SUBSCRIPTION AGREEMENT KAHUNA NETWORK SECURITY, INC. (a Nevada corporation)
KAHUNA
NETWORK SECURITY, INC.
(a
Nevada
corporation)
Kahuna
Network Security, Inc., a Nevada corporation (“Company”) (formerly known as
Computer Automation Systems, Inc.), is offering up to 2,500,000 units (“Units”)
at a purchase price of $0.20
per
Unit. Each Unit consists of (a) one share of Company common stock (“Common
Stock”); (b) one class A warrant to purchase one share of Common Stock at an
exercise price of $0.30 per share (“Class A Warrant”); (c) one class B warrant
to purchase one share of Common Stock at an exercise price of $0.40 per share
(“Class B Warrant”); (d) one class C warrant to purchase one share of Common
Stock at an exercise price of $0.50 per share (“Class C Warrant”); (e) one class
D warrant to purchase one share of Common Stock at an exercise price of $0.60
per share (“Class D Warrant”); (f) one class E warrant to purchase one share of
Common Stock at an exercise price of $0.70 per share (“Class E Warrant”); (g)
one class F warrant to purchase one share of Common Stock at an exercise price
of $0.80 per share (“Class F Warrant”); and (h) one class G warrant to purchase
one share of Common Stock at an exercise price of $0.90 per share (“Class G
Warrant”) (collectively the “Warrants”). Each of the Warrants expires on
December 31, 2006 and is redeemable by the Company, at $0.01 per Warrant, in
the
event that the closing bid price of the Common Stock equals or exceeds 200%
of
the exercise price for twenty out of thirty consecutive trading days during
the
term of the Warrant.
The
Units
are being offered to a limited number of Accredited Investors on a “best
efforts” 1,250,000 Units or $250,000 minimum (the “minimum”) up to 2,500,000
Units or $500,000 maximum (the “maximum”) through our officers and directors.
The Units are being sold in denominations of 50,000 Units, or $10,000. With
respect to the shares of Common Stock, the Warrants and the shares of Common
Stock underlying the Warrants purchased in this offering, each investor will
receive one “demand” registration right.
This
Offering is also conditioned upon obtaining shareholders to effect (i) a 1-for-4
reverse split of all issued and outstanding Common Stock and (ii) an amendment
to the Articles of Incorporation increasing the Common Stock from 15,000,000
shares to 200,000,000 shares. Each of these conditions was satisfied on
January
20, 2004,
there
are a total of 32,500,000 shares of Common Stock outstanding and 17,500,000
shares of Common Stock reserved for issuance upon exercise of the above
referenced Warrants. Additionally, you will be issued shares of Common Stock
and
the Warrants attached hereto as Appendices A-G and a Demand Registration Rights
Agreement in the form attached hereto as Appendix R.
The
Company reserves the right to accept or reject any subscription, in whole or
in
part, and any subscription that is not accepted will be returned without
interest. All proceeds from the sale of the Units will be held in a
non-interest
bearing escrow account until closing. If subscriptions for at least 1,250,000
Units have been received prior to April 30, 2004, an initial closing will be
held as soon as practical thereafter, whereupon such subscriptions shall be
accepted together with the payments therefor and the funds from escrow will
be
released to the Company. If subscriptions for 1,250,000 Units have not been
accepted by April 30, 2004, all subscription funds will be returned to
subscribers without interest.
INSTRUCTIONS
TO INVESTORS
Persons
wishing to subscribe for Units in the Company must perform the
following:
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1.
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Complete
and execute with
a signature
the Subscription Agreement on pages 4 to
6.
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2. Make
check payable to: “Kahuna
Network Security, Inc. - Escrow Account” for shares purchased.
3. Please
retain the Warrant Agreements (A-G) for your files.
4. Execute
with
a signature
page 5
of Schedule B (Holder Section of Registration Rights
Agreement).
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Security Resources Corp\Financial Statements\Exhibits\KHNA-20 Sub Agrmt
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Offering RegRts 04-02-24.docPage
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IN
KAHUNA
NETWORK SECURITY, INC.
L.
▇▇▇▇▇▇
▇▇▇▇▇▇, Chief Executive Officer
Kahuna
Network Security, Inc.
▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
1. SUBSCRIPTION.
The
undersigned (often referred to individually as “Purchaser” or “Shareholder” or
“you”) hereby makes application to become an investor in Kahuna
Network Security,
Inc., a
Nevada corporation (“Company”) (formerly known as Computer Automation Systems,
Inc.), and to purchase Units at a price of $0.20 per Unit. This subscription
may
be rejected by the Company in its sole discretion.
2. ACCEPTANCE
OF SUBSCRIPTION.
It is
understood and agreed that the Company shall have the right, at any time prior
to receipt of notice of cancellation from the undersigned to accept or reject
this Subscription Agreement, in whole or in part, and that the same shall be
deemed to be accepted by the Company only when it is signed by the Chief
Executive Officer.
3. REPRESENTATIONS
BY THE UNDERSIGNED.
The
undersigned represents and warrants as follows:
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a.
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The
undersigned has carefully reviewed and understands this Subscription
Agreement, the Form 10-KSB filed May 20, 2003, the Form 10-QSB filed
June
12, 2003, the Form 10-QSB filed September 23, 2003 and the Form 10-QSB
filed November 21, 2003. The undersigned also understands that ▇▇
▇▇▇▇▇▇
and ▇▇▇ ▇▇▇▇▇ are the sole officers and the directors are ▇▇ ▇▇▇▇▇▇,
▇▇▇
▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇;
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b.
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The
undersigned is purchasing the Units based solely on this Subscription
Agreement (and the documents referred to in 3a above), as well as
the
exhibits attached hereto; the undersigned acknowledges he/she has
read all
documents incorporated by reference into this Subscription
Agreement;
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c.
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The
undersigned recognizes that the Units, or the securities underlying
the
Units, have not been registered under the Securities Act of 1933,
as
amended (“Act”), nor under the securities laws of any state and,
therefore, cannot be resold unless resale of the Units, or the common
stock underlying the Units, is registered under the Act or unless
an
exemption from registration is available; no public agency has passed
upon
the accuracy or adequacy of the information contained in this Subscription
Agreement or the fairness of the terms of the
offering;
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d.
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The
undersigned is acquiring the Units for his own account for long-term
investment and not with a view toward resale, fractionalization or
division, or distribution thereof, and he does not presently have
any
reason to anticipate any change in his circumstances, financial or
otherwise, or particular occasion or event which would necessitate
or
require his sale or distribution of the Units. No one other than
the
undersigned has any beneficial interest in said
securities;
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e.
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The
undersigned is an Accredited Investor as follow:
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An
Accredited Investor shall mean any person who comes within any of
the
following categories, or who the Company reasonably believes comes
within
any of the following categories, at the time of the sale of the securities
to that person:
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(1)
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Any
bank as defined in section 3(a)(2) of the Act or savings and loan
association or other institution as defined in Section 3(a)(5)(A)
of the
Act whether acting in an individual or fiduciary capacity; brokers
and
dealers registered under Section 15 of the Securities Exchange Act
of
1934; an insurance company as defined in section 2(13) of the act;
an
investment company registered under the Investment Company Act of
1940 or
a business development company as defined in section 2(a)(48) of
that act;
a Small Business Investment Company licensed by the U. S. Small Business
Administration under section 301(c) or (d) of the Small Business
Investment Act of 1958; an employee benefit plan within the meaning
of
Title I of the Employee Retirement Income Security Act of 1974, if
the
investment decision is made by a plan fiduciary, as defined in section
3(21) of such act, which is either a bank, insurance company, or
registered investment adviser, or if the employee benefit plan has
total
assets in excess of $5,000,000;
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(2)
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Any
private business development company as defined in section 202(a)(22)
of
the Investment Advisers Act of
1940;
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(3)
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Any
organization described in Section 501(c)(3) of the Internal Revenue
Code,
corporation, Massachusetts or similar business trust, or partnership,
not
formed for the specific purpose of acquiring the securities offered,
with
total assets of more than
$5,000,000;
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(4)
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Any
director, executive officer, or general partner of the issuer of
the
securities being offered or sold, or any director, executive officer,
or
general partner of a general partner of that
issuer;
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(5)
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Any
natural person whose individual net worth, or joint net worth with
that
person's spouse, at the time of his purchase exceeds $1,000,000;
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(6)
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Any
natural person who had an individual income in excess of $200,000
in each
of the two most recent years or joint income with that person’s spouse in
excess of $300,000 in each of those years and has a reasonable expectation
of reaching that same level in the current
year;
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(7)
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Any
trust, with total assets in excess of $5,000,000, not formed for
the
specific purpose of acquiring the securities offered, whose purchase
is
directed by a sophisticated person as described in Rule 506(b)(2)(ii)
of
Regulation D; and
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(8)
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Any
entity in which all of the equity owners are Accredited
Investors.
