RB DRAFT 20040205A
SECURITIES PURCHASE AGREEMENT, dated as of February __, 2003 (this
"AGREEMENT"), between PERFISANS HOLDINGS INC., a Maryland corporation with
principal executive offices at 0000 Xxxxxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx
X0X 0X0,xxx SBI BRIGHTLINE CONSULTING V LLC, a Delaware limited liability
company with its principal offices at 0000 Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxx
Xxxxx, Xxxxxxxxxx 00000 (the "PURCHASER").
INTRODUCTION
Subject to the terms and conditions of this Agreement, the Company may
issue and sell to the Purchaser and the Purchaser shall purchase from the
Company the following: (i) up to 2,000,000 shares of the Common Stock (the
"SHARES"), par value $0.001 per share (the "COMMON STOCK"); (ii) warrants (the
"$2.00 WARRANTS") exercisable for an aggregate of 300,000 shares of Common Stock
at the exercise price of $2.00 per share, in the form attached hereto as Exhibit
A hereto; and (iii) warrants (the "$3.00 WARRANTS", and, together with the $2.00
Warrants, the "WARRANTS", and, together with this Agreement, the "TRANSACTION
AGREEMENTS") exercisable for an aggregate of 300,000 shares of Common Stock at
the exercise price of $3.00 per share, in the form of Exhibit B hereto.
NOW THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the Company and the Purchaser hereby agree as follows:
ARTICLE I
ACQUISITION OF SECURITIES
SECTION 1.01 THE AGREEMENT.
(a) Schedule 1.01(a) attached hereto defines two tranches of Shares
that the Purchaser has agreed to purchase from the Company (each, a "TRANCHE")
and, with respect to each Tranche, sets forth the number of Shares constituting
such Tranche (the "TRANCHE SHARES") and the purchase price per share for the
Tranche Shares in such Tranche (the "TRANCHE PURCHASE PRICE").
(b) The Company may, in its sole discretion, elect to sell the Tranche
Shares of any Tranche to the Purchaser at any time after the date (the
"EFFECTIVE DATE") on which the Registration Statement (as defined in Section
3.01(a)) of the Company covering the resale of the Shares is declared effective
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), provided,
however, (i) the Company must elect to sell all of the Tranche Shares included
in a Tranche if it elects to sell any of the Tranche Shares in such Tranche;
(ii) the Company must elect to sell the Tranche Shares in the order that the
Tranches are listed on Schedule 1.01(a); and (iii) the total beneficial
ownership of the Purchaser of shares of Common Stock shall not exceed 9.8% of
the Common Stock, giving effect to the acquisition of the Tranche or Tranches in
question. Subject to the immediately preceding sentence, the Company may elect
to sell Tranche Shares included in more than one Tranche at the same time. To
effect its election to sell Shares, the Company must give written notice thereof
(an "ELECTION NOTICE") to the Purchaser. The Election Notice shall specify the
Tranche or Tranches with respect to which the election is being made and the
date on which the closing of the sale and purchase of the Tranche Shares shall
occur; provided, such date shall be a Business Day (as hereinafter defined) and
shall not be earlier than five days after the date such Election Notice is given
to the Purchaser. An Election Notice shall be irrevocable except as provided in
Section 1.02(c). For purposes hereof, the term "BUSINESS DAY" shall mean any day
which is not (i) a Saturday or a Sunday or (ii) a day on which banking
institutions are generally authorized or obligated to close in the City of Los
Angeles, California. Subject to the foregoing and provided that the
representations and warranties of the Company set forth herein are true and
correct as of the date of an Election Notice, in the event that the Company
gives an Election Notice, the Purchaser shall be obligated to purchase the
Tranche Shares, covered by such notice.
(c) Simultaneous with the purchase of the Tranche shares, the Company
shall deliver to the Purchaser the Warrants applicable to such Tranche.
SECTION 1.02 CLOSING PROCEDURES; THE CLOSINGS.
(a) Subject to the satisfaction or waiver of the conditions precedent
set forth in Article IV hereof, the closing of a purchase of Tranche Shares by
the Purchaser pursuant to this Agreement (each, a "CLOSING") shall occur at
10:00 a.m. on the date specified in the Election Notice delivered by the Company
with respect to such Tranche Shares unless the Company and the Purchaser have
mutually agreed on a different time or date with respect to such Closing (the
time and date of the Closing of a particular Tranche is referred to herein as
the "TRANCHE CLOSING DATE"). Unless otherwise agreed by the Company and the
Purchaser, each Closing shall occur at the offices of Reitler Xxxxx LLC, New
York, New York, counsel to the Purchaser.
(b) At each Closing, (i) each of the Company and the Purchaser shall
deliver to the other, as applicable, any documents required to be delivered by
Sections 4.01 and 4.02 hereof which have not been delivered prior to such
Closing, (ii) the Purchaser shall deliver to the Companyan acknowledgement of
the applicable Tranche Purchase Price for the Tranche Shares being purchased at
the Closing and state the date, not to exceed five Business Days following the
Tranche Closing Date, on or prior to which the Tranche Purchase Price shall be
delivered by the Purchaser to the Company by wire transfer of immediately
available funds to an account designated in writing by the Company at or prior
to the Closing, and (iii) the Company shall deliver to the Purchaser one or more
stock certificates, determined in accordance with the instructions of the
Purchaser, representing the Tranche Shares being purchased or shall cause the
Tranche Shares being purchased to be electronically transferred to the
Purchaser. The payment of the Tranche Purchase Price referenced in clause (ii)
shall be deemed to have been delivered at the Closing for the purposes hereof.
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(c) If a Closing does not occur on a proposed Tranche Closing Date
because the conditions specified in paragraph (b) of this Section 1.02 and
Section 4.02 were not satisfied at the time of the applicable proposed Tranche
Closing Date, the Election Notice with respect to the Tranche or Tranches
proposed to be sold on such proposed Tranche Closing Date shall automatically be
revoked; provided, however, such revocation shall not impair the right of the
Company to give another Election Notice with respect to the Tranche or Tranches
covered by the revoked Election Notice or to compel the Purchaser to purchase
any Tranche Shares included in such Tranche or Tranches on a subsequent Tranche
Closing Date on which the conditions specified in such paragraphs are satisfied.
ARTICLE II
REPRESENATIONS AND WARRANTIES
SECTION 2.01 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the Purchaser as follows:
(a) The Common Stock has been registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") and the Company
is subject to the periodic reporting requirements of Section 13 of the Exchange
Act. The Company has heretofore provided to the Purchaser true, complete, and
correct copies of all forms, reports, schedules, statements, and other documents
required to be filed by it under the Exchange Act since at least December
19,2003, as such documents have been amended since the time of the filing
thereof and a copy of the Registration Statement (collectively, the "SEC
DOCUMENTS"). The SEC Documents, including, without limitation, any financial
statements and schedules included therein, at the time filed or, if subsequently
amended, as so amended, (i) did not contain any untrue statement of a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading and (ii) complied in all respects with the applicable
requirements of the Exchange Act and the applicable rules and regulations
thereunder.
