EXHIBIT 10.2

 

EXECUTION VERSION

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO UNITED ENERGY CORP. THAT SUCH REGISTRATION IS
NOT REQUIRED.

Right to Purchase 300,000 Shares of Common Stock of

UNITED ENERGY CORP.  

(subject to adjustment as provided herein)

COMMON STOCK PURCHASE WARRANT

No. _________________

Issue Date: February 28, 2005

 

UNITED ENERGY CORP., a corporation organized under the laws of the State of
Nevada, hereby certifies that, for value received, LAURUS MASTER FUND, LTD., or
assigns (the "Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company (as defined herein) from and after the Issue Date of
this Warrant and at any time or from time to time before 5:00 p.m., New York
time, through the close of business February 28, 2012 (the "Expiration Date"),
up to Three Hundred Thousand fully paid and nonassessable shares of Common Stock
(as hereinafter defined), $0.01 par value per share, at the applicable Exercise
Price per share (as defined below). The number and character of such shares of
Common Stock and the applicable Exercise Price per share are subject to
adjustment as provided herein.

As used herein the following terms, unless the context otherwise requires, have
the following respective meanings:

(a)        The term "Company" shall include United Energy Corp. and any
corporation that shall succeed, or assume the obligations of, United Energy
Corp. hereunder.

(b)        The term "Common Stock" includes (i) the Company's Common Stock, par
value $0.01 per share; and (ii) any other securities into which or for which any
of the securities described in (a) may be converted or exchanged pursuant to a
plan of recapitalization, reorganization, merger, sale of assets or otherwise.

(c)        The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or

 

 

 

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which at any time shall be issuable or shall have been issued in exchange for or
in replacement of Common Stock or Other Securities pursuant to Section 4 or
otherwise.

(d)

The "Exercise Price" applicable under this Warrant shall be as follows:

 

(i)

a price of $1.25 for the first 100,00 shares acquired hereunder;

 

 

(ii)

a price of $1.50 for the next 100,000 shares acquired hereunder; and

 

 

(iii)

a price of $1.75 for any additional shares acquired hereunder.

 

1.

Exercise of Warrant.

 

1.1              Number of Shares Issuable upon Exercise. From and after the
date hereof through and including the Expiration Date, the Holder shall be
entitled to receive, upon exercise of this Warrant in whole or in part, by
delivery of an original or fax copy of an exercise notice in the form attached
hereto as Exhibit A (the "Exercise Notice"), shares of Common Stock of the
Company, subject to adjustment pursuant to Section 4.

1.2              Fair Market Value. For purposes hereof, the "Fair Market Value"
of a share of Common Stock as of a particular date (the "Determination Date")
shall mean:

(a)               If the Company's Common Stock is traded on the American Stock
Exchange or another national exchange or is quoted on the National or SmallCap
Market of The Nasdaq Stock Market, Inc. ("Nasdaq"), then the closing or last
sale price, respectively, reported for the last business day immediately
preceding the Determination Date.

(b)               If the Company's Common Stock is not traded on the American
Stock Exchange or another national exchange or on the Nasdaq but is traded on
the NASD OTC Bulletin Board, then the mean of the average of the closing bid and
asked prices reported for the last business day immediately preceding the
Determination Date.

(c)               Except as provided in clause (d) below, if the Company's
Common Stock is not publicly traded, then as the Holder and the Company agree or
in the absence of agreement by arbitration in accordance with the rules then in
effect of the American Arbitration Association, before a single arbitrator to be
chosen from a panel of persons qualified by education and training to pass on
the matter to be decided.

(d)               If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation, dissolution
or winding up pursuant to the Company's charter, then all amounts to be payable
per share to holders of the Common Stock pursuant to the charter in the event of
such liquidation, dissolution or winding up, plus all other amounts to be
payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of the Warrant are outstanding at the
Determination Date.

 

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1.3              Company Acknowledgment. The Company will, at the time of the
exercise of the Warrant, upon the request of the holder hereof acknowledge in
writing its continuing obligation to afford to such holder any rights to which
such holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder any such rights.

