NOTE PURCHASE AGREEMENT
Exhibit
10.2
THIS NOTE
PURCHASE AGREEMENT (this "Agreement") is
entered into as of February 12, 2010, by and among PERPETUAL
TECHNOLOGIES, INC., a Delaware corporation with its principal executive offices
located at Shishan Industrial Park, Nanhai District, Foshan City, Guangdong
Province, China (the "Company"), Hong Hui
Investment Holdings, Inc a British Virgin islands company (the “BVI Company”), the
owner of all of the outstanding equity interests of Technic International
Limited, a Hong Kong company (“Technic”), the owner
of all of the outstanding equity interests of Foshan SLP Special Materials
Company (“Foshan”), a limited
liability company organized under the laws of the People’s Republic of China
(“PRC”) and the
purchasers set forth on Schedule 1 hereof
(collectively, the "Purchasers" and each
a "Purchaser").
RECITALS
A. The
Company has entered into a reverse merger agreement (the “Reverse Merger
Agreement”) pursuant to which the Company acquired control of the BVI
Company, Technic and Foshan (the “Reverse Merger
Transaction”). The Company, BVI Company, Technic and
Foshan are sometimes collectively referred to herein as the “Corporate
Parties.”
B. The
Company and the Purchasers are executing and delivering this Agreement in
reliance upon the exemptions from securities registration afforded by the
provisions of Regulation D ("Regulation D"), as
promulgated by the United States Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "Securities Act")
and/or Regulation S, as promulgated by the SEC under the Securities
Act.
C. Each
Purchaser desires to purchase, upon the terms and conditions stated in this
Agreement: (i) a secured convertible promissory note of the Company in the form
attached hereto as Exhibit A and in the
principal amount set forth on the Purchaser’s signature page to this Agreement
(the “Purchaser’s
Signature Page”), each such note being referred to herein as a “Note” and all of the
notes sold pursuant to this Agreement being collectively referred to herein as
the “Notes,”
the securities issuable upon conversion of the Notes are referred to herein as
the "Conversion
Securities;" and (ii) five (5) year warrants to purchase shares of the
Company’s common stock, $0.001 par value per share (the “Warrants,” and the
shares of the Company’s common stock underlying the Warrants, the “Warrant
Shares”). The Notes, the Conversion Securities, the Warrants,
and the Warrants Shares are collectively referred to herein as the "Securities."
D. Contemporaneous
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement, in the form attached
hereto as Exhibit “I” (the “Registration Rights
Agreement”), pursuant to which the Company has agreed to provide certain
registration rights under the Securities Act and the rules and regulations
promulgated thereunder and applicable state securities laws.
E. Contemporaneous
with the execution and delivery of this Agreement, certain members of management
of the Company will pledge and deliver certain shares of Company Common Stock to
a designated collateral agent (the “Stock Pledge Agreement”) to guarantee the
Company’s obligations under the Notes pursuant to a Non-Recourse Guaranty (the
“Non-Recourse
Guaranty”).
F. This
Agreement, the Notes, the Reverse Merger Agreement, the Warrants, the
Registration Rights Agreement, the Stock Pledge Agreement, the Voting Agreement,
the Non-Recourse Guaranty, and the Escrow Agreement and the Interest Escrow
Agreement (as certain of such terms are defined below), and any other documents
or agreements executed in connection with the transactions contemplated
hereunder are hereinafter referred to as the "Transaction
Documents.”
AGREEMENTS
NOW,
THEREFORE, in consideration of their respective promises contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and the Purchasers hereby agree as
follows:
ARTICLE
I
PURCHASE
AND SALE OF NOTES
1.1 Purchase and Sale of
Notes. Subject to the terms and conditions of this Agreement,
the issuance, sale and purchase of the Notes shall be consummated
at a "Closing" whereby the
Company shall sell and the Purchasers shall purchase: (i) the Notes, in
substantially the form attached hereto as exhibit A; and (ii) a Warrant, in
substantially the form attached hereto as Exhibit B, as
hereinafter provided. The purchase price (the "Purchase Price") per
Note shall be equal to the principal amount of the Note being
purchased. At the Closing, subject to the satisfaction or waiver of
the conditions set forth in ARTICLES VI and VII below, the Company shall issue
and sell to each Purchaser, and each Purchaser severally agrees to purchase from
the Company, a Note in the principal amount set forth on such Purchaser’s
Signature Page and a Warrant to purchase a number of shares of Common Stock
equal to the formula as set forth in the Warrant. Each of the
Warrants shall have a term of five (5) years and has an exercise price per share
equal to the Exercise Price (as defined in the Warrant) and shall be exercisable
as stated in the applicable Warrant. Each Purchaser's obligation to
purchase a Note hereunder is distinct and separate from each other Purchaser's
obligation to purchase, and no Purchaser shall be required to purchase hereunder
more than the principal amount of a Note set forth on the Purchaser’s Signature
Page. The obligations of the Company with respect to each Purchaser
shall be separate from the obligations of the Company to each other Purchaser
and shall not be conditioned as to any Purchaser upon the performance of
obligations of any other Purchaser. The Company and the Purchasers
are executing and delivering this Agreement in accordance with and in reliance
upon the exemption from securities registration afforded by Rule 506 of
Regulation D (“Regulation D”) as
promulgated by the United States Securities and Exchange Commission (the “Commission”) under
the Securities Act of 1933, as amended (the “Securities Act”) or
Section 4(2) of the Securities Act.
1.2. Placement Agent
Fee. The Purchasers acknowledge that the Company has engaged
Primary Capital, LLC as the exclusive placement agent (the “Placement Agent”) in
connection with the offering of the Notes and, as consideration for its
services, has agreed to pay to the Placement Agent at the Closing a commission
equal to five percent (5%) of the gross proceeds received by the Company from
the sale of Notes to the Purchasers. In addition, upon conversion of
the Notes into Conversion Securities, the Company shall issue to the Placement
Agent or its designees warrants to purchase that number of Conversion Securities
equal to 5% of the number of Conversion Securities issued upon such conversion,
exercisable at a price per Conversion Security equal to the price at which the
Notes were so converted. Upon repayment or redemption of the Notes as
provided therein, the Company shall issue to the Placement Agent or its
designees warrants to purchase that number of shares of the Company’s common
stock (the “Common
Stock”) equal to 5% of the aggregate number of shares of Common Stock
underlying the Warrants, exercisable at the same price at which the Warrants are
exercisable. The warrants issuable to the Placement Agent pursuant to
this Section 1.2 shall be in substantially the same form as Exhibit B
hereto.
1.3 Closing
Date. Subject to the satisfaction (or waiver) of the
conditions set forth in ARTICLES VI and VII below, the Closing shall take place
on such date and at such time as the Company and the Placement Agent shall
agree, but no later than three Business Days after the consummation of the
Reverse Merger Transaction.
1.4
Delivery of Purchase Price;
Escrow. Concurrently with each Purchaser’s execution and
delivery of this Agreement, such Purchaser is delivering to the Escrow Agent (as
defined below) by bank or other good check in lawful funds of the United States,
or by wire transfer, the Purchase Price for the Note being purchased by such
Purchaser. Such funds shall be held in escrow pending the Closing,
pursuant to the terms of an escrow agreement by and between the Escrow Agent and
the Company, a copy of which is attached hereto as Exhibit H (the “Escrow
Agreement”).
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ARTICLE
II
PURCHASER'S
REPRESENTATIONS AND WARRANTIES
Each
Purchaser represents and warrants to the Company, as of the date hereof and as
of the Closing, severally and not jointly, with respect to itself and its
purchase hereunder and not with respect to any other Purchaser or the purchase
hereunder by any other Purchaser, that the following statements are true and
correct:
2.1 Investment
Purpose. Purchaser is purchasing its Note for Purchaser's own
account for investment only and not with a view toward or in connection with the
public sale or distribution thereof. Purchaser will not, directly or
indirectly, offer, sell, pledge or otherwise transfer its Securities or any
interest therein, except pursuant to transactions that are exempt from the
registration requirements of the Securities Act or are registered under the
Securities Act. Purchaser understands that Purchaser must bear the
economic risk of its investment in the Securities indefinitely, unless the sale
of its Securities is registered pursuant to the Securities Act and any
applicable state securities laws or an exemption from such registration is
available, and that the Company has no present intention of registering any such
transaction.
2.2 Accredited Investor
Status. Purchaser is an "accredited investor" as that term is
defined in Rule 501(a) of Regulation D.
2.3 Reliance on
Exemptions. Purchaser understands that the Securities are
being offered and sold to Purchaser in reliance upon specific exemptions from
the registration requirements of United States federal and state securities laws
and that the Company is relying upon the truth and accuracy of, and Purchaser's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of Purchaser to acquire its
Note.
2.4 Information. The
Company has made available to the Purchaser the documents publicly filed by the
Company with the SEC (such documents collectively, the "SEC
Documents"). Purchaser has been afforded the opportunity to
ask questions of the Company, was permitted to meet with the Company's officers
and has received what the Purchaser believes to be complete and satisfactory
answers to any such inquiries. Except as set forth in the SEC
Documents or in the Transaction Documents, the Purchaser is not relying upon any
information, representations or warranties of the Company or any other
party. Neither such inquiries nor any other due diligence
investigation conducted by Purchaser or any of its representations shall modify,
amend or affect Purchaser's right to rely on the Company's representations and
warranties contained in ARTICLE III. Purchaser understands that
Purchaser's investment in its Securities involves a high degree of risk,
including, without limitation, the risks and uncertainties disclosed in the SEC
Documents.
2.5 Governmental
Review. Purchaser understands that no United States federal or
state agency or any other government or governmental agency has passed upon or
made any recommendation or endorsement of the Securities.
