EXHIBIT 99.2
PERFISANS HOLDINGS, INC.
SECURITIES PURCHASE AGREEMENT
MARCH 21, 2005
TABLE OF CONTENTS
PAGE
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1. AGREEMENT TO SELL AND PURCHASE............................................1
2. FEES AND WARRANT..........................................................1
3. CLOSING, DELIVERY AND PAYMENT.............................................2
3.1 Closing........................................................2
3.2 Delivery.......................................................2
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................2
4.1 Organization, Good Standing and Qualification..................3
4.2 Subsidiaries...................................................3
4.3 Capitalization; Voting Rights..................................4
4.4 Authorization; Binding Obligations.............................4
4.5 Liabilities....................................................5
4.6 Agreements; Action.............................................5
4.7 Obligations to Related Parties.................................6
4.8 Changes........................................................6
4.9 Title to Properties and Assets; Liens, Etc.....................7
4.10 Intellectual Property..........................................8
4.11 Compliance with Other Instruments..............................8
4.12 Litigation.....................................................9
4.13 Tax Returns and Payments.......................................9
4.14 Employees......................................................9
4.15 Registration Rights and Voting Rights.........................10
4.16 Compliance with Laws; Permits.................................10
4.17 Environmental and Safety Laws.................................10
4.18 Valid Offering................................................11
4.19 Full Disclosure...............................................11
4.20 Insurance.....................................................11
4.21 SEC Reports...................................................11
4.22 Listing.......................................................12
4.23 No Integrated Offering........................................12
4.24 Stop Transfer.................................................12
4.25 Dilution......................................................12
4.26 Patriot Act...................................................12
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER..........................13
5.1 No Shorting...................................................13
5.2 Requisite Power and Authority.................................13
5.3 Investment Representations....................................13
5.4 Purchaser Bears Economic Risk.................................14
5.5 Acquisition for Own Account...................................14
5.6 Purchaser Can Protect Its Interest............................14
5.7 Accredited Investor...........................................14
5.8 Legends.......................................................14
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6. COVENANTS OF THE COMPANY.................................................15
6.1 Stop-Orders...................................................15
6.2 Listing.......................................................15
6.3 Market Regulations............................................16
6.4 Reporting Requirements........................................16
6.5 Use of Funds..................................................16
6.6 Access to Facilities..........................................16
6.7 Taxes.........................................................17
6.8 Insurance.....................................................17
6.9 Intellectual Property.........................................18
6.10 Properties....................................................18
6.11 Confidentiality...............................................18
6.12 Required Approvals............................................18
6.13 Reissuance of Securities......................................19
6.14 Opinion.......................................................20
6.15 Margin Stock..................................................19
6.16 Restricted Cash Disclosure....................................19
6.17 Financing Right of First Refusal..............................19
6.18 Foreign Security Agreements and Guarantees....................19
7. COVENANTS OF THE PURCHASER...............................................21
7.1 Confidentiality...............................................21
7.2 Non-Public Information........................................21
8. COVENANTS OF THE COMPANY AND PURCHASER REGARDING INDEMNIFICATION.........21
8.1 Company Indemnification.......................................21
8.2 Purchaser's Indemnification...................................21
9. CONVERSION OF CONVERTIBLE NOTE...........................................21
9.1 Mechanics of Conversion.......................................21
10. REGISTRATION RIGHTS......................................................23
10.1 Registration Rights Granted...................................23
10.2 Offering Restrictions.........................................23
11. MISCELLANEOUS............................................................23
11.1 Governing Law.................................................23
11.2 Survival......................................................24
11.3 Successors....................................................24
11.4 Entire Agreement..............................................24
11.5 Severability..................................................24
11.6 Amendment and Waiver..........................................24
11.7 Delays or Omissions...........................................24
11.8 Notices.......................................................25
11.9 Attorneys' Fees...............................................26
11.10 Titles and Subtitles..........................................26
11.11 Facsimile Signatures; Counterparts............................26
11.12 Broker's Fees.................................................26
11.13 Construction..................................................26
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LIST OF EXHIBITS
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Form of Convertible Term Note........................................ Exhibit A
Form of A Warrant.................................................... Exhibit B
Form of B Warrant.................................................... Exhibit C
Form of C Warrant.................................................... Exhibit D
Form of Opinion...................................................... Exhibit E
Form of Escrow Agreement............................................. Exhibit F
Form of Registration Rights Agreement................................ Exhibit G
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of March 21, 2005, by and between Perfisans Holdings, Inc., a
Maryland corporation (the "Company"), PERFISANS NETWORKS CORPORATION, an Ontario
corporation and wholly-owned subsidiary of the Company (the Subsidiary"), and
the Investors identified on Schedule A hereto, (collectively the "Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale to the Purchaser of a
Convertible Term Note in the aggregate principal amount of One Million Two
Hundred Thousand Dollars ($1,200,000) (as amended, modified or supplemented from
time to time, the "Note"), which Note is convertible into shares of the
Company's common stock, $0.001 par value per share (the "Common Stock") at an
initial fixed conversion price of $0.3375 per share of Common Stock ("Fixed
Conversion Price");
WHEREAS, the Company wishes to issue a warrant (the "A Warrant") to the
Purchaser to purchase up to 1,777,778 shares of the Company's Common Stock
(subject to adjustment as set forth therein) in connection with Purchaser's
purchase of the Note;
WHEREAS, the Company wishes to issue a warrant (the "B Warrant") to the
Purchaser to purchase up to 3,500,000 shares of the Company's Common Stock
(subject to adjustment as set forth therein) in connection with Purchaser's
purchase of the Note;
WHEREAS, the Company wishes to issue a warrant (the "C Warrant") to the
Purchaser to purchase up to 1,777,778 shares of the Company's Common Stock
(subject to adjustment as set forth therein) in connection with Purchaser's
purchase of the Note;
WHEREAS, the Company wishes to issue a warrant (the "D Warrant") to the
Purchaser to purchase up to 888,888 shares of the Company's Common Stock in
connection with the Purchaser's purchase of the Note.
WHEREAS, Purchaser desires to purchase the Note and the Warrants (as
defined in Section 2) on the terms and conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Note and Warrants to
Purchaser on the terms and conditions set forth herein.
WHEREAS, in connection with the transactions contemplated by this
Agreement, the Company and the Subsidiary are entering into certain other
agreements including the Note, the Warrants, the Guarantee, the Investor
Registration Rights Agreement, the Escrow Agreement, the Security Agreement and
the Security Pledge Agreement (collectively, the "Related Agreements").
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises, representations, warranties and covenants hereinafter set forth
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE. Pursuant to the terms and conditions
set forth in this Agreement, on the Closing Date (as defined in Section 3), the
Company agrees to sell to the Purchaser, and the Purchaser hereby agrees to
purchase from the Company, a Note in the aggregate principal amount of
$1,200,000 convertible in accordance with the terms thereof into shares of the
Company's Common Stock in accordance with the terms of the Note and this
Agreement. The Note purchased on the Closing Date shall be known as the
"Offering." A form of the Note is annexed hereto as Exhibit A. The Note will
mature on the Maturity Date (as defined in the Note). Collectively, the Note,
Warrants and Common Stock issuable in payment of the Note, upon conversion of
the Note and upon exercise of the Warrants are referred to as the "Securities."
2. FEES AND WARRANTS. On the Closing Date:
(a) The Company will issue and deliver to the Purchaser a Warrant
to purchase up to 1,777,778 shares of Common Stock in
connection with the Offering (as amended, modified or
supplemented from time to time, the "A Warrant") pursuant to
Section 1 hereof. The A Warrant must be delivered on the
Closing Date. A form of the A Warrant is annexed hereto as
Exhibit B. The Company will also deliver a Warrant to purchase
up to 3,500,000 shares at $2.00 per share exercisable for a
period of three (3) years (the "B" Warrant). The company will
also deliver a Warrant to purchase up to 1,777,778 shares
exercisable for a period of six (6) months from the date hereof
(the "C Warrant"). The Company will also deliver a Warrant to
purchase up to 888,888 shares exercisable for a period of six
months from the date hereof. The A Warrants, the B Warrants,
the C Warrants and the D Warrants are collectively referred to
as the "Warrants". All the representations, covenants,
warranties, undertakings, and indemnification, and other rights
made or granted to or for the benefit of the Purchaser by the
Company are hereby also made and granted in respect of the
Warrants and shares of the Company's Common Stock issuable upon
exercise of the Warrants (collectively the "Warrant Shares").
(b) The Closing Payment and the expenses referred to in the
preceding clause (c) (net of deposits previously paid by the
Company) shall be paid at closing out of funds held pursuant to
a Escrow Agreement (as defined below) and a disbursement letter
(the "Disbursement Letter").
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3. CLOSING, DELIVERY AND PAYMENT.
3.1 CLOSING. Subject to the terms and conditions herein, the closing of
the transactions contemplated hereby (the "Closing"), shall take place on the
date hereof, at such time or place as the Company and Purchaser may mutually
agree (such date is hereinafter referred to as the "Closing Date").