(b) At the date hereof and at each Tranche Closing Date:
(i) the Common Stock is and shall be traded and quoted in the
over-the-counter Bulletin Board market (the "OTCBB");
(ii) the Company has and shall have performed or satisfied all
of its undertakings to, and of its obligations and requirements with, the
Commission; and
(iii) the Company has not, and shall not have taken any action
that would preclude, or otherwise jeopardize, the inclusion of the Common Stock
for quotation on the OTCBB.
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(c) [SUBSIDIARY], a __________ corporation ("SUBSIDIARY"), is the sole
subsidiary of the Company. Other than Subsidiary, the Company has no
subsidiaries or affiliated corporation or owns any interest in any other
enterprise (whether or not such enterprise is a corporation). Each of the
Company and Subsidiary has been duly organized and is validly existing as a
corporation in good standing under the laws of the respective jurisdiction of
its incorporation with full power and authority (corporate and other) to own,
lease and operate its respective properties and conduct its respective business
as described in the SEC Documents; each of the Company and Subsidiary is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the ownership or leasing of its respective properties
or the conduct of its respective business requires such qualification, except
where the failure to be so qualified or be in good standing would not have a
material adverse effect on the business, prospects, condition (financial or
otherwise), and results of operations of the Company and Subsidiary taken as a
whole; no proceeding has been instituted in any such jurisdiction, revoking,
limiting or curtailing, or seeking to revoke, limit or curtail, such power and
authority or qualification; each of the Company and Subsidiary is in possession
of, and operating in compliance with, all authorizations, licenses,
certificates, consents, orders and permits from state, federal, foreign and
other regulatory authorities that are material to the conduct of its business,
all of which are valid and in full force and effect; neither the Company nor
Subsidiary is in violation of its charter or bylaws or in default in the
performance or observance of any obligation, agreement, covenant or condition
contained in any material bond, debenture, note or other evidence of
indebtedness, or in any material lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to which
it is a party or by which it or its respective properties or assets may be
bound, which violation or default would have a material adverse effect on the
business, prospects, financial condition or results of operations of the Company
and Subsidiary taken as a whole; and neither the Company nor Subsidiary is in
violation of any law, order, rule, regulation, writ, injunction, judgment or
decree of any court, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or Subsidiary or over its
respective properties or assets, which violation would have a material adverse
effect on the business, prospects, financial condition or results of operations
of the Company and Subsidiary taken as a whole. The SEC Documents accurately
describe any corporation, association or other entity owned or controlled,
directly or indirectly, by the Company or Subsidiary.
(d) The Company has full legal right, power and authority to enter into
each of the Transaction Agreements and to perform the transactions contemplated
hereby and thereby. Each of the Transaction Agreements has been duly authorized,
executed and delivered by the Company and is a valid and binding agreement on
the part of the Company, enforceable in accordance with its respective terms;
the performance of each of the Transaction Agreements and the consummation of
the transactions herein or therein contemplated will not result in a breach or
violation of any of the terms and provisions of, or constitute a default under,
(i) any bond, debenture, note or other evidence of indebtedness, or under any
lease, contract, indenture, mortgage, deed of trust, loan agreement, joint
venture or other agreement or instrument to which
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the Company or Subsidiary is a party or by which its respective properties or
assets may be bound, (ii) the charter or bylaws of the Company or Subsidiary, or
(iii) any law, order, rule, regulation, writ, injunction, judgment or decree of
any court, government or governmental agency or body, domestic or foreign,
having jurisdiction over the Company or Subsidiary or over its respective
properties or assets, which violation or default would have a material adverse
effect on the business, prospects, financial condition or results of operations
of the Company and Subsidiary taken as a whole. No consent, approval,
authorization or order of, or qualification with, any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or Subsidiary or over its respective properties or assets is required
for the execution and delivery of any Transaction Agreement and the consummation
by the Company of the transactions herein and therein contemplated, except such
as may be required under the Securities Act or under state or other securities
or blue sky laws, all of which requirements have been, or in accordance
therewith will be, satisfied in all material respects.
(e) There is not any pending or, to the best of the Company's
knowledge, threatened, action, suit, claim or proceeding against the Company or
Subsidiary, or any of its officers or any of its properties, assets or rights,
before any court, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or Subsidiary or over its officers
or properties or otherwise that (i) is reasonably likely to result in any
material adverse change in the business, prospects, financial condition or
results of operations of the Company and Subsidiary taken as a whole or might
materially and adversely affect their properties, assets or rights taken as a
whole, (ii) might prevent consummation of the transactions contemplated by the
Transaction Agreements, or (iii) will be required to be disclosed in the
Registration Statement, except to the extent heretofore disclosed in the SEC
Documents.
(f) The authorized capital stock of the Company consists of 50,000,000
shares of Common Stock, of which 37,618,123 shares of Common Stock are
outstanding, and 5,000,000 shares of preferred stock, par value $0.001 per
share, none of which is outstanding. All outstanding capital stock of Subsidiary
is owned beneficially and of record by the Company. Each of such outstanding
shares of Common Stock and each outstanding share of capital stock of
Subsidiary, is validly authorized, validly issued, fully paid, and
nonassessable, has not been issued and is not owned or held in violation of any
preemptive or similar right of stockholders. Except as disclosed in the SEC
Documents, (i) there is no commitment, plan, or arrangement to issue, and no
outstanding option, warrant, or other right calling for the issuance of, any
share of capital stock of or any security or other instrument convertible into,
exercisable for, or exchangeable for capital stock of the Company or Subsidiary,
except for an aggregate of 5,627,483 options and/or warrants currently
outstanding to acquire shares of Common Stock, and (ii) there is outstanding no
security or other instrument convertible into or exchangeable for capital stock
of the Company or Subsidiary. The Shares and the Warrant Shares (as hereinafter
defined) have been duly authorized for issuance and sale to the Purchaser
pursuant hereto and the Warrants, respectively, and, when issued and delivered
by the Company against payment therefor in accordance with the terms of this
Agreement and the relevant Warrant or Warrants, respectively, will be duly and
validly issued and fully paid and nonassessable, and will be sold
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free and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest of any kind; and no preemptive or similar right, co-sale
right, registration right, right of first refusal or other similar right of
stockholders exists with respect to any of the Shares or Warrant Shares or the
issuance and sale thereof other than those that have been expressly waived prior
to the date hereof and those that will automatically expire upon the execution
hereof. No further approval or authorization of any stockholder, the Board of
Directors of the Company or others is required for the issuance and sale or
transfer of the Shares, the Warrants, or the Warrant Shares, except as may be
required under the Securities Act, the rules and regulations promulgated
thereunder or under state or other securities or blue sky laws. The description
of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised thereunder,
set forth in the SEC Documents accurately and fairly presents the information
required to be shown with respect to such plans, arrangements, options and
rights under the Securities Act, the Exchange Act, and the rules and regulations
promulgated thereunder. The Company has authorized and has reserved and
covenants to continue to reserve, free of preemptive rights and other similar
contractual rights of stockholders, a sufficient number of its authorized, but
unissued, shares of its Common Stock to cover the Shares and the shares of
Common Stock issuable upon the exercise of the Warrants (the "WARRANT SHARES").