2.6 Transfer or
Resale. Purchaser understands that (i) the offer and sale of
the Securities have not been registered under the Securities Act or any state
securities laws, and its Securities may not be offered, sold, pledged or
otherwise transferred unless such transaction is subsequently registered
thereunder or an exemption from such registration is available (which exemption
the Company expressly agrees may be established as contemplated in clauses (b)
and (c) of Section 5.1 hereof); (ii) any sale of its Securities made in reliance
on Rule 144 under the Securities Act (or a successor rule) ("Rule 144") may be
made only in accordance with the terms of Rule 144 and further, if Rule 144 is
not applicable, any resale of such Securities without registration under the
Securities Act under circumstances in which the seller may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the SEC thereunder in order for such resale to be allowed, and
(iii) except as provided in the Registration Rights Agreement being entered into
contemporaneously with this Agreement by and among the Company and the
Purchasers (the “Registration Rights
Agreement”), the Company is under no obligation to register the offer or
sale of such Securities under the Securities Act or any state securities laws or
to comply with the terms and conditions of any exemption
thereunder. Purchaser further understands that Rule 144 is currently
unavailable for the resale of its Securities because the Company has been a
shell company, and Rule 144 will remain unavailable until at least one year has
elapsed from the time the Company files with the SEC current “Form 10 equivalent
information” pertaining to the companies acquired by the Company in the Reverse
Merger Transaction, which the Company agrees may occur through the filing of
the Form 8-K (as hereinafter defined).
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2.7 Legends. Purchaser
understands that, subject to ARTICLE V hereof and until such time, if any, as
the sale of the Securities has been registered under the Securities Act (or the
Securities may be sold by Purchaser pursuant to Rule 144 (subject to and in
accordance with the procedures specified in ARTICLE V hereof)), the certificates
evidencing the Securities will bear a restrictive legend (the "Legend"), which will
include language in substantially the following form:
THE SALE
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR SUCH TRANSACTION UNDER APPLICABLE SECURITIES LAWS OR UNLESS OFFERED, SOLD OR
TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS OR PURSUANT TO REGULATION S. HEDGING
TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.
2.8 Authorization;
Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of Purchaser and is a valid and
binding agreement of Purchaser enforceable in accordance with its terms, except
to the extent that such validity or enforceability may be subject to or affected
by any bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights or remedies of creditors generally, or by other equitable principles of
general application.
2.9 Residency. Purchaser
is a resident of the jurisdiction set forth under Purchaser's name on the
Purchaser’s Signature Page.
2.10 Short Sales Prior To the
Date Hereof; Confidentiality. Other than the transaction
contemplated hereunder, Purchaser has not directly or indirectly, nor has any
person acting on behalf of or pursuant to any understanding with Purchaser,
executed any disposition, including short sales, in the securities of the
Company during the period commencing from the time that Purchaser first received
a term sheet (written or oral) from the Company or any other person setting
forth the material terms of the transactions contemplated hereunder until the
date hereof (the “Discussion
Time”). Other than to each Purchaser’s representatives and
advisors and the other parties to this Agreement, each Purchaser has maintained
the confidentiality of all disclosures of non-public information made to it in
connection with this transaction (including the existence and terms of this
transaction) during the Discussion Time.
2.11 No General
Solicitation. Purchaser is not purchasing the Note as a result
of any advertisement, article, notice or other communication regarding the Notes
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or any other general
solicitation or general advertisement.
2.12 No Directed Selling
Efforts. If the Purchaser is purchasing its Note pursuant to
the exemption provided by compliance with Regulation S:
(i) The Purchaser is not a U.S. Person (as defined in Regulation S), and is
acquiring its Note for its own account for the purpose of investment, not for
the account or benefit of any U.S. Person and not with a view to or for resale
in connection with any distribution thereof or interest therein;
(ii) At the time of the Company’s offer of the Notes to the Purchaser, and the
acceptance of such offer, the Purchaser was outside the United States, and no
offer to acquire the Notes or otherwise to participate in the transactions
contemplated by this Agreement was made to the Purchaser inside the United
States; and
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(iii) The Purchaser has no present plan or intention to sell the Securities in
the U.S. or to a U.S. Person at any predetermined time, and is not acting as an
underwriter, dealer, distributor, or other person who is participating, pursuant
to a contractual arrangement, in the distribution of the
Securities.
2.13 No Assurance of Return on
Investment. Purchaser realizes that the purchase of the
Securities is a highly speculative investment. Purchaser is able to
bear the economic risk of the purchase of the Securities pursuant to the terms
of this Agreement, to hold the Securities for an indefinite period of time and
to suffer a complete loss of Purchaser’s investment. Prior to
executing this Agreement, Purchaser has reviewed carefully a copy of this
Agreement and each schedule and exhibit hereto. Purchaser has such
knowledge and experience in financial and business matters that the Purchaser is
capable of evaluating the merits and risks of the purchase of Securities
pursuant to the terms of this Agreement and protecting the Purchaser’s interests
in connection therewith. THERE IS NO ASSURANCE THAT PURCHASER WILL
RECOVER OR REALIZE ANY RETURN ON PURCHASER’S INVESTMENT IN THE SECURITIES OR
THAT PURCHASER WILL NOT LOSE PURCHASER’S ENTIRE INVESTMENT IN THE
COMPANY. THERE IS NO ASSURANCE THAT THE COMPANY WILL ACHIEVE
PROFITABILITY. PURCHASER HAS READ THE RISK FACTORS CONTAINED IN THE
COMPANY’S SEC DOCUMENTS AND OTHER MATERIAL PROVIDED OR MADE AVAILABLE BY THE
COMPANY CAREFULLY AND CONSULTED WITH PURCHASER’S OWN ATTORNEY OR BUSINESS
ADVISOR PRIOR TO MAKING ANY INVESTMENT DECISION. PURCHASER CAN AFFORD
THE RISK OF LOSS OF PURCHASER’S ENTIRE INVESTMENT IN THE COMPANY.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Each of
the Company, the BVI Company, Technic and Foshan severally (not jointly and
severally) make the following representations and warranties to each Investor;
provided, that, except where the context indicates otherwise, as used in this
Section 3, all references to “Subsidiaries” shall mean the
collective reference to the BVI Company, Technic and Foshan, as Subsidiaries of
the Company. The Corporate Parties represent and warrant to each Purchaser as of
the date hereof and as of the Closing that the following statements are true and
correct, except as set forth on the disclosure schedules indicated below and
attached hereto and except as disclosed in the SEC Documents.
3.1 Subsidiaries. The
Company’s direct and indirect subsidiaries (as defined in Rule 1-02(x) of the
Regulation S-X promulgated by the Commission under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”)) are
set forth in Schedule
3.1 (each, a “Subsidiary”). Upon
consummation of the Reverse Merger, the Company will own 100% of the share
capital of the BVI Company. The BVI Company currently owns all of the shares of
Technic. Technic currently owns 100% of the share capital of
Foshan. As at the date hereof, and as at the consummation of the
Reverse Merger, the outstanding shares of capital stock or similar equity
interests of such Subsidiaries will have been validly issued, fully paid and
nonassessable. Upon the consummation of the Reverse Merger, such
shares shall be owned (i) as to Foshan by Technic, (ii) as to Technic by the BVI
Company and (iii) as to the the BVI Company by the Company. Except as
disclosed in Schedule
3.1, all of the outstanding shares of capital stock of each of the
Subsidiaries are owned beneficially and of record by the Company, one of its
other Subsidiaries, or any combination of the Company or one or more of its
other Subsidiaries, in each case free and clear of any liens, charges,
restrictions, claims or encumbrances of any nature whatsoever (collectively,
“Liens”); and
there are no outstanding subscriptions, warrants, options, convertible
securities, or other rights (contingent or other) pursuant to which any of the
Subsidiaries is or may become obligated to issue any shares of its capital stock
to any person other than the Company or one of the other
Subsidiaries. All the issued and outstanding shares of capital stock
of each subsidiary are validly issued and are fully paid, non-assessable and
free of preemptive and similar rights. The capitalization of each
Subsidiary is set forth on Schedule 3.1
hereof.
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3.2 Organization and
Qualification. The Company and each of its Subsidiaries
are duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation of
any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter
documents. The Company and each Subsidiary are duly qualified to
conduct its respective businesses and are in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case may
be, could not, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect. "Material Adverse
Effect" means any effect which, individually or in the aggregate with all
other effects, reasonably would be expected to be materially adverse to the
business, operations, properties, financial condition, operating results or
prospects of the Company or its Subsidiaries, taken as a whole, or on the
transactions contemplated hereby.
3.3 Authorization;
Enforcement. (a) The Company has the requisite corporate power
and authority to enter into and perform its obligations under the Transaction
Documents, and to issue, sell and perform its obligations with respect to the
Securities in accordance with the terms hereof and thereof and in accordance
with the terms and conditions of the Securities; (b) the execution, delivery and
performance of the Transaction Documents by the Company and the consummation by
it of the transactions contemplated hereby and thereby (including, without
limitation, the issuance of the Notes and the other Securities) have been duly
authorized by all necessary corporate action and no further consent or
authorization of the Company, its board of directors, or its stockholders or any
other person or entity is required with respect to any of the transactions
contemplated hereby or thereby; (c) this Agreement has been, and at the Closing
the Notes will be, duly executed and delivered by the Company; and (d) this
Agreement constitutes, and when issued pursuant to the terms of this Agreement,
the Notes and the Warrants will constitute, legal, valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms, except (i) to the extent that such validity or enforceability
may be subject to or affected by any bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally the
enforcement of, creditors' rights or remedies of creditors generally, or by
other equitable principles of general application, and (ii) as rights to
indemnity under this Agreement may be limited by federal or state securities
laws.
3.4 Capitalization. The
capitalization of the Corporate Parties are set forth on Schedule 3.4
hereof. All of outstanding shares of capital stock of the Company
have been, or upon issuance will be, validly issued, fully paid and
nonassessable. No shares of capital stock of the Company (including
the Common Stock, the Conversion Securities and the Warrant Shares) are subject
to preemptive rights or any other similar rights of the stockholders of the
Company or any Liens enforceable against the Company. Except as
disclosed in Schedule
3.4 hereof, (i) there are no outstanding options, warrants, scrip, rights
to subscribe for, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into or exercisable or exchangeable for, any
shares of capital stock of the Company, or contracts, commitments,
understandings or arrangements by which the Company is or may become bound to
issue additional shares of capital stock of the Company and (ii) issuance of the
Securities will not trigger anti-dilution rights for any other outstanding or
authorized securities of the Company. The Company has made available
to Purchaser true and correct copies of the Company's Certificate of
Incorporation, as amended ("Certificate of
Incorporation"), and the Company's By-laws, as amended (the "By-laws"). The
Company has set forth on Schedule 3.4 hereof
all instruments and agreements (other than the Certificate of Incorporation and
By-laws) governing securities convertible into or exercisable or exchangeable
for any class of its Common Stock (and the Company shall provide to each
Purchaser copies thereof upon the request of such Purchaser).