1.4              Trustee for Warrant Holders. In the event that a bank or trust
company shall have been appointed as trustee for the holders of the Warrant
pursuant to Subsection 3.2, such bank or trust company shall have all the powers
and duties of a warrant agent (as hereinafter described) and shall accept, in
its own name for the account of the Company or such successor person as may be
entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.

2.

Procedure for Exercise.

2.1              Delivery of Stock Certificates, Etc., on Exercise. The Company
agrees that the shares of Common Stock purchased upon exercise of this Warrant
shall be deemed to be issued to the Holder as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares in accordance herewith. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within three (3) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder, or as such Holder (upon
payment by such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such Holder
is entitled upon such exercise pursuant to Section 1 or otherwise.

2.2              Exercise. Payment may be made either (i) in cash or by
certified or official bank check payable to the order of the Company equal to
the applicable aggregate Exercise Price, (ii) by delivery of the Warrant, or
shares of Common Stock and/or Common Stock receivable upon exercise of the
Warrant in accordance with Section (b) below, or (iii) by a combination of any
of the foregoing methods, for the number of Common Shares specified in such
Exercise Notice (as such exercise number shall be adjusted to reflect any
adjustment in the total number of shares of Common Stock issuable to the Holder
per the terms of this Warrant) and the Holder shall thereupon be entitled to
receive the number of duly authorized, validly issued, fully-paid and
non-assessable shares of Common Stock (or Other Securities) determined as
provided herein.

(b)               Notwithstanding any provisions herein to the contrary, if the
Fair Market Value of one share of Common Stock is greater than the Exercise
Price (at the date of calculation as set forth below), in lieu of exercising
this Warrant for cash, the Holder may elect to receive shares equal to the value
(as determined below) of this Warrant (or the portion thereof being exercised)

 

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by surrender of this Warrant at the principal office of the Company together
with the properly endorsed Exercise Notice in which event the Company shall
issue to the Holder a number of shares of Common Stock computed using the
following formula:

X=Y

(A-B)

 

A

 

Where X =

the number of shares of Common Stock to be issued to the Holder

 

Y =

the number of shares of Common Stock purchasable under the Warrant or, if only a
portion of the Warrant is being exercised, the portion of the Warrant being
exercised (at the date of such calculation)

A =

the Fair Market Value of one share of the Company's Common Stock (at the date of
such calculation)

B =

Exercise Price (as adjusted to the date of such calculation)

 

3.

Reserved.  

 

4.

Effect of Reorganization, Etc.; Adjustment of Exercise Price.

 

4.1              Reorganization, Consolidation, Merger, Etc. In case at any time
or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 5.

4.2              Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, concurrently with any distributions made to holders of its Common
Stock, shall at its expense deliver or cause to be delivered to the Holder the
stock and other securities and property (including cash, where applicable)
receivable by the Holder of the Warrant pursuant to Section 4.1, or, if the
Holder shall so instruct the Company, to a bank or trust company specified by
the Holder and having its principal office in New York, NY as trustee for the
Holder of the Warrant (the “Trustee”).

4.3              Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 4, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the

 

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consummation of such reorganization, consolidation or merger or the effective
date of dissolution following any such transfer, as the case may be, and shall
be binding upon the issuer of any such stock or other securities, including, in
the case of any such transfer, the person acquiring all or substantially all of
the properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 5. In the
event this Warrant does not continue in full force and effect after the
consummation of the transactions described in this Section 4, then the Company's
securities and property (including cash, where applicable) receivable by the
Holders of the Warrant will be delivered to Holder or the Trustee as
contemplated by Section 4.2.

5. Extraordinary Events Regarding Common Stock. In the event that the Company
shall (a) issue additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock, (b) subdivide its outstanding shares
of Common Stock, or (c) combine its outstanding shares of the Common Stock into
a smaller number of shares of the Common Stock, then, in each such event, the
Exercise Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Exercise Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Exercise Price then in effect. The Exercise
Price, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive event or events described herein in this Section 5. The number
of shares of Common Stock that the holder of this Warrant shall thereafter, on
the exercise hereof as provided in Section 1, be entitled to receive shall be
increased to a number determined by multiplying the number of shares of Common
Stock that would otherwise (but for the provisions of this Section 5) be
issuable on such exercise by a fraction of which (a) the numerator is the
Exercise Price that would otherwise (but for the provisions of this Section 5)
be in effect, and (b) the denominator is the Exercise Price in effect on the
date of such exercise.

