Securities Purchase Agreement
PerfectEnergy
International Limited
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▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇
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The
undersigned (the “Investor”)
hereby
confirms its agreement with you as follows:
1. This
Securities Purchase Agreement is made as of the date set forth below between
PerfectEnergy
International Limited,
a
Nevada corporation (the “Company”),
and
the Investor.
2. The
Company has authorized the sale and issuance of up to [______________] shares
(the “Shares”)
of the
Common Stock of the Company, par value $0.001 per share (the “Common
Stock”),
to
certain investors in a private placement, along with warrants (the “Warrants”)
to
purchase up to _________ shares (the “Warrant
Shares”)
of
Common Stock at an exercise price of $________ (the “Offering”).
3. The
Company and the Investor agree that the Investor will purchase from the Company
and the Company will issue and sell to the Investor ___________ Shares at a
purchase price of $[_______] per Share, along with Warrants to purchase _____
Shares for an aggregate purchase price of $____________________ (the
“Purchase
Price”),
subject to the Terms and Conditions for Purchase of Shares attached hereto
as
Annex I and incorporated herein by reference as if fully set forth herein.
Unless otherwise requested by the Investor in Exhibit
A,
certificates representing the Shares purchased by the Investor and Warrants
will
be registered in the Investor’s name and address as set forth below. The Company
and the Investor agree to enter into a registration rights agreement (the
“Registration
Rights Agreement”)
in the
form of Exhibit
B
concurrently with the execution of this Securities Purchase
Agreement.
4. The
Investor represents that, except as set forth below, (a) it has had no position,
office or other material relationship within the past three years with the
Company or its affiliates, (b) neither it, nor any group of which it is a member
or to which it is related, beneficially owns (including the right to acquire
or
vote) any securities of the Company, and (c) it has no direct or indirect
affiliation or association with any NASD, Inc. (“NASD”)
member. Exceptions:
(If
no
exceptions, write “none.” If left blank, response will be deemed to be
“none.”)
Please
confirm that the foregoing correctly sets forth the agreement between us by
signing in the space provided below for that purpose.
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Dated
as of:
_________________, 2007
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[Investor
Name]
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By:
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Name:
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Title:
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Address:
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AGREED
AND ACCEPTED:
PERFECTENERGY
INTERNATIONAL LIMITED
| By: | ||
| Name: | ||
| Title: |
[SECURITIES
PURCHASE AGREEMENT SIGNATURE PAGE]
Annex
I
Terms
and Conditions for Purchase of Shares
1. Agreement
to Sell and Purchase the Shares; Subscription Date.
1.1 Purchase
and Sale.
At the
Closing (as defined in Section 2), the Company will sell to the Investor,
and
the Investor will purchase from the Company, upon the terms and subject to
the
conditions set forth herein, and at the Purchase Price, the number of Shares
and
Warrants described in paragraph 3 of the Securities Purchase Agreement attached
hereto (collectively with this Annex I and the other exhibits attached hereto,
this “Agreement”).
1.2 Other
Investors.
As part
of the Offering, the Company proposes to enter into Securities Purchase
Agreements in the same form as this Agreement with certain other investors
(the
“Other
Investors”),
and
the Company expects to complete sales of Shares to them. The Investor and
the
Other Investors are sometimes collectively referred to herein as the
“Investors,”
and
this Agreement, the Registration Rights Agreement and the Securities Purchase
Agreements executed by the Other Investors are sometimes collectively referred
to herein as the “Agreements.”
The
Company may accept executed Agreements from Investors for the purchase of
Shares
and Warrants commencing upon the date on which the Company provides the
Investors with the proposed purchase price per Share and concluding upon
the
date (the “Subscription
Date”)
on
which the Company has notified Canaccord ▇▇▇▇▇ or ▇▇▇▇▇▇ Capital Markets
LLC
(each , in its capacity as placement agent for the Shares, the “Placement
Agent”)
in
writing that it will no longer accept Agreements for the purchase of Shares
in
the Offering, but in no event shall the Subscription Date be later than July
[___],
2007.
Each Investor must execute and deliver a Securities Purchase Agreement and
a
Registration Rights Agreement and must complete a Stock Certificate
Questionnaire (in the form attached as Exhibit
A
hereto)
and an Investor Questionnaire (in the form attached as Exhibit
C
hereto)
in order to purchase Shares and Warrants in the Offering.
1.3 Placement
Agent Fee.
The
Investor acknowledges that the Company intends to pay to the Placement Agents
a
fee, plus certain expenses, in respect of the sale of Shares and Warrants
to the
Investor.
2. Delivery
of the Shares at Closing. The
completion of the purchase and sale of the Shares and Warrants (the
“Closing”)
shall
occur on a date specified by the Company and the Placement Agent (the
“Closing
Date”),
which
date shall not be later than July [__],
2007
(the “Outside
Date”),
and
of which the Investors will be notified in advance by a Placement Agent.
At the
Closing, the Company shall deliver to the Investor one or more stock
certificates representing the number of Shares set forth in paragraph 3 of
the
Securities Purchase Agreement, each such certificate to be registered in
the
name of the Investor or, if so indicated on the Stock Certificate Questionnaire
attached hereto as Exhibit
A,
in the
name of a nominee designated by the Investor, along with a Warrant registered
in
the same name. In exchange for the delivery of the stock certificates
representing such Shares and the Warrant , the Investor shall deliver the
Purchase Price to the Company by wire transfer of immediately available funds
pursuant to the Company’s written instructions. On the Closing Date, the Company
shall cause counsel to the Company to deliver to the Investors and the Placement
Agents a legal opinion, dated the Closing Date, substantially in the form
attached hereto as Exhibit
D
(the
“Legal
Opinion”).
The
Company’s obligation to issue and sell the Shares and Warrants to the Investor
shall be subject to the following conditions, any one or more of which may
be
waived by the Company: (a) prior receipt by the Company of a copy of this
Agreement executed by the Investor; (b) completion of purchases and sales
of
Shares and Warrants under the Agreements with the Other Investors; (c) the
accuracy of the representations and warranties made by the Investor in this
Agreement and the fulfillment of the obligations of the Investor to be fulfilled
by it under this Agreement on or prior to the Closing;
and (d)
the absence of any order, writ, injunction, judgment or decree that questions
the validity of the Agreements or the right of the Company or the Investor
to
enter into such Agreements or to consummate
the
transactions contemplated hereby
and thereby.