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3.5 No
Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company, and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance and reservation for issuance, as applicable, of the Securities) do not
and will not (a) result in a violation of the Certificate of Incorporation or
By-laws or (b) conflict with, or constitute a default (or an event which, with
notice or lapse of time or both, would become a default) under or a breach of,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any Subsidiary is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including U.S. federal and state
securities laws) applicable to the Company or any Subsidiary or by which any
property or asset of the Company or any Subsidiary is bound or
affected. Neither the Company nor any Subsidiary is in default (and
no event has occurred which has not been waived which, with notice or lapse of
time or both, could reasonably be expected to put the Company or any Subsidiary
in default) under or breach of, nor has there occurred any event giving others
(with notice or lapse of time or both) any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture or instrument
to which the Company or such Subsidiary is a party. The business of
the Company and each Subsidiary has been conducted, is being conducted, and
shall be conducted so long as a Purchaser owns any of the Securities, in
compliance in all material respects with all applicable laws, ordinances and
regulations. The businesses of the Corporate Parties, if any, are not
being conducted in violation of any law, ordinance or regulation of any
governmental entity material to the business of such Corporate
Parties. Except as specifically contemplated by this Agreement and as
required under the Securities Act and any applicable laws of the People’s
Republic of China, neither the Company nor its Subsidiaries is required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court, governmental agency, regulatory agency, self
regulatory organization or stock market or any third party, in order for the
execution, delivery or performance of any of its obligations under this
Agreement and the other Transaction Documents in accordance with the terms
hereof or thereof, or to issue and sell the Notes and the Warrants in accordance
with the terms hereof and to issue the Conversion Securities on conversion of
the Notes and/or the Warrant Shares upon exercise of the Warrants.
3.6 Consents. The
execution, delivery and performance by the Company of the Transaction Documents
and the offer, issuance and sale of the Securities require no consent or
authorization of, action by or in respect of, or filing or registration with,
any person, entity, governmental body, agency, or official other than (i)
filings that have been made pursuant to applicable state securities laws, (ii)
post-sale filings pursuant to applicable state and federal securities laws,
(iii) filings with FINRA and (iv) any filings required under the
Registration Rights Agreement.
3.7 SEC Documents; Financial
Statements.
(a)
Since January 10, 2008, the Company has filed the SEC Documents required to be
filed by it with the SEC pursuant to the reporting requirements of the Exchange
Act and is a fully-reporting company under Section 12(g) of the Exchange
Act. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the statements made in any of the SEC Documents
which is required to be updated or amended under applicable law has not been so
updated or amended. The financial statements of the Company
included in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC or other applicable rules and regulations with respect
thereto. Such financial statements have been prepared in accordance
with U.S. generally accepted accounting principles, consistently applied, and
the rules and regulations of the SEC during the periods involved (except (i) as
may be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they do not
include footnotes or are condensed or summary statements) and present accurately
and completely the financial position of the Company as of the dates thereof and
the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). To the Company’s knowledge, the SEC Documents contain a
complete and accurate list of all material undischarged written or oral
contracts, agreements, leases or other instruments to which the Company or a
Subsidiary is a party or by which the Company or a Subsidiary is bound or to
which any of the properties or assets of the Company or a Subsidiary is subject
(each, a "Contract"), a copy of
which would be required to be filed with the SEC as an exhibit to a registration
statement on Form S-3 or applicable form if the Company or any
subsidiary were registering securities under the Securities Act. None
of the Company, any Subsidiary, or, to the Company's knowledge, any of the other
parties thereto, is in breach or violation of any Contract.
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(b)
A true and complete copy of the consolidated financial statements of Technic as
of and for the fiscal years ended September 30, 2009 and 2008 and the related
notes thereto (the “Technic Financial
Statements”) and the unaudited proforma condensed consolidated financial
statements of the Company and its Subsidiaries and the related notes thereto
(the “Pro Forma
Statements” and, together with the Technic Financial Statements, the
“Financial
Statements”), each as to be included in the Form 8-K to be filed with the
SEC within four Business Days of the date of this Agreement (the “Form 8-K”), are
attached hereto in Schedule
3.7(b). The Financial Statements have been prepared in
accordance with U.S. generally accepted accounting principles, consistently
applied, and the rules and regulations of the SEC during the periods involved
(except as may be otherwise indicated in such financial statements or the notes
thereto). The Technic Financial Statements present accurately and
completely the consolidated financial position of Technic as of the dates
thereof and the results of its operations and cash flows for the periods then
ended. Except as set forth, in a manner clearly evident to a
sophisticated, accredited or institutional investor, in the Financial
Statements, neither the Company nor any of its Subsidiaries has liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business consistent with past practice subsequent to the date of such
Financial Statements that, individually and in the aggregate, are not material
to its business; and (ii) obligations under contracts and commitments (other
than for breaches thereof) incurred in the ordinary course of business
consistent with past practice and not required under generally accepted
accounting principles to be reflected in the Financial Statements. No
event, occurrence or condition exists which, with the lapse of time, the giving
of notice, or both, could become a default by the Company or any Subsidiary
which could reasonably be expected to have a Material Adverse
Effect.
3.8 Absence of Certain
Changes. Since September 30, 2009, or otherwise included in
the Financial Statements, there has been no material adverse change and no
material adverse development in the business, properties, operations, financial
condition, results of operations or prospects of the Company or any
of its Subsidiaries.
3.9 Absence of
Litigation. Except as disclosed in Schedule 3.9
hereof or as disclosed in the SEC Documents, there is no action,
suit, proceeding, inquiry or investigation before or by any court, public board,
government agency, or self-regulatory organization or body pending or, to the
Company's knowledge, threatened against or affecting the Company, any Subsidiary
or any of their respective directors or officers in their capacities as
such. There are no facts known to the Company which, if known by a
potential claimant or governmental authority, could reasonably be expected to
give rise to a claim or proceeding which, if asserted or conducted with results
unfavorable to the Company or a Subsidiary could reasonably be expected to have
a Material Adverse Effect.
3.10 Tax
Matters. Except as set forth on Schedule 3.10
attached hereto, the Company and each Subsidiary has timely prepared and filed
all tax returns required to have been filed by the Company and such Subsidiary
with all appropriate governmental agencies and timely paid all taxes shown
thereon or otherwise owed by it. The charges, accruals and reserves
on the books of the Company and each Subsidiary in respect of taxes for all
fiscal periods are adequate in all material respects, and there are no material
unpaid assessments against the Company or any Subsidiary nor, to the Company's
knowledge, any basis for the assessment of any additional taxes, penalties or
interest for any fiscal period or audits by any federal, state or local taxing
authority except for any assessment which is not material to the Company or such
Subsidiary. All taxes and other assessments and levies that the
Company or any Subsidiary is required to withhold or to collect for payment have
been duly withheld and collected and paid to the proper governmental entity or
third party when due. There are no tax Liens or claims pending or, to
the Company's knowledge, threatened against the Company or any Subsidiary or any
of their respective assets or property. There are no outstanding tax
sharing agreements or other such arrangements between the Company or any
Subsidiary on the one hand, and any other corporation or entity on the other
hand.
3.11 Transactions with
Affiliates. Except as disclosed in Schedule 3.11
or the SEC Documents, none of the officers or directors of the Company or any
Subsidiary and, to the Company's knowledge, none of the employees of the Company
or any Subsidiary is presently a party to any transaction with the Company or
any Subsidiary (other than as holders of stock options and/or warrants, and for
customary services as employees, officers, and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the Company's knowledge, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.
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3.12 Patents and
Trademarks. Schedule 3.12 sets
forth all of the patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that the Company and its Subsidiaries owns or has the rights to use
(collectively, the “Intellectual Property
Rights”). The
Intellectual Property Rights constitute all of the patents, patent applications,
trademarks, trademark applications, service marks, trade names, copyrights,
licenses and other similar rights that are necessary for use by the Company and
its Subsidiaries in connection with their respective businesses. The
Intellectual Property Rights do not violate or infringe upon the rights of any
person or entity. Except as set forth in Schedule 3.12, all
such Intellectual Property Rights are enforceable and, to the knowledge of the
Company and its Subsidiaries, there is no existing infringement by another
person or entity of any of the Intellectual Property Rights. The
Intellectual Property Rights and the owner thereof or agreement through which
they are licensed to any of the Company or its Subsidiaries are set forth on
Schedule
3.12. By the Closing, Foshan shall have granted the
Company an irrevocable, exclusive, royalty-free license on all Intellectual
Property Rights that are registered to or owned by Foshan or its
predecessor.
3.13 Disclosure. No
information relating to or concerning the Company or any Subsidiary set forth in
this Agreement or any of the other Transaction Documents contains an untrue
statement of a material fact. No information relating to or
concerning the Company set forth in any of the SEC Documents contains a
statement of material fact that was untrue as of the date such SEC Document was
filed with the SEC. The Company has not omitted to state a material
fact necessary in order to make the statements made herein or in any of the
other Transaction Documents, in light of the circumstances under which they were
made, not misleading. Except for the execution and performance of the
Transaction Documents, no material fact (within the meaning of the federal
securities laws of the United States and of applicable state securities laws)
exists with respect to the Company or any of its Subsidiaries which has not been
publicly disclosed (or will be publicly disclosed in the Form 8-K).
3.14 No General
Solicitation. Neither the Company nor to the Company’s
knowledge any distributor participating on the Company's behalf in the
transactions contemplated hereby (if any) nor any person acting for the Company,
or to the Company’s knowledge any such distributor, has conducted any "general
solicitation," as described in Rule 502(c) under Regulation D, or any “directed
selling efforts” in the United States, as defined in Regulation S, with respect
to any of the Securities being offered hereby.
3.15 No Integrated
Offering. Neither the Company, nor any of its 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 prevent the parties hereto from consummating the
transactions contemplated hereby pursuant to an exemption from registration
under the Securities Act pursuant to the provisions of Regulation
D. The transactions contemplated hereby are exempt from the
registration requirements of the Securities Act, assuming the accuracy of the
representations and warranties herein contained of each Purchaser.