6. Certificate as to Adjustments. In each case of any adjustment or readjustment
in the shares of Common Stock (or Other Securities) issuable on the exercise of
the Warrant, the Company at its expense will promptly cause its Chief Financial
Officer or other appropriate designee to compute such adjustment or readjustment
in accordance with the terms of the Warrant and prepare a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of
Common Stock (or Other Securities) issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock (or Other Securities)
outstanding or deemed to be outstanding, and (c) the Exercise Price and the
number of shares of Common Stock to be received upon exercise of this Warrant,
in effect immediately prior to such adjustment or readjustment and as adjusted
or readjusted as provided in this Warrant. The Company will forthwith mail a
copy of each such certificate to the holder of the Warrant and any Warrant agent
of the Company (appointed pursuant to Section 12 hereof).

7. Reservation of Stock, Etc., Issuable on Exercise of Warrant. The Company will
at all times reserve and keep available, solely for issuance and delivery on the
exercise of the

 

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Warrant, shares of Common Stock (or Other Securities) from time to time issuable
on the exercise of the Warrant.

8. Assignment; Exchange of Warrant. Subject to compliance with applicable
securities laws, this Warrant, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a "Transferor") in whole or in
part. On the surrender for exchange of this Warrant, with the Transferor's
endorsement in the form of Exhibit B attached hereto (the "Transferor
Endorsement Form") and together with evidence reasonably satisfactory to the
Company demonstrating compliance with applicable securities laws, which shall
include, without limitation, a legal opinion from the Transferor's counsel that
such transfer is exempt from the registration requirements of applicable
securities laws, the Company at its expense but with payment by the Transferor
of any applicable transfer taxes) will issue and deliver to or on the order of
the Transferor thereof a new Warrant of like tenor, in the name of the
Transferor and/or the transferee(s) specified in such Transferor Endorsement
Form (each a "Transferee"), calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant so surrendered by the Transferor.

9. Replacement of Warrant. On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction of this Warrant, on delivery of
an indemnity agreement or security reasonably satisfactory in form and amount to
the Company or, in the case of any such mutilation, on surrender and
cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.

10.              Registration Rights. The Holder of this Warrant has been
granted certain registration rights by the Company. These registration rights
are set forth in a Registration Rights Agreement entered into by the Company and
Purchaser dated as of even date of this Warrant.

11.              Maximum Exercise. The Holder shall not be entitled to exercise
this Warrant on an exercise date, in connection with that number of shares of
Common Stock which would be in excess of the sum of (i) the number of shares of
Common Stock beneficially owned by the Holder and its affiliates on an exercise
date, and (ii) the number of shares of Common Stock issuable upon the exercise
of this Warrant with respect to which the determination of this proviso is being
made on an exercise date, which would result in beneficial ownership by the
Holder and its affiliates of more than 4.99% of the outstanding shares of Common
Stock of the Company on such date. For the purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13d-3 thereunder. Notwithstanding the foregoing, the
restriction described in this paragraph may be revoked upon 75 days prior notice
from the Holder to the Company and is automatically null and void upon an Event
of Default under the Note.

12.              Warrant Agent. The Company may, by written notice to the each
Holder of the Warrant, appoint an agent for the purpose of issuing Common Stock
(or Other Securities) on the exercise of this Warrant pursuant to Section 1,
exchanging this Warrant pursuant to Section 8, and replacing this Warrant
pursuant to Section 9, or any of the foregoing, and thereafter any such

 

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issuance, exchange or replacement, as the case may be, shall be made at such
office by such agent.

13.              Transfer on the Company's Books. Until this Warrant is
transferred on the books of the Company, the Company may treat the registered
holder hereof as the absolute owner hereof for all purposes, notwithstanding any
notice to the contrary.

14.              Notices, Etc. All notices and other communications from the
Company to the Holder of this Warrant shall be mailed by first class registered
or certified mail, postage prepaid, at such address as may have been furnished
to the Company in writing by such Holder or, until any such Holder furnishes to
the Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.

