payment of any of the indebtedness, (c) accept additional security therefor of any kind, and (d) release any property, real or personal, securing the indebtedness. 9 SECTION 2.09. This Deed of Trust constitutes a Security Agreement under the laws of the state of Utah, so that Beneficiary shall have and may endorse a security interest in any or all of the Mortgaged Property that may or might now or hereafter be or be deemed to be personal property, fixtures or property other than real estate (collectively, "Personal Property") and Trustor agrees to execute, as debtor, such financing statement or statements as Beneficiary may now or hereafter reasonably request in order that such security interest or interests may be perfected pursuant to such laws. SECTION 2.10. Notwithstanding any release of any or all of the property included in the Mortgaged Property, which is deemed " real property," any proceedings to foreclose this Deed of Trust, or its satisfaction of record, the terms hereof shall survive as a security agreement with respect to the security interest created hereby and referred to above until the repayment or satisfaction in full of the obligations of Trustor as are now or hereafter evidenced by the Loan Documents. SECTION 2.11. During the continuance of any Event of Default, Beneficiary shall have all of the rights and remedies of a secured party under the Uniform Commercial Code (the "Code") of the state of Utah, and specifically the right to direct notice and collections of any obligation owing to Trustor by any lessee. In addition to its rights to foreclose this Deed of Trust, Beneficiary shall have the right to sell the Personal Property or any part thereof, or any further, additional or substituted Personal Property, at one or more times and from time to time, at public sale or at private sale or sales, on such terms as to cash or credit, or partly for cash and partly on credit, as Beneficiary may deem proper. Beneficiary shall have the right to become the purchaser at any such public sale or sales, free and clear of any and all claims, rights of equity or redemption in Trustor, all of which are hereby waived and released. Trustor shall not be credited with the amount of any part of such purchase price, unless, until and only to the extent that such payment is actually received in cash. Notice of public sale, if given, shall be sufficiently given, for all purposes, if published not less than seven days prior to any sale, in any newspaper of general circulation distributed in the city in which the property to be sold is located or as otherwise required by the Code. The net proceeds of any sale of the Personal Property, which may remain after the deduction of all costs, fees and expenses incurred in connection therewith, including, but not limited to, all advertising expenses, broker's or brokerage commissions, documentary stamps, recording fees, foreclosure costs, stamp taxes and counsel fees, shall be credited by Beneficiary against the liabilities, obligations and indebtedness of Trustor to Beneficiary secured by this Deed of Trust and evidenced by the Loan Documents. Any portion of the Personal Property which may remain unsold after the full payment, satisfaction and discharge of all of the liabilities, obligations and indebtedness of Trustor to Beneficiary shall be returned to the respective parties which delivered the same to Beneficiary. If at any time Trustor or any party shall become entitled to the return of any of the Personal Property hereunder, any transfer or assignment thereof by Beneficiary shall be, and shall recite that the same is, made wholly without representation or warranty whatsoever by, or recourse whatsoever against Beneficiary. SECTION 2.12. All rights, remedies and powers provided by Sections 2.01 through 2.11 hereof may be exercised only to the extent that the exercise thereof does not violate any applicable provision of Utah law, and all such provisions are intended to be subject to all applicable provisions of law which may be controlling and to be limited to the extent necessary so that they will not render this Deed of Trust invalid, illegal or unenforceable under the provisions of any applicable law. ARTICLE III MISCELLANEOUS SECTION 3.01. In the event any one or more of the provisions contained in this Deed of Trust shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability 10 shall not affect other provisions of this Deed of Trust, but this Deed of Trust shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. SECTION 3.02. All notices or demands by any party relating to this Deed of Trust or any other agreement entered into in connection herewith shall be in writing and be personally delivered or sent by registered or certified mail, postage prepaid, return receipt requested, to Trustor or to Beneficiary, as the case may be, at its addresses set forth below: If to Beneficiary: SCRS Investors LLC 3800 Howard Hughes Parkway, Suite 860 Las Vegas, Nevada 89109 If to Trustor: Mid-Power Service Corporation 3800 Howard Hughes Parkway, Suite 860 Las Vegas, Nevada 89109 The parties hereto may change the address at which they are to receive notices hereunder by notice in writing in the foregoing manner given to the other. All notices or demands sent in accordance with this Section 3.02, other than notices by Beneficiary in connection with Sections 9504 or 9505 of the Code, shall be deemed received on the earlier of the date of actual receipt of three calendar days after the deposit thereof in the mail. Trustor acknowledges and agrees that notices sent by Beneficiary in connection with Sections 9504 or 9505 of the Code shall be deemed sent when deposited in the mail or transmitted by other method permitted by law. SECTION 3.03. Whenever in this Deed of Trust the giving of notice by mail or otherwise is required, the giving of such notice may be waived in writing by the person or persons entitled to received such notice. SECTION 3.04. All of the grants, covenants, terms, obligations, provisions and conditions herein contained shall run with the land and shall apply to, bind and inure to the benefit of, the successors and assigns of Trustor and Beneficiary and to the successors of the Trustee. SECTION 3.05. This Deed of Trust may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original; and all such counterparts shall together constitute but one and the same Deed of Trust. SECTION 3.06. It shall be lawful for the Trustee or Beneficiary, at its election, upon the occurrence of an Event of Default, to sue out forthwith a complaint in foreclosure upon this Deed of Trust and to proceed thereon to judgment and execution for the recovery of all sums payable by Trustor pursuant to the terms of this Deed of Trust without further stay, and law, usage or custom to the contrary notwithstanding. SECTION 3.07. Notwithstanding the appointment of any receiver, liquidator or trustee of Trustor, or of any of its property, or of the Mortgaged Property, or any part thereof, Trustee shall be entitled to retain possession and control of all property now or hereafter held under this Deed of Trust. SECTION 3.08. Trustor hereby waives and relinquishes unto and in favor of Beneficiary all benefit under all laws, now in effect or hereafter passed, to relieve Trustor in any manner from the obligations assumed and the obligation for which this Deed of Trust is security or to reduce the amount of the said obligation to any greater extent than the amount actually paid for the Mortgaged Property, in any judicial proceedings upon the said obligation or upon this Deed of Trust. 11 SECTION 3.09. Neither Trustor nor any other person now or hereafter obligated for payment for all or any part of the indebtedness secured hereby shall be relieved of such obligation by reason of the failure of Beneficiary to comply with any request of Trustor, or of any other person so obligated to take action to foreclose on this Deed of Trust or otherwise enforce any provisions hereof or of the Loan Documents, or by reason of the release, regardless of consideration, of all or any part of the security held for the indebtedness secured hereby, or by reason of any agreement or stipulation between a subsequent owner of the Mortgaged Property and Beneficiary extending the time of payment or modifying the terms hereof without first having obtained the consent of Trustor or such other person, and in the latter event, Trustor and all other such extension or modification agreement, unless expressly released and discharged in writing by Beneficiary. SECTION 3.10. By accepting or approving anything required to be observed, performed or fulfilled or to be given to Beneficiary pursuant to this Deed of Trust, including (but not limited to) any certificate, balance sheet, statement of profit and loss or other financial statement, survey, appraisal or insurance policy, Beneficiary shall not be deemed to have warranted or represented the sufficiency, legality, effectiveness or legal effect of the