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f.
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The
undersigned recognizes that the total amount of funds tendered to
purchase
the Units is placed at the risk of the business and may be completely
lost. The undersigned understands that there can be no assurance
of
profitable operations and the purchase of Units as an investment
involves
risks;
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g.
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The
undersigned realizes that the Units cannot readily be sold, that
it may
not be possible to sell or dispose of the Units and therefore the
Units
must not be purchased unless the undersigned has liquid assets sufficient
to assure that such purchase will cause no undue financial difficulties
and the undersigned can provide for current needs and possible personal
contingencies;
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h.
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The
undersigned understands that there are substantial restrictions on
the
transferability of the Units, and the securities underlying the Units,
and
that any certificate or other document evidencing the Units, and
the
securities underlying the Units, will have substantially the following
restrictive legend thereon:
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“The
securities represented by this certificate have been acquired for
investment and have not been registered under the Securities Act
of 1933,
as amended ("Act") or the securities laws of any state. Such securities
may not be sold, pledged, hypothecated or otherwise transferred at
any
time except upon registration or upon delivery to the Company of
an
opinion of counsel satisfactory to the Company that such registration
is
not required or evidence satisfactory to the Company that any such
transfer will not violate the Act or the securities laws of any
state.”
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i.
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The
undersigned has not become aware of the offering of Units by any
form of
general solicitation or advertising, including, but not limited to
advertisements, articles, notices or other communications published
in any
newspaper, magazine or other similar media or broadcast over television
or
radio or any seminar or meeting where those individuals that have
attended
have been invited by any such or similar means of general solicitation
or
advertising; and
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j.
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The
undersigned is a bona fide resident of the state set forth as his
྿residence address࿀ in Subscription Agreement, and that (i) if a
corporation, partnership, trust, or other form of business organization,
it has its principal office within such state; (ii) if an individual,
he
has his principal residence in such state; and (iii) if a corporation,
partnership, trust, or other form of business organization which
was
organized for the specific purpose of acquiring the Units in the
Company,
all of its beneficial owners are residents of such
state.
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4. INDEMNIFICATION.
It is
acknowledged that the meaning and legal consequences of the representations
and
warranties contained in this Subscription Agreement are understood and the
undersigned hereby agrees to indemnify and hold harmless the Company and each
officer thereof from and against any and all loss, damage and liability due
to
or arising out of a breach of any of the representations and warranties made
in
this Subscription Agreement. The representations and warranties contained herein
are intended to and shall survive delivery of the Subscription
Agreement.
5. PURCHASE
OF UNITS.
The
undersigned hereby subscribes to purchase ______________Units
for
a
total investment of $_____________________ ($0.20
per
Unit).
The
purchase price is being paid herewith by delivery of a check payable to
“Kahuna
Network Security -- Escrow Account.”
This
Subscription Agreement is executed on this the _____ day of ________________,
2004, in the State
of
_____________________.
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FOR
OFFICE USE ONLY
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Name:
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Cert.
Number:
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Warrant
Number:
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Dated:
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$
Sent: $
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Shares:
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TYPE
OF OWNERSHIP (CHECK ONE)
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_____ INDIVIDUAL
OWNERSHIP
(one
signature required)
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_____COMMUNITY
PROPERTY (one signature if shares are held in one name, i.e., managing
spouse; two signatures required if interest is held in both
names)
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___ CORPORATION
(Please include certified corporate resolution authorizing
signature.)
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_____PARTNERSHIP
(Please include a copy of the statement of partnership or partnership
agreement authorizing signature.)
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___ TRUST
(Please include name of trust, name of trustee, date trust was formed
and
copy of the trust agreement or other authorization.)
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Please
print the exact name (registration)
Investor
desires on records of the Company
Street
Address
[
] Home [ ] Work Suite
or
Apt.
City,
State
Zip
Code
Work
Number
Facsimile
Social
Security or Taxpayer I.D. Number
Email
Address
EXECUTION
Please
execute this Subscription Agreement by completing the appropriate section
below.