3.16 No
Brokers. Except with respect to the Placement Agent, the
Company has taken no action which would give rise to any claim by any person for
brokerage commissions, finder's fees or similar payments by any Purchaser
relating to this Agreement or the transactions contemplated hereby.
3.17 Subsidiaries and Other
Interests. Except for the
Subsidiaries, the Company does not (a) own of record or beneficially, directly
or indirectly (or have any obligation, right or option to acquire) (i) any
shares of capital stock or securities exercisable for or convertible into
capital stock of any other entity, or (ii) any participating, proprietary, or
equity interest in any partnership, limited liability company, joint venture or
other entity, or (b) control, directly or indirectly, through the ownership of
voting securities, by contract or credit arrangement, as trustee or executor, or
otherwise, any other entity.
3.18 Additional PRC
Representations and Warranties.
(a)
All material consents, approvals,
authorizations or licenses requisite under People’s Republic of China (“PRC”) law for the due
and proper establishment and operation of Foshan have been duly obtained from
the relevant PRC governmental authorities and are in full force and
effect.
(b) All
material filings and registrations with the PRC governmental authorities
required in respect of Foshan and its operations including, without limitation,
the registration with the Ministry of Commerce, the State Administration of
Industry and Commerce, the State Administration for Foreign Exchange, tax bureau
and customs authorities have been duly completed in accordance with the relevant
PRC rules and regulations.
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(c) Foshan
has complied with all relevant PRC laws and regulations regarding the
contribution and payment of its registered share capital, the payment schedule
of which has been approved by the relevant PRC governmental
authorities. There are no outstanding rights of, or commitments made
by, Foshan to sell any of its equity interests.
(d) Foshan
is not in receipt of any letter or notice from any relevant PRC governmental
authority notifying it of the revocation, or otherwise questioning the validity,
of any material licenses or qualifications issued to it or any material subsidy
granted to it by any PRC governmental authority for non-compliance with the
terms thereof or with applicable PRC laws, or the need for compliance or
remedial actions in respect of the activities carried out by
Foshan.
(e) Foshan
has conducted its business activities within its permitted scope of business or
has otherwise operated its businesses in material compliance with all relevant
legal requirements and with all requisite licenses and approvals granted by
competent PRC governmental authorities. As to licenses, approvals and
government grants and concessions requisite or material for the conduct of any
part of Foshan’s business which is subject to periodic renewal, Foshan has no
knowledge of any grounds on which such requisite renewals will not be granted by
the relevant PRC governmental authorities.
(f) With
regard to employment and staff or labor, Foshan has complied with all applicable
PRC laws and regulations in all material respects, including without limitation,
laws and regulations pertaining to welfare funds, social benefits, medical
benefits, insurance, retirement benefits, pensions or the like.
3.19 Subsidiary
Contracts. Schedule 3.19 sets
forth a complete and accurate list of all material undischarged written or oral
contracts, agreements, leases or other instruments to which a Subsidiary is a
party or by which a Subsidiary is bound or to which any of the properties or
assets of a Subsidiary is subject (each, a “Subsidiary
Contract”). Each Subsidiary Contract is valid, binding, and
enforceable in accordance with it terms, and no Subsidiary or, to the Company’s
knowledge, any other party to such Subsidiary Contract is in breach or violation
of any Subsidiary Contract.
3.20 Title to and Condition of
Properties. The Company and each Subsidiary owns (with good
and marketable title in the case of real property), or holds under valid leases
or other rights to use, all real property, plants, machinery and equipment
necessary for the conduct of its business as presently conducted, free and clear
of all Liens. All material items of tangible personal property used
in the operation of such business are in satisfactory condition and repair,
ordinary wear and tear excepted.
3.21 Issuance of
Shares. The Notes and the Warrants to be issued at the Closing
have been duly authorized by all necessary corporate action and the Conversion
Securities, when paid for or issued in accordance with the terms hereof, shall
be validly issued and outstanding, fully paid and nonassessable and entitled to
the rights and preferences of such securities. When the Conversion
Securities and the Warrant Shares are issued in accordance with their respective
terms such shares will be duly authorized by all necessary corporate action and
validly issued and outstanding, fully paid and nonassessable, and the holders
shall be entitled to all rights accorded to a holder of Common
Stock
3.22 Foreign Corrupt Practices;
Foreign Assets Control Regulations. Neither the sale of the
Securities hereunder nor the Company’s use of the proceeds thereof will violate
the Trading with the Enemy Act, as amended, or any foreign assets control
regulations of the United States Treasury Department (31 CFR Subtitle B, Chapter
V, as amended) or any enabling legislation or executive order relating
therefrom. None of the Corporate Parties nor any director or senior
officer of any of the Corporate Parties is a Person named on the U.S. Treasury
Department’s Office of Foreign Assets Control (“OFAC”) list, nor is a Person
prohibited under the OFAC programs.
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3.23 Solvency. Each
of the Corporate Parties (after giving effect to the transactions contemplated
by this Agreement) is solvent (i.e., its assets have a fair
market value in excess of the amount required to pay its probable liabilities on
its existing debts as they become absolute and matured). Each of the
Corporate Parties (after giving effect to the transactions contemplated by this
Agreement) has the ability to pay its debts from time to time incurred in
connection therewith as such debts mature.
3.24 Public Utility Holding
Company Act and Investment Company Act Status. The Company is
not a “holding company” or a “public utility company” as such terms are defined
in the Public Utility Holding Company Act of 1935, as amended. The
Company is not, and as a result of and immediately upon the Closing will not be,
an “investment company” or a company “controlled” by an “investment company,”
within the meaning of the Investment Company Act of 1940, as
amended.
3.25 Independent Nature of
Purchasers. The Company acknowledges that the obligations of
each Purchaser under the Transaction Documents are several and not joint with
the obligations of any other Purchaser, and no Purchaser shall be responsible in
any way for the performance of the obligations of any other Purchaser under the
Transaction Documents. The Company acknowledges that the decision of
each Purchaser to purchase securities pursuant to this Agreement has been made
by such Purchaser independently of any other purchase and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or of its Subsidiaries
which may have made or given by any other Purchaser or by any agent or employee
of any other Purchaser, and no Purchaser or any of its agents or employees shall
have any liability to any Purchaser (or any other person) relating to or arising
from any such information, materials, statements or opinions. The
Company acknowledges that nothing contained herein, or in any Transaction
Document, and no action taken by any Purchaser pursuant hereto or thereto, shall
be deemed to constitute the Purchasers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Purchasers
are in any way acting in concert or as a group with respect to such obligations
or the transactions contemplated by the Transaction Documents. The
Company acknowledges that each Purchaser shall be entitled to independently
protect and enforce its rights, including without limitation, the rights arising
out of this Agreement or out of the other Transaction Documents, and it shall
not be necessary for any other Purchaser to be joined as an additional party in
any proceeding for such purpose. The Company acknowledges that for
reasons of administrative convenience only, the Transaction Documents have been
prepared by counsel for one of the Purchasers and such counsel does not
represent all of the Purchasers but only such Purchaser and the other Purchasers
have retained their own individual counsel with respect to the transactions
contemplated hereby. The Company acknowledges that it has elected to
provide all Purchasers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or requested to do so
by the Purchasers. The Company acknowledges that such procedure with
respect to the Transaction Documents in no way creates a presumption that the
Purchasers are in any way acting in concert or as a group with respect to the
Transaction Documents or the transactions contemplated hereby or
thereby.
3.26 Dilutive
Effect. The Company understands and acknowledges that its
obligation to issue Conversion Securities upon conversion of the Notes in
accordance with this Agreement and its obligations to issue the Warrant Shares
upon the exercise of the Warrants in accordance with this Agreement and the
Warrants, is, in each case, absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interest of other
stockholders of the Company.
3.27 No Undisclosed
Liabilities. Neither the Company nor any of its subsidiaries
has any liabilities, obligations, claims or losses (whether liquidated or
unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise)
other than those incurred in the ordinary course of the Company’s or its
subsidiaries respective businesses since September 30, 2009 and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect on the Company or its subsidiaries.
3.28 No Undisclosed Events or
Circumstances. No event or circumstance has occurred or exists
with respect to the Company or its subsidiaries or their respective businesses,
properties, prospects, operations or financial condition, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or
disclosed.
11
ARTICLE
IV
COVENANTS
AND AGREEMENTS
4.1 Reasonable
Efforts. The parties shall use their commercially reasonable
efforts to timely satisfy each of the conditions described in ARTICLES VI and
VII of this Agreement.
4.2 Securities Laws; Disclosure;
Press Release. The Company agrees to file a Form D with
respect to the Securities with the SEC as required under Regulation D within
fifteen (15) days of the Closing Date. The Company shall, on or prior to the
date of Closing, take such action as is necessary to sell the Securities to each
Purchaser under applicable securities laws. The Company agrees to
file the Form 8-K disclosing this Agreement and the transactions contemplated
hereby with the SEC within four (4) Business Days following the date of
consummation of the Reverse Merger Transaction. The Company and the
Placement Agent shall consult with each other in connection with the Form 8-K,
and in issuing any press releases with respect to the transactions contemplated
hereby, and no Purchaser shall issue any such press release or otherwise make
any such public statement without the prior written consent of the Company,
which consent shall not unreasonably be withheld, except if such disclosure is
required by law, in which case the disclosing party shall promptly provide the
other party with prior notice of such public statement or
communication. For purposes of this Agreement, “Business Day” means
any day other than a Saturday, a Sunday or a day on which banks in the City of
New York are required or authorized by law to be closed.
4.3 Reporting
Status. So long as any Purchaser beneficially owns any of the
Securities, the Company shall use commercially reasonable efforts to timely file
all reports required to be filed with the SEC pursuant to the Exchange Act, and
the Company shall not voluntarily terminate its status as an issuer required to
file reports under the Exchange Act even if the Exchange Act or the rules and
regulations thereunder would permit such termination.
4.4 Reservation of Common
Stock. The Company shall take all action necessary to at all times have
authorized, and reserved for the purpose of issuance, a sufficient number of the
shares of its authorized Common Stock for the issuance upon conversion of all of
the Notes (if applicable) and the exercise of all of the Warrants.