same, or of any term, provision or condition thereof, and such acceptance or approval thereof shall not be or constitute any warranty or representation with respect thereto by Beneficiary. SECTION 3.11. Beneficiary may from time to time, without notice to Trustor or to the Trustee, with or without cause, and with or without the resignation of the Trustee, substitute a successor or successors to the Trustee named herein or acting hereunder to execute this trust. Upon such appointment and without conveyance to the successor Trustee, the latter shall be vested with all title, powers and duties conferred upon the Trustee herein named or acting hereunder. Each such appointment and substitution shall be made by written document executed by Beneficiary, containing reference to this Deed of Trust and its place of record, which when duly filed for record in the proper office shall be conclusive proof of proper appointment of the successor Trustee. The procedure herein provided for substitution of the Trustee shall be conclusive of all other provisions for substitution, statutory or otherwise. SECTION 3.12. Trustor agrees to pay to Beneficiary or to the authorized loan servicing representative of Beneficiary a charge not to exceed fifty dollars ($50.00), or maximum permitted by law, for any statement regarding the obligations secured by this Deed of Trust requested by Trustor or on its behalf. IN WITNESS WHEREOF, Trustor has caused this Deed of Trust and Security Agreement to be executed as of the date first set forth above. MID-POWER RESOURCE CORPORATION, a Nevada corporation By: /s/ James W. Scott ------------------------------ Name: James W. Scott Title: President Scrs.deedoftrust.050902.2 12 STATE OF Nevada ) ) ss. COUNY OF Clark ) On June 25, 2001, before me, Susana D. McGee personally appeared James W. Scott, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. [notary seal] /s/ Susana D. McGee ---------------------------------- 13 Exhibit A to Deed of Trust and Security Agreement Description of Property EX-10.07 12 ex107form8k061402.txt 2002 STOCK OPTION AND PURCHASE RIGHTS PLAN Exhibit 10.07 MID-POWER SERVICE CORPORATION 2002 STOCK OPTION AND PURCHASE RIGHTS PLAN Mid-Power Service Corporation, a Nevada corporation (the "Company"), hereby adopts this "2002 Stock Option and Purchase Rights Plan" (the "Plan"). 1. Purposes of the Plan. The Board has adopted this Plan with the intent, and directs that it be administered as necessary, to attract and retain the best available personnel for positions of substantial responsibility; provide additional incentive to Employees, Directors and Consultants; and promote the success of the Company's business. Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant. Stock Purchase Rights may also be granted under the Plan. 2. Definitions. As used herein, the following definitions shall apply: (a) "Administrator" means the Board or any of its Committees as shall be administering the Plan, in accordance with section 4 of the Plan. (b) "Applicable Laws" means the requirements relating to the administration of stock option plans under the corporate laws of the state in which the Company is incorporated, federal and state securities laws, the Code, the regulations and policies of any stock exchange or quotation system on which the Common Stock is listed or quoted, and the Applicable Laws of any foreign country or jurisdiction where Options or Stock Purchase Rights are or will be granted under the Plan. (c) "Board" means the Board of Directors of the Company. (d) "Code" means the Internal Revenue Code of 1986, as amended. (e) "Committee" means a committee of Directors appointed by the Board in accordance with section 4 of the Plan. (f) "Common Stock" means the common stock of the Company. (g) "Company" means Mid-Power Service Corporation, a Nevada corporation. (h) "Consultant" means any person, including an advisor, engaged by the Company or a Parent or Subsidiary to render services to such entity. (i) "Director" means a member of the Board. (j) "Disability" means total and permanent disability as defined in Section 22(e)(3) of the Code. (k) "Employee" means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive Stock Options, no such leave may exceed 90 days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then three months following the 91st day of such leave, any Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option. Neither service as a Director nor payment of a Director's fee by the Company shall be sufficient to constitute "employment" by the Company. (l) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (m) "Fair Market Value" means, as of any date, the value of Common Stock determined as follows: (i) if the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or the Nasdaq SmallCap Market of the Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; (ii) if the Common Stock is regularly quoted by a recognized securities dealer, but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or (iii) in the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator. (n) "Incentive Stock Option" means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder. (o) "Inside Director" means a Director who is an Employee. (p) "Nonstatutory Stock Option" means an Option not intended to qualify as an Incentive Stock Option. (q) "Notice of Grant" means a written or electronic notice evidencing certain terms and conditions of an individual Option or Stock Purchase Right grant. The Notice of Grant is part of the Option Agreement. (r) "Officer" means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. (s) "Option" means a stock option granted pursuant to the Plan. 2 (t) "Option Agreement" means an agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan. (u) "Option Exchange Program" means a program whereby outstanding Options are surrendered in exchange for Options with a lower exercise price. (v) "Optioned Stock" means the Common Stock subject to an Option or Stock Purchase Right. (w) "Optionee" means the holder of an outstanding Option or Stock Purchase Right granted under the Plan. (x) "Outside Director" means a Director who is not an Employee (as defined in Rule 16b-3 of the Exchange Act and Section 162(m) of the Code). (y) "Parent" means a "parent corporation," whether now or hereafter existing, as defined in Section 424(e) of the Code. (z) "Plan" means this 2002 Stock Option and Purchase Rights Plan, as amended and restated. (aa) "Restricted Stock" means Shares of Common Stock acquired pursuant to a grant of Stock Purchase Rights under section 11 of the Plan. (bb) "Restricted Stock Purchase Agreement" means a written agreement between the Company and the Optionee evidencing the terms and restrictions applying to stock purchased under a Stock Purchase Right. The Restricted Stock Purchase Agreement is subject to the terms and conditions of the Plan and the Notice of Grant. (cc) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan. (dd) "Section 16(b)" means Section 16(b) of the Exchange Act. (ee) "Service Provider" means an Employee, Director or Consultant. (ff) "Share" means a share of the Common Stock, as adjusted in accordance with section 15 of the Plan. (gg) "Stock Purchase Right" means the right to purchase Common Stock pursuant to section 11 of the Plan, as evidenced by a Notice of Grant. (hh) "Subsidiary" means a "subsidiary corporation," whether now or hereafter existing, as defined in Section 424(f) of the Code. 3. Stock Subject to the Plan. Subject to the provisions of section 15 of the Plan, the maximum aggregate number of Shares that may be optioned and sold under the Plan is 500,000 Shares. The Shares may be authorized, but unissued, or reacquired Common Stock. 