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1.
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If
the subscriber is an INDIVIDUAL,
complete the following:
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_______________________________________
Signature
of Investor
Signature
of Spouse or Co-Owner if funds are
to
be
invested as joint tenants by the entirety
or
community property.
_____________________________________________
Name
(please type or print)
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2.
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If
the subscriber is a CORPORATION,
complete the following:
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The
undersigned hereby represents, warrants and covenants that the undersigned
has been duly authorized by all requisite action on the part of the
corporation listed below (྿Corporation࿀) to acquire the Units and,
further, that the Corporation has all requisite authority to acquire
such
Units.
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The
officer signing below represents and warrants that each of the above
representations or agreements or understandings set forth herein
applies
to that Corporation and that he has authority under the articles
of
incorporation, bylaws, and resolutions of the board of directors
of such
Corporation to execute this Subscription Agreement. Such officer
encloses
a true copy of the articles of incorporation, the bylaws and, as
necessary, the resolutions of the board of directors authorizing
a
purchase of the investment herein, in each case as amended to
date.
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Name
of
Corporation (please type or print)
By:
________________________________
Name:
______________________________
Title:
_______________________________
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Security Resources Corp\Financial Statements\Exhibits\KHNA-20 Sub Agrmt
- Units
Offering RegRts 04-02-24.docPage
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3.
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If
the subscriber is a PARTNERSHIP,
complete the following:
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The
undersigned hereby represents, warrants and covenants that the undersigned
is a general partner of the partnership named below (“Partnership”), and
has been duly authorized by the Partnership to acquire the Units
and that
he has all requisite authority to acquire such Units for the
Partnership.
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The
undersigned represents and warrants that each of the above representations
or agreements or understandings set forth herein applies to that
Partnership and he is authorized by such Partnership to execute this
Subscription Agreement. Such partner encloses a true copy of the
partnership agreement of said Partnership, as amended to date, together
with a current and complete list of all partners
thereof.
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Name
of
Partnership (please type or print)
By:
________________________________
Name:
______________________________
Title:
_______________________________
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4.
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If
the subscriber is a TRUST,
complete the following:
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The
undersigned hereby represents, warrants and covenants that he is
duly
authorized by the terms of the trust instrument (྿Trust Instrument࿀) for
the (྿Trust࿀) set forth below to acquire the Units and the undersigned, as
trustee, has all requisite authority to acquire such Units for the
Trust.
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The
undersigned, as trustee, executing this Subscription Agreement on
behalf
of the Trust, represents and warrants that each of the above
representations or agreements or understandings set forth herein
applies
to that Trust and he is authorized by such Trust to execute this
Subscription Agreement. Such trustee encloses a true copy of the
Trust
Instrument of said Trust as amended to
date.
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Name
of
Trust (Please type or print)
By:
________________________________
Name:
______________________________
Title:
_______________________________
ACCEPTED
BY THE COMPANY this the ______ day of _______________________,
2004.
KAHUNA
NETWORK SECURITY, INC.
By:______________________________________________
L.
▇▇▇▇▇▇
▇▇▇▇▇▇, Chief Executive Officer
Schedule
B
Registration
Rights Agreement B-
SCHEDULE
B
REGISTRATION
RIGHTS AGREEMENT
THIS
REGISTRATION RIGHTS AGREEMENT
(this
“Agreement”) is by and between Kahuna Network Security, Inc., a Nevada
Corporation (“Company”) (formerly known as Computer Automation Systems, Inc.),
and the party executing this document on page 5 (the “Holder”), dated as of the
date set forth on page 5.
W
I T N E S S E T H:
WHEREAS,
the
Holder has purchased the number of shares of Company common stock (“Common
Stock”) set forth on page 5 of this Agreement (the “Common Stock”),
and
WHEREAS,
the
Company desires to grant to the Holder certain registration rights in respect
of
the resale of the Common Stock.