(g) Xxxxxxxx Xxxxxxxx Xxxxxxx LLP and Dohan & Company (the "AUDITORS"),
which has examined the [consolidated] financial statements of the Company,
together with the related schedules and notes, for the period from January 1,
2001 to December 31, 2001, January 1, 2002 to December 31, 2002 and for the nine
month period ended September 30, 2003, respectively, filed with the Commission
as a part of the SEC Documents, and which, pursuant to the rules and regulations
of the Commission are to be included in the Registration Statement, are
independent accountants within the meaning of the Securities Act, the Exchange
Act, and the rules and regulations promulgated thereunder; the audited
[consolidated] financial statements of the Company, together with the related
schedules and notes, and the unaudited financial information, forming part of
the SEC Documents, fairly present the financial position and the results of
operations of the Company at the respective dates and for the respective periods
to which they apply; and all audited [consolidated] financial statements of the
Company, together with the related schedules and notes, and the unaudited
[consolidated] financial information, filed with the Commission as part of the
SEC Documents, complied as to form in all material respects with applicable
accounting requirements and with the rules and regulations of the Commission
with respect hereto when filed, have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved except as may be otherwise stated therein (except as may be indicated
in the notes thereto or as permitted by the rules and regulations of the
Commission) and fairly present, subject in the case of the unaudited
[consolidated] financial statements, to customary year end audit adjustments,
the financial position of the Company as at the dates thereof and the results of
its operations and cash flows. The procedures pursuant to which the
aforementioned [comsolidated] financial statements have been audited are
compliant with generally accepted auditing standards. The selected and summary
[consolidated] financial and statistical data included in the SEC Documents
present fairly the information shown therein and have been compiled on a basis
consistent with the
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audited [consolidated] financial statements presented therein. No other
financial statements or schedules are required to be included in the SEC
Documents.
(h) Subsequent to the respective dates as of which information is given
in the SEC Documents, there has not been (i) any material adverse change in the
business, prospects, financial condition or results of operations of the Company
and Subsidiary taken as a whole, (ii) any transaction committed to or
consummated that is material to the Company and Subsidiary taken as a whole,
(iii) any obligation, direct or contingent, that is material to the Company and
Subsidiary taken as a whole incurred by the Company or Subsidiary, except such
obligations as have been incurred in the ordinary course of business, (iv) any
change in the capital stock or outstanding indebtedness of the Company or
Subsidiary that is material to the Company and Subsidiary taken as whole, (v)
any dividend or distribution of any kind declared, paid, or made on the capital
stock of the Company, or (vi) any loss or damage (whether or not insured) to the
property of the Company or Subsidiary which has a material adverse effect on the
business, prospects, condition (financial or otherwise), or results of
operations of the Company and Subsidiary taken as a whole.
(i) Except as set forth in the SEC Documents, (i) each of the Company
and Subsidiary has good and marketable title to all properties and assets
described in the SEC Documents as owned by it, free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest, other than
such as would not have a material adverse effect on the business, prospects,
financial condition or results of operations of the Company and Subsidiary taken
as a whole, (ii) the agreements to which the Company and Subsidiary is a party
described in the SEC Documents are legal, valid and binding agreements,
enforceable by the Company or Subsidiary, as applicable, in accordance with
their terms, and, to the best of the Company's knowledge, the other contracting
party or parties thereto are not in breach or default under any of such
agreements, and (iii) each of the Company and Subsidiary has valid and
enforceable leases for all properties described in the SEC Documents as leased
by it. Except as set forth in the SEC Documents, each of the Company and
Subsidiary owns or leases all such properties as are necessary to its respective
operations as now conducted and as described in the SEC Documents.
(j) Each of the Company and Subsidiary has timely filed all respective
federal, state, local and foreign tax returns required to be filed by it and has
paid all taxes shown thereon as due, and there is no tax deficiency that has
been or, to the best of the Company's knowledge, is likely to be asserted
against the Company or Subsidiary if audited, which might have a material
adverse effect on the business, prospects, financial condition or results of
operations of the Company and Subsidiary taken as a whole, and all tax
liabilities are adequately provided for on the books of the Company and
Subsidiary.
(k) Each of the Company and Subsidiary maintains insurance with
insurers of recognized financial responsibility of the types and in the amounts
generally deemed adequate for its business including, but not limited to,
insurance covering real and personal property owned or leased by the Company or
Subsidiary, as applicable, against theft, damage, destruction,
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acts of vandalism, and all other risks customarily insured against, all of which
insurance is in full force and effect; neither the Company nor Subsidiary has
been refused any insurance coverage sought or applied for; and neither the
Company does has reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the business,
prospects, condition , or results of operations of the Company and Subsidiary
taken as a whole.
(l) No labor disturbance by the employees of the Company or Subsidiary
exists or, to the best of the Company's knowledge, is imminent. The Company is
not aware of any existing or imminent labor disturbance by the employees of any
principal suppliers or customers of the Company or Subsidiary that might be
expected to result in any material adverse change in the business, prospects,
condition (financial or otherwise), or results of operations of the Company and
Subsidiary taken as a whole. No collective bargaining agreement exists with any
of the Company's or Subsidiary's employees and, to the best of the Company's
knowledge, no such agreement is imminent.
(m) Each of the Company and Subsidiary owns or possesses adequate
rights to use all patents, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names, logos, and copyrights described or
referred to in the SEC Documents as owned by or used by it or that are necessary
to conduct its respective businesses as described in the SEC Documents; neither
the Company nor Subsidiary has received any notice of, or has knowledge of, any
infringement of or conflict with asserted rights of the Company or Subsidiary by
others with respect to any patents, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names, logos, or copyrights described
or referred to in the SEC Documents as owned by or used by it; and neither the
Company nor Subsidiary has received any notice of, or has knowledge of, any
infringement of, or conflict with, asserted rights of others with respect to any
patents, patent rights, inventions, trade secrets, know-how, trademarks, service
marks, trade names, logos, or copyrights described or referred to in the SEC
Documents as owned by or used by it or which, individually or in the aggregate,
in the event of an unfavorable decision, ruling or finding, would have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and Subsidiary taken as a whole.