3 If an Option or Stock Purchase Right expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased Shares that were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated); provided, however, that Shares that have actually been issued under the Plan, whether upon exercise of an Option or Right, shall not be returned to the Plan and shall not become available for future distribution under the Plan, except that if Shares of Restricted Stock are repurchased by the Company at their original purchase price, such Shares shall become available for future grant under the Plan. 4. Administration of the Plan. (a) Procedure. (i) The Board may designate different Committees to administer the Plan with respect to different groups of Service Providers. (ii) To the extent that the Administrator determines it to be desirable to qualify Options granted hereunder as "performance-based compensation" within the meaning of Section 162(m) of the Code, the Plan shall be administered by a Committee of two or more "Outside Directors" within the meaning of Section 162(m) of the Code. (iii) To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder shall be structured to satisfy the requirements for exemption under Rule 16b-3. (iv) Other than as provided above, the Plan shall be administered by the Board or a Committee, which Committee shall be constituted to satisfy Applicable Laws. (b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion: (i) to determine the Fair Market Value; (ii) to select the Service Providers to whom Options and Stock Purchase Rights may be granted hereunder; (iii) to determine the number of Shares of Common Stock to be covered by each Option and Stock Purchase Right granted hereunder; (iv) to approve forms of agreement for use under the Plan; (v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Option or Stock Purchase Right granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options or Stock Purchase Rights may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Option or Stock Purchase Right or the Shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine; 4 (vi) to reduce the exercise price of any Option or Stock Purchase Right to the then-current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option or Stock Purchase Right shall have declined since the date the Option or Stock Purchase Right was granted; (vii) to institute an Option Exchange Program; (viii) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan; (ix) to establish, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to subplans established for the purpose of satisfying applicable foreign laws; (x) to modify or amend each Option or Stock Purchase Right (subject to section 17(c) of the Plan), including the discretionary authority to extend the post-termination exercisability period of Options longer than is otherwise provided for in the Plan; (xi) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Option or Stock Purchase Right previously granted by the Administrator; (xii) to correct any defect, supply any omission, or reconcile any inconsistency in the Plan or in any Option Agreement, in a manner and to the extent it shall deem necessary, all of which determinations and interpretations made by the Administrator shall be conclusive and binding on all Optionees, any other holders of Options, and on their legal representatives and beneficiaries; (xiii) except to the extent prohibited by or impermissible in order to obtain treatment desired by the Administrator under applicable law or rule, to allocate or delegate all or any portion of its powers and responsibilities to any one or more of its members or to any person(s) selected by it, subject to revocation or modification by the Administrator of such allocation or delegation; and (xiv) to make all other determinations deemed necessary or advisable for administering the Plan. (c) Effect of Administrator's Decision. The Administrator's decisions, determinations and interpretations shall be final and binding on all Optionees and any other holders of Options or Stock Purchase Rights. 5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may be granted to Service Providers. Incentive Stock Options may be granted only to Employees. 6. Limitations. (a) Designation. Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the 5 Optionee during any calendar year (under all Plans of the Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of this section 6(a), Incentive Stock Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted. (b) No Right of Continuing Service or Employment. Neither the Plan nor any Option or Stock Purchase Right shall confer upon an Optionee any right with respect to continuing the Optionee's relationship as a Service Provider with the Company, nor shall they interfere in any way with the Optionee's right or the Company's right to terminate such relationship at any time, with or without cause. (c) Limitations on Grants of Options. The following limitations shall apply to grants of Options: (i) No Service Provider shall be granted, in any fiscal year of the Company, Options to purchase more than 50,000 Shares. (ii) In connection with his or her initial service, a Service Provider may be granted Options to purchase up to an additional 50,000 Shares, which shall not count against the limit set forth in subsection (i) above. (iii) The foregoing limitations shall be adjusted proportionately in connection with any change in the Company's capitalization as described in section 15. (iv) If an Option is cancelled in the same fiscal year of the Company in which it was granted (other than in connection with a transaction described in section 15), the cancelled Option will be counted against the limits set forth in subsections (i) and (ii) above. For this purpose, if the exercise price of an Option is reduced, the transaction will be treated as a cancellation of the Option and the grant of a new Option. 7. Term of Plan. Subject to section 21 of the Plan, the Plan shall become effective upon its adoption by the Board. It shall continue in effect for a term of 10 years unless terminated earlier under section 17 of the Plan. 8. Term of Option. The term of each Option shall be stated in the Option Agreement. In the case of an Incentive Stock Option, the term shall be 10 years from the date of grant or such shorter term as may be provided in the Option Agreement. Moreover, in the case of an Incentive Stock Option granted to an Optionee who, at the time the Incentive Stock Option is granted, owns stock representing more than 10% of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option shall be five years from the date of grant or such shorter term as may be provided in the Option Agreement. 9. Option Exercise Price and Consideration. (a) Exercise Price. The per Share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the Administrator, subject to the following: (i) In the case of an Incentive Stock Option: 6 (1) granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant. (2) granted to any Employee other than an Employee described in subsection 9(a)(i)(1) immediately above, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. (ii) In the case of a Nonstatutory Stock Option, the per Share exercise price shall be determined by the Administrator. In the case of a Nonstatutory Stock Option intended to qualify as "performance-based compensation" within the meaning of Section 162(m) of the Code, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. (iii) Notwithstanding the foregoing, Options may be granted with a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a merger or other corporate transaction. (b) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator shall fix the period within which the Option may be exercised and shall determine any conditions that must be satisfied before the Option may be exercised. (c) Form of Consideration. The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator shall determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely of: (i) cash; (ii) check; (iii) promissory note; (iv) other Shares, provided Shares acquired from the Company have been owned by the Optionee for more than six months on the date of surrender and have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised; (v) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan; (vi) a reduction in the amount of any Company liability to the Optionee, including any liability attributable to the Optionee's participation in any Company-sponsored deferred compensation program or arrangement; (vii) any combination of the foregoing methods of payment; or (viii) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws. 7 10. Exercise of Option. (a) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement. Unless the Administrator provides otherwise, vesting of Options granted hereunder shall be tolled during any unpaid leave of absence. An Option may not be exercised for a fraction of a Share. An Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse or in the name of a family trust of which the Optionee is a trustee. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised; provided that if the Company shall be advised by counsel that certain requirements under the federal, state or foreign securities laws must be met before Shares may be issued under this Plan, the Company shall notify all persons who have been issued Options, and the Company shall have no liability for failure to issue Shares under any exercise of Options because of delay while such requirements are being met or the inability of the Company to comply with such requirements. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in section 15 of the Plan. Exercising an Option in any manner shall decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. (b) Termination of Relationship as a Service Provider. If an Optionee ceases to be a Service Provider, other than upon the Optionee's death or Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for three months following the Optionee's termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. (c) Disability of Optionee. If an Optionee ceases to be a Service Provider as a result of the Optionee's Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for 12 months following the Optionee's termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee 8 does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. (d) Death of Optionee. If an Optionee dies while a Service Provider, the Option may be exercised within such period of time as is specified in the Option Agreement (but in no event later than the expiration of the term of such Option as set forth in the Notice of Grant), by the Optionee's estate or by a person who acquires the right to exercise the Option by bequest or inheritance, but only to the extent that the Option is vested on the date of death. In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for 12 months following the Optionee's termination. If, at the time of death, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall immediately revert to the Plan. The Option may be exercised by the executor or administrator of the Optionee's estate or, if none, by the person(s) entitled to exercise the Option under the Optionee's will or the laws of descent or distribution. If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. 11. Stock Purchase Rights. (a) Rights to Purchase. Stock Purchase Rights may be issued either alone, in addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan, it shall advise the offeree in writing or electronically, by means of a Notice of Grant, of the terms, conditions and restrictions related to the offer, including the number of Shares that the offeree shall be entitled to purchase, the price to be paid, and the time within which the offeree must accept such offer. The offer shall be accepted by execution of a Restricted Stock Purchase Agreement in the form determined by the Administrator. (b) Repurchase Option. Unless the Administrator determines otherwise, the Restricted Stock Purchase Agreement shall grant the Company a repurchase Option exercisable upon the voluntary or involuntary termination of the purchaser's service with the Company for any reason (including death or Disability). The purchase price for Shares repurchased pursuant to the Restricted Stock Purchase Agreement shall be the original price paid by the purchaser, plus interest at the rate of ten percent (10%) per year from the date of the original purchase, and may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase Option shall lapse at a rate determined by the Administrator. (c) Other Provisions. The Restricted Stock Purchase Agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion. (d) Rights as a Stockholder. Once the Stock Purchase Right is exercised, the purchaser shall have the rights equivalent to those of a stockholder and shall be a stockholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Stock Purchase Right is exercised, except as provided in section 15 of the Plan. 12. Withholding. If the grant or exercise of an Option or a Stock Purchase Right pursuant to this Plan, or any other event in connection with any such grant or exercise, creates an obligation to withhold income and employment 9 taxes pursuant to the Applicable Laws, such obligation may, at the discretion of the Administrator at the time of the grant of the Option or Stock Purchase Right and to the extent permitted by the terms of the Option or Stock Purchase Right and the then-governing provisions of the Code and the Exchange Act, be satisfied (a) by the holder of the Option or Stock Purchase Right delivering to the Company an amount of cash equal to such withholding obligation; (b) by the Company withholding from any compensation or other amount owing to the holder of the Option or Stock Purchase Right the amount (in cash, stock, or other property as the Company may determine) of the withholding obligation; (c) by the Company withholding Shares of stock subject to the Option or Stock Purchase Right with a Fair Market Value equal to such obligation; or (d) by the holder of the Option or Stock Purchase Right either delivering Shares of stock that have been owned by the holder for more than six months or canceling Options or other rights to acquire stock from the Company that have been held for more than six months with a Fair Market Value equal to such requirements. In all events, delivery of Shares of stock issuable on exercise of the Option or on grant of the Stock Purchase Right shall be conditioned upon and subject to the satisfaction or making provision for the satisfaction of the withholding obligation of the Company resulting from the grant or exercise of the Option, grant of the Stock Purchase Right, or any other event. The Company shall be further authorized to take such other action as may be necessary, in the opinion of the Company, to satisfy all obligations for the payment of such taxes. 13. Nontransferability of Options and Stock Purchase Rights. Unless determined otherwise by the Administrator, an Option or Stock Purchase Right may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. If the Administrator makes an Option or Stock Purchase Right transferable, such Option or Stock Purchase Right shall contain such additional terms and conditions as the Administrator deems appropriate. 14. Grants to Directors and Officers. To the extent the Company has a class of securities registered under the Exchange Act, Options or Stock Purchase Rights granted under the Plan to Directors and Officers (as used in Rule 16b-3 promulgated under the Exchange Act or any amendment or successor rule of like tenor) intended to qualify for the exemption from Section 16(b) of the Exchange Act provided in Rule 16b-3 shall, in addition to being subject to the other restrictions and limitations set forth in this Plan, be made as follows: (a) Requirements for Grant to Officer or Director. A transaction whereby there is a grant of an Option or Stock Purchase Right pursuant to this Plan must satisfy one of the following: (i) The transaction must be approved by the Board or duly authorized Committee composed solely of two or more Outside Directors of the Company. (ii) The transaction must be approved or ratified, in compliance with Section 14 of the Exchange Act, by either: the affirmative vote of the holders of a majority of the securities of the Company present or represented and entitled to vote at a meeting of the stockholders of the Company held in accordance with the Applicable Laws of the state of incorporation of the Company; or, if allowed by applicable state law, the written consent of the holders of a majority, or such greater percentage as may be required by Applicable Laws of the state of incorporation of the Company, of the securities of the Company entitled to vote. If the transaction is ratified by the stockholders, such ratification must occur no later than the date of the next annual meeting of stockholders. (iii) The stock acquired must be held by the Officer or Director for a period of six months subsequent to the date 10 of the grant; provided that if the transaction involves a derivative security (as defined in Section 16 of the Exchange Act), this condition shall be satisfied if at least six months elapse from the date of acquisition of the derivative security to the date of disposition of the derivative security (other than on exercise or conversion) or its underlying equity security. (b) Approval Required for Disposition of Securities. Any transaction involving the disposition by the Company of its securities in connection with Options or Stock Purchase Rights granted pursuant to this Plan shall: (i) be approved by the Board or duly authorized Committee composed solely of two or more Outside Directors; or (ii) be approved or ratified, in compliance with Section 14 of the Exchange Act, by either: the affirmative vote of the holders of a majority of the securities of the Company present or represented and entitled to vote at a meeting duly held in accordance with the Applicable Laws of the state of incorporation of the Company; or, if allowed by applicable state law, the written consent of the holders of a majority, or such greater percentage as may be required by Applicable Laws of the state of incorporation of the Company, of the securities of the Company entitled to vote; provided that such ratification occurs no later than the date of the next annual meeting of stockholders. All of the foregoing restrictions and limitations are based on the governing provisions of the Exchange Act and the rules and regulations promulgated thereunder as of the date of adoption of this Plan. If, at any time, the governing provisions are amended to permit an Option or Stock Purchase Right to be granted or exercised pursuant to Rule 16b-3 or any amendment or successor rule of like tenor without one or more of the foregoing restrictions or limitations, or the terms of such restrictions or limitations are modified, the Administrator may award Options or Stock Purchase Rights to Directors and Officers and may modify outstanding Options or Stock Purchase Rights in accordance with such changes, all to the extent that such action by the Administrator does not disqualify the Options or Stock Purchase Rights from exemption under the provisions of Rule 16b-3 or any amendment or successor rule of similar tenor. 