15.              Voluntary Adjustment by the Company. The Company may at any
time during the term of this Warrant reduce the then current Exercise Price to
any amount and for any period of time deemed appropriate by the Board of
Directors of the Company.

16.              Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be governed by and construed in accordance with
the laws of State of New York without regard to principles of conflicts of laws.
Any action brought concerning the transactions contemplated by this Warrant
shall be brought only in the state courts of New York or in the federal courts
located in the state of New York; provided, however, that the Holder may choose
to waive this provision and bring an action outside the state of New York. The
individuals executing this Warrant on behalf of the Company agree to submit to
the jurisdiction of such courts and waive trial by jury. The prevailing party
shall be entitled to recover from the other party its reasonable attorney's fees
and costs. In the event that any provision of this Warrant is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform to such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Warrant.
The headings in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision. The Company acknowledges that legal
counsel participated in the preparation of this Warrant and, therefore,
stipulates that the rule of construction that ambiguities are to be resolved
against the drafting party shall not be applied in the interpretation of this
Warrant to favor any party against the other party. The Holder shall not, by
virtue hereof, be entitled to any rights of a shareholder in the Company, until
this Warrant is exercised.

[BALANCE OF PAGE INTENTIONALLY LEFT BLANK;

SIGNATURE PAGE FOLLOWS.]

 

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IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first
written above.

 

 

UNITED ENERGY CORP.

 

 

 

 

 

By:

/s/ Brian F. King

 

 

Brian F. King

 

 

 

Chief Executive Officer

 

 

 

 

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EXHIBIT A

FORM OF SUBSCRIPTION

(To Be Signed Only On Exercise Of Warrant)

To:

United Energy Corp.

 

[

]

 

 

[

]

 

Attention:

[

]

 

 

The undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable box):

 

 

________ shares of the Common Stock covered by such Warrant; or

 

 

 

 

 

the maximum number of shares of Common Stock covered by such Warrant pursuant to
the cashless exercise procedure set forth in Section 2.

 

 

The undersigned herewith makes payment of the full Exercise Price for such
shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):

 

 

$__________ in lawful money of the United States; and/or

 

 

 

 

 

the cancellation of such portion of the attached Warrant as is exercisable for a
total of _______ shares of Common Stock (using a Fair Market Value of $_______
per share for purposes of this calculation); and/or

 

 

 

 

 

 

the cancellation of such number of shares of Common Stock as is necessary, in
accordance with the formula set forth in Section 2.2, to exercise this Warrant
with respect to the maximum number of shares of Common Stock purchasable
pursuant to the cashless exercise procedure set forth in Section 2.

 

 

 

The undersigned requests that the certificates for such shares be issued in the
name of, and delivered to __________________________________________ whose
address is _____________________________________________________.

The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.

Dated:

 

 

 

 

 

(Signature must conform to name of holder as specified on the face of the
Warrant)

 

 

 

 

 

Address:

 

 

 

 

 

 

 

A-1

 

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EXHIBIT B

FORM OF TRANSFEROR ENDORSEMENT

(To Be Signed Only On Transfer Of Warrant)

For value received, the undersigned hereby sells, assigns, and transfers unto
the person(s) named below under the heading "Transferees" the right represented
by the within Warrant to purchase the percentage and number of shares of Common
Stock of United Energy Corp. into which the within Warrant relates specified
under the headings "Percentage Transferred" and "Number Transferred,"
respectively, opposite the name(s) of such person(s) and appoints each such
person Attorney to transfer its respective right on the books of United Energy
Corp. with full power of substitution in the premises.

 

Transferees

 

 

Address

 

Percentage

Transferred

 

Number Transferred

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dated:

 

 

 

 

 

(Signature must conform to name of holder as specified on the face of the
Warrant)

 

 

 

 

 

Address:

 

 

 

 

 

 

 

 

SIGNED IN THE PRESENCE OF:

 

 

 

 

 

(Name)

ACCEPTED AND AGREED:

 

[TRANSFEREE]

 

 

 

 

 

 

 

(Name)

 

 

 

 

B-1