4.5 Use of
Proceeds. The Company will use the proceeds from the sale of
the Notes for the following purposes: (a) payment of fees and expenses in
connection with the transactions contemplated hereby, including interest on the
Notes, and (b) general operating purposes and not to redeem any Common Stock or
securities convertible, exercisable or exchangeable into Common Stock or to
settle any outstanding litigation.
4.6 Corporate
Existence. So long as any Purchaser beneficially owns any
Securities, the Company shall maintain its corporate existence, except in the
event of a merger, consolidation or sale of all or substantially all of the
Company's assets, as long as the surviving or successor entity in such
transaction assumes, in writing, the Company's obligations hereunder and under
the agreements and instruments entered into in connection herewith.
4.7 Notice of Event of
Default. Upon the occurrence of each Event of Default (as
defined in the Notes), the Company shall (i) notify the Purchasers of the nature
of such Event of Default as soon as practicable (but in no event later than one
Business Day after the Company becomes aware of such Event of Default), and (ii)
not later than two Business Days after delivering such notice to the Purchasers,
issue a press release disclosing such Event of Default and take such other
actions as may be necessary to ensure that none of the Purchasers are in the
possession of material, nonpublic information as a result of receiving such
notice from the Company.
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4.8 No Senior
Indebtedness. Until each Note has been fully repaid, the
Company covenants that, without the prior unanimous approval of the holders of
the outstanding Notes, the Company will not incur any indebtedness which by its
terms is senior in right of payment of principal or interest to the
Notes.
4.9 Warrants. Concurrently
with the issuance of the Notes hereunder, the Company shall issue to each
Purchaser a warrant in form attached hereto as Exhibit B (the “Warrant”).
4.10 Non-Recourse Guaranty;
Security for Guaranty. (a) The repayment of all indebtedness
and obligations under the Notes shall be guaranteed by the shareholders set
forth on Exhibit
C (the “Management
Shareholders”) pursuant to a Non-Recourse Guaranty substantially in the
form of Exhibit
D attached hereto (the “Non-Recourse
Guaranty”). The Management Shareholders’
obligations under the Non-Recourse Guaranty shall be secured by a pledge by the
Management Shareholders of the number of shares of Common Stock set forth
opposite their names on Exhibit C, to be held
by The Law Offices of Xxxxx X. Xxxxxxx, PC, a member of Leser, Hunter, Taubman
& Taubman, as collateral agent for the Noteholders (the “Collateral
Agent”). The
pledge shall be made pursuant to a Stock Pledge Agreement in the form of Exhibit E attached
hereto (the “Stock
Pledge Agreement”).
(b) At
the Closing, the Company shall deposit an aggregate of $200,000 in escrow with
Interwest Transfer Company, as escrow agent (the “Escrow Agent”), under
the Escrow Agreement
4.11 Board Seat,
etc. From and after the Closing and for as long as any of the
Notes are outstanding, the Purchasers shall have the right to designate
Technic’s Corporate Secretary (the “Noteholder Designee”)
with full authority to access the bank accounts of Technic and Foshan upon the
occurrence of, and during the continuance of, an Event of Default (as defined in
the Notes). The Company and Foshan shall, prior to the Closing, take
all measures reasonably necessary and shall execute all documents required under
PRC law to appoint such Noteholder Designee and and afford him/her such
rights. From and after the Closing and for as long as any of the
Notes are outstanding, the Company and Foshan shall take all measures reasonably
necessary and shall execute all documents required to cause the Noteholder
Designee to be appointed to each of the Corporate Parties’ Board of
Directors.
4.12 No Hedging Transactions,
etc. Each Purchaser covenants that it will not knowingly make
any sale, transfer, or other disposition of the Notes, or engage in hedging
transactions with respect to the Notes, in violation of the Securities Act
(including Regulation S), the Securities Exchange Act of 1934, as amended, or
the rules and regulations promulgated under either of the
foregoing.
4.13 Compliance with
Laws. The Company shall comply, and cause each Subsidiary to
comply, with all applicable laws, rules, regulations and orders, noncompliance
with which could have a Material Adverse Effect.
4.14 Keeping of Records and Books
of Account. The Company shall keep and cause each Subsidiary
to keep adequate records and books of account, in which complete entries will be
made in accordance with GAAP consistently applied, reflecting all financial
transactions of the Company and its subsidiaries, and in which, for each fiscal
year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made.
4.15 Other
Agreements. The Company shall not enter into any agreement in
which the terms of such agreement would restrict or impair the right or ability
to perform of the Company or any subsidiary under any Transaction
Document.
4.16 Registration and
Listing. The Company shall cause its Common Stock to continue
to be registered under Sections 12(b) or 12(g) of the Exchange Act, to comply in
all respects with its reporting and filing obligations under the Exchange Act
and to not take any action or file any document (whether or not permitted by the
Securities Act or the rules promulgated thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under the Exchange Act or Securities Act, except as permitted
herein. When available and subject to the terms of the Transaction
Documents, the Company further covenants that it will take such further action
as the Purchasers may reasonably request, all to the extent required from time
to time to enable the Purchasers to sell the Shares without registration under
the Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act. Upon the request of the
Purchasers, the Company shall deliver to the Purchasers a written certification
of a duly authorized officer as to whether it has complied with such
requirements.
13
4.17 Disclosure of Material
Information. The Company covenants and agrees that neither it
nor any other person acting on its behalf has provided or will provide any
Purchaser or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto such
Purchaser shall have executed a written agreement regarding the confidentiality
and use of such information. The Company understands and confirms
that each Purchaser shall be relying on the foregoing representations in
effecting transactions in securities of the Company.
4.18 No Loans or
Advances. Except for loans and advances outstanding as of the
Closing Date, the Company and its Subsidiaries (direct or indirect) will not
make any loans, advances or other extensions of credit to the executive officers
or directors of the Company, any Subsidiary or any family member or Affiliate of
any of such executive officers or directors.
ARTICLE
V
LEGEND
REMOVAL, TRANSFER, CERTAIN SALES, ADDITIONAL SHARES
5.1 Removal of
Legend. The Legend shall be removed and the Company shall
issue a certificate without such Legend to the holder of any Security upon which
it is stamped, and a certificate for a Security shall be originally issued
without the Legend, if (a) the sale of such Security is registered under the
Securities Act, (b) such holder provides the Company with an opinion of counsel,
in form, substance and scope customary for opinions of counsel in comparable
transactions and reasonably satisfactory to the Company and its counsel (the
reasonable cost of which shall be borne by the Company if such sale takes place
within twelve months after the date of the Closing and neither an effective
registration statement under the Securities Act or Rule 144 is available in
connection with such sale) to the effect that a public sale or transfer of such
Security may be made without registration under the Securities Act pursuant to
an exemption from such registration requirements or (c) such Security can be
sold pursuant to Rule 144 and the holder provides the Company with reasonable
assurances that the Security can be so sold without restriction. The
Company may not make any notation on its records or give instructions to any
transfer agent of the Company that enlarge the restrictions on transfer set
forth in this Section. Each Purchaser agrees to sell all Securities,
including those represented by a certificate(s) from which the Legend has been
removed, or which were originally issued without the Legend, in compliance with
registration requirements of the Securities Act (including Regulation S) or an
exemption therefrom, and understands and acknowledges that the Company shall
refuse to register the transfer of the Securities in the absence of such
compliance. In the event the Legend is removed from any Security or
any Security is issued without the Legend, and the Security is to be disposed of
other than pursuant to a registration statement or pursuant to Rule 144, then
prior to, and as a condition to, such disposition such Security shall be
relegended as provided herein in connection with any disposition if the
subsequent transfer thereof would be restricted under the Securities
Act. Also, in the event the Legend is removed from any Security or
any Security is issued without the Legend and thereafter the effectiveness of a
registration statement covering the resale of such Security is suspended or the
Company determines that a supplement or amendment thereto is required by
applicable securities laws, then upon reasonable advance notice to Purchaser
holding such Security, the Company may require that the Legend be placed on any
such Security that cannot then be sold pursuant to an effective registration
statement or Rule 144 or with respect to which the opinion referred to in clause
(b) above has not been rendered, which Legend shall be removed when such
Security may be sold pursuant to an effective registration statement or Rule 144
or such holder provides the opinion with respect thereto described in clause (b)
above.
14
5.2 Transfer Agent
Instructions. The Company agrees that at such time as the
Legend is no longer required under Section 5.1, it will, no later
than three (3) Business Days following the delivery by a Purchaser to the
Company or the Company's transfer agent of a certificate representing Securities
issued with a restrictive legend (such date, the "Legend Removal
Date"), deliver or cause to be delivered to such Purchaser a certificate
representing such Securities that is free from all restrictive and other
legends, registered in the name of each Purchaser or its nominee for the
Securities. The Company covenants that no instruction other than such
instructions referred to in this ARTICLE V, and stop transfer instructions to
give effect to Section 2.6 hereof, will be given by the Company to its transfer
agent, and that the Securities shall otherwise be freely transferable on the
books and records of the Company. Nothing in this Section shall
affect in any way each Purchaser's obligations and agreement set forth in
Section 5.1 hereof to resell the Securities in compliance with applicable
securities laws. If, in connection with the transfer of Securities,
(a) a Purchaser provides the Company with an opinion of counsel, which opinion
of counsel shall be in form, substance and scope customary for opinions of
counsel in comparable transactions and reasonably satisfactory to the Company
and its counsel (the reasonable cost of which shall be borne by the Company if,
within six months after the date of the Closing, neither an effective
registration statement under the Securities Act or Rule 144 is available in
connection with such transfer), to the effect that the Securities to be
transferred may be transferred pursuant to an exemption from registration or (b)
a Purchaser transfers Securities to an affiliate which is an accredited investor
(within the meaning of Regulation D) and which delivers to the Company in
written form the same representations, warranties and covenants made by the
Purchasers hereunder or pursuant to Rule 144, the Company shall permit the
transfer, and, in the case of the Warrant Shares, promptly instruct its transfer
agent to issue one or more certificates in such name and in such denomination as
specified by such Purchaser. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to a Purchaser by
vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law
for a breach of its obligations under this ARTICLE V will be inadequate and
agrees, in the event of a breach or threatened breach by the Company of the
provisions of this ARTICLE V, that a Purchaser shall be entitled, in addition to
all other available remedies to an injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss or special damages and without any bond or other security being
required.