The
Investor’s obligation to purchase the Shares and Warrants shall be subject to
the following conditions, any one or more of which may be waived by the
Investor: (a) the completion of purchases and sales under the Agreements
with
the Other Investors for an aggregate purchase price of not less than
[__________________
dollars ($_____________)];
(b) the
delivery of the Legal Opinion to the Investor by counsel to the Company;
(c) the
accuracy of the representations and warranties made by the Company in this
Agreement on the date hereof and, if different, on the Closing Date; (c)
the
execution and delivery by the Company of the Registration Rights Agreement,
(d)
the fulfillment of the obligations of the Company to be fulfilled by it under
this Agreement on or prior to the Closing; (e) the absence of any order,
writ,
injunction, judgment or decree that questions the validity of the Agreements
or
the right of the Company or the Investor to enter into such Agreements or
to
consummate the transactions contemplated hereby and thereby; and (f) the
delivery to the Investor by the Secretary or Assistant Secretary of the Company
of a certificate stating that the conditions specified in this paragraph
have
been fulfilled. In the event that the Closing does not occur on or before
the
Outside Date as a result of the Company’s failure to satisfy any of the
conditions set forth above (and such condition has not been waived by the
Investor), the Company shall return any and all funds paid hereunder to the
Investor no later than one Business Day following the Outside Date and the
Investors shall have no further obligations hereunder. For purposes of this
Agreement, “Business
Day”
shall
mean any day other than a Saturday, Sunday or other day on which the New
York
Stock Exchange or commercial banks located in New York, New York are permitted
or required by law to close.
3. Representations,
Warranties and Covenants of the Company.
Except
as otherwise described in the Company’s Annual Report on Form 10-KSB for the
year ended October 31, 2006 filed on February 13, 2007 (and any amendments
thereto filed at least two (2) Business Days prior to the date hereof), the
Company’s Quarterly Reports on Form 10-QSB filed on March 26, 2007 and June 19,
2007 for the quarterly periods ended January 31, 2007 and April 30, 2007,
respectively, or any of the Company’s Current Reports on Form 8-K filed since
June 19, 2007 and at least two (2) Business Days prior to the date hereof
(collectively, the “SEC
Reports”),
the
Company hereby represents and warrants to, and covenants with, the Investor
as
of the date hereof and the Closing Date, as follows:
3.1 Organization.
The
Company is duly incorporated and validly existing in good standing under
the
laws of the State of Nevada. The Company has full power and authority to
own,
operate and occupy its properties and to conduct its business as presently
conducted and is registered or qualified to do business and in good standing
in
each jurisdiction in which it owns or leases property or transacts business
and
where the failure to be so qualified would have a material adverse effect
upon
the Company and its subsidiaries as a whole or the business, financial
condition, properties, operations or assets of the Company and its subsidiaries
as a whole or the Company’s ability to perform its obligations under the
Agreements in all material respects (“Material
Adverse Effect”),
and
no proceeding has been instituted in any such jurisdiction revoking, limiting
or
curtailing, or seeking to revoke, limit or curtail, such power and authority
or
qualification. The Company has no “subsidiaries” (as defined in Rule 405 under
the Securities Act of 1933, as amended (the “Securities
Act”)),
other than as set forth in its most recent From 10_KSB.
2
3.2 Due
Authorization. The
Company has all requisite power and authority to execute, deliver and perform
its obligations under the Agreements. The execution and delivery of the
Agreements, and the consummation by the Company of the transactions contemplated
hereby, have been duly authorized by all necessary corporate action and no
further action on the part of the Company or its Board of Directors or
stockholders is required. The Agreements have been validly executed and
delivered by the Company and constitute legal, valid and binding agreements
of
the Company enforceable against the Company in accordance with their terms,
except to the extent (i) rights to indemnity and contribution may be limited
by
state or federal securities laws or the public policy underlying such laws,
(ii)
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ and contracting
parties’ rights generally and (iii) such enforceability may be subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
3.3 Non-Contravention.
The
execution and delivery of the Agreements, the issuance and sale of the Shares
and Warrants to be sold by the Company under the Agreements, the fulfillment
of
the terms of the Agreements and the consummation of the transactions
contemplated thereby, including the issuance of the Warrant Shares in accordance
with the terms of the Warrants, will not (A) result in a conflict with or
constitute a violation of, or default (with the passage of time or otherwise)
under, (i) any bond, debenture, note or other evidence of indebtedness, or
any material lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture
or
other agreement or instrument to which the Company or any subsidiary (each,
a
“Subsidiary”
and
collectively, the “Subsidiaries”)
is a
party or by which the Company or the Subsidiaries or their respective properties
are bound, (ii) the Certificate of Incorporation, Bylaws, or other
organizational documents of the Company, as amended, or (iii) any law,
administrative regulation, ordinance or order of any court or governmental
agency, arbitration panel or authority binding upon the Company or any
Subsidiary or their respective properties, which conflict, violation or default,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect, or (B) result in the creation or imposition of any lien,
encumbrance, claim, security interest or restriction whatsoever upon any
of the
material properties or assets of the Company or the Subsidiaries or an
acceleration of indebtedness pursuant to any obligation, agreement or condition
contained in any material bond, debenture, note or any other evidence of
indebtedness or any material indenture, mortgage, deed of trust or any other
agreement or instrument to which the Company or any Subsidiary is a party
or by
which it is bound or to which any of the property or assets of the Company
is
subject. No consent, approval, authorization or other order of, or registration,
qualification or filing with, any regulatory body, administrative agency,
or
other governmental body is required for the execution and delivery of the
Agreements by the Company and the valid issuance or sale of the Shares by
the
Company pursuant to the Agreements, other than such as have been made or
obtained, and except for any filings required to be made under federal or
state
securities laws.
3.4 Capitalization.
The
authorized capital stock of the Company as of July [__], 2007 consists of
377,000,000 shares of Common Stock, of which [69,707,300]
shares
are outstanding and 10,000,000 shares of Preferred Stock, of which 0 shares
are
outstanding. The Company has not issued any capital stock since October 25,
2007, other than pursuant to the purchase
of shares under the Company’s long term incentive plans and the exercise
of outstanding warrants or stock options, in each case as disclosed in the
SEC
Reports. The Shares, Warrants and Warrant Shares to be sold pursuant to the
Agreements have been duly authorized, and when issued and paid for in accordance
with the terms of the Agreements and the Warrants, will be duly and validly
issued, fully paid and nonassessable, subject to no lien, claim or encumbrance
(except
for any such lien, claim or encumbrance created,
directly or indirectly, by the Investor). The outstanding shares of capital
stock of the Company have been duly and validly issued and are fully paid
and
nonassessable, have been issued in compliance with the registration requirements
of federal and state securities laws, and were not issued in violation of
any
preemptive rights or similar rights to subscribe for or purchase securities.