3.2 DELIVERY. Pursuant to the Escrow Agreement, at the Closing on the
Closing Date, the Company will deliver to the Purchaser, among other things, a
Note in the form attached as Exhibit A representing the aggregate principal
amount of $1,200,000 and Warrants in the form attached as Exhibit B, Exhibit C,
Exhibit D and Exhibit E in the Purchaser's name representing 1,777,778 Warrant
Shares, 3,500,000 Warrant Shares, 1,777,778 Warrant Shares and 888,888 Warrant
Shares, respectively, and the Purchaser will deliver to the Company, among other
things, the amounts set forth in the Disbursement Letter by certified funds or
wire transfer.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents
and warrants to the Purchaser as follows (which representations and warranties
are supplemented by the Company's filings under the Securities Exchange Act of
1934 made prior to the date of this Agreement (collectively, the "Exchange Act
Filings"), copies of which have been provided to the Purchaser):
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of the Company
and its Subsidiary is a corporation, partnership or limited liability company,
as the case may be, duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization. Each of the Company and it
Subsidiary has the corporate power and authority to own and operate its
properties and assets, to execute and deliver (i) this Agreement, (ii) the Note
and the Warrant to be issued in connection with this Agreement, (iii) the
Security Agreement dated as of the date hereof between the Company, the
Subsidiary and the Purchaser (as amended, modified or supplemented from time to
time, the "Security Agreement"), (iv) the Registration Rights Agreement relating
to the Securities dated as of the date hereof between the Company and the
Purchaser (as amended, modified or supplemented from time to time, the
"Registration Rights Agreement"), (v) the Escrow Agreement dated as of the date
hereof among the Company, the Purchaser and the escrow agent referred to
therein, substantially in the form of Exhibit D hereto (as amended, modified or
supplemented from time to time, the "Escrow Agreement"), (x) all other
agreements related to this Agreement and the Note and referred to herein (the
preceding clauses (ii) through (x), collectively, the "Related Agreements"), to
issue and sell the Note and the shares of Common Stock issuable upon conversion
of the Note (the "Note Shares"), to issue and sell the Warrant and the Warrant
Shares, and to carry out the provisions of this Agreement and the Related
Agreements and to carry on its business as presently conducted. Each of the
Company and the Subsidiary is duly qualified and is authorized to do business
and is in good standing as a foreign corporation, partnership or limited
liability company, as the case may be, in all jurisdictions in which the nature
of its activities and of its properties (both owned and leased) makes such
qualification necessary, except for those jurisdictions in which failure to do
so has not, or could not reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the business, assets, liabilities,
condition (financial or otherwise), properties, operations or prospects of the
Company and it Subsidiaries, taken individually and as a whole (a "Material
Adverse Effect").
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4.2 SUBSIDIARIES. Each direct and indirect Subsidiary of the Company,
the direct owner of such Subsidiary and its percentage ownership thereof, is set
forth on Schedule 4.2. For the purpose of this Agreement, a "Subsidiary" of any
person or entity means (i) a corporation or other entity whose shares of stock
or other ownership interests having ordinary voting power (other than stock or
other ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the directors of such corporation, or other
persons or entities performing similar functions for such person or entity, are
owned, directly or indirectly, by such person or entity or (ii) a corporation or
other entity in which such person or entity owns, directly or indirectly, more
than 50% of the equity interests at such time.
4.3 CAPITALIZATION; VOTING RIGHTS.
(a) The authorized capital stock of the Company, as of the date
hereof consists of 51,000,000 shares, of which 50,000,000
are shares of Common Stock, par value $.001 per share,
39,720,189 shares of which are issued and outstanding and
21,000,000 are shares of preferred stock, par value $.001
per share of which 0 shares of preferred stock are issued
and outstanding. The authorized capital stock of each
Subsidiary of the Company is set forth on Schedule 4.3.
(b) Except as disclosed on Schedule 4.3 and the Exchange Act
Filings, other than: (i) the shares reserved for issuance
under the Company's stock option plans; and (ii) shares
which may be granted pursuant to this Agreement and the
Related Agreements, there are no outstanding options,
warrants, rights (including conversion or preemptive rights
and rights of first refusal), proxy or stockholder
agreements, or arrangements or agreements of any kind for
the purchase or acquisition from the Company of any of its
securities. Except as disclosed on Schedule 4.3, neither the
offer, issuance or sale of any of the Note or the Warrant,
or the issuance of any of the Note Shares or Warrant Shares,
nor the consummation of any transaction contemplated hereby
will result in a change in the price or number of any
securities of the Company outstanding, under anti-dilution
or other similar provisions contained in or affecting any
such securities.
(c) All issued and outstanding shares of the Company's Common
Stock: (i) have been duly authorized and validly issued and
are fully paid and nonassessable; and (ii) were issued in
compliance with all applicable state and federal laws
concerning the issuance of securities.
(d) The rights, preferences, privileges and restrictions of the
shares of the Common Stock are as stated in the Company's
Certificate of Incorporation (the "Charter"). The Note
Shares and substantially all of the Warrant Shares have been
duly and validly reserved for issuance and further the
Company covenants to increase its authorized capital to
150,000,000 shares of Common Stock within 30 days of the
date hereof. When issued in compliance with the provisions
of this Agreement and the Company's Charter, the Securities
will be validly issued, fully paid and nonassessable,
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and will be free of any liens or encumbrances; provided,
however, that the Securities may be subject to restrictions
on transfer under state and/or federal securities laws as
set forth herein or as otherwise required by such laws at
the time a transfer is proposed.
4.4 AUTHORIZATION; BINDING OBLIGATIONS. All corporate, partnership or
limited liability company, as the case may be, action on the part of the Company
and the Subsidiary (including the respective officers and directors) necessary
for the authorization of this Agreement and the Related Agreements, the
performance of all obligations of the Company and the Subsidiary hereunder and
under the other Related Agreements at the Closing and, the authorization, sale,
issuance and delivery of the Note and Warrant has been taken or will be taken
prior to the Closing. This Agreement and the Related Agreements, when executed
and delivered and to the extent it is a party thereto, will be valid and binding
obligations of each of the Company and the Subsidiary, enforceable against each
such person in accordance with their terms, except:
(a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights; and
(b) general principles of equity that restrict the availability
of equitable or legal remedies.
The sale of the Note and the subsequent conversion of the Note into Note Shares
are not and will not be subject to any preemptive rights or rights of first
refusal that have not been properly waived or complied with. The issuance of the
Warrant and the subsequent exercise of the Warrant for Warrant Shares are not
and will not be subject to any preemptive rights or rights of first refusal that
have not been properly waived or complied with.
4.5 LIABILITIES. Neither the Company nor the Subsidiary has any
contingent liabilities, except current liabilities incurred in the ordinary
course of business and liabilities disclosed in any Exchange Act Filings.
4.6 AGREEMENTS; ACTION. Except as set forth on Schedule 4.6 or as
disclosed in any Exchange Act Filings:
(a) there are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs
or decrees to which the Company or the Subsidiary is a party
or by which it is bound which may involve: (i) obligations
(contingent or otherwise) of, or payments to, the Company in
excess of $50,000 (other than obligations of, or payments
to, the Company arising from purchase or sale agreements
entered into in the ordinary course of business); or (ii)
the transfer or license of any patent, copyright, trade
secret or other proprietary right to or from the Company
(other than licenses arising from the purchase of "off the
shelf" or other standard products); or (iii) provisions
restricting the development, manufacture or distribution of
the Company's products or services; or (iv) indemnification
by the Company with respect to infringements of proprietary
rights.
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(b) Since December 31, 2003, except as disclosed in any Exchange
Act Filing, neither the Company nor the Subsidiary has: (i)
declared or paid any dividends, or authorized or made any
distribution upon or with respect to any class or series of
its capital stock; (ii) incurred any indebtedness for money
borrowed or any other liabilities (other than ordinary
course obligations) individually in excess of $50,000 or, in
the case of indebtedness and/or liabilities individually
less than $50,000, in excess of $100,000 in the aggregate;
(iii) made any loans or advances to any person not in
excess, individually or in the aggregate, of $100,000, other
than ordinary course advances for travel expenses; or (iv)
sold, exchanged or otherwise disposed of any of its assets
or rights, other than the sale of its inventory in the
ordinary course of business.
(c) For the purposes of subsections (a) and (b) above, all
indebtedness, liabilities, agreements, understandings,
instruments, contracts and proposed transactions involving
the same person or entity (including persons or entities the
Company has reason to believe are affiliated therewith)
shall be aggregated for the purpose of meeting the
individual minimum dollar amounts of such subsections.
4.7 OBLIGATIONS TO RELATED PARTIES. Except as set forth on Schedule
4.7, there are no obligations of the Company or the Subsidiary to officers,
directors, stockholders or employees of the Company or the Subsidiary other
than:
(a) for payment of salary for services rendered and for bonus
payments;
(b) reimbursement for reasonable expenses incurred on behalf of
the Company and the Subsidiary;
(c) for other standard employee benefits made generally
available to all employees (including stock option
agreements outstanding under any stock option plan approved
by the Board of Directors of the Company); and
(d) obligations listed in the Company's financial statements or
disclosed in any of its Exchange Act Filings.