(n) The Company has been advised concerning the Investment Company Act
of 1940, as amended (the "INVESTMENT COMPANY Act"), and the rules and
regulations thereunder, and has in the past conducted, and intends in the
future, to conduct its affairs in such a manner as to ensure that it is not and
will not become an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act and such
rules and regulations.
(o) Neither the Company nor Subsidiary has, and no person or entity
acting on behalf or at the request of the Company or Subsidiary has, at any time
during the last five years (i) made any unlawful contribution to any candidate
for foreign office or failed to disclose fully any
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contribution in violation of law, or (ii) made any payment to any federal or
state governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments required or permitted by the
laws of the United States or any other applicable jurisdiction.
(p) Neither the Company nor Subsidiary, has taken or will take,
directly or indirectly, any action designed to, or that might reasonably be
expected to cause or result in, stabilization in violation of law, or
manipulation, of the price of the Common Stock to facilitate the sale or resale
of the Shares or the Warrant Shares.
(q) Each officer and director and of the Company and each beneficial
owner of five percent (5%) or more of the Common Stock has entered into,
executed, and delivered the Escrow Agreement, dated as of _________, among such
persons and the Purchaser, as escrow agent, and such agreement is a legal, valid
and binding obligation of all parties thereto, enforceable in accordance with
its terms.
(r) Except as set forth in the SEC Documents, (i) each of the Company
and Subsidiary is in compliance in all material respects with all rules, laws
and regulations relating to the use, treatment, storage and disposal of toxic
substances and protection of health or the environment ("ENVIRONMENTAL LAWS")
that are applicable to its business, (ii) neither the Company nor Subsidiary has
received notice from any governmental authority or third party of an asserted
claim under Environmental Laws, which claim is required to be disclosed in the
SEC Documents, (iii) to the best knowledge of the Company, neither the Company
nor Subsidiary is likely to be required to make future material capital
expenditures to comply with Environmental Laws (iv) no property which is owned,
leased or occupied by the Company or Subsidiary has been designated as a
Superfund site pursuant to the Comprehensive Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. ss. 9601, ET SEQ.), or otherwise
designated as a contaminated site under applicable state or local law, and (v)
neither the Company nor Subsidiary is in violation of any federal or state law
or regulation relating to occupational safety or health.
(s) The books, records and accounts of each of the Company and
Subsidiary accurately and fairly reflect, in reasonable detail, the transactions
in, and dispositions of, the assets of, and the results of operations of, the
Company and Subsidairy, as applicable, all to the extent required by generally
accepted accounting principles. Each of the Company and Subsidiary maintains a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in accordance with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
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(t) There are no outstanding loans, advances (except normal advances
for business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company or Subsidiary to, or for the benefit of, any of the
officers, directors, or director-nominees of the Company or Subsidiary or any of
the members of the families of any of them, except as disclosed in the SEC
Documents.
(u) Neither the Company nor Subsidiary has incurred any liability,
direct or indirect, for finders' or similar fees on behalf of or payable by the
Company or Subsidiary or the Purchaser in connection with the Transaction
Agreements or any other transaction involving the Company and the Purchaser.
(v) No stockholder of the Company has any right (which has not been
waived or has not expired by reason of lapse of time following notification of
the Company's intent to file the Registration Statement) to request or require
the Company to register the sale of any shares owned by such stockholder under
the Securities Act on the Registration Statement.
SECTION 2.02 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
PURCHASER. The Purchaser represents and warrants to the Company as follows:
(a) The Purchaser is a company duly organized, validly existing and in
good standing under the laws of its jurisdiction of formation.
(b) The Purchaser has full legal right, power and authority to enter
into this Agreement and to perform the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Purchaser. The
execution, delivery and performance of this Agreement by the Purchaser and the
consummation of the transactions herein contemplated will not violate any
provision of the organizational documents of the Purchaser and will not result
in the creation of any lien, charge, security interest or encumbrance upon any
assets or property of the Purchaser pursuant to the terms or provisions of, or
will not conflict with, result in the breach or violation of, or constitute,
either by itself or upon notice or the passage of time or both, a default under
any agreement, mortgage, deed of trust, lease, franchise, license, indenture,
permit or other instrument to which the Purchaser is a party or by which the
Purchaser or any of its assets or properties may be bound or affected or any
statute or any authorization, judgment, decree, order, rule or regulation of any
court or any regulatory body, administrative agency or other governmental body
applicable to the Purchaser or any of its properties. No consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body is required for the execution, delivery and
performance of this Agreement or the consummation by the Purchaser of the
transactions contemplated hereby. Assuming the valid execution hereof by the
Company, this Agreement will constitute the legal, valid and binding obligation
of the Purchaser, enforceable in accordance with its terms, except as
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enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as the indemnification agreements of the Purchaser
in Section 3.03 hereof may be legally unenforceable.
(c) There are no legal or governmental actions, suits or proceedings
pending or, to the Purchaser's knowledge, threatened to which the Purchaser is
or may be a party which seeks to prevent or restrain the transactions
contemplated by this Agreement or to recover damages as a result of the
consummation of such transactions. To the knowledge of the Purchaser, the
Purchaser has not been and is not currently the subject of an investigation or
inquiry by the Commission, National Association of Securities Dealers, Inc.,
NASD Regulation, Inc., or any state securities commission.
(d) The Purchaser is knowledgeable, sophisticated and experienced in
making, and is qualified to make, decisions with respect to investments in
shares representing an investment decision like that involved in the purchase of
the Shares, the Warrants, and the Warrant Shares, including investments in
securities issued by the Company. The Purchaser is an "accredited investor"
within the meaning of Rule 501(a) of Regulation D promulgated under the
Securities Act. The Purchaser is not a "dealer" within the meaning of the
Securities Act or a "broker" or "dealer" within the meaning of the Exchange Act.
The Purchaser is able to bear the economic risk of loss of the Purchaser's
entire investment in the Shares, the Warrants, and the Warrant Shares.
(e) The Purchaser has requested, received, reviewed and considered all
information it deems relevant in making an informed decision to purchase the
Shares and the Warrants. The Purchaser understands that the Company is still in
the development stage and does not have operating revenues.
(f) The Purchaser is acquiring the Shares and the Warrants in the
ordinary course of its business and for its own account for investment only and
with no present intention of distributing any of such Shares in violation of the
Securities Act or entering into any arrangement or understanding with any other
person regarding the distribution of such Shares in violation of the Securities
Act (it being understood that the foregoing does not limit the Purchaser's right
to sell Shares pursuant to the Registration Statement).