The
Company owns all of the outstanding capital stock of each Subsidiary, free
and
clear of all liens, claims and encumbrances. There are no outstanding rights
(including, without limitation, preemptive rights), warrants or options to
acquire, or instruments convertible into or exchangeable for, any unissued
shares of capital stock or other equity interest in the Company or any
Subsidiary, or any contract, commitment, agreement, understanding or arrangement
of any kind to which the Company or any Subsidiary is a party and providing
for
the issuance or sale of any capital stock of the Company or of any Subsidiary,
any such convertible or exchangeable securities or any such rights, warrants
or
options. Without limiting the foregoing, no preemptive right, co-sale right,
registration right, right of first refusal or other similar right exists
with
respect to the issuance and sale of the Shares, except as provided in the
Agreements. There are no shareholders agreements, voting agreements or other
similar agreements with respect to the Common Stock to which the Company
is a
party.
3
3.5 Legal
Proceedings. There
is
no material legal or governmental proceeding pending, or to the knowledge
of the
Company, threatened, to which the Company or any Subsidiary is a party or
of
which the business or property of the Company or any Subsidiary is subject
that
is required to be disclosed and that is not so disclosed in the SEC Reports.
Neither the Company nor any Subsidiary is subject to any injunction, judgment,
decree or order of any court, regulatory body, administrative agency or other
government body.
3.6 No
Violations. Neither
the Company nor any Subsidiary is in violation of its Certificate of
Incorporation, Bylaws or other organizational documents, as amended, or in
violation of any law, administrative regulation, ordinance or order of any
court
or governmental agency, arbitration panel or authority applicable to the
Company, which violation, individually or in the aggregate, is reasonably
likely
to have a Material Adverse Effect, and neither the Company nor any Subsidiary
is
in default (and there exists no condition which, with the passage of time
or
otherwise, would constitute a default) in the performance of any bond,
debenture, note or any other evidence of indebtedness or any indenture,
mortgage, deed of trust or any other material agreement or instrument to
which
the Company or any Subsidiary is a party or by which the Company or such
Subsidiary or their respective properties are bound, which default is reasonably
likely to have a Material Adverse Effect.
3.7 Governmental
Permits, Etc. Each
of
the Company and the Subsidiaries has all necessary franchises, licenses,
certificates and other authorizations from any foreign, federal, state or
local
government or governmental agency, department or body that are currently
necessary for the operation of the business of the Company and the Subsidiaries
as currently conducted, except where the failure to currently possess such
franchises, licenses, certificates and other authorizations is not reasonably
likely to have a Material Adverse Effect.
3.8 Intellectual
Property.
(a) Except
for matters which are not reasonably likely to have a Material Adverse Effect,
(i) each of the Company and the Subsidiaries has ownership of, or a license
or
other legal right to use, all patents, copyrights, trade secrets, trademarks,
customer lists, designs, manufacturing or other processes, computer software,
systems, data compilation, research results or other proprietary rights used
in
the business of the Company (collectively, “Intellectual
Property”)
and
(ii) all of the Intellectual Property owned by the Company or by the
Subsidiaries consisting of patents, registered trademarks and registered
copyrights have been duly registered in, filed in or issued by the United
States
Patent and Trademark Office, the United States Register of Copyrights or
the
corresponding offices of other jurisdictions and have been maintained and
renewed in accordance with all applicable provisions of law and administrative
regulations in the United States and/or such other jurisdictions.
4
(b) Except
for matters which are not reasonably likely to have a Material Adverse Effect,
all material licenses or other material agreements under which (i) the Company
or any Subsidiary employs rights in Intellectual Property, or (ii) the Company
or any Subsidiary has granted rights to others in Intellectual Property owned
or
licensed by the Company or any Subsidiary are in full force and effect, and
there is no default by the Company with respect thereto.
(c) The
Company believes that it has taken all steps reasonably required in accordance
with sound business practice and business judgment to establish and preserve
the
ownership of all material Intellectual Property owned by the Company or any
Subsidiary.
(d) Except
for matters which are not reasonably likely to have a Material Adverse Effect,
to the knowledge of the Company, (i) the present business, activities and
products of the Company or any Subsidiary do not infringe any intellectual
property of any other person; (ii) neither the Company nor any Subsidiary
is
making unauthorized use of any confidential information or trade secrets
of any
person; and (iii) the activities of any of the employees of the Company or
any
Subsidiary, acting on behalf of the Company or such Subsidiary, do not violate
any agreements or arrangements related to confidential information or trade
secrets of third parties.
(e) No
proceedings are pending, or to the knowledge of the Company, threatened,
which
challenge the rights of the Company or any Subsidiary to the use of Intellectual
Property, except for matters which are not reasonably likely to have a Material
Adverse Effect.
3.9 Financial
Statements. The
financial statements of the Company and the related notes contained in the
SEC
Reports present fairly and accurately in all material respects the financial
position of the Company as of the dates therein indicated, and the results
of
its operations, cash flows and the changes in shareholders’ equity for the
periods therein specified, subject, in the case of unaudited financial
statements for interim periods, to normal year-end audit adjustments. Such
financial statements (including the related notes) have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis at the times and throughout the periods therein specified, except that
unaudited financial statements may not contain all footnotes required by
generally accepted accounting principles.
3.10 No
Material Adverse Change.
Except
as disclosed in the SEC Reports or
in any
press releases issued by the Company
at least two (2) Business Days prior to the date of this Agreement,
since
April 30, 2007, there has not been (i) an event, circumstance or change
that has had or is reasonably likely to have a Material Adverse Effect, (ii)
any
obligation incurred by the Company or any Subsidiary, direct or contingent,
that
is material to the Company, (iii) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company, or (iv) any loss
or
damage (whether or not insured) to the physical property of the Company or
any
Subsidiary which has had a Material Adverse Effect.
3.11 Reporting
Status.