Except as described above or set forth on Schedule 4.7, none of the officers,
directors or, to the best of the Company's knowledge, key employees or
stockholders of the Company or any members of their immediate families, are
indebted to the Company, individually or in the aggregate, in excess of $50,000
or have any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation which competes with the Company, other
than passive investments in publicly traded companies (representing less than
one percent (1%) of such company) which may compete with the Company. Except as
described above, no officer, director or stockholder, or any member of their
immediate families, is, directly or indirectly, interested in any material
contract with the Company and no agreements, understandings or
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proposed transactions are contemplated between the Company and any such person.
Except as set forth on Schedule 4.7, the Company is not a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation.
4.8 CHANGES. Since December 31, 2003, except as disclosed in any
Exchange Act Filing or in any Schedule to this Agreement or to any of the
Related Agreements, there has not been:
(a) any change in the business, assets, liabilities, condition
(financial or otherwise), properties, operations or
prospects of the Company or the Subsidiary, which
individually or in the aggregate has had, or could
reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect;
(b) any resignation or termination of any officer, key employee
or group of employees of the Company or the Subsidiary;
(c) any material change, except in the ordinary course of
business, in the contingent obligations of the Company or
the Subsidiary by way of guaranty, endorsement, indemnity,
warranty or otherwise;
(d) any damage, destruction or loss, whether or not covered by
insurance, has had, or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
(e) any waiver by the Company or the Subsidiary of a valuable
right or of a material debt owed to it;
(f) any direct or indirect loans made by the Company or the
Subsidiary to any stockholder, employee, officer or director
of the Company or the Subsidiary, other than advances made
in the ordinary course of business;
(g) any material change in any compensation arrangement or
agreement with any employee, officer, director or
stockholder of the Company or the Subsidiary;
(h) any declaration or payment of any dividend or other
distribution of the assets of the Company or the Subsidiary;
(i) any labor organization activity related to the Company or
the Subsidiary;
(j) any debt, obligation or liability incurred, assumed or
guaranteed by the Company or the Subsidiary, except those
for immaterial amounts and for current liabilities incurred
in the ordinary course of business;
(k) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets owned
by the Company or the Subsidiary;
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(l) any change in any material agreement to which the Company or
the Subsidiary is a party or by which either the Company or
the Subsidiary is bound which either individually or in the
aggregate has had, or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
(m) any other event or condition of any character that, either
individually or in the aggregate, has had, or could
reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect; or
(n) any arrangement or commitment by the Company or the
Subsidiary to do any of the acts described in subsection (a)
through (m) above.
4.9 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. Except as set forth on
Schedule 4.9, each of the Company and the Subsidiary has good and marketable
title to its properties and assets, and good title to its leasehold estates, in
each case subject to no mortgage, pledge, lien, lease, encumbrance or charge,
other than:
(a) those resulting from taxes which have not yet become
delinquent;
(b) minor liens and encumbrances which do not materially detract
from the value of the property subject thereto or materially
impair the operations of the Company or the Subsidiary; and
(c) those that have otherwise arisen in the ordinary course of
business.
All facilities, machinery, equipment, fixtures, vehicles and other properties
owned, leased or used by the Company and the Subsidiary are in good operating
condition and repair and are reasonably fit and usable for the purposes for
which they are being used. Except as set forth on Schedule 4.9, the Company and
the Subsidiary are in compliance with all material terms of each lease to which
it is a party or is otherwise bound.
4.10 INTELLECTUAL PROPERTY. Each of the Company and the Subsidiary owns
or possesses sufficient legal rights to all patents,
trademarks, service marks, trade names, copyrights, trade
secrets, licenses, information and other proprietary rights
and processes necessary for its business as now conducted
and to the Company's knowledge, as presently proposed to be
conducted (the "Intellectual Property"), without any known
infringement of the rights of others. There are no
outstanding options, licenses or agreements of any kind
relating to the foregoing proprietary rights, nor is the
Company or the Subsidiary bound by or a party to any
options, licenses or agreements of any kind with respect to
the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information and other
proprietary rights and processes of any other person or
entity other than such licenses or agreements arising from
the purchase of "off the shelf" or standard products.
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(b) Neither the Company nor the Subsidiary has received any
communications alleging that the Company or the Subsidiary
has violated any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity, nor is
the Company the Subsidiary aware of any basis therefor.
(c) The Company does not believe it is or will be necessary to
utilize any inventions, trade secrets or proprietary
information of any of its employees made prior to their
employment by the Company or the Subsidiary, except for
inventions, trade secrets or proprietary information that
have been rightfully assigned to the Company or the
Subsidiary.
4.11 COMPLIANCE WITH OTHER INSTRUMENTS. Neither the Company nor the
Subsidiary is in violation or default of (x) any term of its Charter or Bylaws,
or (y) of any provision of any indebtedness, mortgage, indenture, contract,
agreement or instrument to which it is party or by which it is bound or of any
judgment, decree, order or writ, which violation or default, in the case of this
clause (y), has had, or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect. The execution,
delivery and performance of and compliance with this Agreement and the Related
Agreements to which it is a party, and the issuance and sale of the Note by the
Company and the other Securities by the Company each pursuant hereto and
thereto, will not, with or without the passage of time or giving of notice,
result in any such material violation, or be in conflict with or constitute a
default under any such term or provision, or result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company or the Subsidiary or the suspension, revocation,
impairment, forfeiture or nonrenewal of any permit, license, authorization or
approval applicable to the Company, its business or operations or any of its
assets or properties.
4.12 LITIGATION. Except as set forth on Schedule 4.12 hereto, there is
no action, suit, proceeding or investigation pending or, to the Company's
knowledge, currently threatened against the Company or the Subsidiary that
prevents the Company or the Subsidiary from entering into this Agreement or the
other Related Agreements, or from consummating the transactions contemplated
hereby or thereby, or which has had, or could reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect or any change
in the current equity ownership of the Company or the Subsidiary, nor is the
Company aware that there is any basis to assert any of the foregoing. Neither
the Company nor the Subsidiary is a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality. Except as set forth on Schedule 4.12 hereto, there is no
action, suit, proceeding or investigation by the Company or the Subsidiary
currently pending or which the Company or the Subsidiary intends to initiate.
4.13 TAX RETURNS AND PAYMENTS. Each of the Company the Subsidiary has
timely filed all tax returns (federal, state and local) required to be filed by
it. All taxes shown to be due and payable on such returns, any assessments
imposed, and all other taxes due and payable by the Company or the Subsidiary on
or before the Closing, have been paid or will be paid prior to the time they
become delinquent. Except as set forth on Schedule 4.13, neither the Company nor
the Subsidiary has been advised:
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(a) that any of its returns, federal, state or other, have been
or are being audited as of the date hereof; or
(b) of any deficiency in assessment or proposed judgment to its
federal, state or other taxes.
The Company has no knowledge of any liability of any tax to be imposed upon its
properties or assets as of the date of this Agreement that is not adequately
provided for.
4.14 EMPLOYEES. Except as set forth on Schedule 4.14, neither the
Company nor the Subsidiary has any collective bargaining agreements with any of
its employees. There is no labor union organizing activity pending or, to the
Company's knowledge, threatened with respect to the Company or the Subsidiary.
Except as disclosed in the Exchange Act Filings or on Schedule 4.14, neither the
Company nor the Subsidiary is a party to or bound by any currently effective
employment contract, deferred compensation arrangement, bonus plan, incentive
plan, profit sharing plan, retirement agreement or other employee compensation
plan or agreement. To the Company's knowledge, no employee of the Company or the
Subsidiary, nor any consultant with whom the Company or the Subsidiary has
contracted, is in violation of any term of any employment contract, proprietary
information agreement or any other agreement relating to the right of any such
individual to be employed by, or to contract with, the Company or the Subsidiary
because of the nature of the business to be conducted by the Company or the
Subsidiary; and to the Company's knowledge the continued employment by the
Company or the Subsidiary of its present employees, and the performance of the
Company's and the Subsidiary contracts with its independent contractors, will
not result in any such violation. Neither the Company nor the Subsidiary is
aware that any of its employees is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would interfere with their duties to the Company or the Subsidiary. Neither the
Company nor the Subsidiary has received any notice alleging that any such
violation has occurred. Except for employees who have a current effective
employment agreement with the Company or the Subsidiary, no employee of the
Company or any the Subsidiary has been granted the right to continued employment
by the Company or the Subsidiary or to any material compensation following
termination of employment with the Company or the Subsidiary. Except as set
forth on Schedule 4.14, the Company is not aware that any officer, key employee
or group of employees intends to terminate his, her or their employment with the
Company or the Subsidiary, nor does the Company or the Subsidiary have a present
intention to terminate the employment of any officer, key employee or group of
employees.
4.15 REGISTRATION RIGHTS AND VOTING RIGHTS. Except as set forth on
Schedule 4.15 and except as disclosed in Exchange Act Filings, neither the
Company nor the Subsidiary is presently under any obligation, and neither the
Company nor the Subsidiary has granted any rights, to register any of the
Company's presently outstanding securities or any of its securities that may
hereafter be issued. Except as set forth on Schedule 4.15 and except as
disclosed in Exchange Act Filings, to the Company's knowledge, no stockholder of
the Company or the Subsidiary has entered into any agreement with respect to the
voting of equity securities of the Company or the Subsidiary.