15. Adjustments upon Changes in Capitalization, Dissolution, Merger or Asset Sale. (a) Changes in Capitalization. Subject to any required action by the stockholders of the Company, the number of Shares of Common Stock covered by each outstanding Option and Stock Purchase Right, the number of Shares of Common Stock that have been authorized for issuance under the Plan but as to which no Options or Stock Purchase Rights have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option or Stock Purchase Right, the number of Shares that may be added annually to the Shares reserved under the Plan by the Board (pursuant to section 3), the number of Shares that may be granted pursuant to the automatic grant provisions of section 14, as well as the price per Share of Common Stock covered by each such outstanding Option or Stock Purchase Right, shall be proportionately adjusted for any increase or decrease in the number of issued Shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued Shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of Shares of stock of any class, or securities convertible into Shares of stock of any class, shall affect, and no adjustment by reason 11 thereof shall be made with respect to, the number or price of Shares of Common Stock subject to an Option or Stock Purchase Right. (b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Optionee as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for an Optionee to have the right to exercise his or her Option until ten days prior to such transaction as to all of the Optioned Stock covered thereby, including Shares as to which the Option would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase option applicable to any Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse as to all such Shares, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised, an Option or Stock Purchase Right will terminate immediately prior to the consummation of such proposed action. (c) Merger or Asset Sale. In the event of a merger of the Company with or into another corporation, or the sale of substantially all of the assets of the Company, each outstanding Option and Stock Purchase Right shall be assumed or an equivalent Option or right substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. With respect to Options granted to an Outside Director pursuant to section 14 that are assumed or substituted for, if following such assumption or substitution the Optionee's status as a Director or a director of the successor corporation, as applicable, is terminated other than upon a voluntary resignation by the Optionee, then the Optionee shall fully vest in and have the right to exercise the Option as to all of the Optioned Stock, including Shares as to which it would not otherwise be vested or exercisable. In the event that the successor corporation refuses to assume or substitute for the Option or Stock Purchase Right, the Optionee shall fully vest in and have the right to exercise the Option or Stock Purchase Right as to all of the Optioned Stock, including Shares as to which it would not otherwise be vested or exercisable. If an Option or Stock Purchase Right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrator shall notify the Optionee in writing or electronically that the Option or Stock Purchase Right shall be fully vested and exercisable for a period of 15 days from the date of such notice, and the Option or Stock Purchase Right shall terminate upon the expiration of such period. For the purposes of this subsection, the Option or Stock Purchase Right shall be considered assumed if, following the merger or sale of assets, the Option or right confers the right to purchase or receive, for each Share of Optioned Stock subject to the Option or Stock Purchase Right immediately prior to the merger or sale of assets, the consideration (whether stock, cash or other securities or property) received in the merger or sale of assets by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or sale of assets is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock subject to the Option or Stock Purchase Right, to be solely common stock of the successor corporation or its Parent equal in Fair Market Value to the per Share consideration received by holders of Common Stock in the merger or sale of assets. 12 16. Date of Grant. The date of grant of an Option or Stock Purchase Right shall be, for all purposes, the date on which the Administrator makes the determination granting such Option or Stock Purchase Right, or such other later date as is determined by the Administrator. Notice of the determination shall be provided to each Optionee within a reasonable time after the date of such grant. 17. Amendment and Termination of the Plan. (a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan. (b) Stockholder Approval. The Company shall obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws. (c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company. Termination of the Plan shall not affect the Administrator's ability to exercise the powers granted to it hereunder with respect to Options granted under the Plan prior to the date of such termination. 18. Conditions upon Issuance of Shares. (a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an Option or Stock Purchase Right unless the exercise of such Option or Stock Purchase Right and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance. (b) Investment Representations. As a condition to the exercise of an Option or Stock Purchase Right, the Company may require the person exercising such Option or Stock Purchase Right to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required. 19. Inability To Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. 20. Reservation of Shares. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. 21. Stockholder Approval. The Plan shall be subject to approval by the stockholders of the Company within 12 months after the date the Plan is adopted. Such stockholder approval shall be obtained in the manner and to the degree required under Applicable Laws. If such approval is not timely obtained, any Options theretofore granted shall remain in full force and effect, except the Options granted as Incentive Stock Options shall not be eligible for treatment as such and shall be treated as Nonstatutory Stock Options. 13 SECRETARY'S CERTIFICATE The undersigned, the duly constituted and elected secretary of Mid-Power Service Corporation hereby certifies that pursuant a majority written consent of stockholders effective June 25, 2002, in accordance with the requirements of law and the Company's certificate of incorporation and bylaws, the foregoing Mid-Power Service Corporation 2002 Stock Option and Purchase Rights Plan was approved by the affirmative vote of the holders of a majority of the Shares of Common Stock. DATED this 25 day of June, 2002. /s/ Kenneth M. Emter ----------------------------- Kenneth M. Emter, Secretary 14 EX-10.08 13 ex108form8k061402.txt NOTICE OF GRANT, STOCK AND OPTION GRANT SCHEDULE Exhibit 10.08 The stock Options represented hereby and the Common Stock underlying such Options have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), nor under any other state securities law or regulation and are subject to substantial restrictions on transferability by operation of the Securities Act and other applicable state securities laws and regulations. MID-POWER SERVICE CORPORATION NOTICE OF GRANT MID-POWER SERVICE CORPORATION, a Nevada corporation (the "Company"), is pleased to grant to the Optionee named below, the following Options to purchase Shares of its common stock, par value $0.001 per Share ("Common Stock"), under its 2002 Stock Option and Purchase Rights Plan (the "Plan") and subject to the provisions of the Plan and the Stock Option Agreement: Name of Optionee: ____________________________________ Address: ____________________________________ Type of Option: [ ] Incentive Stock Option [ ] Nonstatutory Option (not an ISO) Date of Grant: ____________________________________ Number of Shares of Common Stock Purchasable under this Option: Exercise Price: $_____ per Share Expiration Date: ____________________________________ Vesting Schedule: One half of the shares granted in this Option shall vest upon execution of the Stock Option Agreement. The remaining half shall vest and be fully exercisable on January 1, 2003. The Plan may be inspected at the offices of the Secretary of the Company. A copy of the Plan will be provided to the Optionee upon request. STOCK OPTION AGREEMENT Unless otherwise defined herein, capitalized terms shall have the meanings given in the Plan. References herein to "you" or "your" shall refer to Optionee. 1. Options. The Company hereby grants to Optionee the right and option to purchase up to the number of Shares of Common Stock specified above, at the Exercise Price specified above, subject to the conditions and limitations set forth herein (the "Options"). 