The
Company has timely made all filings required under the Exchange Act during
the
twelve (12) months preceding the date of this Agreement, and all of those
documents complied in all material respects with the SEC’s requirements as of
their respective filing dates, and the information contained therein as of
the
respective dates thereof did not contain an untrue statement of a material
fact
or omit to state a material fact required to be stated therein or necessary
to
make the statements therein in light of the circumstances under which they
were
made not misleading.
3.12 No
Manipulation; Disclosure of Information. The
Company has not taken and will not take any action designed to or that might
reasonably be expected to cause or result in an unlawful manipulation of
the
price of the Common Stock to facilitate the sale or resale of the Shares.
The
Company has not disclosed any material non-public information to the
Investors.
5
3.13 Accountants. Jewett,
Schwartz, Wolf & Associates,
who
expressed their opinion with respect to the consolidated financial statements
in
the Company’s Annual Report on Form 10-KSB for the year ended October 31, 2006,
have advised the Company that they are, and to the knowledge of the Company
they
are, independent accountants as required by the Securities Act and the rules
and
regulations promulgated thereunder.
3.14 Contracts.
Except
for matters which are not reasonably likely to have a Material Adverse Effect
and those contracts that are substantially or fully performed or expired
by
their terms, the contracts listed as exhibits to or described in the SEC
Reports
that are material to the Company and all amendments thereto, are in full
force
and effect on the date hereof, and neither the Company nor, to the Company’s
knowledge, any other party to such contracts is in breach of or default under
any of such contracts.
3.15 Taxes.
Except
for matters which are not reasonably likely to have a Material Adverse Effect,
each of the Company and the Subsidiaries has filed all necessary federal,
state
and foreign income and franchise tax returns and has paid or accrued all
taxes
shown as due thereon, and the Company has no knowledge of a tax deficiency
which
has been asserted or threatened against the Company or any
Subsidiary.
3.16 Transfer
Taxes.
On the
Closing Date, all stock transfer or other taxes (other than income taxes)
which
are required to be paid in connection with the sale and transfer of the Shares
hereunder will be, or will have been, fully paid or provided for by the Company
and the Company will have complied with all laws imposing such
taxes.
3.17 Investment
Company.
The
Company is not an “investment company” or an “affiliated person” of, or
“promoter” or “principal underwriter” for an investment company, within the
meaning of the Investment Company Act of 1940, as amended, and will not be
deemed an “investment company” as a result of the transactions contemplated by
this Agreement.
3.18 Reserved.
3.19 Offering
Prohibitions.
Neither
the Company nor any person acting on its behalf or at its direction has in
the
past or will in the future take any action to sell, offer for sale or solicit
offers to buy any securities of the Company which would bring the offer or
sale
of the Shares or Warrants as contemplated by this Agreement within the
provisions of Section 5 of the Securities Act.
3.20 Related
Party Transactions. To
the
knowledge of the Company, no transaction
has occurred between or among the Company or any of its affiliates, officers
or
directors or any affiliate or affiliates of any such officer or director
that
with the passage of time will be required to be disclosed pursuant to Section
13, 14 or 15(d) of the Exchange Act.
3.21 Books
and Records.
The
books, records and accounts of the Company accurately and fairly reflect,
in
reasonable detail, the transactions in, and dispositions of, the assets of,
and
the operations of, the Company. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles and to maintain asset accountability, (iii) access
to
assets is permitted only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets is compared
with
the existing assets at reasonable intervals and appropriate action is taken
with
respect to any differences.
6
4. Representations,
Warranties and Covenants of the Investor.
4.1 Investor
Knowledge and Status.
The
Investor represents and warrants to, and covenants with, the Company that:
(i)
the Investor is an “accredited investor” as defined in Regulation D under the
Securities Act, is knowledgeable, sophisticated and experienced in making,
and
is qualified to make decisions with respect to, investments in securities
presenting an investment decision similar to that involved in the purchase
of
the Shares and Warrants, and has requested, received, reviewed and considered
all information it deemed relevant in making an informed decision to purchase
the Shares and Warrants; (ii) the Investor understands that the Shares and
Warrants are each “restricted securities” and have not been registered under the
Securities Act and is acquiring the number of Shares set forth in paragraph
3 of
the Securities Purchase Agreement and the Warrant in the ordinary course
of its
business and for its own account for investment only, has no present intention
of distributing any of such Shares or Warrants and has no arrangement or
understanding with any other persons regarding the distribution of such Shares
or Warrants (this representation and warranty not limiting the Investor’s right
to sell Shares pursuant to a Registration Statement filed under the Registration
Rights Agreement or otherwise, or other than with respect to any claim arising
out of a breach of this representation and warranty, the Investor’s right to
indemnification under Section 3 of the Registration Rights Agreement); (iii)
the
Investor will not, directly or indirectly, offer, sell, pledge, transfer
or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the Shares or Warrants except in compliance
with the Securities Act, applicable state securities laws and the respective
rules and regulations promulgated thereunder; (iv) the Investor has answered
all
questions in paragraph 4 of the Securities Purchase Agreement and the Investor
Questionnaire attached hereto as Exhibit
C
for use
in preparation of the Registration Statement and for determining the
availability of state “Blue Sky” exemptions and the answers thereto are true and
correct as of the date hereof and will be true and correct as of the Closing
Date; (v) the Investor will notify the Company promptly of any change in
any of
such information until such time as the Investor has sold all of its Shares
or
until the Company is no longer required to keep the Registration Statement
effective; and (vi) the Investor has, in connection with its decision to
purchase the number of Shares set forth in paragraph 3 of the Securities
Purchase Agreement, relied upon the representations and warranties of the
Company contained herein and the information contained in the SEC Reports.
The
Investor understands that the issuance of the Shares and Warrants to the
Investor has not been registered under the Securities Act, or registered
or
qualified under any state securities law, in reliance on specific exemptions
therefrom, which exemptions may depend upon, among other things, the
representations made by the Investor in this Agreement. No person (including
without limitation either Placement Agent) is authorized by the Company to
provide any representation that is inconsistent with or in addition to those
contained herein or in the SEC Reports, and the Investor acknowledges that
it
has not received or relied on any such representations.
4.2 Transfer
of Shares.
The
Investor agrees that it will not make any sale, transfer or other disposition
of
the Shares, the Warrants or the shares issuable upon exercise of the Warrants
(a
“Disposition”)
other
than Dispositions that are made pursuant to the Registration Statement in
compliance with any applicable prospectus delivery requirements or that are
exempt from registration under the Securities Act.
4.3 Power
and Authority.