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4.16 COMPLIANCE WITH LAWS; PERMITS. Neither the Company nor the
Subsidiary is in violation of any applicable statute, rule, regulation, order or
restriction of any domestic or foreign government or any instrumentality or
agency thereof in respect of the conduct of its business or the ownership of its
properties which has had, or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect. No governmental
orders, permissions, consents, approvals or authorizations are required to be
obtained and no registrations or declarations are required to be filed in
connection with the execution and delivery of this Agreement or any other
Related Agreement and the issuance of any of the Securities, except such as has
been duly and validly obtained or filed, or with respect to any filings that
must be made after the Closing, as will be filed in a timely manner. Each of the
Company and the Subsidiary has all material franchises, permits, licenses and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could, either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
4.17 ENVIRONMENTAL AND SAFETY LAWS. Neither the Company nor the
Subsidiary is in violation of any applicable statute, law or regulation relating
to the environment or occupational health and safety, and to its knowledge, no
material expenditures are or will be required in order to comply with any such
existing statute, law or regulation. Except as set forth on Schedule 4.17, no
Hazardous Materials (as defined below) are used or have been used, stored, or
disposed of by the Company or the Subsidiary or, to the Company's knowledge, by
any other person or entity on any property owned, leased or used by the Company
or the Subsidiary. For the purposes of the preceding sentence, "Hazardous
Materials" shall mean:
(a) materials which are listed or otherwise defined as
"hazardous" or "toxic" under any applicable local, state,
federal and/or foreign laws and regulations that govern the
existence and/or remedy of contamination on property, the
protection of the environment from contamination, the
control of hazardous wastes, or other activities involving
hazardous substances, including building materials; or
(b) any petroleum products or nuclear materials.
4.18 VALID OFFERING. Assuming the accuracy of the representations and
warranties of the Purchaser contained in this Agreement, the offer, sale and
issuance of the Securities will be exempt from the registration requirements of
the Securities Act of 1933, as amended (the "Securities Act"), and will have
been registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws.
4.19 FULL DISCLOSURE. Each of the Company and the Subsidiary has
provided the Purchaser with all information requested by the Purchaser in
connection with its decision to purchase the Note and Warrant, including all
information the Company and the Subsidiary believe is reasonably necessary to
make such investment decision. Neither this Agreement, the Related Agreements,
the exhibits and schedules hereto and thereto nor any other document delivered
by the Company or the Subsidiary to Purchaser or its attorneys or agents in
connection herewith or therewith or with the transactions contemplated hereby or
thereby, contain any untrue statement of a material fact nor omit to state a
material fact necessary in order to make the
11
statements contained herein or therein, in light of the circumstances in which
they are made, not misleading. Any financial projections and other estimates
provided to the Purchaser by the Company or the Subsidiary were based on the
Company's and the Subsidiary's experience in the industry and on assumptions of
fact and opinion as to future events which the Company or the Subsidiary, at the
date of the issuance of such projections or estimates, believed to be
reasonable.
4.20 INSURANCE. Each of the Company and the Subsidiary has general
commercial, product liability, fire and casualty insurance policies with
coverages which the Company believes are customary for companies similarly
situated to the Company and the Subsidiary in the same or similar business.
4.21 SEC REPORTS. Except as set forth on Schedule 4.21, the Company has
filed all proxy statements, reports and other documents required to be filed by
it under the Securities ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, as amended (the "Exchange Act"). The
Company has furnished the Purchaser with copies of: (i) its Annual Report on
Form 10-KSB for its fiscal year ended December 31, 2003; and (ii) its Quarterly
Report on Form 10-QSB for its fiscal quarter ended September 30, 2004,
(collectively, the "SEC Reports"). Except as set forth on Schedule 4.21, each
SEC Report was, at the time of its filing, in substantial compliance with the
requirements of its respective form and none of the SEC Reports, nor the
financial statements (and the notes thereto) included in the SEC Reports, as of
their respective filing dates, contained any untrue statement of a material fact
or omitted 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.
4.22 LISTING. The Company's Common Stock is traded on the National
Association of Securities Dealers Over the Counter Bulletin Board ("NASD OTCBB")
and satisfies all requirements for the continuation of such trading. The Company
has not received any notice that its Common Stock will not be eligible to be
traded on the NASD OTCBB or that its Common Stock does not meet all requirements
for such trading.
4.23 NO INTEGRATED OFFERING. Neither the Company, nor the Subsidiary or
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the
Securities pursuant to this Agreement or any of the Related Agreements to be
integrated with prior offerings by the Company for purposes of the Securities
Act which would prevent the Company from selling the Securities pursuant to Rule
506 under the Securities Act, or any applicable exchange-related stockholder
approval provisions, nor will the Company or any of its affiliates or Subsidiary
take any action or steps that would cause the offering of the Securities to be
integrated with other offerings.
4.24 STOP TRANSFER. The Securities are restricted securities as of the
date of this Agreement. The Company will not issue any stop transfer order or
other order impeding the sale and delivery of any of the Securities at such time
as the Securities are registered for public sale or an exemption from
registration is available, except as required by state and federal securities
laws.
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4.25 DILUTION. The Company specifically acknowledges that its
obligation to issue the shares of Common Stock upon conversion of the Note and
exercise of the Warrant is binding upon the Company and enforceable regardless
of the dilution such issuance may have on the ownership interests of other
shareholders of the Company.
4.26 PATRIOT ACT. The Company certifies that, to the best of Company's
knowledge, neither the Company nor the Subsidiary has been designated, and is
not owned or controlled, by a "suspected terrorist" as defined in Executive
Order 13224. The Company hereby acknowledges that the Purchaser seeks to comply
with all applicable laws concerning money laundering and related activities. In
furtherance of those efforts, the Company hereby represents, warrants and agrees
that: (i) none of the cash or property that the Company or the Subsidiary will
pay or will contribute to the Purchaser has been or shall be derived from, or
related to, any activity that is deemed criminal under United States law; and
(ii) no contribution or payment by the Company or any of the Subsidiary to the
Purchaser, to the extent that they are within the Company's and/or the
Subsidiary's control shall cause the Purchaser to be in violation of the United
States Bank Secrecy Act, the United States International Money Laundering
Control Act of 1986 or the United States International Money Laundering
Abatement and Anti-Terrorist Financing Act of 2001. The Company shall promptly
notify the Purchaser if any of these representations ceases to be true and
accurate regarding the Company or the Subsidiary. The Company agrees to provide
the Purchaser any additional information regarding the Company or any the
Subsidiary that the Purchaser deems necessary or convenient to ensure compliance
with all applicable laws concerning money laundering and similar activities. The
Company understands and agrees that if at any time it is discovered that any of
the foregoing representations are incorrect, or if otherwise required by
applicable law or regulation related to money laundering similar activities, the
Purchaser may undertake appropriate actions to ensure compliance with applicable
law or regulation, including but not limited to segregation and/or redemption of
the Purchaser's investment in the Company. The Company further understands that
the Purchaser may release confidential information about the Company and the
Subsidiary and, if applicable, any underlying beneficial owners, to proper
authorities if the Purchaser, in its sole discretion, determines that it is in
the best interests of the Purchaser in light of relevant rules and regulations
under the laws set forth in subsection (ii) above.
5. BROKER'S FEE. (a) The Company on the one hand, and each Subscriber (for
himself only) on the other hand, agree to indemnify the other against and hold
the other harmless from any and all liabilities to any persons claiming
brokerage commissions or finder's fees other than Westor Online, Inc. ("Broker")
on account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby and arising out of such party's actions. The Company agrees
that it will pay the Broker, in the aggregate, on each Closing Date a fee of ten
percent (10%) of the Purchase Price and a non-accountable expense fee of two
percent (2%) of the Purchase Price invested on each Closing Date (collectively,
"Broker's Fees"). The Company represents that there are no other parties
entitled to receive fees, commissions, or similar payments in connection with
the Offering except the Broker. Additionally, upon the exercise of the Warrants
issued hereunder, the Broker shall receive a commission equal to ten percent
(10%) of the cash consideration received by the company and a non-accountable
expense fee equal to two percent (2%) of the cash consideration received by the
Company.
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(b) BROKER'S WARRANTS. On the Initial Closing Date, the Broker
shall receive one warrant to purchase common shares for every 10 shares into
which the Notes could be converted into on the closing date (the "Initial Broker
Warrants"). Additionally, upon the exercise of any of the warrants issued
hereunder, the Company shall issue to the Broker additional warrants as provided
for herein (the "Additional Broker Warrants"). The Initial Broker Warrants and
the Additional Broker Warrants shall be exercisable at 120 percent of the 5 day
average closing price of Perfisan's Holding's common stock for the five (5)
trading days immediately preceding the Closing Date. All the representations,
covenants, warranties, undertakings, remedies, liquidated damages,
indemnification, and other rights including but not limited to reservation
requirements and registration rights made or granted to or for the benefit of
the Subscribers are hereby also made and granted to the Broker in respect of the
Broker's Warrants.
(c) LEGAL AND ESCROW AGENT FEES. Upon the first closing, the
Company will pay the Placement Agent the sum of $15,000 as partial reimbursement
for legal and due diligence fees incurred by Placement Agent in connection with
this Offering. The Company will also pay ▇▇▇▇▇ & Associates, LLC the sum of
$1,000 on the Initial Closing Date for acting as Escrow Agent. Placement Agent
will pay Grushko and ▇▇▇▇▇▇▇, PC the amount of $10,000 for services rendered in
connection with this offering.