(g) Except for the representations and warranties contained in this
Section 2.02, the Purchaser makes no representation or warranty to the Company,
express or implied, in connection with the transactions contemplated by this
Agreement.
SECTION 2.03 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
the Purchaser herein and in the certificates delivered pursuant hereto shall
survive the execution of this Agreement, the
11
delivery to the Purchaser of the Shares and the Warrants being purchased and the
payment therefor.
ARTICLE III
COVENANTS
SECTION 3.01 COVENANTS OF THE COMPANY.
(a) (i) As soon as practicable, but in any event no later than 30 days
following the date of this Agreement, the Company shall prepare and file with
the Commission a registration statement on Form SB-2 or other applicable form as
determined by the Company (the "REGISTRATION STATEMENT") for the purpose of
registering the sale of the Shares by the Purchaser from time to time on the
facilities of any securities exchange or trading system on which the Common
Stock is then traded or in privately-negotiated transactions, which Registration
Statement shall contain all material non-public information disclosed to the
Purchasers by the Company in connection with the issuance and sale of the
Shares. For purposes of this Section 3.01(a), the term "SHARES" shall include
any other securities of the Company issued in exchange for the Shares, as a
dividend on the Shares or in connection with a stock split or other
reorganization transaction affecting the Shares. The Company shall use its
commercially reasonable efforts to cause the Registration Statement to become
effective as soon as practicable.
(ii) The Company shall prepare and file with the Commission such
amendments and supplements to the Registration Statement and the prospectus
forming a part thereof as may be necessary to keep the Registration Statement
effective until the earliest date, after the date on which all of the Shares
have been purchased pursuant to this Agreement or the obligation of the
Purchaser to purchase the Shares pursuant to this Agreement has been terminated,
on which (i) all the Shares have been disposed of pursuant to the Registration
Statement, (ii) all of the Shares then held by the Purchaser may be sold under
the provisions of Rule 144 without limitation as to volume, whether pursuant to
Rule 144(k) or otherwise, or (iii) the Company has determined that all Shares
then held by the Purchaser may be sold without restriction under the Securities
Act and has removed any stop transfer instructions relating to such Shares and
offered to cause to be removed any restrictive legends on the certificates, if
any representing such Shares (the period between the Effective Date and the
earliest of such dates is referred to herein as the "REGISTRATION PERIOD"). At
any time after the end of the Registration Period, the Company may withdraw the
Registration Statement and its obligations under this Section 3.01(a) shall
automatically terminate.
(iii) The Company shall not be obligated to prepare and file a
post-effective amendment or supplement to the Registration Statement or the
prospectus constituting a part
12
thereof during the continuance of a Blackout Event. A "BLACKOUT EVENT" means any
of the following: (a) the possession by the Company of material information that
is not ripe for disclosure in a registration statement or prospectus, as
determined in good faith by the Chief Executive Officer or the Board of
Directors of the Company or that disclosure of such information in the
Registration Statement or the prospectus constituting a part thereof would be
materially detrimental to the business and affairs of the Company; or (b) any
material engagement or activity by the Company which would, in the good faith
determination of the Chief Executive Officer or the Board of Directors of the
Company, be materially adversely affected by disclosure in a registration
statement or prospectus at such time. In each event that there should be in
excess of one Blackout Event during any year commencing on the date of this
Agreement or any anniversary hereof, or in each event that any Blackout Period
should continue in excess of 30 days, for each such Blackout Period and for each
30-day period or portion thereof following the aforementioned initial 30 days,
the number of shares of Common Stock issuable upon exercise of the Warrants
shall be increased by 2% and the exercise price thereof shall be decreased by 2%
from the number of shares of Common Stock and exercise price thereof on effect
immediately prior to such adjustment.
(iv) At least five (5) Business Days prior to the filing with the
Commission of the Registration Statement (or any amendment thereto) or the
prospectus forming a part thereof (or any supplement thereto), the Company shall
provide draft copies thereof to the Purchaser and shall consider incorporating
into such documents such comments as the Purchaser (and its counsel) may propose
to be incorporated therein. Notwithstanding the foregoing, no prospectus
supplement, the form of which has previously been provided to the Purchaser,
need be delivered in draft form to the Purchaser.
(v) The Company shall promptly notify the Purchaser upon the
occurrence of any of the following events in respect of the Registration
Statement or the prospectus forming a part thereof: (i) receipt of any request
for additional information from the Commission or any other federal or state
governmental authority during the Registration Period, the response to which
would require any amendments or supplements to the Registration Statement or
related prospectus; (ii) the issuance by the Commission or any other federal or
state governmental authority of any stop order suspending the effectiveness of
the Registration Statement or the initiation of any proceedings for that
purpose; or (iii) receipt of any notification with respect to the suspension of
the qualification or exemption from qualification of any of the Shares for sale
in any jurisdiction or the initiation or threatening of any proceeding for such
purpose.
(vi) The Company shall furnish to the Purchaser with respect to the
Shares registered under the Registration Statement (and to each underwriter, if
any, of such Shares) such number of copies of prospectuses and such other
documents as the Purchaser may reasonably request, in order to facilitate the
public sale or other disposition of all or any of the Shares by the Purchaser
pursuant to the Registration Statement.
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(vii) The Company shall file or cause to be filed such documents as
are required to be filed by the Company for normal state securities law or "blue
sky" clearance in states specified in writing by the Purchaser; PROVIDED,
HOWEVER, that the Company shall not be required to qualify to do business or
consent to service of process in any jurisdiction in which it is not now so
qualified or has not so consented.
(viii) With a view to making available to the Purchaser the
benefits of Rule 144, the Company agrees, throughout the Registration Period and
so long as the Purchaser owns Shares purchased pursuant to this Agreement, to:
(A) comply with the provisions of paragraph (c)(1) of
Rule 144; and
reports and other documents required to be filed by the Company pursuant to
Section 13, 14 or 15(d) under the Exchange Act; and, if at any time it is not
required to file such reports but in the past had been required to or did file
such reports, it will, upon the request of the Purchaser, make available other
information as required by, and so long as necessary to permit sales of its
Shares pursuant to, Rule 144.
(ix) The Company shall bear all expenses incurred by it in
connection with the procedures in paragraphs (i) through (ix) of this Section
3.01(a) and the registration of the Shares pursuant to the Registration
Statement. The Company shall not be responsible for any expenses incurred by the
Purchaser in connection with its sale of the Shares or its participation in the
procedures in paragraphs (i) through (ix) of this Section 3.01(a), including,
without limitation, any fees and expenses of counsel or other advisers to the
Purchaser and any underwriting discounts, brokerage fees and commissions
incurred by the Purchaser.