2. Vesting Dates. The Options shall not be exercisable until on or after their respective Vesting Dates. The Options shall partially vest in periodic installments on the Vesting Dates; provided, as a condition of vesting, that the Optionee shall have been in the Continuous Service of the Company at all times after the Date of Grant through and including each such Vesting Date. If this is an Incentive Stock Option, the exercise price times the number of Shares exercisable for the first time by Optionee in any calendar year as Incentive Stock Options shall not exceed $100,000, and any Options first becoming exercisable in any calendar year in excess of such amount shall not be treated as Incentive Stock Options but as Nonstatutory Options. 3. Number of Shares and Exercise Price. The number of Shares that Optionee may purchase upon exercise of the Option (the "Option Shares") and the Exercise Price may be adjusted from time to time for Capitalization Adjustments, as provided in the Plan. 4. Method of Payment. Payment of the Exercise Price is due in full upon exercise of all or any part of the Options. Optionee may elect to make payment of the Exercise Price in cash or by check or in any other manner permitted by the Administrator under the Plan. As soon as practicable after receipt by the Company of such notice and of payment in full of the Option price of all the Shares of Common Stock with respect to which the Option has been exercised, a certificate or certificates representing such Shares of Common Stock having been paid for shall be issued in the name of the Optionee, or, if the Optionee shall so request in the notice exercising the Option, in the name of the Optionee and another person jointly, with right of survivorship, and shall be delivered to the Optionee. If this Option is not exercised with respect to all Shares of Common Stock subject hereto, Optionee shall be entitled to receive a similar Option of like tenor covering the number of Shares of Common Stock with respect to which this Option shall not have been exercised. 5. Whole Shares. The Options may only be exercised for whole Shares of Common Stock. Fractional Shares of Common Stock shall not be issued. 6. Securities Law Compliance; Limitation of Exercise; Extension of Exercise Period. If the Board of Directors of the Company, in its sole discretion, shall determine that it is necessary or desirable to list, register or qualify the Option Shares under any state or federal law, these Options may not be exercised, in whole or part, until such listing, registration or qualification shall have been obtained free of any conditions not acceptable to the Board of Directors. If no registration statement is effective on the date of exercise of these Options, the Option Shares will not be issued unless and until there is evidence available to the Company, including representations from the Optionee that such Shares are being acquired for investment and not for resale, on which the Company may reasonably rely as to the availability of an exemption from registration in issuing such Shares. The Company shall utilize its best efforts to comply with the requirements of each regulatory commission or agency having jurisdiction in order to issue and sell the Shares to satisfy these Options. Such compliance will be a condition precedent to the right to exercise these Options. The inability of the Company to effect such compliance with any such regulatory commission or agency that counsel for the Company deems necessary for the lawful issuance and sale of the Shares to satisfy these Options shall relieve the Company from any liability for failure to issue and sell the Shares to satisfy these Options for such time as such compliance is not effectuated. If at any time Optionee delivers a Notice of Exercise in accordance with paragraph 8 below and the Options are not exercisable solely because of the condition set forth in this paragraph 6, the Exercise Period (as defined in paragraph 7) shall be correspondingly extended until the Company determines that the Options can be exercised in compliance with this paragraph 6, at which point the Optionee shall have the remainder of the applicable Exercise Period, as delineated in paragraph 7, within which to exercise such Options. If the issuance of the Option Shares is not covered by an effective registration statement under the Securities Act, in order to enforce the restrictions imposed upon the Option Shares, the Company shall cause a legend or legends to be placed upon any certificates representing such Option Shares, which legend or legends shall be substantially as follows: The shares represented hereby have not been registered under the Securities Act of 1933, as amended (the "Act"), nor under any applicable state securities laws and may not be transferred without registration under the Act and under such state securities laws, or pursuant to an available exemption from the Act and such laws. 7. Exercise Period. The vested portions of Options shall be exercisable during the period (the "Exercise Period") commencing upon their respective Vesting Dates and terminating upon the earliest of the following dates: (a) on the date of the termination of your Continuous Service at any time "for cause," as defined in your separate written employment agreement, if any, or in the absence of a written employment agreement, by a good faith determination by the Board of Directors that you (i) have been grossly negligent in the performance of your duties; (ii) have engaged in material willful or gross misconduct in the performance of your duties; (iii) have committed an act of personal dishonesty or breach of fiduciary duty involving personal profit in connection with your employment by the Company; or (iv) have committed, as determined by the Board of Directors of the Company, or have been convicted of fraud, embezzlement, theft or dishonesty or other criminal conduct, unless the Board of Directors waives the provisions of this subparagraph; (b) three months after the termination of your Continuous Service for any other reason; (c) twelve months after the termination of your Continuous Service due to Disability; (d) in the event of your death either during your Continuous Service or within three months after your Continuous Service terminates, six months after the issuance of letters testamentary or letters of administration or the appointment of an administrator, executor or personal representative but not later than 12 months after termination of your Continuous Service; or (e) the Expiration Date. If this is an Incentive Stock Option, to obtain the federal income tax advantages associated with such options, the Internal Revenue Code requires that at all times beginning on the Date of Grant of the Option and ending on the day three months before the date of the Option's exercise, you must be an Employee 2 of the Company or an affiliate, except in the event of your death or your Disability. The Company has provided for extended exercisability of the Options under certain circumstances for your benefit, but cannot guarantee that the Options will necessarily be treated as "Incentive Stock Options" under the Internal Revenue Code if you exercise the Option more than three months after the date your employment with the Company or an Affiliate terminates. 8. Exercise. (a) You may exercise the vested portion of the Options during their Exercise Period by delivering a Notice of Exercise (in a form designated by the Company), together with the Exercise Price to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require. (b) By exercising the Options you agree that, as a condition to any exercise of the Options, the Company may require you to enter an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of: (i) the exercise of the Options; (ii) the lapse of any substantial risk of forfeiture to which the Option Shares are subject at the time of exercise; or (iii) the disposition of Option Shares acquired upon such exercise. (c) If these Options are intended to qualify as "Incentive Stock Options" under the provisions of the Internal Revenue Code, you acknowledge that in order to be entitled to receive treatment as an Incentive Stock Option, the holding and exercise of these Options and the Common Stock acquired pursuant to these Options are subject to certain limitations and restrictions, including a requirement that any Common Stock acquired hereunder be held by you until after the date that is both two years subsequent to the date of this Option and one year subsequent to the date the Common Stock is acquired pursuant to these Options. Failure to hold the Shares of Common Stock for the above period will cause a "disqualifying disposition" of the Common Stock resulting in the loss of Incentive Stock Option treatment and the associated favorable tax benefits. As a result of the disqualifying disposition, the Company may also be