6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
represents and warrants to the Company as follows (such representations and
warranties do not lessen or obviate the representations and warranties of the
Company set forth in this Agreement):
6.1 COMPLIANCE WITH SECURITIES ACT. The Purchaser understands and
agrees that the shares of common stock issuable upon conversion of the Notes and
upon exercise of the Warrants have not been registered under the 1933 Act or any
applicable state securities laws, by reason of their issuance in a transaction
that does not require registration under the 1933 Act (based in part on the
accuracy of the representations and warranties of Purchaser contained herein),
and that such securities must be held indefinitely unless a subsequent
disposition is registered under the 1933 Act or any applicable state securities
laws or is exempt from such registration. In any event, and subject to
compliance with applicable securities laws, the Purchaser may enter into lawful
hedging transactions, with third parties, which may in turn engage in short
sales of the Company's Common Stock in the course of hedging the position they
assume and the Purchaser may also enter into short positions or other derivative
transactions relating to the Company's Common Stock, or interests in the
Company's Common Stock, and deliver the Company's Common Stock, or interests in
the Company's Common Stock to close out their short or other positions or
otherwise settle short sales or other transactions, or loan or pledge the shares
of common stock issuable upon conversion of the Notes and upon exercise of the
Warrants, or interest in the shares of common stock issuable upon conversion of
the Notes and upon exercise of the Warrants, to third parties that in turn may
dispose of these shares of common stock issuable upon conversion of the Notes
and upon exercise of the Warrants.
6.2 REQUISITE POWER AND AUTHORITY THE PURCHASER. has all necessary
power and authority under all applicable provisions of law to execute and
deliver this Agreement and the Related Agreements and to carry out their
provisions. All corporate action on Purchaser's part required for the lawful
execution and delivery of this Agreement and the Related Agreements have been or
will be effectively taken prior to the Closing. Upon their execution and
delivery,
14
this Agreement and the Related Agreements will be valid and binding obligations
of Purchaser, enforceable in accordance with their terms, except:
(a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights; and
(b) as limited by general principles of equity that restrict the
availability of equitable and legal remedies.
6.3 INVESTMENT REPRESENTATIONS. Purchaser understands that the
Securities are being offered and sold pursuant to an exemption from registration
contained in the Securities Act based in part upon Purchaser's representations
contained in the Agreement, including, without limitation, that the Purchaser is
an "accredited investor" within the meaning of Regulation D under the Securities
Act of 1933, as amended (the "Securities Act"). The Purchaser confirms that it
has received or has had full access to all the information it considers
necessary or appropriate to make an informed investment decision with respect to
the Note and the Warrant to be purchased by it under this Agreement and the Note
Shares and the Warrant Shares acquired by it upon the conversion of the Note and
the exercise of the Warrant, respectively. The Purchaser further confirms that
it has had an opportunity to ask questions and receive answers from the Company
regarding the Company's and the Subsidiary's business, management and financial
affairs and the terms and conditions of the Offering, the Note, the Warrant and
the Securities and to obtain additional information (to the extent the Company
possessed such information or could acquire it without unreasonable effort or
expense) necessary to verify any information furnished to the Purchaser or to
which the Purchaser had access.
6.4 PURCHASER BEARS ECONOMIC RISK. The Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. The Purchaser must bear the economic risk
of this investment until the Securities are sold pursuant to: (i) an effective
registration statement under the Securities Act; (ii) converted in accordance
with the terms thereof; or (iii) an exemption from registration is available
with respect to such sale.
6.5 ACQUISITION FOR OWN ACCOUNT. The Purchaser is acquiring the Note
and Warrant and the Note Shares and the Warrant Shares for the Purchaser's own
account for investment only, and not as a nominee or agent and not with a view
towards or for resale in connection with their distribution.
6.6 PURCHASER CAN PROTECT ITS INTEREST. The Purchaser represents that
by reason of its, or of its management's, business and financial experience, the
Purchaser has the capacity to evaluate the merits and risks of its investment in
the Note, the Warrant and the Securities and to protect its own interests in
connection with the transactions contemplated in this Agreement and the Related
Agreements. Further, Purchaser is aware of no publication of any advertisement
in connection with the transactions contemplated in the Agreement or the Related
Agreements.
15
6.7 ACCREDITED INVESTOR. Purchaser represents that it is an accredited
investor within the meaning of Regulation D under the Securities Act.
6.8 LEGENDS. (a) The Note shall bear substantially the following
legend:
"THIS NOTE AND THE COMMON STOCK ISSUABLE UPON
CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE, STATE SECURITIES LAWS. THIS NOTE
AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE
OR SUCH SHARES UNDER SAID ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO PERFISANS HOLDINGS,
INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
(b) The Note Shares and the Warrant Shares, if not issued by
DWAC system (as hereinafter defined), shall bear a legend
which shall be in substantially the following form until
such shares are covered by an effective registration
statement filed with the SEC:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS. THESE SHARES MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH SECURITIES ACT AND APPLICABLE STATE
LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO PERFISANS HOLDINGS, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
(c) The Warrant shall bear substantially the following legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON
EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE STATE SECURITIES LAWS. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS
WARRANT OR THE UNDERLYING SHARES OF COMMON STOCK
UNDER SAID ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO PERFISANS HOLDINGS, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
16
7. COVENANTS OF THE COMPANY. The Company covenants and agrees with the Purchaser
as follows:
7.1 STOP-ORDERS. The Company will advise the Purchaser, immediately
(on the same day) promptly after it receives notice of issuance by the
Securities and Exchange Commission (the "SEC"), any state securities commission
or any other regulatory authority of any stop order or of any order preventing
or suspending any offering of any securities of the Company, or of the
suspension of the qualification of the Common Stock of the Company for offering
or sale in any jurisdiction, or the initiation of any proceeding for any such
purpose.
7.2 LISTING. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon conversion of the Note and upon the
exercise of the Warrant on the NASD OTCBB (the "Principal Market") upon which
shares of Common Stock are listed (subject to official notice of issuance) and
shall maintain such listing so long as any other shares of Common Stock shall be
so listed. The Company will maintain the listing of its Common Stock on the
Principal Market, and will comply in all material respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
National Association of Securities Dealers ("NASD") and such exchanges, as
applicable.
7.3 MARKET REGULATIONS. The Company shall notify the SEC, NASD and
applicable state authorities, in accordance with their requirements, of the
transactions contemplated by this Agreement, and shall take all other necessary
action and proceedings as may be required and permitted by applicable law, rule
and regulation, for the legal and valid issuance of the Securities to the
Purchaser and promptly provide copies thereof to the Purchaser.
7.4 REPORTING REQUIREMENTS. The Company will timely file with the SEC
all reports required to be filed pursuant to the Exchange Act and refrain from
terminating its status as an issuer required by the Exchange Act to file reports
thereunder even if the Exchange Act or the rules or regulations thereunder would
permit such termination.
7.5 USE OF FUNDS. The Company agrees that it will use the proceeds of
the sale of (x) the Note for general working capital purposes and (y) the
Warrant for general working capital purposes only.
7.6 ACCESS TO FACILITIES. Each of the Company and the Subsidiary will
permit any representatives designated by the Purchaser (or any successor of the
Purchaser), upon reasonable notice and during normal business hours, at such
person's expense and accompanied by a representative of the Company, to:
(a) visit and inspect any of the properties of the Company or
the Subsidiary;
(b) examine the corporate and financial records of the Company
or the Subsidiary (unless such examination is not permitted
by federal, state or local law or by contract) and make
copies thereof or extracts therefrom; and
17
(c) discuss the affairs, finances and accounts of the Company or
the Subsidiary with the directors, officers and independent
accountants of the Company or the Subsidiary.
Notwithstanding the foregoing, neither the Company nor the Subsidiary will
provide any material, non-public information to the Purchaser unless the
Purchaser signs a confidentiality agreement and otherwise complies with
Regulation FD, under the federal securities laws.
7.7 TAXES. Each of the Company and the Subsidiary will promptly pay
and discharge, or cause to be paid and discharged, when due and payable, all
lawful taxes, assessments and governmental charges or levies imposed upon the
income, profits, property or business of the Company and the Subsidiary;
provided, however, that any such tax, assessment, charge or levy need not be
paid if the validity thereof shall currently be contested in good faith by
appropriate proceedings and if the Company and/or such Subsidiary shall have set
aside on its books adequate reserves with respect thereto, and provided,
further, that the Company and the Subsidiary will pay all such taxes,
assessments, charges or levies forthwith upon the commencement of proceedings to
foreclose any lien which may have attached as security therefor.