(b) (i) The Company may refuse to register (or permit its transfer
agent to register) any transfer of any Shares not made in accordance with this
Section 3.01(b) and for such purpose may place stop order instructions with its
transfer agent with respect to the Shares.
(c) So long as the Registration Statement is effective covering the
resale of Shares then still owned by the Purchaser, the Company shall furnish to
the Purchaser:
(i) as soon as practicable after available, one copy of (A) its
Annual Report to Stockholders (which Annual Report shall contain financial
statements audited in accordance with generally accepted accounting principles
by a firm of certified public accountants), (B) upon written request, its Annual
Report on Form 10-KSB, (C) upon written request, its Quarterly Reports on Form
10-QSB, (D) upon written request, its Current Reports on Form 8-K, and (E) a
full copy of the Registration Statement (the foregoing, in each case, excluding
exhibits); and
(ii) upon the written request of the Purchaser, all exhibits
excluded by the parenthetical to subparagraph (i)(E) of this Section 3.01(d).
14
(d) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar (which may be the
same entity as the transfer agent) for its Common Stock, which transfer agent
and registration shall be reasonably satisfactory to the Purchaser.
(e) If at any time prior to the termination of the Registration Period,
any rumor, publication or event relating to or affecting the Company shall occur
as a result of which, in the reasonable opinion of the Purchaser, the market
price of the Common Stock has been or is likely to be materially affected
(regardless of whether such rumor, publication or event necessitates a
supplement to, or amendment of, the Prospectus), the Company will, if reasonably
requested by the Purchaser, forthwith prepare, and, if permitted by law,
disseminate a press release or other public statement, reasonably satisfactory
to the Purchaser, responding to or commenting on such rumor, publication or
event.
(f) The Company shall promptly comply with the Xxxxxxxx-Xxxxx Act of
2002 and the regulations promulgated pursuant thereto if it is not in compliance
at the date hereof.
(g) Simultaneously with the execution hereof, the Company shall enter
into an escrow agreement with the Purchaser and Reitler Xxxxx LLC, as escrow
agent, substantially in the form of Exhibit 3.01(g) hereto.
SECTION 3.02 COVENANTS OF THE PURCHASER.
(a) The Purchaser agrees to comply in all material respects with all
federal and state securities laws and the rules and regulations promulgated
thereunder in connection with any sale by it of the Shares, the Warrants and the
Warrant Shares, whether or not such sale is pursuant to the Registration
Statement. In connection with the sale of any Shares pursuant to the
Registration Statement, but without limiting the generality of the foregoing
sentence, the Purchaser shall (i) comply with the provisions of Regulation M
promulgated under the Exchange Act, and (ii) deliver to the purchaser of Shares
the prospectus forming a part of the Registration Statement and all relevant
supplements thereto which have been provided by the Company to the Purchaser on
or prior to the applicable delivery date.
(b) The Purchaser will cooperate with the Company in all respects in
connection with the performance by the Company of its obligations under Section
3.01(a), including timely supplying all information reasonably requested by the
Company (which shall include all information regarding the Purchaser, and any
person who beneficially owns Shares held by the Purchaser within the meaning of
Rule 13d-3 promulgated under the Exchange Act, and the proposed manner of sale
of the Shares required to be disclosed in the Registration Statement) and
executing and returning all documents reasonably requested in connection with
the registration and sale of the Shares. The Purchaser hereby consents to be
named as an underwriter in the
15
Registration Statement, if applicable, in accordance with current Commission
policy and, if necessary, to join in the request of the Company for the
acceleration of the effectiveness of the Registration Statement.
(c) Neither the Purchaser nor any entity controlling it, under its
control or under common control with it has, prior to the execution of this
Agreement, and will not, for a period of 18 months following the execution of
this Agreement, carry a net short position in the Common Stock of the Company,
participate in any short selling activities, recommendations, or collusion,
directly or indirectly, as such activities relate to the Common Stock. A net
short position will include any derivative instruments such as a put option,
collar, swap or any other instrument which would result in a net short position.
(d) In connection with the sale of any Shares pursuant to the
Registration Statement, the Purchaser shall deliver to the purchaser thereof the
prospectus forming a part of the Registration Statement and all relevant
supplements thereto which have been provided by the Company to the Purchaser on
or prior to the applicable delivery date, all in accordance with the
requirements of the Securities Act and the rules and regulations promulgated
thereunder and any applicable blue sky laws.
(e) If at any time or from time to time after the Effective Date, the
Company notifies the Purchaser in writing that the Registration Statement or the
prospectus forming a part thereof (taking into account any prior amendments or
supplements thereto) contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading, the Purchaser shall
not offer or sell any Shares or engage in any other transaction involving or
relating to the Shares (other than purchases of Shares pursuant to this
Agreement), from the time of the giving of notice with respect to such untrue
statement or omission until the Purchaser receives written notice from the
Company that such untrue statement or omission no longer exists or has been
corrected or disclosed in an effective post-effective amendment to the
Registration Statement or a valid prospectus supplement to the prospectus
forming a part thereof.
(f) The Purchaser acknowledges and understands that the Shares, the
Warrants, and the Warrant Shares are (or upon the issuance thereof will be)
"restricted securities" as defined in Rule 144. The Purchaser hereby agrees not
to offer or sell (as such terms are defined in the Securities Act and the rules
and regulations promulgated thereunder) any Shares, Warrants, or Warrant Shares
unless such offer or sale is made (a) pursuant to an effective registration of
such securities under the Securities Act, or (b) pursuant to an available
exemption from the registration requirements of the Securities Act. The
Purchaser agrees that it will not engage in hedging transactions with regard to
the Shares, the Warrants, and the Warrant Shares other than in compliance with
the Securities Act. A proposed transfer shall be deemed to comply with this
Section 3.02(f) if the Purchaser delivers to the Company a legal opinion in form
and substance reasonably satisfactory to the Company from counsel reasonably
satisfactory to the Company to the effect that such transfer complies with this
Section 3.02(f).
16
(g) Simultaneously with the execution hereof, the Purchaser shall enter
into an escrow agreement with the Company and Reitler Xxxxx LLC, as escrow
agent, substantially in the form of Exhibit 3.01(g) hereto, and shall deposit
into the escrow created thereby $50,000.
SECTION 3.03 INDEMNIFICATION.
(a) For the purpose of this paragraph (a) of this Section 3.03: (i) the
term "PURCHASER AFFILIATE" shall mean any person who controls the Purchaser
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act; and (ii) the term "REGISTRATION STATEMENT" shall include any final
prospectus, exhibit, supplement or amendment included in or relating to the
Registration Statement referred to in Section 3.01(a).