ARTICLE
VI
CONDITIONS
TO THE COMPANY'S OBLIGATION TO SELL
6.1 Conditions to the Company's
Obligation to Sell. The obligation of the Company hereunder to
issue and sell the Notes to a Purchaser at the Closing is subject to the
satisfaction, as of the date of the Closing and with respect to such Purchaser,
of each of the following conditions, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion:
(i) Such
Purchaser shall have fully completed, executed and delivered the Purchaser’s
Signature Page;
(ii) Such
Purchaser shall have remitted the Purchase Price set forth opposite the name of
such Purchaser on Schedule 1 hereto to
the Escrow Agent;
(iii) The
representations and warranties of such Purchaser shall be true and correct as of
the date when made and as of the Closing with the same force and effect as
though such representations and warranties had been made on and as of the date
of Closing (except for representations and warranties that speak as of a
specific date), and such Purchaser shall have performed, satisfied and complied
in all material respects with the covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by such Purchaser
at or prior to the Closing;
(iv) The
Company shall have received from such Purchaser a fully completed Investor
Questionnaire, and must have found the contents of such questionnaire to be
reasonably satisfactory in the Company’s sole discretion; and
(v) No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which restricts or prohibits the
consummation of any of the transactions contemplated by this Agreement or the
other Transaction Documents.
15
ARTICLE
VII
CONDITIONS
TO EACH PURCHASER'S OBLIGATION TO PURCHASE
7.1 The
obligation of each Purchaser hereunder to purchase the Note to be purchased by
it on the date of the Closing is subject to the satisfaction of each of the
following conditions, provided that these conditions are for each Purchaser's
sole benefit and may be waived by such Purchaser at any time in such Purchaser's
sole discretion:
(i) The
Company shall have delivered to the Purchaser a Note in the principal amount of
the Purchase Price paid by such Purchaser, and a Warrant registered in the name
of the Purchaser;
(ii) The
representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the Closing with the same
force and effect as though such representations and warranties had been made on
and as of the date of Closing, and the Company shall have performed, satisfied
and complied in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing;
(iii) No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the consummation
of any of the transactions contemplated by this Agreement or the other
Transaction Documents;
(iv) The
Management Shareholders shall have executed and delivered to the Purchasers the
Non-Recourse Guaranty and the Stock Pledge Agreement, and delivered the shares
of the Common Stock being pledged by them pursuant to the Stock Pledge Agreement
to the Collateral Agent;
(v) The
Company and each of the Management Shareholders shall have executed and
delivered to the Purchasers at the Closing a voting agreement substantially in
the form of Exhibit
G attached hereto (the “Voting Agreement”)
pursuant to which, among other things, the Management Shareholders agree to take
such actions as shall be necessary to appoint the Noteholder Designee as a
director of the Company, Technic and Foshan and maintain such Noteholder
Designee as a director until time as the Notes are no longer
outstanding;
(vi) The
Company and Foshan shall have taken all necessary action and shall have executed
and delivered all such documents as shall be necessary to grant to the
Noteholder Designee access to the Foshan bank accounts in the manner and to the
extent required by Section 4. 11 of this Agreement.
(vii) The
Company and the Escrow Agent shall have executed and delivered to the Purchasers
the Escrow Agreement, and the Company shall have deposited $200,000 with the
Escrow Agent pursuant to the terms of the Escrow Agreement;
(viii)
The Company shall have obtained all waivers, authorizations, approvals and
consents needed to consummate the transaction contemplated by this Agreement and
the other Transaction Documents; and
(ix) The
Company shall have executed and delivered to the Purchasers the Registration
Rights Agreement and the Stock Pledge Agreement.
(x) The
Company shall have executed the Reverse Merger Agreement and completed the
Reverse Merger Transactions.
16
(xi) No
event shall have occurred which could reasonably be expected to have a Material
Adverse Effect.
(xii) The
Company shall have delivered to the Purchasers a certificate of an executive
officer of the Company, dated as of such Closing Date, confirming the accuracy
of the Company’s representations, warranties and covenants as of such Closing
Date and confirming the compliance by the Company with the conditions precedent
set forth in this Article VII as of the Closing Date.
(xiii) The
Board of Directors of the Company shall have adopted resolutions consistent with
Section 3.3(b) hereof in a form reasonably acceptable to such
Purchaser.
ARTICLE
VIII
GOVERNING
LAW; MISCELLANEOUS
8.1 Governing Law:
Jurisdiction. This Agreement shall be governed by and
construed in accordance with the Delaware General Corporation Law (in respect of
matters of corporation law) and the laws of the State of New York (in respect of
all other matters) applicable to contracts made and to be performed in the State
of New York. The parties hereto irrevocably consent to the
jurisdiction of the United States federal courts and state courts located in the
State of New York and County of New York in any suit or proceeding based on or
arising under this Agreement or the transactions contemplated hereby and
irrevocably agree that all claims in respect of such suit or proceeding may be
determined in such courts. The Company and each Purchaser irrevocably
waives the defense of an inconvenient forum to the maintenance of such suit or
proceeding in such forum. The Company and each Purchaser further
agrees that service of process upon the Company or such Purchaser, as
applicable, mailed by the first class mail in accordance with Section 8.7 shall
be deemed in every respect effective service of process upon the Company or such
Purchaser in any suit or proceeding arising hereunder. Nothing herein
shall affect the right of a party hereto to serve process in any other manner
permitted by law. The parties hereto agree that a final
non-appealable judgment in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner. The parties hereto irrevocably waive any right to a
trial by jury under applicable law.
8.2 Reserved.
8.3 Counterparts. This
Agreement may be executed in two or more counterparts, including, without
limitation, by electronic or facsimile transmission, all of which counterparts
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other
parties. In the event any signature page is delivered by facsimile or
electronic transmission, the party using such means of delivery shall cause
additional original executed signature pages to be delivered to the other
parties as soon as practicable thereafter.
8.4 Headings. The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
8.5 Severability. If
any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
8.6 Entire Agreement;
Amendments. This Agreement and the instruments referenced
herein contain the entire understanding of the parties with respect to the
maters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor any Purchaser makes any representation,
warranty, covenant or undertaking with respect to such matters. No
provision of this Agreement may be waived other than by an instrument in writing
signed by the party to be charged with enforcement and no provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and each Purchaser.
17
8.7 Notices. Any
notice herein required or permitted to be given shall be in writing and shall be
delivered personally, by nationally-recognized overnight courier or by facsimile
machine confirmed telecopy to the applicable addresses set forth below (or to
such other address as a party may designate by written notice in accordance with
the provisions of this Section 8.7), and shall be deemed given and effective on
the earliest of (a) the date of transmission if such notice or communication is
delivered by fax prior to 5:30 p.m. (Eastern Time) on a Business Day, (b) the
next Business Day after the date of transmission if such notice or communication
is delivered via fax on a day that is not a Business Day or later than 5:30 p.m.
(Eastern Time) on a Business Day, (c) the 1st
Business Day after the date of mailing if sent by U.S. nationally recognized
overnight courier service for next Business Day delivery, or (d) upon actual
receipt by the party to whom such notice is required to be given. The addresses
for such communications shall be:
If to the
Company, to :
Perpetual
Technologies, Inc.
Xxxxxxx
Xxxxxxxxxx Xxxx
Xxxxxx
Xxxxxxxx, Xxxxxx Xxxx, Xxxxxxxxx Xxxxxxxx, PRC
Attention: Mr. Ji Lie
Facsimile:
with a
copy to:
Guzov
Ofsink, LLC
000
Xxxxxxx Xxxxxx
Xxx Xxxx,
Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx,
Esq.
Facsimile: 212-688-7273
If to any
Purchaser, to such address set forth under such Purchaser's name on the
Purchaser’s Signature Page executed by such Purchaser. Each party
shall provide notice to the other parties of any change in address in the
meaning set forth in this Section 8.7.
8.8 Successors and
Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and assigns. Neither the
Company nor any Purchaser shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the
other. Notwithstanding the foregoing, each Purchaser may assign its
rights and obligations hereunder to any of its "affiliates," as that term is
defined under the Securities Act, without the consent of the Company so long as
such affiliate is an accredited investor (within the meaning of Regulation D)
and agrees in writing to be bound by this Agreement. This provision
shall not limit each Purchaser's right to transfer the Securities pursuant to
the terms of this Agreement or to assign such Purchaser's rights hereunder to
any such transferee. In that regard, if a Purchaser sells all or part
of its Securities to someone that acquires the Securities subject to
restrictions on transferability (other than restrictions, if any, arising out of
the transferee's status as an affiliate of the Company), Purchaser shall be
permitted to assign its rights hereunder, in whole or in part, to such
transferee.
8.9 Third Party
Beneficiaries. Except as set forth in Sections 8.10 and 8.13
below, this Agreement is intended for the benefit of the parties hereto and
their respective permitted successors and assigns and is not for the benefit of,
nor may any provision hereof be enforced by, any other person or
entity.
8.10 Survival;
Indemnification. The representations and warranties of the
Company shall survive for a period of one year after the Closing,
notwithstanding any due diligence investigation conducted by or on behalf of a
Purchaser. The Company agrees to indemnify and hold harmless each
Purchaser and each Purchaser's officers, directors, employees, partners, agents
and affiliates from and against any and all losses, claims, damages, liabilities
and expenses (including, without limitation, reasonable attorneys' fees and
disbursements and other expenses incurred in connection with investigating,
preparing or defending any action, claim or proceeding, pending or threatened
and the costs of enforcement thereof) (collectively, "Losses") arising
as a result of or related to any breach or alleged breach by the Company of any
of its representations or covenants set forth herein, including advancement of
expenses as they are incurred. The representations and warranties of
the Purchasers shall survive for a period of one year after the Closing,
notwithstanding any due diligence investigation conducted by or on behalf of the
Company, and each Purchaser shall indemnify and hold harmless the Company and
each of its officers, directors, employees, partners, agents and affiliates from
and against any and all Losses arising as a result of or related to any breach
of such Purchaser's representations and warranties contained
herein. The maximum aggregate liability of each Purchaser pursuant to
its indemnification obligations under this Article VII, if any, shall not exceed
the portion of the Purchase Price paid by such Purchaser hereunder.