7.8 INSURANCE. Each of the Company and the Subsidiary will keep its
assets which are of an insurable character insured by financially sound and
reputable insurers against loss or damage by fire, explosion and other risks
customarily insured against by companies in similar business similarly situated
as the Company and the Subsidiary; and the Company and the Subsidiary will
maintain, with financially sound and reputable insurers, insurance against other
hazards and risks and liability to persons and property to the extent and in the
manner which the Company reasonably believes is customary for companies in
similar business similarly situated as the Company and the Subsidiary and to the
extent available on commercially reasonable terms. The Company, and the
Subsidiary will jointly and severally bear the full risk of loss from any loss
of any nature whatsoever with respect to the assets pledged to the Purchaser as
security for its obligations hereunder and under the Related Agreements. At the
Company's and the Subsidiary's joint and several cost and expense in amounts and
with carriers reasonably acceptable to Purchaser, the Company and the Subsidiary
shall (i) keep all its insurable properties and properties in which it has an
interest insured against the hazards of fire, flood, sprinkler leakage, those
hazards covered by extended coverage insurance and such other hazards, and for
such amounts, as is customary in the case of companies engaged in businesses
similar to the Company's or the Subsidiary's including business interruption
insurance; (ii) maintain a bond in such amounts as is customary in the case of
companies engaged in businesses similar to the Company's or the respective
Subsidiary's insuring against larceny, embezzlement or other criminal
misappropriation of insured's officers and employees who may either singly or
jointly with others at any time have access to the assets or funds of the
Company or the Subsidiary either directly or through governmental authority to
draw upon such funds or to direct generally the disposition of such assets;
(iii) maintain public and product liability insurance against claims for
personal injury, death or property damage suffered by others; (iv) maintain all
such worker's compensation or similar insurance as may be required under the
laws of any state or jurisdiction in which the Company or the respective
Subsidiary is engaged in business; and (v) furnish Purchaser with (x) copies of
all policies and evidence of the maintenance of such policies at least thirty
(30) days before any expiration date, (y) evidence that as to Purchaser the
insurance
18
coverage shall not be impaired or invalidated by any act or neglect of the
Company or the Subsidiary.
7.9 INTELLECTUAL PROPERTY. Each of the Company and the Subsidiary
shall maintain in full force and effect its existence, rights and franchises and
all licenses and other rights to use Intellectual Property owned or possessed by
it and reasonably deemed to be necessary to the conduct of its business.
7.10 PROPERTIES. Each of the Company and the Subsidiary will keep its
properties in good repair, working order and condition, reasonable wear and tear
excepted, and from time to time make all needful and proper repairs, renewals,
replacements, additions and improvements thereto; and each of the Company and
the Subsidiary will at all times comply with each provision of all leases to
which it is a party or under which it occupies property if the breach of such
provision could, either individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
7.11 CONFIDENTIALITY. The Company agrees that it will not disclose, and
will not include in any public announcement, the name of the Purchaser, unless
expressly agreed to by the Purchaser or unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of such
requirement. Notwithstanding the foregoing, the Company may disclose Purchaser's
identity and the terms of this Agreement to its current and prospective debt and
equity financing sources.
7.12 REQUIRED APPROVALS. For so long as the principal amount of the
Note is outstanding and the Warrants are exercisable, the Company, without the
prior written consent of the Purchaser, shall not, and shall not permit the
Subsidiary to:
(a) (i) directly or indirectly declare or pay any dividends,
other than dividends paid to the Company, (ii) issue any
preferred stock that is manditorily redeemable prior to the
one year anniversary of Maturity Date (as defined in the
Note) or (iii) redeem any of its preferred stock or other
equity interests
(b) liquidate, dissolve or effect a material reorganization (it
being understood that in no event shall the Company
dissolve, liquidate or merge with any other person or entity
(unless the Company is the surviving entity);
(c) become subject to (including, without limitation, by way of
amendment to or modification of) any agreement or instrument
which by its terms would (under any circumstances) restrict
the Company's or the Subsidiary's right to perform the
provisions of this Agreement, any Related Agreement or any
of the agreements contemplated hereby or thereby;
(d) materially alter or change the scope of the business of the
Company and the Subsidiary taken as a whole;
(e) (i) create, incur, assume or suffer to exist any
indebtedness (exclusive of trade debt and debt incurred to
finance the purchase of equipment (not in
19
excess of five percent (5%) of the fair market value of the
Company's and the Subsidiary's assets) whether secured or
unsecured other than (w) up to $5,000,000 principal amount
of unsecured subordinated indebtedness subject to terms,
conditions and documentation satisfactory to the Purchaser,
(x) the Company's indebtedness to the Purchaser, (y)
indebtedness set forth on SCHEDULE 6.12(e) attached hereto
and made a part hereof and any refinancings or replacements
thereof on terms no less favorable to the Purchaser than the
indebtedness being refinanced or replaced, and (z) any debt
incurred in connection with the purchase of assets in the
ordinary course of business, or any refinancings or
replacements thereof on terms no less favorable to the
Purchaser than the indebtedness being refinanced or
replaced; (ii) cancel any debt owing to it in excess of
$50,000 in the aggregate during any 12 month period; (iii)
assume, guarantee, endorse or otherwise become directly or
contingently liable in connection with any obligations of
any other Person, except the endorsement of negotiable
instruments by the Company for deposit or collection or
similar transactions in the ordinary course of business or
guarantees of indebtedness otherwise permitted to be
outstanding pursuant to this clause (e); and
(f) create or acquire any Subsidiary after the date hereof
unless (i) such Subsidiary is a wholly-owned Subsidiary of
the Company and (ii) such Subsidiary becomes party to the
Security Agreement (either by executing a counterpart
thereof or an assumption or joinder agreement in respect
thereof), executes such other documentation satisfactory to
the Purchaser and, to the extent required by the Purchaser,
satisfies each condition of this Agreement and the Related
Agreements as if such Subsidiary were a Subsidiary on the
Closing Date.
(g) Except for a registration statement filed on behalf of the
Purchaser, the Company will not file any registration
statements or amend any already filed registration
statement, including but not limited to Form S-8, with the
Commission or with state regulatory authorities without the
consent of the Purchaser until the sooner of (i) the
Registration Statement shall have been current and available
for use in connection with the public resale of the Shares
and Warrant Shares for six (6) months, or (ii) until all the
Shares have been resold or transferred by the Purchaser
pursuant to the Registration Statement, or Rule 144, without
regard to volume limitations ("EXCLUSION PERIOD"). The
Exclusion Period will be tolled during the pendency of an
Event of Default as defined in the Note.
(h) OFFERING RESTRICTIONS. The Company will not enter into an
agreement to, nor issue any equity, convertible debt or
other securities convertible into common stock or equity of
the Company not modify any of the foregoing which may be
outstanding at anytime at a price or conversion price which
is less than the Conversion Price of the Notes, without the
prior written consent of the Purchaser. For so long as the
Notes and Warrants are
20
outstanding the Company will not enter into any equity line
of credit or similar agreement, nor issue any floating or
variable priced equity linked instruments nor any of the
foregoing or equity with price reset rights.
(i) FAVORED NATIONS PROVISIONS. If at any time which the Notes
or Warrants are outstanding the Company shall offer, issue
or agree to issue any common stock or series convertible
into or exercisable for shares of common stock (or modify
any of the foregoing which may be outstanding) to any person
or entity at a price per share or conversion or exercise
price per share which shall be less than the Conversion
Price in respect of the Shares, or if less than the Warrant
exercise price in respect of the Warrant Shares, without the
consent of the Purchaser holding Notes, Shares and/or
Warrants or Warrant Shares , then the Company shall issue,
for each such occasion, additional shares of Common Stock to
the Purchaser so that the average per share purchase price
of the shares of Common Stock issued to the Purchaser (of
only the Common Stock or Warrant Shares still owned by the
Purchaser) is equal to such other lower price per share and
the Conversion Price and Warrant Exercise Price shall
automatically be reduced to such other lower price per
share. The average Purchase Price of the Shares and average
exercise price in relation to the Warrant Shares shall be
calculated separately for the Shares and Warrant Shares. The
foregoing calculation and issuance shall be made separately
for Shares received upon conversion and separately for
Warrant Shares. The delivery to the Purchaser of the
additional shares of Common Stock shall be not later than
the closing date of the transaction giving rise to the
requirement to issue additional shares of Common Stock. For
purposes of the issuance and adjustment described in this
paragraph, the issuance of any security of the Company
carrying the right to convert such security into shares of
Common Stock or of any warrant, right or option to purchase
Common Stock shall result in the issuance of the additional
shares of Common Stock upon sooner of the agreement to or
actual issuance of such convertible security, warrant, right
or option and again at any time upon any subsequent
issuances of shares of Common Stock upon exercise of such
conversion or purchase rights if such issuance is at a price
lower than the Conversion Price or Warrant exercise price in
effect upon such issuance. The rights of the Purchaser set
forth in this Section are in addition to any other rights
the Purchaser has pursuant to this Agreement, the Note and
any other agreement referred to or entered into in
connection herewith.
7.13 REISSUANCE OF SECURITIES. The Company agrees to reissue
certificates representing the Securities without the legends set forth in
Section 5.8 above at such time as:
(a) the holder thereof is permitted to dispose of such
Securities pursuant to Rule 144(k) under the Securities Act
or any other applicable exemption; or
21
(b) upon resale subject to an effective registration statement
after such Securities are registered under the Securities
Act.
The Company agrees to cooperate with the Purchaser in connection with all
resales pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions
necessary to allow such resales provided the Company and its counsel receive
reasonably requested representations from the selling Purchaser and broker, if
any.