The
Investor represents and warrants to the Company that (i) the Investor has
full
right, power, authority and capacity to enter into this Agreement and to
consummate the transactions contemplated hereby and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement,
and (ii) this Agreement constitutes a valid and binding obligation of the
Investor enforceable against the Investor in accordance with its terms, except
to the extent (i) rights to indemnity and contribution may be limited by
state
or federal securities laws or the public policy underlying such laws, (ii)
such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ and contracting
parties’ rights generally and (iii) such enforceability may be subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
7
4.4 Short
Position.
From the
earlier of (i) thirty (30) days prior to the date hereof and (ii) the date
the
Investor learned of the Offering, neither the Investor nor any affiliate
has
directly or indirectly established or agreed to establish any
hedge, “put equivalent position” (as defined in Rule 16a-1 under the Exchange
Act) or other position
in the Common Stock that is outstanding on the Closing Date and
that
is designed to or could reasonably be expected to lead to or result in a
Disposition by the Investor or any other person or entity. For purposes hereof,
a “hedge or other position” includes, without limitation, effecting any short
sale or having in effect any short position (whether or not such sale or
position is against the box and regardless of when such position was entered
into) or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to the Common Stock or with
respect to any security (other than a broad-based market basket or index)
that
includes, relates to or derives any significant part of its value from the
Common Stock.
Each
Investor acknowledges that this representation is made for the benefit of
the
Company and the other Investors, any of which may assert claims arising out
of
the breach of this Section 4.4.
4.5 No
Investment, Tax or Legal Advice.
The
Investor understands that nothing in the SEC Reports, this Agreement, or
any
other materials presented to the Investor in connection with the purchase
and
sale of the Shares or Warrants constitutes legal, tax or investment advice.
The
Investor has consulted such legal, tax and investment advisors as it, in
its
sole discretion, has deemed necessary or appropriate in connection with its
purchase of Shares and Warrants.
4.6 Confidential
Information.
The
Investor covenants that from the date hereof it will maintain in confidence
all
material non-public information regarding the Company received by the Investor
from the Company, including the receipt and content of any Suspension Notice
(as
defined in the Registration Rights Agreement) until such information (a)
becomes
generally publicly available other than through a violation of this provision
by
the Investor or its agents or (b) is required to be disclosed in legal
proceedings (such as by deposition, interrogatory, request for documents,
subpoena, civil investigation demand, filing with any governmental authority
or
similar process); provided, however, that before making any disclosure in
reliance on this Section 4.6, the Investor will give the Company at least
fifteen (15) days prior written notice (or such shorter period as required
by
law) specifying the circumstances giving rise thereto and will furnish only
that
portion of the non-public information which is legally required and will
exercise its commercially reasonable efforts to ensure that confidential
treatment will be accorded any non-public information so furnished. The parties
acknowledge and agree that as of the date hereof and as of the Closing Date,
the
Company has not disclosed any material non-public information to the
Investor.
4.7 Acknowledgments
Regarding Placement Agents.
The
Investor acknowledges that the Placement Agents have acted solely as placement
agents for the Company in connection with the Offering of the Shares and
Warrants by the Company, and that the Placement Agents have made no
representation or warranty whatsoever with respect to the accuracy or
completeness of information, data or other related disclosure material that
has
been provided to the Investor. The Investor further acknowledges that in
making
its decision to enter into this Agreement and purchase the Shares and Warrants,
it has relied on its own examination of the Company and the terms of, and
consequences of holding, the Shares and the Warrants. The Investor further
acknowledges that the provisions of this Section 4.7 are for the benefit
of, and may be enforced by, each of the Placement Agents.
8
4.8 Additional
Acknowledgement.
The
Investor acknowledges that it has independently evaluated the merits of the
transactions contemplated by this Agreement, that it has independently
determined to enter into the transactions contemplated hereby, that it is
not
relying on any advice from or evaluation by any Other Investor, and that
it is
not acting in concert with any Other Investor in making its purchase of the
Shares and Warrants hereunder. The Investor and, to its knowledge, the Company
acknowledge that the Investors have not taken any actions that would deem
the
Investors to be members of a “group” for purposes of Section 13(d) of the
Exchange Act.
5. Transfer
Restrictions.
5.1 Legends.
Certificates evidencing the Shares and the Warrant shall each bear any legend
as
required by the “blue sky” laws of any state and a restrictive legend in
substantially the following form, until such time as they are not
required:
[NEITHER
THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES
HAVE BEEN REGISTERED] [THESE SECURITIES HAVE NOT BEEN REGISTERED] UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT
FOR
THE SECURITIES UNDER THE SECURITIES ACT OR (B) AN AVAILABLE EXEMPTION FROM,
OR
IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS
AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY
AND ITS TRANSFER AGENT OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE
SECURITIES.
9
The
Company acknowledges and agrees that an Investor may from time to time pledge,
and/or grant a security interest in, some or all of the legended Shares in
connection with applicable securities laws, pursuant to a bona fide margin
agreement in compliance with a bona fide margin loan. Such a pledge would
not be
subject to approval or consent of the Company and no legal opinion of legal
counsel to the pledgee, secured party or pledgor shall be required in connection
with the pledge, but such legal opinion shall be required in connection with
a
subsequent transfer or foreclosure following default by the Investor transferee
of the pledge. No notice shall be required of such pledge, but the Investor’s
transferee shall promptly notify the Company of any such subsequent transfer
or
foreclosure. Each Investor acknowledges that the Company shall not be
responsible for any pledges relating to, or the grant of any security interest
in, any of the Shares or for any agreement, understanding or arrangement
between
any Investor and its pledgee or secured party. At the appropriate Investor’s
expense, the Company will execute and deliver such reasonable documentation
as a
pledgee or secured party of Shares may reasonably request in connection with
a
pledge or transfer of the Shares, including the preparation and filing of
any
required prospectus supplement under Rule 424(b)(3) of the Securities Act
or
other applicable provision of the Securities Act to appropriately amend the
list
of selling stockholders thereunder.
5.2 Delivery
of Certificates.