(i) The Company agrees to indemnify and hold harmless the
Purchaser and each Purchaser Affiliate, against any losses, claims, damages,
liabilities or expenses, joint or several, to which such Purchaser or such
Purchaser Affiliate may become subject, under the Securities Act, the Exchange
Act, or any other federal or state statutory law or regulation, or at common law
or otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of the Company, which consent shall not be
unreasonably withheld), insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof as contemplated below) arise out of or
are based upon (A) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, as amended as of the
Effective Date, including any information deemed to be a part thereof as of the
time of effectiveness pursuant to paragraph (b) of Rule 430A, or pursuant to
Rule 434 promulgated under the Securities Act, or the prospectus, in the form
first filed with the Commission pursuant to Rule 424(b) of the Regulations, or
filed as part of the Registration Statement at the time of effectiveness if no
Rule 424(b) filing is required (the "PROSPECTUS"), or any amendment or
supplement thereto, (B) the omission or alleged omission to state in the
Registration Statement as of the Effective Date a material fact required to be
stated therein or necessary to make the statements in the Registration Statement
or any post-effective amendment or supplement thereto, or in the Prospectus or
any amendment or supplement thereto, not misleading, in each case in the light
of the circumstances under which the statements contained therein were made, or
(C) any inaccuracy in the representations and warranties of the Company
contained in this Agreement, or any failure of the Company to perform its
obligations hereunder, and will reimburse the Purchaser and each such Purchaser
Affiliate for any legal and other expenses as such expenses which are reasonably
incurred by the Purchaser or such Purchaser Affiliate in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action; PROVIDED, HOWEVER, that the Company will
not be liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon (A) an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, the prospectus included therein, or any amendment or
supplement thereto in reliance upon, and in conformity with, written information
furnished to the Company by the Purchaser expressly for use therein, or (B) the
failure of the Purchaser to comply with the
17
covenants and agreements contained in Section 3.02 hereof, or (C) the inaccuracy
of any representations made by the Purchaser herein or (D) any statement or
omission in any Prospectus that is corrected or disclosed in any subsequent
Prospectus that was delivered to the Purchaser prior to the pertinent sale or
sales by the Purchaser.
(ii) The Purchaser will indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement and each person, if any, who controls the Company within the meaning
of the Securities Act and the Exchange Act, against any losses, claims, damages,
liabilities or expenses to which the Company, each of its directors, each of its
officers who signed the Registration Statement or controlling person may become
subject, under the Securities Act, the Exchange Act, or any other federal or
state statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of such Purchaser) insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof as contemplated below) arise out of
or are based upon (A) any failure to comply with the covenants and agreements
contained in Section 3.02 hereof, (B) the inaccuracy of any representation made
by the Purchaser herein, or (C) any (I) untrue or alleged untrue statement of
any material fact contained in the Registration Statement, the Prospectus, or
any amendment or supplement thereto, or (II) omission or alleged omission to
state in the Registration Statement, the Prospectus or any amendment or
supplement thereto a material fact required to be stated therein or necessary to
make the statements in the Registration Statement or any amendment or supplement
thereto, in the prospectus included therein, or any amendment or supplement
thereto, not misleading, in each case in the light of the circumstances under
which they were made; provided, that the Purchaser's indemnification obligation
under this clause (C) shall apply to the extent, and only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, such prospectus, or any
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company by the Purchaser expressly for use therein,
and will reimburse the Company, each of its directors, each of its officers who
signed the Registration Statement or controlling person for any legal and other
expense reasonably incurred by the Company, each of its directors, each of its
officers who signed the Registration Statement or controlling person in
connection with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability, expense or action.
(iii) Promptly after receipt by an indemnified party under
this Section 3.03 of notice of the threat or commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section 3.03, promptly notify the indemnifying
party in writing thereof; provided, the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party for contribution (except as provided in paragraph (iv)) or
otherwise than under the indemnity agreement contained in this Section 3.03 or
to the extent it is not prejudiced as a result of such failure. In case any such
action is brought against any indemnified party and such indemnified party seeks
or intends to seek indemnity from an indemnifying party, the
18
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with all other indemnifying parties similarly notified, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Upon receipt of notice from the indemnifying party to such
indemnified party of its election so to assume the defense of such action and
approval by the indemnified party of counsel, the indemnifying party will not be
liable to such indemnified party under this Section 3.03 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof unless the indemnified party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of action, in which
case the reasonable fees and expenses of counsel shall be at the expense of the
indemnifying party or both the Company and Purchaser, in the reasonable opinion
of counsel to the Purchaser, have defenses distinct from, or contradictory to,
the defenses available to the other.
(iv) If the indemnification provided for in this Section 3.03
is required by its terms but is for any reason held to be unavailable to or
otherwise insufficient to hold harmless an indemnified party under paragraphs
(i) or (ii) of this Section 3.03 in respect to any losses, claims, damages,
liabilities or expenses referred to herein (subject to the limitation of
paragraph (iii) of this Section 3.03), then each applicable indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of any losses, claims, damages, liabilities or expenses referred to
herein (I) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Purchaser from the sale of the Common Stock
contemplated by this Agreement or (II) if the allocation provided by clause (I)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (I) above but
the relative fault of the Company and the Purchaser in connection with the
statements or omissions or inaccuracies in the representations and warranties in
this Agreement that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Purchaser on the other
shall be deemed to be in the same proportion as the amount paid by the Purchaser
to the Company pursuant to this Agreement for the Shares purchased by the
Purchaser that were sold pursuant to the Registration Statement bears to the
difference (the "DIFFERENCE") between the amount such Purchaser paid for the
Shares that were sold pursuant to the Registration Statement and the amount
received by such Purchaser from such sale. The relative fault of the Company on
the one hand and the Purchaser on the other shall be determined by reference to,
among other things, whether the untrue or alleged statement of a material fact
or the omission or alleged omission to state a material fact or the inaccurate
or the alleged inaccurate representation and/or warranty relates to information
supplied by the Company or by the Purchaser and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement, omission or inaccuracy. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
paragraph (iii) of this Section 3.03, any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim. The provisions set forth in paragraph (iii) of this Section