18
8.11 Further
Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby and by the other Transaction
Documents.
8.12 Remedies. No
provision of this Agreement providing for any remedy to a Purchaser shall limit
any remedy which would otherwise be available to such Purchaser at law or in
equity. Nothing in this Agreement shall limit any rights a Purchaser
may have under any applicable federal or state securities laws with respect to
the investment contemplated hereby. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to a
Purchaser. Accordingly, the Company acknowledges that the remedy at
law for a material breach of its obligations under this Agreement will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Agreement, that a Purchaser shall be entitled,
in addition to all other available remedies, to an injunction restraining any
breach and requiring immediate compliance, without the necessity of showing
economic loss or special damages, and without any bond or other security being
required.
8.13. Arm’s Length Negotiations;
Counsel for the Company. Each Purchaser expressly represents
and warrants to the Company that (a) before executing this Agreement, said
Purchaser has fully informed himself or itself of the terms, contents,
conditions and effects of this Agreement; (b) said Purchaser has relied solely
and completely upon his or its own judgment in executing this Agreement; (c)
said Purchaser has had the opportunity to seek the advice of his or its own
counsel and advisors before executing this Agreement; (d) said Purchaser has
acted voluntarily and of his or its own free will in executing this Agreement;
(e) said Purchaser is not acting under duress, whether economic or physical, in
executing this Agreement; (f) this Agreement is the result of arm’s length
negotiations conducted by and among the parties; and (g) said Purchaser
acknowledges that the law firm of Guzov Ofsink, LLC has been retained by the
Company to prepare this Agreement as legal counsel for the Company, that Guzov
Ofsink, LLC does not represent any Purchaser in connection with the preparation
or execution of this Agreement, and that Guzov Ofsink, LLC has not given any
legal, investment or tax advice to any Purchaser regarding this
Agreement. Guzov Ofsink, LLC is expressly intended as a beneficiary
of the representations and warranties of the Purchasers contained in this
Section 8.13.
19
IN
WITNESS WHEREOF, the undersigned Purchasers and the Company have caused this
Agreement to be duly executed as of the date first above written.
COMPANY:
PERPETUAL
TECHNOLOGIES, INC.
|
By:
/s/ Xxx Xx
|
|
|
Name: Xxx
Xx
|
|
|
Title: Chief
Executive Officer
|
|
HONG HUI HOLDINGS LIMITED
(the “BVI Company”)
|
By:
/s/ Xxx Xx
|
|
|
Name: Xxx
Xx
|
|
|
Title: Director
|
|
Technic International
Limited
|
By: /s/
Wawai Law
|
|
|
Name:
Wawai Law
|
|
|
Title:
Chairman
|
|
Foshan SLP Special Materials
Company
|
By: /s/
Xxx Xx
|
|
|
Name:
Xxx Xx
|
|
|
Title:
Legal Representative
|
|
PURCHASERS:
See
attached Signature Pages
20
PURCHASER SIGNATURE PAGE
TO NOTE PURCHASE AGREEMENT
IN
WITNESS WHEREOF, the undersigned has executed this Agreement on this 12th day
of February, 2010.
Name of
Purchaser:___________________________________
Signature
of Purchaser: ____________________________________
Consideration:
$__________________ in cash.
Taxpayer
Identification or
Social
Security Number of
Purchaser: ____________________________________
|
Name and Residence Address:
|
|||
|
(Post Office Address Not Acceptable)
|
|||
|
Mailing
Address if Different
|
|||
|
from
Residence Address
|
|||
|
(Post
Office Address is Acceptable)
|
|||
Type of
Ownership (check one):
________________ Individual
Ownership
________________ Community
Property (each spouse must sign)
________________ Joint
Tenants with Right of Survivorship (all sign)
________________ Tenants
in Common (all sign)
________________ Trust
________________ Corporation
________________ S
Corporation
________________ C
Corporation
________________ Limited
Liability Company
________________ Other
(please specify type of entity )
Fax
Number of Purchaser:___________________________
E-Mail
Address of Purchaser: _________________________
21
SCHEDULE
1
LIST OF
INVESTORS
|
Investor Name, Address,
Telephone and Fax Number
|
Principal Amount
of Note
|
Purchase Price
|
||||||
|
Jayhawk
Capital
|
$
|
2,500,000
|
$
|
2,500,000
|
||||
|
Blue
Earth Fund, LP
Longboard
Captial
0000
Xxxxx Xxxxxx
XxxxxXxxxxx,
XX 00000
|
$
|
1,000,000
|
$
|
1,000,000
|
||||
|
Lumen
Capital LP
000
Xxxx Xxxxx
Xxxxxxxx,
XX 00000
|
$
|
100,000
|
$
|
100,000
|
||||
|
Trading
Systems, LLC
00
Xxx Xxxx Xxxxx,
Xxxxxxxxx
Xxxxx XX 00000
|
$
|
100,000
|
$
|
100,000
|
||||
|
Xxxxxx
Xxxxxxx
000
Xxxxx 000 Xxxx,
Xxxxxxxx,
XX 00000
|
$
|
100,000
|
$
|
100,000
|
||||
|
Xxxxx
X. Little
0000
Xxxxxxx Xxx., Xxx.000,
Xxxxxx
Xxxx, XX 00000
|
$
|
200,000
|
$
|
200,000
|
||||
|
Xxxxxxx Xxxxxxxx
00
Xxxxx Xxxx,
Xxx
Xxxx XX 00000
|
$
|
100,000
|
$
|
100,000
|
||||
|
Xxxxx
Xxxx
0000
Xxxx Xxx
XxxXxxx,
XX 00000
|
$
|
20,000
|
$
|
20,000
|
||||
|
Xxxxxxx
X'Xxxxxxx
000
Xxxxx Xx. Xxx.0X,
Xxxxxxxx,
XX 00000
|
$
|
10,000
|
$
|
10,000
|
||||
|
Sik
Wing Sung
00
Xxxxxxxx Xxxxxx,
Xxxxxx
Xxxxxx, XX 00000
|
$
|
10,000
|
$
|
10,000
|
||||
|
Totals:
|
$
|
4,140,000.00
|
$
|
4,140,000.00
|
||||
22
Disclosure Schedules to the Note
Purchase Agreement, dated as of February 12, 2010 (the “Agreement”), by and between Perpetual
Technologies, Inc., a Delaware corporation (the “Company”), Hong Hui Investment Holdings, Inc
a British Virgin islands company (the “BVI
Company”), the owner of
all of the outstanding equity interests of Technic International, Inc., a Hong
Kong company (“Technic”), the owner of all of the
outstanding equity interests of Foshan SLP Special Materials Company
(“Foshan”), a limited liability company organized
under the laws of the People’s Republic of China (“PRC”)
and the investors listed on the
Schedule of Buyers attached hereto as Annex
A and identified on the
signature pages thereto (each, an “Investor” and collectively, the
“Investors”).
All
capitalized terms used but not defined herein shall have the meanings as defined
in the Agreement, unless otherwise provided herein.
This
Disclosure Schedule shall be construed with and be deemed as an integral part of
the Agreement to the same extent as if the same had been set forth in their
entirety therein. This Disclosure Schedule is intended only to
qualify and limit the representations and warranties of the Company in the
Agreement and shall not be deemed to expand in any way the scope or effect of
any such representations and warranties.
The
Disclosure Schedule indicates the section and, if applicable, the subsection of
the Agreement to which it relates, but shall also qualify such other sections or
subsections in the Agreement provided the disclosure is in sufficient detail to
enable a reasonable person to identify such other section or subsection to which
such information is responsive.
Headings
have been inserted in the sections of this Disclosure Schedule for convenience
of reference only and shall to no extent have the effect of amending or changing
the express language of the corresponding sections in the
Agreement.
Where the
terms of a contract, lease, or agreement have been summarized or described in
this Disclosure Schedule, such summary or description does not purport to be a
complete statement of the material terms of such contract, lease, agreement or
other disclosure item but is a sufficient statement of the matters required to
be disclosed in such description.
23
Schedule
3.1 Subsidiaries
Our
direct and indirect subsidiaries are set forth in the diagram
below:
24
Schedule 3.4 - Capitalization
Capitalization of Perpetual
Technologies, Inc.
|
Description
|
Number of Shares
|
|||
|
Authorized
Common Stock
|
200,000,000 | |||
|
Authorized
Preferred Stock
|
10,000,000 | |||
|
Issued
and Outstanding Common Stock
|
Immediately
prior to the closing of the share exchange agreement, shareholders holding
12,640,000 of the 13,000,000 shares of our then outstanding common stock
will surrender their shares for cancellation under the stock purchase
agreements entered into between Xxx Xxxxxxx and each such
holder. Under the share exchange agreement we will issue an aggregate
of 72,551,020 shares of common stock to the stockholders of Hong
Hui. In addition, immediately following the closing of the share
exchange agreement we will issue 4,646,000 shares of our common stock to
Primary Capital Accordingly following the closing of all of these
transactions there will be 77,551,020 shares of common stock issued
and outstanding.
|
|||
|
Issued
and Outstanding Preferred Stock
|
0 | |||
Capitalization of Hong Hui
Holdings Limited
|
Description
|
Number of Shares
|
|||
|
Authorized
Shares
|
50,000 | |||
|
Issued
and Outstanding Shares
|
10,000 | |||
25
Capitalization of Technic
International, Limited.
|
Description
|
Number of Shares
|
|||
|
Authorized
Shares
|
10,000 | |||
|
Issued
and Outstanding Shares
|
10,000 | |||
Capitalization of
Foshan SLP
Special Materials Company
|
Description
|
||||
|
Registered
Capital
|
RMB
|
60,000,000 | ||
Warrants
Reference
is made to the convertible notes and warrants being issued pursuant to the Note
Purchase Agreement and the warrants being issued to Primary Capital pursuant to
the engagement agreement with Primary Capital LLC as placement
agent.
Reference
is made to the 4,640,000 shares of common stock being issued to Primary Capital,
LLC under the placement agent agreement.
Schedule
3.5 No Conflicts
The
Company will comply with all applicable blue sky laws.