Following effectiveness of a registration statement registering the Shares,
if
the Company shall fail for any reason or for no reason to issue to an Investor
unlegended certificates within five (5) Business Days of receipt of all
documents necessary for the removal of the legend set forth above (the
“Deadline
Date”),
then,
in addition to all other remedies available to such Investor, if on or after
the
Business Day immediately following such five (5) Business Day period, such
Investor purchases (in an open market transaction or otherwise) shares of
Common
Stock to deliver in satisfaction of a sale by the holder of shares of Common
Stock that such Investor anticipated receiving from the Company without any
restrictive legend (a “Buy-In”),
then
the Company shall, within three (3) Business Days after such Investor’s request
and in such Investor’s sole discretion, either (i) pay cash to the Investor in
an amount equal to such Investor’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased (the
“Buy-In
Price”),
at
which point the Company’s obligation to deliver such certificate (and to issue
such shares of Common Stock) shall terminate, or (ii) promptly honor its
obligation to deliver to such Investor a certificate or certificates
representing such shares of Common Stock and pay cash to the Investor in
an
amount equal to the excess (if any) of the Buy-In Price over the product
of (a)
such number of shares of Common Stock, times (b) the Closing Bid Price on
the
Deadline Date.
6. Survival
of Representations, Warranties and Agreements. Notwithstanding
any investigation made by any party to this Agreement or by the Placement
Agent,
all covenants, agreements, representations and warranties made by the Company
and the Investor herein shall survive the execution of this Agreement, the
delivery to the Investor of the Shares being purchased and the payment therefor,
and a party’s reliance on such representations and warranties shall not be
affected by any investigation made by such party or any information developed
thereby.
7. Registration
of Shares; Public Statements.
7.1 In
connection with the purchase and sale of the Shares by the Investors
contemplated hereby, the Company has entered into a Registration Rights
Agreement with each Investor providing for the filing by the Company of a
Registration Statement on Form S-B-2 (or, if the Company is ineligible to
use
From SB-2, another appropriate form) to enable the resale of the Shares by
the
Investors from time to time.
10
7.2 The
Company agrees to disclose on a Current Report on Form 8-K the existence
of the
Offering and the material terms, thereof, including pricing, within two (2)
Business Days after the Closing. The Company will not issue any public
statement, press release or any other public disclosure listing the Investor
as
one of the purchasers of the Shares without the Investor’s prior written
consent, except as may be required by applicable law or rules of any exchange
on
which the Company’s securities are listed.
8. Notices.
All
notices, requests, consents and other communications hereunder shall be in
writing, shall be delivered (A) if within the United States, by first-class
registered or certified airmail, or nationally recognized overnight express
courier, postage prepaid, or by facsimile, or (B) if from outside the United
States, by International Federal Express (or comparable service) or facsimile,
and shall be deemed given (i) if delivered by first-class registered or
certified mail domestic, upon the Business Day received, (ii) if delivered
by
nationally recognized overnight carrier, one (1) Business Day after timely
delivery to such carrier, (iii) if delivered by International Federal Express
(or comparable service), two (2) Business Days after timely delivery to such
carrier, (iv) if delivered by facsimile, upon electric confirmation of receipt
and shall be addressed as follows, or to such other address or addresses
as may
have been furnished in writing by a party to another party pursuant to this
paragraph:
(a) if
to the
Company, to:
PerfectEnergy
International Limited
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: [___________]
Telephone: [___________]
with
a
copy to:
[______________________]
[______________________]
[______________________]
Attention:
[_____________]
Telephone: [____________]
(b) if
to the
Investor, at its address on the signature page to the Securities Purchase
Agreement.
9. Amendments;
Waiver. This
Agreement may not be modified or amended except pursuant to an instrument
in
writing signed by the Company and the Investor. Any waiver of a provision
of
this Agreement must be in writing and executed by the party against whom
enforcement of such waiver is sought.
10. Headings.
The
headings of the various sections of this Agreement have been inserted for
convenience of reference only and shall not be deemed to be part of this
Agreement.
11. Entire
Agreement; Severability. This
Agreement sets forth the entire agreement and understanding of the parties
relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written relating to the subject matter hereof. If any provision
contained in this Agreement is determined to be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of
the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
11
12. Governing
Law. This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of [New York], without giving effect to the principles
of
conflicts of law.
13. Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
constitute an original, but all of which, when taken together, shall constitute
but one instrument, and shall become effective when one or more counterparts
have been signed by each party hereto and delivered to the other
parties.
12
Exhibit
A
PERFECTENERGY
INTERNATIONAL LIMITED
STOCK
CERTIFICATE QUESTIONNAIRE
Pursuant
to Section 4 of the Agreement, please provide us with the following
information:
|
1. The
exact name in which your Shares and Warrants are to be registered
(this is
the name that will appear on your stock certificate(s) and Warrants).
You
may use a nominee name if appropriate:
|
|
|
2. If
a nominee name is listed in response to item 1 above, the relationship
between the Investor and such nominee:
|
|
|
3. The
mailing address of the registered holder listed in response to
item 1
above:
|
|
|
4. The
Social Security Number or Tax Identification Number of the registered
holder listed in the response to item 1 above:
|
A-1
Exhibit
b
PERFECTENERGY
INTERNATIONAL LIMITED
FORM
OF REGISTRATION RIGHTS AGREEMENT
B-1
Exhibit
C
PERFECTENERGY
INTERNATIONAL LIMITED
INVESTOR
QUESTIONNAIRE
(All
information will be treated confidentially)
To:
PerfectEnergy International Limited,
The
undersigned hereby acknowledges the following:
This
Investor Questionnaire (“Questionnaire”)
must
be completed by each potential investor in connection with the offer and
sale of
the shares of the Common Stock, par value $0.001 per share (the “Shares”)
and
Warrants, of Perfectenergy International Limited (the “Company”).
The
Shares are being offered and sold by the Company without registration under
the
Securities Act of 1933, as amended (the “Securities
Act”),
and
the securities laws of certain states, in reliance on the exemptions contained
in Section 4 of the Securities Act and on Regulation D promulgated thereunder
and in reliance on similar exemptions under applicable state laws. The Company
must determine that a potential investor meets certain suitability requirements
before offering or selling Shares and Warrants to such investor. The purpose
of
this Questionnaire is to assure the Company that each investor will meet
the
applicable suitability requirements. The information supplied by the undersigned
will be used in determining whether the undersigned meets such criteria,
and
reliance upon the private offering exemption from registration is based in
part
on the information herein supplied.