7.14 OPINION. On the Closing Date, the Company will deliver to the
Purchaser an opinion acceptable to the Purchaser from the Company's external
legal counsel. The Company will provide, at the Company's expense, such other
legal opinions in the future as are deemed reasonably necessary by the Purchaser
(and acceptable to the Purchaser) in connection with the conversion of the Note
and exercise of the Warrant.
7.15 MARGIN STOCK. The Company will not permit any of the proceeds of
the Note or the Warrant to be used directly or indirectly to "purchase" or
"carry" "margin stock" or to repay indebtedness incurred to "purchase" or
"carry" "margin stock" within the respective meanings of each of the quoted
terms under Regulation U of the Board of Governors of the Federal Reserve System
as now and from time to time hereafter in effect.
7.16 FOREIGN SECURITY AGREEMENTS AND GUARANTEES. No later than 30 days
following a request by the Purchaser, the Company shall cause each Subsidiary of
the Company requested by the Purchaser and organized in a jurisdiction outside
of the United States (collectively, the "Foreign Subsidiaries") to, to the
extent permitted by applicable law, execute such documentation as the Purchaser
deems necessary or desirable to (x) grant in favor of the Purchaser a security
interest in all of such Foreign Subsidiary's assets, (y) cause the equity
interests of any such Foreign Subsidiary to be pledged to the Purchaser and (y)
cause such Foreign Subsidiary to guaranty the obligations of the Company set
forth in this Agreement and the Related Agreements, in each case pursuant to
documentation governed by the jurisdiction of organization of such Foreign
Subsidiary (the preceding clauses (x) and (y), collectively, the "Foreign
Documentation"). All such Foreign Documentation shall be in form and substance
satisfactory to the Purchaser, and the Company agrees to cause the respective
Foreign Subsidiary to deliver all such other documentation as is requested by
the Purchaser in connection with the execution and delivery of such Foreign
Documentation (including, without limitation, an opinion of counsel satisfactory
to the Purchaser).
7.17 RESERVATION. Prior to the Closing Date, the Company undertakes to
reserve, pro rata, on behalf of each holder of a Note or Warrant, from its
authorized but unissued common stock, a number of common shares equal to 150% of
the amount of Common Stock necessary to allow each holder of a Note to be able
to convert all such outstanding Notes and interest and reserve the amount of
Warrant Shares issuable upon exercise of the Warrants. Failure to have
sufficient shares reserved pursuant to this Section 7.17 for three (3)
consecutive business days or ten (10) days in the aggregate shall be a material
default of the Company's obligations under this Agreement and an Event of
Default under the Note. It being acknowledged that the Company currently has
approximately 10,000,000 share of common stock available for reservation, all of
which will be reserved for conversion of the Notes and exercise of the Warrants
and that once
22
the Company takes the action required by 7.18 hereof the Company will reserve a
sufficient number of additional shares to comply with this Section.
7,18 INCREASE OF AUTHORIZED COMMON STOCK. The Company will increase its
authorized capital to 150,000,000 shares of Common Stock within 30 days hereof.
Failure to do so will constitute an Event of Default.
8. COVENANTS OF THE PURCHASER. The Purchaser covenants and agrees with the
Company as follows:
8.1 CONFIDENTIALITY. The Purchaser agrees that it will not disclose,
and will not include in any public announcement, the name of the Company, unless
expressly agreed to by the Company or unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of such
requirement.
8.2 NON-PUBLIC INFORMATION. The Purchaser agrees not to effect any
sales in the shares of the Company's Common Stock while in possession of
material, non-public information regarding the Company if such sales would
violate applicable securities law.
9. COVENANTS OF THE COMPANY AND PURCHASER REGARDING INDEMNIFICATION.
9.1 COMPANY INDEMNIFICATION. The Company agrees to indemnify, hold
harmless, reimburse and defend the Purchaser, each of the Purchaser's officers,
directors, agents, affiliates, control persons, and principal shareholders,
against any claim, cost, expense, liability, obligation, loss or damage
(including reasonable legal fees) of any nature, incurred by or imposed upon the
Purchaser which results, arises out of or is based upon: (i) any
misrepresentation by the Company or the Subsidiary or breach of any warranty by
the Company or the Subsidiary in this Agreement, any other Related Agreement or
in any exhibits or schedules attached hereto or thereto; or (ii) any breach or
default in performance by Company or the Subsidiary of any covenant or
undertaking to be performed by Company or the Subsidiary hereunder, under any
other Related Agreement or any other agreement entered into by the Company
and/or the Subsidiary and Purchaser relating hereto or thereto.
9.2 PURCHASER'S INDEMNIFICATION. Purchaser agrees to indemnify, hold
harmless, reimburse and defend the Company and each of the Company's officers,
directors, agents, affiliates, control persons and principal shareholders, at
all times against any claim, cost, expense, liability, obligation, loss or
damage (including reasonable legal fees) of any nature, incurred by or imposed
upon the Company which results, arises out of or is based upon: (i) any
misrepresentation by Purchaser or breach of any warranty by Purchaser in this
Agreement or in any exhibits or schedules attached hereto or any Related
Agreement; or (ii) any breach or default in performance by Purchaser of any
covenant or undertaking to be performed by Purchaser hereunder, or any other
agreement entered into by the Company and Purchaser relating hereto. In no event
shall the liability of any Purchaser or permitted successor hereunder or under
this Agreement or other agreement delivered in connection herewith be greater in
amount than the dollar amount of the net proceeds actually received by such
Purchaser upon the sale of Registrable Securities (as defined herein).
23
10. CONVERSION OF CONVERTIBLE NOTE MECHANICS OF CONVERSION.
(a) Provided the Purchaser has notified the Company of the
Purchaser's intention to sell the Note Shares and the Note
Shares are included in an effective registration statement
or are otherwise exempt from registration when sold: (i)
upon the conversion of the Note or part thereof, the Company
shall, at its own cost and expense, take all necessary
action (including the issuance of an opinion of counsel
reasonably acceptable to the Purchaser following a request
by the Purchaser) to assure that the Company's transfer
agent shall issue shares of the Company's Common Stock in
the name of the Purchaser (or its nominee) or such other
persons as designated by the Purchaser in accordance with
Section 9.1(b) hereof and in such denominations to be
specified representing the number of Note Shares issuable
upon such conversion; and (ii) the Company warrants that no
instructions other than these instructions have been or will
be given to the transfer agent of the Company's Common Stock
and that after the Effectiveness Date (as defined in the
Registration Rights Agreement) the Note Shares issued will
be freely transferable subject to the prospectus delivery
requirements of the Securities Act and the provisions of
this Agreement, and will not contain a legend restricting
the resale or transferability of the Note Shares.
(b) Purchaser will give notice of its decision to exercise its
right to convert the Note or part thereof by telecopying or
otherwise delivering an executed and completed notice of the
number of shares to be converted to the Company (the "Notice
of Conversion"). The Purchaser will not be required to
surrender the Note until the Purchaser receives a credit to
the account of the Purchaser's prime broker through the DWAC
system (as defined below), representing the Note Shares or
until the Note has been fully satisfied. Each date on which
a Notice of Conversion is telecopied or delivered to the
Company in accordance with the provisions hereof shall be
deemed a "Conversion Date." Pursuant to the terms of the
Notice of Conversion, the Company will issue instructions to
the transfer agent accompanied by an opinion of counsel
within one (1) business day of the date of the delivery to
the Company of the Notice of Conversion and shall cause the
transfer agent to transmit the certificates representing the
Conversion Shares to the Holder by crediting the account of
the Purchaser's prime broker with the Depository Trust
Company ("DTC") through its Deposit Withdrawal Agent
Commission ("DWAC") system within three (3) business days
after receipt by the Company of the Notice of Conversion
(the "Delivery Date").
(c) The Company understands that a delay in the delivery of the
Note Shares in the form required pursuant to Section 9
hereof beyond the Delivery Date could result in economic
loss to the Purchaser. In the event that the Company fails
to direct its transfer agent to deliver the Note Shares to
the Purchaser via the DWAC system within the time frame set
forth in Section
24
9.1(b) above and the Note Shares are not delivered to the
Purchaser by the Delivery Date, as compensation to the
Purchaser for such loss, the Company agrees to pay late
payments to the Purchaser for late issuance of the Note
Shares in the form required pursuant to Section 9 hereof
upon conversion of the Note in the amount equal to the
greater of: (i) $100 per business day after the Delivery
Date for each $10,000 of the purchase price of the
Unlegended Shares subject to delivery default; or (ii) the
Purchaser's actual damages from such delayed delivery.
Notwithstanding the foregoing, the Company will not owe the
Purchaser any late payments if the delay in the delivery of
the Note Shares beyond the Delivery Date is solely out of
the control of the Company and the Company is actively
trying to cure the cause of the delay. The Company shall pay
any payments incurred under this Section in immediately
available funds upon demand and, in the case of actual
damages, accompanied by reasonable documentation of the
amount of such damages. Such documentation shall show the
number of shares of Common Stock the Purchaser is forced to
purchase (in an open market transaction) which the Purchaser
anticipated receiving upon such conversion, and shall be
calculated as the amount by which (A) the Purchaser's total
purchase price (including customary brokerage commissions,
if any) for the shares of Common Stock so purchased exceeds
(B) the aggregate principal and/or interest amount of the
Note, for which such Conversion Notice was not timely
honored.