3.03 with respect to the notice of the threat or commencement of any threat or
action
19
shall apply if a claim for contribution is to be made under this paragraph (iv);
PROVIDED, HOWEVER, that no additional notice shall be required with respect to
any threat or action for which notice has been given under paragraph (iii) for
purposes of indemnification. The Company and each Purchaser agree that it would
not be just and equitable if contribution pursuant to this Section 3.03 were
determined solely by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in this
paragraph. Notwithstanding the provisions of this Section 3.03, the Purchaser
shall not be required to contribute any amount in excess of the amount by which
the Difference exceeds the amount of any damages that such Purchaser has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
ARTICLE IV
CONDITIONS TO CLOSING
SECTION 4.01 CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER. The
obligation of the Purchaser to purchase Tranche Shares at a Closing shall be
subject to the satisfaction of the following conditions, or the waiver of such
conditions by the Purchaser, at or prior to the applicable Tranche Closing Date:
(a) the representations and warranties of the Company set
forth in Section 2.01 of this Agreement shall be true and correct with the same
force and effect as though expressly made on and as of such Tranche Closing
Date, except for representations or warranties made as of a particular date
which representations and warranties shall be true and correct as of such date;
(b) the Company shall have complied with all the agreements
hereunder and satisfied all the conditions on its part to be performed or
satisfied hereunder at or prior to such Tranche Closing Date;
(c) the Company shall have delivered to the Purchaser a
certificate executed by the Chairman of the Board or President and the chief
financial or accounting officer of the Company, dated the applicable Tranche
Closing Date, to the effect that the conditions in clauses (i) and (ii) have
been satisfied;
(d) the Registration Statement shall have been declared by the
Securitires and Exchange Commission (the "COMMISSION") to be effective under the
Securities Act on or prior to ________________, 2004, and shall not have been
withdrawn, no stop order suspending the effectiveness of the Registration
Statement shall be in effect, and no proceedings for the suspension of the
effectiveness of the Registration Statement shall have been instituted or
20
threatened by the Commission;
(e) Xxxxxxx Xxxxxx Xxxxxxxxx Xxxx & Xxxxxx LLP, counsel to the
Company, shall have delivered its legal opinion to the Purchaser that the
Tranche Shares being issued on such Tranche Closing Date will, upon issuance, be
duly authorized, validly issued, fully paid and non-assessable. [SCOPE OF
OPINION UNDER DISCUSSION WITH SBI]
SECTION 4.02 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligation of the Company to sell Tranche Shares at any Closing shall be subject
to the satisfaction of the following conditions, or the waiver of such
conditions by the Company, at or prior to the applicable Tranche Closing Date:
(a) the representations and warranties of the Purchaser set
forth in Section 2.02 of this Agreement shall be true and correct with the same
force and effect as though expressly made on and as of such Tranche Closing
Date, except for representations or warranties made as of a particular date
which representations and warranties shall be true and correct as of such date;
(b) the Purchaser shall have complied with all the agreements
hereunder and satisfied all the conditions on its part to be performed or
satisfied hereunder at or prior to such Tranche Closing Date;
(c) the Purchaser shall have delivered to the Company a
certificate executed by a duly authorized officer of the Purchaser, dated the
applicable Tranche Closing Date, to the effect that the conditions in clauses
(a) and (b) have been satisfied; and
(d) no stop order suspending the effectiveness of the
Registration Statement shall be in effect, and no proceedings for the suspension
of the effectiveness of the Registration Statement shall have been instituted or
threatened by the Commission.
ARTICLE V
MISCELLANEOUS
SECTION 5.01 NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified airmail, confirmed facsimile or nationally recognized
overnight express courier postage prepaid, and shall be deemed given when so
mailed and shall be delivered as addressed as follows:
21
(a) if to the Company, to:
Perfisans Holdings Inc.
0000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx X0X 0X0
Phone: 000-000-0000
Facsimile: 000-000-0000
Attn: To-Xxx Xxx
with a copy to:
Xxxxxxx, Savage, Kaplowitz, Wolf & Marcus, LLP
000 Xxxx 00xx Xxxxxx - 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx, Esq.
Phone: 000-000-0000
Facsimile:
or to such other person at such other place as the
Company shall designate to the Purchaser in writing;
and
(b) if to the Purchaser, to:
SBI Brightline V LLC
Address: 0000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxx
Phone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Reitler Xxxxx LLC
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx Xxxxx, Esq.
Phone: 000-000-0000
Telecopy: 000-000-0000
SECTION 5.02 ASSIGNMENT. Neither party hereto may assign or delegate
any of such party's rights or obligations under or in connection with this
Agreement, and any attempted assignment or delegation of such rights or
obligations shall be void. Except as expressly provided in Section 3.03 with
respect to Purchaser Affiliates, directors and controlling persons of the
Company and officers of the Company who signed the Registration Statement, no
person,
22
including without limitation any person who purchases or otherwise acquires or
receives any Shares from the Purchaser, is an intended third party beneficiary
of this Agreement, and no party to this Agreement shall have any obligation
arising under this Agreement to any person other than the other party hereto
and, to the extent expressly provided in Section 3.03, Purchaser Affiliates,
directors and controlling persons of the Company and officers of the Company who
signed the Registration Statement.
SECTION 5.03 CHANGES. This Agreement may not be modified or amended
except pursuant to an instrument in writing signed by the Company and the
Purchaser.
SECTION 5.04 HEADINGS. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
SECTION 5.05 SEVERABILITY. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
SECTION 5.06 GOVERNING LAW; VENUE. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to its conflicts of law principles, and the federal law of the United
States of America. The Company irrevocably consents to the jurisdiction of the
courts of the State of California and of any federal court, in each case located
in Los Angeles or Orange County, California in connection with any action or
proceeding arising out of, or relating to, this Agreement, any document or
instrument delivered pursuant to, in connection with, or simultaneously with
this Agreement, or a breach of this Agreement or any such document or
instrument. In any such action or proceeding, the Company waives personal
service of any summons, complaint, or other process and agrees that service
thereof may be made in accordance with Section 5.01. Within 30 days after such
service, or such other time as may be mutually agreed upon in writing by the
attorneys for the parties to such action or proceeding, the Company shall appear
or answer such summons, complaint, or other process. Should the Company fail to
appear or answer within such 30-day period or such extended period, as the case
may be, the Company shall be deemed in default and judgment may be entered
against the Company for the amount as demanded in any summons, complaint, or
other process so served.
SECTION 5.07 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument, and shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other parties.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
PERFISANS HOLDINGS INC.
BY:
------------------------------------
NAME:
TITLE: CHIEF EXECUTIVE OFFICER
SBI BRIGHTLINE V LLC
BY:
------------------------------------
NAME: XXXXXX XXXXXXX
TITLE: MANAGING MEMBER
24
SCHEDULE 1.01(A)
TRANCHES
NUMBER OF TRANCHE SHARES TRANCHE PURCHASE PRICE PER
TRANCHE NO. INCLUDED IN TRANCHE TRANCHE SHARE (U.S. DOLLARS)
----------- ------------------- ----------------------------
1 1,000,000 $2.00
2 1,000,000 $3.00
25