This
Questionnaire does not constitute an offer to sell or a solicitation of an
offer
to buy any security. The undersigned’s answers will be kept strictly
confidential. However, by signing this Questionnaire the undersigned will
be
authorizing the Company to provide a completed copy of this Questionnaire
to
such parties as the Company deems appropriate in order to ensure that the
offer
and sale of the Shares and Warrants will not result in a violation of the
Securities Act or the securities laws of any state and that the undersigned
otherwise satisfies the suitability standards applicable to purchasers of
the
Shares. All potential investors must answer all applicable questions and
complete, date and sign this Questionnaire. The undersigned shall print or
type
its responses and attach additional sheets of paper if necessary to complete
its
answers to any item.
A. Background
Information
Name:__________________________________________________________________________________
Business
Address:________________________________________________________________________
(Number
and
Street)
____________________________________________________________________________
(City) (State) &
#160;
(Zip
Code)
Telephone
Number: ( )________________________
Residence
Address:________________________________________________________________________
(Number
and
Street)
_______________________________________________________________________________________
(City) (State)
;
(Zip
Code)
Telephone
Number: (
)________________________
If
an
individual:
Age:______
Citizenship:__________
Where
registered to vote:____________________________
If
a
corporation, partnership, limited liability company, trust or other
entity:
Type
of
entity:____________________________________________________________________________
C-1
State
of
formation:______________ Date
of
formation:_____________________
Social
Security or Taxpayer Identification
No.__________________________________
Send
all
correspondence to (check one): ____
Residence Address ____
Business Address
B. Status
as Accredited Investor
The
undersigned is an “accredited investor” as such term is defined in Regulation D
under the Securities Act, because at the time of the sale of the Shares the
undersigned falls within one or more of the following categories (Please
initial
one or more, as applicable):
_____ (1) a
bank as
defined in Section 3(a)(2) of the Securities Act, or a savings and loan
association or other institution as defined in Section 3(a)(5)(A) of the
Securities Act whether acting in its individual or fiduciary capacity; a
broker
or dealer registered pursuant to Section 15 of the Securities Exchange Act
of
1934; an insurance company as defined in Section 2(13) of the Securities
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;
a plan
established and maintained by a state, its political subdivisions, or any
agency
or instrumentality of a state or its political subdivisions for the benefit
of
its employees, if such plan has total assets in excess of $5,000,000; an
employee benefit plan within the meaning 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, savings and
loan
association, insurance company, or registered investment adviser, or if the
employee benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with the investment decisions made solely by persons
that
are accredited investors;1
_____ (2) a
private
business development company as defined in Section 202(a)(22) of the Investment
Advisers Act of 1940;
_____ (3) an
organization described in Section 501(c)(3) of the Internal Revenue Code
of
1986, corporation, Massachusetts or similar business trust, or partnership,
not
formed for the specific purpose of acquiring the Shares offered, with total
assets in excess of $5,000,000;
_____ (4) a
natural
person whose individual net worth, or joint net worth with that person’s spouse,
at the time of such person’s purchase of the Shares exceeds
$1,000,000;
_____ (5) a
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
the
same income level in the current year;
_____ (6) a
trust,
with total assets in excess of $5,000,000, not formed for the specific purpose
of acquiring the Shares offered, whose purchase is directed by a sophisticated
person as described in Rule 506(b)(2)(ii) of Regulation D; and
_____ (7) an
entity
in which all of the equity owners are accredited investors (as defined
above).
_______________
1
As used in this Questionnaire, the term “net worth” means the excess of total
assets over total liabilities. In computing net worth for the purpose of
subsection (4), the principal residence of the investor must be valued at cost,
including cost of improvements, or at recently appraised value by a professional
appraiser. In determining income, the investor should add to the investor’s
adjusted gross income any amounts attributable to tax exempt income received,
losses claimed as a limited partner in any limited partnership, deductions
claimed for depreciation, contributions to an ▇▇▇ or ▇▇▇▇▇ retirement plan,
alimony payments, and any amount by which income from long-term capital gains
has been reduced in arriving at adjusted gross income.
C-2
C. Representations
The
undersigned hereby represents and warrants to the Company as
follows:
1. Any
purchase of the Shares and Warrants would be solely for the account of the
undersigned and not for the account of any other person or with a view to
any
resale, fractionalization, division, or distribution thereof.
2. The
information contained herein is complete and accurate and may be relied upon
by
the Company, and the undersigned will notify the Company immediately of any
material change in any of such information occurring prior to the closing,
if
any, with respect to the purchase of Shares by the undersigned or any
co-purchaser.
3. There
are
no suits, pending litigation, or claims against the undersigned that could
materially affect the net worth of the undersigned as reported in this
Questionnaire.
4. The
undersigned acknowledges that there may occasionally be times when the Company,
based on the advice of its counsel, determines that it must suspend the use
of
the Prospectus forming a part of the Registration Statement (as such terms
are
defined in the Securities Purchase Agreement to which this Questionnaire
is
attached) until such time as an amendment to the Registration Statement has
been
filed by the Company and declared effective by the Securities and Exchange
Commission or until the Company has amended or supplemented such Prospectus.
The
undersigned is aware that, in such event, the Shares will not be subject
to
ready liquidation, and that any Shares purchased by the undersigned would
have
to be held during such suspension. The overall commitment of the undersigned
to
investments which are not readily marketable is not excessive in view of
the
undersigned’s net worth and financial circumstances, and any purchase of the
Shares will not cause such commitment to become excessive. The undersigned
is
able to bear the economic risk of an investment in the Shares.
5. The
undersigned has carefully considered the potential risks relating to the
Company
and a purchase of the Shares and Warrants and fully understands that the
Shares
and Warrants are speculative investments which involve a high degree of risk
of
loss of the undersigned’s entire investment. Among others, the undersigned has
carefully considered each of the risks described in the Company’s Annual Report
on Form 10-KSB for the year ended October 31, 2006 and in the Company’s
Confidential Private Placement Memorandum dated [_______], 2007.
6. The
following is a list of all states and other jurisdictions in which blue sky
or
similar clearance will be required in connection with the undersigned’s purchase
of the Shares and Warrants:
___________________________________________
___________________________________________
___________________________________________
The
undersigned agrees to notify the Company in writing of any additional states
or
other jurisdictions in which blue sky or similar clearance will be required
in
connection with the undersigned’s purchase of the Shares.