subject to certain disclosure requirements, and, therefore, you agree to notify the Company, in writing, 30 days prior to any disqualifying disposition. (d) By exercising the Options you (and any other person or entity to which any Option Shares are transferred or assigned) agree that the Company (or a representative of the underwriters) may, in connection with the first underwritten registration of the offering of any securities of the Company under the Securities Act, require that you not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any Shares of Common Stock or other securities of the Company, including Option Shares or other securities held by you, for a period of time specified by the underwriter(s) (not to exceed 180 days) following the effective date of the registration statement of the Company filed under the Securities Act. The Option Shares shall be subject to the foregoing restrictions and any assignee, transferee or other holder of the Option Shares shall be bound by the foregoing provisions. You further agree to execute and deliver such other agreements as may be reasonably requested by the Company and/or the underwriter(s) that are consistent with the foregoing or that are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop transfer instructions with respect to your Option Shares or other securities until the end of such period. Further, you hereby constitute and appoint the Company and any of its Officers as your agent and attorney-in-fact with full power of substitution to act in your place and in your stead, and to make, execute and deliver any 3 agreements or instruments consistent with the foregoing. The foregoing power of attorney is and shall be irrevocable, and you agree that the foregoing power of attorney is coupled with the Company's interest in and to the Option Shares. (e) The Option Shares may not be sold, transferred or assigned, pledged or otherwise alienated or hypothecated, except in compliance with the Plan and this Agreement, including paragraph 10 below. (f) In order to enforce the restrictions imposed upon the Option Shares, the Company shall cause a legend or legends to be placed upon any certificates representing such Option Shares, which legend or legends shall be substantially as follows: The shares represented hereby are subject to restrictions on transferability and related repurchase rights under the Company's 2002 Stock Option and Purchase Rights Plan and applicable Stock Option Agreements or other agreements executed in connection therewith, copies of which are available at the principal business offices of the Company. (g) Upon issuance, the Option Shares shall be considered to be fully-paid, nonassessable, issued and outstanding Shares of the Company, and Optionee shall be entitled to vote the Option Shares and receive all cash dividends and other distributions with respect thereto. 9. Transferability. The Options are not transferable and are exercisable only by you during your life or by the executors, administrators or beneficiaries of your estate. In the event of any alienation, assignment, pledge, hypothecation or other transfer of this Option or any right hereunder in violation of the terms hereof or in the event of any levy, attachment, execution or similar process, this Option and all rights granted hereunder shall be immediately null and void. 10. Right of First Refusal. Prior to the date the Company's Common Stock is first listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or the Nasdaq Smallcap Market of the Nasdaq National Market, or is regularly quoted by a recognized securities dealer, as determined by the Administrator, the Company shall have a "Right of First Refusal" as to all or any part of the Option Shares on the following terms and conditions: (a) Should you propose to sell or transfer any Option Shares in one or more related transactions, you shall promptly deliver a written notice (the "Transfer Notice") to the Company prior to the closing of such sale or transfer. The Transfer Notice shall describe in reasonable detail the proposed sale or transfer including, without limitation, the number of Shares to be sold or transferred, the nature of such sale or transfer, the consideration to be paid, and the name and address of each prospective purchaser or transferee. Upon the request of the Company, you shall promptly furnish to the Company such other information as may be reasonably requested to establish that the offer and prospective purchaser or transferee is bona fide. (b) For 30 days following the receipt of the Transfer Notice, the Company shall have the option to purchase all or any portion of the Shares specified in the Transfer Notice upon the terms set forth in the Transfer Notice and at a price that is the lesser of the price set forth in the Transfer Notice or the Exercise Price plus interest at the rate of ten percent (10%) per year from the date of the exercise of the Options to the date the Company exercises its right of first refusal. 4 In the event the Company does not elect to acquire the Shares proposed for sale in the Transfer Notice, the Secretary of the Company shall give written notice thereof to you (the "Refusal Notice"). If the Company fails or refuses to furnish a Refusal Notice within such 30-day period, the Company shall be deemed to have refused its right and option to purchase the Shares specified in the Transfer Notice. (c) In the event the Company elects to acquire the Shares as specified in the Transfer Notice, the Secretary of the Company shall so notify you (the "Acceptance Notice"), and settlement thereof shall be made in cash within 30 days from the date of the Acceptance Notice. At such time, you shall deliver to the Company the certificates representing the Shares to be purchased, each certificate to be properly endorsed for transfer. (d) Should the purchase price specified in the Transfer Notice be payable in property other than cash or evidence of indebtedness, the Company shall have the right to pay the purchase price in the form of cash equal in amount to the value of such property. If you and the Company cannot agree on such cash value within 10 days after your receipt of the Acceptance Notice, the valuation shall be made by an appraiser of recognized standing selected by you and the Company (or its assignees) or, if you cannot agree on an appraiser within 20 days after your receipt of the Acceptance Notice, each shall select an appraiser of recognized standing and the two appraisers shall designate a third appraiser of recognized standing, whose appraisal shall be determinative of such value. You and the Company shall equally share the cost of such appraisal. The closing shall then be held on the fifth business day after such cash valuation has been made. (e) The exercise or nonexercise of the rights of the Company hereunder to elect to exercise the Right of First Refusal in one or more sales or transfers of the Shares shall not adversely affect the Company's rights to exercise the Right of First Refusal in subsequent sales or transfers of Option Shares. (f) The Company's Right of First Refusal shall terminate upon the effective date of a registration statement pertaining to the Company's initial registered firm commitment underwritten public offering. (g) If, from time to time, there is any change in the character or amount of any of the outstanding Shares of the Common Stock of the Company, then in such event any and all new, substituted or additional Shares to which you are entitled by reason of your ownership of the Option Shares shall be immediately subject to the Right of First Refusal with the same force and effect as the Option Shares subject to the Right of First Refusal immediately before such event. 11. Right of Repurchase. To the extent provided in the Company's bylaws, as amended from time to time, or as noted in paragraph 10 above, the Company shall have the right to repurchase all or any part of the Option Shares. 12. Options not a Service Contract. Optionee acknowledges and agrees that the vesting of Shares pursuant to the vesting schedule hereof is earned only by continuing as a Service Provider at the will of the Company (and not through the act of being hired, being granted an Option, or purchasing Shares hereunder). Optionee further acknowledges and agrees that this agreement, the transactions contemplated hereunder, and the vesting schedule set forth herein do not constitute an express or implied promise of continued engagement as a Service Provider for the vesting period, for any period, or at all, and shall not interfere with Optionee's right or the Company's right to terminate Optionee's relationship as a Service Provider under Optionee's written 5 employment agreement with the Company or, in the absence of a written employment agreement, Optionee's right or the Company's right to terminate Optionee's relationship as a Service Provider at any time, with or without cause. 