(d) The Company understands that a delay in the delivery of the
Unlegended Shares pursuant to Section 10(a) hereof later
than two business days after the Unlegended Shares Delivery
Date could result in economic loss to the Purchaser. As
compensation to the Purchaser for such loss, the Company
agrees to pay late payment fees (as liquidated damages and
not as a penalty) to the Purchaser for late delivery of
Unlegended Shares in the amount of $100 per business day
after the Delivery Date for each $10,000 of purchase price
of the Unlegended Shares subject to delivery default. If
during any 360 day period, the Company fails to deliver
Unlegended Shares as required by this Agreement for an
aggregate of thirty (30) days, then the Purchaser or
assignee holding Securities subject to such default may, at
its option require the Company to redeem all or any portion
of the Shares and Warrant Shares subject to such default at
a price per share equal to 125% of the Purchase Price of
such Common Stock and Warrant Shares ("UNLEGENDED REDEMPTION
AMOUNT"). The amount of the aforedescribed liquidated
damages that have accrued or been paid for the twenty day
period prior to the receipt by the Purchaser of the
Unlegended Redemption Amount shall be credited against the
Unlegended Redemption Amount. The Company shall pay any
payments incurred under this Section in immediately
available funds upon demand.
(e) In addition to any other rights available to the Purchaser,
if the Company fails to deliver to the Purchaser Unlegended
Shares as required pursuant to this Agreement, with seven
(7) business days after the Unlegended Shares
25
Delivery Date and the Purchaser thereafter purchases (in an
open market transaction or otherwise) shares of common stock
to deliver in satisfaction of a sale by such Purchaser of
the shares of Common Stock which the Purchaser was entitled
to receive from the Company (a "Buy-In"), then the Company
shall pay in cash to the Purchaser (in addition to any
remedies available to or elected by the Purchaser) the
amount by which (A) the Purchaser's total purchase price
(including brokerage commissions, if any) for the shares of
common stock so purchased exceeds (B) the aggregate purchase
price of the shares of Common Stock delivered to the Company
for reissuance as Unlegended Shares- together with interest
thereon at a rate of 15% per annum, accruing until such
amount and any accrued interest thereon is paid in full
(which amount shall be paid as liquidated damages and not as
a penalty). For example, if the Purchaser purchases shares
of Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to $10,000 of purchase price of
shares of Common Stock delivered to the Company for
reissuance as Unlegended Shares, the Company shall be
required to pay the Purchaser $1,000, plus interest. The
Purchaser shall provide the Company written notice
indicating the amounts payable to the Purchaser in respect
of the Buy-In.
(f) In the event the Purchaser shall request delivery of
Unlegended Shares the Company is required to deliver such
Unlegended Shares pursuant to this Agreement, the Company
may not refuse to deliver Unlegended Shares based on any
claim that the Purchaser or any one associated or affiliated
with the Purchaser has been engaged in any violation of law,
or for any other reason unless, an injunction or temporary
restraining order from a court, on notice, restraining and
or enjoining delivery of such Unlegended Shares or exercise
of all or part of said Warrant shall have been sought and
obtained and the Company has posted a surety bond for the
benefit of the Purchaser in the amount of 120% of the amount
of the aggregate purchase price of the Common Stock and
Warrant Shares which are subject to the injunction or
temporary restraining order, which bond shall remain in
effect until the completion of arbitration/litigation of the
dispute and the proceeds of which shall be payable to the
Purchaser to the extent the Purchaser obtains judgment in
the Purchaser's favor.
Nothing contained herein or in any document referred to herein or delivered in
connection herewith shall be deemed to establish or require the payment of a
rate of interest or other charges in excess of the maximum permitted by
applicable law. In the event that the rate of interest or dividends required to
be paid or other charges hereunder exceed the maximum amount permitted by such
law, any payments in excess of such maximum shall be credited against amounts
owed by the Company to a Purchaser and thus refunded to the Company.
26
11. REGISTRATION RIGHTS.
11.1 REGISTRATION RIGHTS GRANTED. The Company hereby grants
registration rights to the Purchaser pursuant to a Registration Rights Agreement
dated as of even date herewith between the Company and the Purchaser.
12. MISCELLANEOUS GOVERNING LAW. THIS AGREEMENT AND EACH RELATED
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. ANY ACTION
BROUGHT BY EITHER PARTY AGAINST THE OTHER CONCERNING THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT AND EACH RELATED AGREEMENT SHALL BE BROUGHT ONLY
IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF
NEW YORK. BOTH PARTIES AND THE INDIVIDUALS EXECUTING THIS AGREEMENT AND THE
RELATED AGREEMENTS ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE JURISDICTION
OF SUCH COURTS AND WAIVE TRIAL BY JURY. IN THE EVENT THAT ANY PROVISION OF THIS
AGREEMENT OR ANY RELATED AGREEMENT DELIVERED IN CONNECTION HEREWITH IS INVALID
OR UNENFORCEABLE UNDER ANY APPLICABLE STATUTE OR RULE OF LAW, THEN SUCH
PROVISION SHALL BE DEEMED INOPERATIVE TO THE EXTENT THAT IT MAY CONFLICT
THEREWITH AND SHALL BE DEEMED MODIFIED TO CONFORM WITH SUCH STATUTE OR RULE OF
LAW. ANY SUCH PROVISION WHICH MAY PROVE INVALID OR UNENFORCEABLE UNDER ANY LAW
SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION OF THIS
AGREEMENT OR ANY RELATED AGREEMENT.
12.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchaser and
the closing of the transactions contemplated hereby to the extent provided
therein. All statements as to factual matters contained in any certificate or
other instrument delivered by or on behalf of the Company pursuant hereto in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Company hereunder solely as of the date of
such certificate or instrument.
12.3 SUCCESSORS. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, heirs, executors and administrators of the parties hereto and shall
inure to the benefit of and be enforceable by each person who shall be a holder
of the Securities from time to time, other than the holders of Common Stock
which has been sold by the Purchaser pursuant to Rule 144 or an effective
registration statement. Purchaser may not assign its rights hereunder to a
competitor of the Company.
12.4 ENTIRE AGREEMENT. This Agreement, the Related Agreements, the
exhibits and schedules hereto and thereto and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and no party shall be
liable or bound to any other in any manner by any representations, warranties,
covenants and agreements except as specifically set forth herein and therein.
27
12.5 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
12.6 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and the Purchaser.
(b) The obligations of the Company and the rights of the
Purchaser under this Agreement may be waived only with the
written consent of the Purchaser.
(c) The obligations of the Purchaser and the rights of the
Company under this Agreement may be waived only with the
written consent of the Company.
12.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement or the Related
Agreements, shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of or in any similar breach, default or noncompliance
thereafter occurring. All remedies, either under this Agreement or the Related
Agreements, by law or otherwise afforded to any party, shall be cumulative and
not alternative.
12.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given:
(a) upon personal delivery to the party to be notified;
(b) when sent by confirmed facsimile if sent during normal
business hours of the recipient, if not, then on the next
business day;
(c) three (3) business days after having been sent by registered
or certified mail, return receipt requested, postage
prepaid; or
(d) one (1) day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with
written verification of receipt.
All communications shall be sent as follows:
IF TO THE COMPANY, TO: Perfisans Holdings, Inc.
▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ #▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: To-▇▇▇ ▇▇▇
Facsimile: (▇▇▇)-▇▇▇-▇▇▇▇
28
WITH A COPY TO:
▇▇▇▇▇▇▇, Savage, Kaplowitz, Wolf & Marcus, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
IF TO THE PURCHASER, TO: [ ]
WITH A COPY TO:
[ ]
or at such other address as the Company or the Purchaser may designate by
written notice to the other parties hereto given in accordance herewith.
12.9 ATTORNEYS' FEES. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including, without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
12.10 TITLES AND SUBTITLES. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
12.11 FACSIMILE SIGNATURES; COUNTERPARTS. This Agreement may be
executed by facsimile signatures and in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
12.12 BROKER'S FEES. Except as set forth on Section 5 hereof, each
party hereto represents and warrants that no agent, broker, investment banker,
person or firm acting on behalf of or under the authority of such party hereto
is or will be entitled to any broker's or finder's fee or any other commission
directly or indirectly in connection with the transactions contemplated herein.
Each party hereto further agrees to indemnify each other party for any claims,
losses or expenses incurred by such other party as a result of the
representation in this Section 11.12 being untrue.
12.13 CONSTRUCTION. Each party acknowledges that its legal counsel
participated in the preparation of this Agreement and the Related Agreements
and, therefore, stipulates that the rule of construction that ambiguities are to
be resolved against the drafting party shall not be applied in the
interpretation of this Agreement to favor any party against the other.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
29
IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES
PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: PURCHASER:
PERFISANS HOLDINGS, INC.
By: By:
-------------------------------- --------------------------------
Name: Name:
-------------------------------- --------------------------------
Title: Title:
-------------------------------- --------------------------------
30
EXHIBIT A
FORM OF CONVERTIBLE NOTE
A-1
EXHIBIT B
FORM OF WARRANT
B-1
EXHIBIT C
FORM OF OPINION
C-1
EXHIBIT F
FORM OF ESCROW AGREEMENT
F-1
EXHIBIT G
FORM OF REGISTRATION RIGHTS AGREEMENT
G-1