C-3
IN
WITNESS WHEREOF, the undersigned has executed this Questionnaire this _____
day
of __________, 2007, and declares under oath that it is truthful and
correct.
| Print Name | ||
|
|
||
| By: | ||
| Signature | ||
| Title: | ||
|
(required for any purchaser that is a
corporation,
partnership, trust or other entity)
|
||
|
|
||
C-4
Exhibit D
FORM
OF LEGAL OPINION
_________,
2007
To: The
Investors in Common Stock and Warrants of PerfectEnergy International Limited
and the Placement Agents
Ladies
and Gentlemen:
We
have
acted as counsel for Perfectenergy International Limited, a Nevada corporation
(the “Company”), in connection with the issuance of
shares
(the “Shares”) of the Company’s common stock, par value $0.001 per share, and
warrants to purchase _______ shares (the “Warrant Shares”) of the Company’s
common stock pursuant to those certain Securities Purchase Agreements, dated
as
of July [_], 2007, including the annex and exhibits thereto (collectively,
the
“Agreement”), between the Company and the Investors named therein. This opinion
is being delivered to you pursuant to Section 2 of Annex I of the Agreement.
Capitalized terms used herein are as defined in the Agreement unless otherwise
specifically provided herein.
We
have
examined such documents and have reviewed such questions of law as we have
considered necessary or appropriate for the purpose of this
opinion.
In
rendering our opinion below, we have assumed the authenticity of all documents
submitted to us as originals, the genuineness of all signatures, and the
conformity to authentic originals of all documents submitted to us as copies.
We
have also assumed the legal capacity for all purposes relevant hereto of
all
natural
persons and, with respect to all parties
to agreements
and instruments
relevant
hereto other than the Company,
that
such parties had the requisite power and authority (corporate or otherwise)
to
execute, deliver and perform such agreement or instruments, that such agreements
or instruments have been duly authorized by all requisite action (corporate
or
otherwise), executed and delivered by such parties and that such agreements
or
instruments are the valid, binding and enforceable obligations of such parties
and that the issuance of the Warrant Shares will be in releinace upon an
applicable exemption from the registration requirements of the Securities
Act.
As to
questions of fact material to our opinion, we have relied, without independent
verification, on the representations and warranties contained in the Agreement
and on certificates of officers of the Company and public
officials.
In
rendering such opinions, we have not conducted any independent investigation
or
consulted with other attorneys in our firm with respect to the matters covered
by the Agreement. No inference as to our knowledge with respect to such matters
should be drawn from the fact of our representation of the Company.
Based
on
the foregoing, we are of the opinion that:
1. The
Company is a corporation incorporated, validly existing and in good standing
under the laws of the State of Nevada, with the corporate power to conduct
any
lawful business activity. The Company has the corporate power to execute,
deliver and perform the Agreement and the Warrants including, without
limitation, the issuance and sale of the Shares and Warrants under the Agreement
and to issue the Warrant Shares upon exercise of the Warrants.
D-1
2. Each
of
the Agreement, the Warrants and the Registration Rights Agreement has been
duly
authorized by all requisite corporate action, executed and delivered by the
Company. Each of the Agreement, the Warrants and the Registration Rights
Agreement constitutes the valid and binding agreement of the Company enforceable
in accordance with its terms.
3. The
Shares and Warrants have been duly authorized and, upon issuance, delivery
and
payment therefor as described in the Agreement and the Warrants, will be
validly
issued, fully paid and nonassessable. The shares issuable upon exercise of
the
Warrants have been duly and validly reserved for issuance by all proper
corporate action.
4. The
execution, delivery and performance of the Agreement, the Warrants and the
Registration Rights Agreement and the issuance and sale of the Shares and
Warrants in accordance with the Agreement, and the issuance and sale of the
Warrant Shares upon exercise of the Warrants in accordance with the terms
of the
Warrants, does not: (a) violate or conflict with, or result in a breach of
or
default under, the Certificate of
Incorporation or
Bylaws
of the Company, as amended, or (b) violate or conflict with, or constitute
a
default under any material agreement or instrument (limited, with your consent,
to agreements filed with the Securities and Exchange Commission under the
Exchange Act and applicable rules and regulations) to which the Company is
a
party.
5. To
our
knowledge, no consent, approval, authorization or order of, and no notice
to or
filing with, any governmental agency or body or any court is required to
be
obtained or made by the Company for the issue and sale of the Shares and
Warrants pursuant to the Agreement and the issuance of the Warrant Shares
upon
exercise of the Warrants in accordance with the terms of the Warrants, except
such as have been obtained or made and such as may be required under the
federal
securities laws or the Blue Sky laws of the various states.
6. Assuming
the representations made by the Investors and the Company set forth in the
Agreement and the exhibits thereto are true and correct and subject to the
Placement Agents’ compliance with applicable securities laws and regulations
(including, without limitation, the requirements of Regulation D under the
Securities Act), the offer, sale, issuance and delivery of the Shares and
the
Warrants to the Investors, in the manner contemplated by the Agreement, is
exempt from the registration requirements of the Securities Act, it being
understood that no opinion is expressed as to any subsequent resale of such
shares.
The
opinions set forth above are subject to the following qualifications and
exceptions:
(a) Our
opinion in paragraph 1 above, with respect to the good standing of the
Company, is based solely ona Certificate of Existence with Status in Good
Standing dated _________, 2007 electronically received for the Secretary
of
State of Nevada.
(b) Our
opinion in paragraph 2 above is subject to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws of
general application affecting creditors’ rights.
(c) Our
opinion in paragraph 2 above is subject to the effect of general principles
of equity, including (without limitation) concepts of materiality,
reasonableness, good faith and fair dealing, and other similar doctrines
affecting the enforceability of agreements generally (regardless of whether
considered in a proceeding in equity or at law).
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(d) Our
opinion in paragraph 2 above, insofar as it relates to indemnification
provisions, is subject to the effect of federal and state securities laws
and
public policy relating thereto.
(e) We
express no opinion as to the compliance or the effect of noncompliance by
the
Investors with any state or federal laws or regulations applicable to the
Investors in connection with the transactions described in the Agreement
or the
payment obligations of the Company under Sections 1(b) and 2(d) of the
Registration Rights Agreement if the payment obligations are construed as
unreasonable in relation to actual damages or disproportionate to actual
damages
suffered by the Investor.
Our
opinions
expressed above are limited to the laws of the State of Nevada and the federal
laws of the United States of America.
The
foregoing opinions are being furnished to you solely for your benefit and
may
not be relied upon by any other person without our prior written consent.
Notwithstanding
the foregoing, Canaccord
▇▇▇▇▇ and ▇▇▇▇▇▇ Capital Markets LLC may
rely
on the opinions herein expressed as if
this
letter were
addressed to it.
| Very truly yours, |
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