13. Withholding Obligations. (a) At the time the Options are exercised, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a "cashless exercise" pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an affiliate, if any, which arise in connection with the Options. (b) Upon your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable conditions or restrictions of law, the Company may withhold from fully-vested Shares of Common Stock otherwise issuable to you upon the exercise of the Options a number of whole Shares having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law. If the date of determination of any tax withholding obligation is deferred to a date later than the date of exercise of the Options, Share withholding pursuant to the preceding sentence shall not be permitted unless you make a proper and timely election under Section 83(b) of the Internal Revenue Code covering the aggregate number of Shares of Common Stock acquired upon such exercise with respect to which such determination is otherwise deferred, to accelerate the determination of such tax withholding obligation to the date of exercise of the Options. Notwithstanding the filing of such election, Shares shall be withheld solely from fully-vested Shares of Common Stock determined as of the date of exercise of the Options that are otherwise issuable to you upon such exercise. Any adverse consequences to you arising in connection with such Share withholding procedure shall be your sole responsibility. (c) The Options are not exercisable unless the tax withholding obligations of the Company and/or any affiliate are satisfied. Accordingly, you may not be able to exercise the Options when desired even though the Options are vested, and the Company shall have no obligation to issue a certificate for such Shares or release such Shares from any escrow provided for herein. 14. Governing Plan Document. The Options are subject to all of the provisions of the Plan, the provisions of which are hereby made a part of the Options, and are further subject to all interpretations, amendments, rules and regulations that may, from time to time, be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of the Options and those of the Plan, the provisions of the Plan shall control. Additionally, if this is an Incentive Stock Option, all Options granted hereunder shall be deemed to contain such other limitations and restrictions as are necessary to conform the Options to the requirements for "Incentive Stock Options" as defined in Section 422 of the Internal Revenue Code or any amendment or successor statute of like tenor. 15. Notices. Any notices provided for in the Options or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by the Company to you, five days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company. 6 By your signature and the signature of the Company's representative below, you and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this Option Agreement. Optionee has reviewed the Plan and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option Agreement and fully understands all provisions of the Plan and Option Agreement. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and Option Agreement. Optionee further agrees to notify the Company upon any change in the residence address indicated below. OPTIONEE: MID-POWER SERVICE CORPORATION ____________________________________ Signature By ____________________________ ____________________________________ _______________________________ Print Name Title ____________________________________ ____________________________________ Residence Address 7 MID-POWER SERVICE CORPORATION STOCK OPTION NOTICE OF EXERCISE Mid-Power Service Corporation Date of Exercise: _______________ 3800 Howard Hughes Parkway, Suite 860 Las Vegas, Nevada 89109 Ladies and Gentlemen: This constitutes notice under my Stock Option Agreement that I elect to purchase the number of shares for the price set forth below. Type of Option (check one): [ ] Incentive [ ] Nonstatutory Stock Option Dated: ________________________________ Number of Shares as to which Option Is Exercised: ________________________________ Certificates To Be Issued in Name Of: ________________________________ Total Exercise Price: $_______________________________ Cash payment delivered Herewith: $_______________________________ By this exercise, I agree (i) to provide such additional documents as you may require pursuant to the terms of the 2002 Stock Option and Purchase Rights Plan (the "Plan") or the Stock Option Agreement, (ii) to provide for the payment by me to you (in the manner designated by you) of your withholding obligation, if any, relating to the exercise of this option, and (iii) if this exercise relates to an incentive stock option, to notify you in writing 30 days before the date of any disposition of any shares of common stock issued upon exercise of this option that will occur within two years after the date of grant of this option or within one year after such shares of common stock are issued upon exercise of this option. I hereby make the following certifications and representations with respect to the number of shares of common stock of the company listed above (the "Shares"), which are being acquired by me for my own account upon exercise of my stock option as set forth above: I acknowledge that I have read and understood the Plan and the Stock Option Agreement, that both the Plan and the Stock Option Agreement are incorporated herein by reference, and I agree to abide by and be bound by their terms and conditions. I further acknowledge that until the issuance (as evidenced by the appropriate entry on the books of the company or of a duly authorized transfer agent of the company) of the Shares, no right to vote or receive dividends or any other right of a stockholder shall exist with regard to the optioned stock, notwithstanding the exercise of the option. I further acknowledge that I may suffer adverse tax consequences as a result of my purchase or disposition of the shares, and I represent that I have consulted with any tax consultants I deem advisable in connection with the purchase or disposition of the Shares and that I am not relying on the company for any tax advice. I further acknowledge that the Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and are deemed to constitute "restricted securities" under Rule 144 promulgated under the Securities Act. I warrant and represent to the company that I have no present intention of distributing or selling said Shares, except as permitted under the Securities Act and any applicable state securities laws. I further acknowledge that I will not be able to resell the Shares for least 90 days after the stock of the company becomes publicly traded (i.e., subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934) under Rule 701 and that more restrictive conditions apply to affiliates of the company under Rule 144. I further acknowledge that all certificates representing any of the Shares subject to the provisions of the option shall have endorsed thereon appropriate legends reflecting the foregoing limitations, as well as any legends reflecting restrictions pursuant to the company's Certificate of Incorporation, Bylaws, and/or applicable securities laws. I further agree that, if required by the company (or a representative of the underwriters) in connection with the first underwritten registration of the offering of securities of the company under the Securities Act, I will not sell or otherwise transfer or dispose of any Shares or other securities of the company held by me as provided by the terms of the Plan and my Stock Option Agreement. I further acknowledge that this agreement, the Plan and the Stock Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof, supersede in their entirety any and all prior agreements with regard to the subject matter hereof, and that this agreement may not be amended except by a writing signed by both parties. Submitted by: Accepted by: PURCHASER: MID-POWER SERVICE CORPORATION __________________________________ By _________________________________ (signature) __________________________________ ____________________________________ (print name) Its Address: Address: __________________________________ 3800 Howard Hughes Parkway, Suite 860 __________________________________ Las Vegas, Nevada 89109 2
SCHEDULE OF STOCK OPTION AND BONUS GRANTS Name No. of Options Exercise Price No. of Shares Issuance Date - ---- -------------- -------------- ------------- ------------- Mark T. Davis 40,000 $1.50 20,000 06/25/02 Kenneth M. Emter 40,000 1.50 -- 06/25/02 Rod Lighthipe 20,000 1.50 10,000 06/25/02 Susan Trimboli 20,000 1.50 10,000 06/25/02 Michael T. Maloney 10,000 1.50 --
The options granted to Michael T. Maloney vested upon execution of the Stock Option Agreement. The options granted to the remaining recipients vest in equal amounts upon execution of the Stock Option Agreement and January 1, 2003. All options expire one year from the grant date. -----END PRIVACY-ENHANCED MESSAGE-----