NOW,
THEREFORE,
in
consideration of the premises and the mutual covenants contained herein, and
other good and valuable consideration, the receipt and sufficiency of which
is
hereby acknowledged, the parties hereto agree as follows:
ARTICLE
ONE
Registration
Rights Agreement
SECTION
1.1 Registration Rights Available. The Company agrees to provide Holder with
respect to the resale of the Common Stock, and any other securities issued
or
issuable at any time or from time to time in respect of such securities upon
a
stock split, stock dividend, recapitalization or other similar event involving
the Company (collectively, the “Securities”): (a) one demand secondary offering
by means of registration pursuant to the Securities Act of 1933, as amended
(“Securities Act”), subject to the provisions of this Agreement, and (b)
unlimited rights to register the resale under the Securities Acton a “piggyback”
basis in resale of the Company securities, subject to the provisions of this
Agreement. The demand registration right and piggyback registration rights
are
referred to herein as the “Registration Rights”).
SECTION
1.2 Demand Registration. With respect to Holder's right to one demand
registration pursuant to Section 1.1 (a), the parties agree as
follows:
(a) Beginning
on the earlier of (i) May 1, 2004, or (ii) 30 days following the closing of
a
private placement of equity or debt securities providing the Company with gross
proceeds equal to $250,000 minimum, and up to a maximum of $500,000. Holder
shall be entitled to exercise the demand registration right.
(b) Holder
shall provide written notice to the Company indicating his intention to exercise
the demand registration right at any time prior to January 31, 2006. The Company
shall promptly, and in any event within 90 days of receiving notice from the
Holders, use its best efforts to file with the Securities and Exchange
Commission (the “Commission”) and cause to become effective, a registration
statement on appropriate form relating to the offer and sale of the Common
Stock
by Holder. The Company agrees to provide Holder with notice of the filing of
such registration and of the filing of any amendments or supplements
thereto.
(c) The
Company agrees to maintain such registration statement in effect for the maximum
period allowable under the regulations promulgated by the Commission then in
effect.
(d) In
any
offering pursuant to this Section that becomes effective in which the Holder
participates, the Company shall use its best efforts to keep available to the
Holder a prospectus meeting the requirements of Section 10(a)(3) of the
Securities Act and shall file all amendments and supplements under the
Securities Act required for that purpose. In any offering pursuant to this
Section the Company will, as soon as practicable, use its best efforts to effect
such registration and use its best efforts to effect such qualification and
compliance as may be so requested and as would permit or facilitate the
distribution of such Securities, including, without limitation, registration
under the Securities Act, appropriate qualifications under applicable blue-sky
or other state securities laws, appropriate compliance with any other
governmental requirements and listing on a national securities exchange on
which
the Common Stock is then listed or inter-dealer quotation system.
SECTION
1.3 Piggyback Registration. With respect to Holder’s right to piggyback on a
firm commitment underwriting or a self-underwritten offering of the Company
securities pursuant to Section 1.1, the parties agree as follows:
(a) Pursuant
to Section 1.1, the Company will (i) promptly give to the Holder notice of
any
registration relating to a public offering of the Company securities other
a
registration on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be issued solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with the stock option or other employee
benefit plans; and (ii) include in such registration (and related qualification
under blue sky laws or other compliance, unless such expense or terms of such
qualification is unreasonable in comparison to the number of securities to
be
registered in such jurisdiction, as determined in the sole discretion of the
Company), and in the underwriting involved therein, all the Securities of the
Holder, with or without written request.
(b) The
right
of Holder to registration pursuant to Section 1.1 shall be conditioned upon
Holder’s participation in such underwriting, and the inclusion of the Securities
in the underwriting shall be limited to the extent provided herein. The Holder
and all other holders proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by the Company. Notwithstanding any other provision of this Agreement, if the
managing underwriter determines that marketing factors require a limitation
of
the number of shares to be underwritten, the managing underwriter may limit
some
or all of the Securities that may be included in the registration and
underwriting as follows: the number of Securities that may be included in the
registration and underwriting by the Holder shall be determined by multiplying
the number of shares of Securities of all selling shareholders of the Company
which the managing underwriter is willing to include in such registration and
underwriting, times a fraction, the numerator of which is the number of
Securities requested to be included in such registration and underwriting by
the
Holder, and the denominator of which is the total number of Securities which
all
selling shareholders of the Company have requested to have included in such
registration and underwriting. To facilitate the allocation of shares in
accordance with the above provisions, the Company may round the number of shares
allocable to any such person to the nearest 100 shares. If the Holder
disapproves of the terms of any such underwriting, it may elect to withdraw
therefrom by written notice to the Company and the managing underwriter,
delivered not less than seven days before the effective date. Any securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration, and shall not be transferred in a public distribution prior to
120
days after the effective date of the registration statement relating thereto,
or
such other shorter period of time as the underwriters may require.
SECTION
1.3 Registration Procedure. With respect to the Registration Right, the
following provisions shall apply:
(a) Holder
shall be obligated to furnish to the Company such information regarding the
Securities and the proposed manner of distribution of the Securities as the
Company and the underwriters (if any) may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to herein and shall otherwise cooperate with the Company and the
underwriters (if any) in connection with such registration, qualification or
compliance.
(b) With
a
view to making available the benefits of certain rules and regulations of the
Commission which may at any time permit the sale of the Restricted Securities
(used herein as defined in Rule 144 under the Securities Act) to the public
without registration, the Company agrees to use its best lawful efforts
to:
(i) Make
and
keep public information available, as those terms are understood and defined
in
Rule 144 under the Securities Act, at all times during which the Company is
subject to the reporting requirements of the Securities Exchange Act of 1934,
as
amended (the “Exchange Act”);
(ii) File
with
the Commission in a timely manner all reports and other documents required
of
the Company under the Securities Act and the Exchange Act (at all times during
which the Company is subject to such reporting requirements); and
(iii) So
long
as Holder owns any Restricted Securities, to furnish to Holder forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of said Rule 144 and with regard to the Securities Act
and the Exchange Act (at all times during which the Company is subject to such
reporting requirements), a copy of the most recent annual or quarterly report
of
the Company, and such other reports and documents of the Company and other
information in the possession of or reasonably obtainable by the Company as
Holder may reasonably request in availing themselves of any rule or regulation
of the Commission allowing Holder to sell any such securities without
registration.
(c) The
Company agrees that it will furnish to Holder such number of prospectuses,
offering circulars or other documents incident to any registration,
qualification or compliance referred to herein as provided or, if not otherwise
provided, as the Holder from time to time may reasonably request.
(d) Except
for the legal fees of Holder and any sales commissions that may be paid by
Holder, all expenses of any registrations permitted pursuant to this Agreement
and of all other offerings by the Company (including, but not limited to, the
expenses of any qualifications under the blue-sky or other state securities
laws
and compliance with governmental requirements of preparing and filing any
post-effective amendments required for the lawful distribution of the Securities
to the public in connection with such registration, of supplying prospectuses,
offering circulars or other documents) will be paid by the Company.
(e) The
Registration Right of this Agreement, subject to the terms and conditions
hereof, shall be available to any subsequent holder of the Securities owned
by
Holder. Each subsequent holder entitled to the Registration Right under this
Agreement shall be bound by the terms and subject to the obligations of this
Agreement as though it were an original signatory hereto.
ARTICLE
TWO
Indemnification
SECTION
2.1 Indemnification by the Company. In the event of any registration of the
Securities of the Company under the Securities Act, the Company agrees to
indemnify and hold harmless Holder and each other person who participates as
an
underwriter in the offering or sale of such securities against any and all
claims, demands, losses, costs, expenses, obligations, liabilities, joint or
several, damages, recoveries and deficiencies, including interest, penalties
and
attorneys’ fees (collectively, “Claims”), to which Holder may become subject
under the Securities Act or otherwise, insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out
of
or are based on any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which Holder’s Securities
were registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, 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, and the Company will reimburse Holder and each such
underwriter for any legal or any other expenses reasonably incurred by them
in
connection with investigating or defending any such Claim (or action or
proceeding in respect thereof); provided that the Company shall not be liable
in
any such case to the extent that any such Claim (or action or proceeding in
respect thereof) or expense arises out of or is based on an untrue statement
or
alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance on and in conformity
with written information furnished to the Company through an instrument duly
executed by Holder specifically stating that it is for use in the preparation
thereof. Such indemnity shall remain in full force and effect regardless of
any
investigation made by or on behalf of Holder or any such underwriter and shall
survive the transfer of the Securities by Holder.
SECTION
2.2 Indemnification by Holder. The Company may require, as a condition to
including the Securities in any registration statement filed pursuant to this
Agreement, that the Company shall have received an undertaking satisfactory
to
it from Holder, to indemnify and hold harmless (in the same manner and to the
same extent as set forth in Section 2.1) the Company, each director of the
Company, each officer of the Company and each other person, if any, who controls
the Company, within the meaning of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance on and in conformity with
written information furnished to the Company through an instrument duly executed
by Holder specifically stating that it is for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Notwithstanding the foregoing, the maximum
liability hereunder which any holder shall be required to suffer shall be
limited to the net proceeds to such Holder from the Securities sold by such
Holder in the offering. Such indemnity shall remain in full force and effect,
regardless of any investigation made by or on behalf of the Company or any
such
director, officer or controlling person and shall survive the transfer of the
Securities by Holder.
SECTION
2.3 Notices of Claims, etc. Promptly after receipt by an indemnified party
of
notice of the commencement of any action or proceeding involving a Claim
referred to in this Article Two, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action, provided that the failure
of
any indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Article Two, except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnifying party,
unless in such indemnified party’s reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist in respect of such
Claim, the indemnifying party shall be entitled to participate in and to assume
the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory
to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry
of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such
Claim.
SECTION
2.4 Indemnification Payments. The indemnification required by this Article
shall
be made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred.
ARTICLE
THREE
Miscellaneous
SECTION
3.1 Consent to Amendments. Except as otherwise expressly provided herein, the
provisions of this Agreement may be amended or waived only by the written
agreement of the Company and the Holder of 51% or more of the shares of Common
Stock who received shares for services rendered and executed this and shall
be
effective only to the extent specifically set forth in such
writing.
SECTION
3.2 Term of the Agreement. This Agreement shall terminate with respect to Holder
on the earlier to occur of (i) the Securities having been registered as provided
in Article One or (ii) February 1, 2006.
SECTION
3.3 Successors and Assigns. Except as otherwise expressly provided herein,
all
covenants and agreements contained in this Agreement by or on behalf of any
of
the parties hereto are transferable and will bind and inure to the benefit
of
the respective successors and assigns of the parties hereto, but only if so
expressed in writing.
SECTION
3.4 Severability. Whenever possible, each provision of this Agreement will
be
interpreted in such a manner as to be effective and valid under applicable
law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent
of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
SECTION
3.5 Delays or Omissions. No failure to exercise or delay in the exercise of
any
right, power or remedy accruing to Holder on any breach or default of the
Company under this Agreement shall impair any such right, power or remedy nor
shall it be construed to be a waiver of any such breach or default.
SECTION
3.6 Remedies Cumulative. All remedies under this Agreement, or by law or
otherwise afforded to any party hereto shall be cumulative and not
alterative.
SECTION
3.7 Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
Unless clearly denoted otherwise, any reference to Articles or Sections
contained herein shall be to the Articles or Sections of this
Agreement.
SECTION
3.8 Notices. Any notices required or permitted to be sent hereunder shall be
delivered personally or mailed, certified mail, return receipt requested, to
the
following addresses, and shall be deemed to have been received on the day of
personal delivery or within three business days after deposit in the mail,
postage prepaid:
If
to the
Company, to:
▇▇▇▇▇▇
▇▇▇▇▇▇, Chief Executive Officer
Kahuna
Network Security, Inc. f/k/a Computer Automation Systems, Inc.
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇. ▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
If
to
Holder, to:
[the
address set forth on the signature page below]
SECTION
3.9 Governing Law. The validity, meaning and effect of this Agreement shall
be
determined in accordance with the laws of the State of Texas applicable to
contracts made and to be performed in that state.
SECTION
3.10 Final Agreement. This Agreement, together with those documents expressly
referred to herein, constitutes the final agreement of the parties concerning
the matters referred to herein, and supersedes all prior agreements and
understandings.
SECTION
3.11 Execution in Counterparts. This Agreement may be executed in any number
of
counterparts, each of which when so executed and delivered shall be deemed
an
original, and such counterparts together shall constitute one
instrument.
The
parties hereto have executed this Agreement as of the date first set forth
above.
COMPANY:
KAHUNA
NETWORK SECURITY, INC.
|
/s/
▇▇ ▇▇▇▇▇▇
|
|
L.
▇▇▇▇▇▇ ▇▇▇▇▇▇, Chief Executive Officer
|
|
Dated:
March 12, 2004
|
HOLDER:
|
By:
|
||
|
Name:
|
||
|
Address:
|
||
|
Number
of Shares Purchased:
|
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