Schedule
3.7(b) Consolidated Financial Statements of
Technic
A true
and complete copy of the consolidated financial statements of Technic
International Inc.(“Technic”) as of and for the fiscal years ended September 30,
2009 and 2008 and the related notes thereto (the “Technic Financial Statements”)
are attached hereto in Schedule
3.7(b).
Pro forma
financial statements have note yet been completed but will be included in the
8-K.
Schedule
3.9 Absence of Litigation
Foshan
has not paid in full the social insurance (as set forth below) for
all of its employees as
required by PRC law. According to the social insurance payment proof
for December 2009 of Foshan, the total number of employees of Foshan was 171, of
whom 92 have been covered by pension insurance, 92 have been covered by medical
insurance, 7 have been covered by unemployment insurance and 164 have been
covered by work-related injury insurance. According to Foshan, this
practice of payment of social insurance adopted by Foshan has been approved by
the local authority in charge or labor and social insurance
administration. Notwithstanding this approval the employees could xxx
the company for failing to do so and if successful the Company could be required
to pay all arrears.
Under PRC
law Foshan is required to pay housing funds for all of its employees, however,
Foshan has not paid housing funds for any of its employees. The
employees could xxx the company for failing to do so and if successful the
Company could be required to pay all arrears.
26
Schedule
3.10 Tax Matters
Perpetual
Technologies has not filed its tax return for the fiscal year ended December 31,
2009.
Schedule
3.11 Transactions with Affiliates
Reference
is made the Company prior SEC filings and to 8-K being filed within four
business days of the date hereof.
Schedule
3.12 Patents and Trademarks lets discuss the
trademarks
The
pending patents applied by Foshan is:
|
No.
|
Name
|
Applicant
|
Patent
Application
Date
|
Patent
Application
Number
|
Remarks
|
|||||
|
|
Polyphenylene
sulfide nonwoven spunbond needle production method and device
(聚苯硫醚纺粘针刺无纺布的制备方法及其装置)
|
|
Foshan
SLP Special Materials Company
(佛山市斯乐普特种材料有限公司)
|
|
January
26, 2010
|
|
2010101026602
|
|
Invention.
|
The
following pending patent applications are being transferred
from Dalian Huayang Chemical Fiber Engineering technology Co., Ltd
(“Dalian”) to Foshan. When the patents are issued the issue date will
be in March, 2009 and the name of the holder will be Foshan.
|
No.
|
Name
|
Applicant
|
Patent
Application
Date
|
Patent
Application
Number
|
Remarks
|
|||||
|
1
|
Tube-type
air distraction apparatus
(管式气流牵伸器)
|
Dalian
Huayang Chemical Fiber Engineering technology Co., Ltd
(大连华阳化纤工程技术有限公司)
|
March
12, 2009
|
200920011528.3
|
Utility
model
|
|||||
|
2
|
new
spinning box structure
(新型纺丝箱结构)
|
Dalian
Huayang Chemical Fiber Engineering technology Co., Ltd
(大连华阳化纤工程技术有限公司)
|
March
12, 2009
|
200920011529.8
|
Utility
model
|
|||||
|
3
|
|
Lapper
(铺网机)
|
|
Dalian
Huayang Chemical Fiber Engineering technology Co., Ltd
(大连华阳化纤工程技术有限公司)
|
|
March
19, 2009
|
|
200920012058.2
|
|
Utility
model
|
27
Foshan
has the following trademarks:
|
Trademark
|
Registrant
|
Registration
Number
|
Term of Validity
|
|||
|
Jinglong
Nonwoven
(锦龙无纺)
|
|
Foshan
SLP Special Materials Company (佛山市斯乐普特种材料有限公司)
|
|
3571234
|
|
From
October 21, 2005
To
October
20, 2015
|
|
Trademark
Application
|
Applicant
|
Application
Number
|
Application Date
|
|||
|
S.L.P
|
Foshan
SLP Special Materials Company (佛山市斯乐普特种材料有限公司)
|
7161477
|
January
12, 2009
|
|||
|
Si
Le Pu
(斯乐普)
|
|
Foshan
SLP Special Materials Company (佛山市斯乐普特种材料有限公司)
|
|
7161478
|
|
January
12, 2009
|
Schedule
3.18 Additional PRC Representations and
Warranties
The PRC
shareholders, of the offshore special purpose vehicles set forth below being the
indirect shareholders of Foshan have not completed the registration with the
State Administration of Foreign Exchange (the “SAFE”) under the Circular of the
State Administration of Foreign Exchange on Relevant Issues concerning Foreign
Exchange Administration of Financing and Inbound Investment through Offshore
Special Purpose Companies by PRC Residents (the “SAFE Circular 75”) as of the
date hereof. According to the Company, it will urge the PRC residents
to complete such registration.
|
Name of Offshore
Shareholder
|
PRC Resident
|
|
|
Bestyield
Group Limited
|
Xxx
Xx
|
|
|
Newise
Holdings Limited
|
Xxx
Xx
|
|
|
Pilot
Link International Limited
|
Xxxxx
Xx and Xxx Xxxx
|
|
|
China
Investment Management
|
|
Huaying
Song
|
In the
history of Foshan certain applications made by the then shareholders of Foshan
with Nanhai Foreign Trade and Economic Bureau (the “Local MOFCOM”) for extension
of certain capital contributions to Foshan did not meet the statutory deadline
but were accepted by the Local MOFCOM which approved such applications by
issuing the approval letters of (i) Xxx Xxx Xxxx Xx Bu [2001] No. 166 on May 16,
2001 and (ii) Xxx Xxx Xxxx Xx Bu [2006] No. 71 on April 6,
2006.
28
Schedule
3.19 Subsidiary Contracts
The land
under the State-owned Land Use Right Certificate (Xxx Xx Xxx Xxxx (2002)
No.180084) and the buildings under the Real Property Ownership Right
Certificates (Xxx Xxxx Di Zheng Zi No. C 1226877, No. C 1226878, No. C 1226879,
No. C 1226880, No. C 1594954 and No. C 1957090) have been mortgaged to Foshan
Nanhai Shishan Branch of the Agricultural Bank of China (中国农业银行佛山南海狮山支行)
under the Mortgage Agreement No. 44906200800001513. The term of mortgage is from
August 1, 2008 to July 28, 2010.
Two sets
of twin-roll hot rolling xxxxx, two sets of non-woven equipments, five sets of
screw compressors, one set of air conditioning unit, three sets of cross-flow
type cooling towers, two sets of power equipments, one compressor, three cranes,
three fans, eighty spinneret boards, two inverters, four air compressor repair
parts, one masterbatch injection machine, one compressed air tank and one
stenter machine owned by Foshan have been mortgaged to Foshan Nanhai Shishan
Branch of the Agricultural Bank of China (中国农业银行佛山南海狮山支行)
pursuant to the Mortgage Agreement No. 44906200900016735. The term of mortgage
is from December 15, 2009 to December 14, 2011.
29
LIST OF
EXHIBITS
|
EXHIBIT A
|
-
|
FORM
OF NOTE
|
|
EXHIBIT
B
|
-
|
FORM
OF WARRANT
|
|
EXHIBIT
C
|
-
|
MANAGEMENT
SHAREHOLDERS
|
|
EXHIBIT
D
|
-
|
FORM
OF NON-RECOURSE GUARANTY
|
|
EXHIBIT
E
|
-
|
FORM
OF STOCK PLEDGE AGREEMENT
|
|
EXHIBIT G -
|
FORM
OF VOTING AGREEMENT
|
|
|
EXHIBT
H -
|
FORM
OF ESCROW AGREEMENT
|
|
|
EXHIBT
I -
|
FORM
OF REGISTRATION RIGHTS
AGREEMENT
|
30
Exhibit
A
To
FORM OF SECURED CONVERTIBLE
PROMISSORY NOTE
THE
SALE OF THIS SECURED CONVERTIBLE PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR SUCH TRANSACTION UNDER APPLICABLE SECURITIES LAWS OR UNLESS OFFERED, SOLD OR
TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS.
PERPETUAL
TECHNOLOGIES, INC.
SECURED
CONVERIBLE PROMISSORY NOTE
|
$______________
|
February
12, 2010
|
|
Delaware
|
FOR VALUE RECEIVED, and upon
and subject to the terms and conditions set forth herein, Perpetual
Technologies, Inc., a Delaware corporation (“Issuer”), hereby promises to
pay to the order of _____________________, a _________________ (“Purchaser” and, together with
its successors and assigns, “Holder”), the principal sum of
__________________ UNITED STATED DOLLARS (U.S. $____________) on the Maturity
Date, together with interest as provided herein. This Note was issued
under and is subject to a Note Purchase Agreement (the “Purchase Agreement”) dated as
of __________, 2010 among Issuer, Purchaser and certain other
parties. This Note is one of a series of secured convertible
promissory notes of Issuer issued pursuant to the Purchase
Agreement. The other notes are referred to herein as the “Other Notes” (and, together
with this Note, the “Notes”) and the holders of
such Other Notes are referred to herein as the “Other Noteholders.”
Capitalized terms used and not otherwise defined herein will have the respective
meanings given to such terms in the Purchase Agreement.
1. Maturity
Date. This Note will mature, and be due and payable in full,
on February 12, 2011 (the “Maturity Date”).
2. Interest. From
and after the date hereof, all outstanding principal of this Note will bear
simple interest at the rate of ten percent (10%) per annum. On the
last Business Day of each fiscal quarter while this Note is outstanding and on
the earlier of the Maturity Date and the conversion of this Note pursuant to
Section 6 hereof, Issuer shall pay the then accrued interest on this
Note. Upon the occurrence and during the continuance of any Event of
Default (as hereinafter defined), all outstanding principal of this Note shall
bear interest at the rate of fifteen percent (15%) per annum (the “Default Rate”) and all accrued
and unpaid interest, as well as any interest due and unpaid before the default
is cured, shall be paid at the Default Rate. All outstanding
principal and accrued but unpaid interest on this Note shall be payable on the
Maturity Date.
31
3. Guaranty;
Security. Repayment of this Note shall be guaranteed, pari passu with the Other
Noteholders, by certain shareholders (the “Management Shareholders”)
pursuant to a Non- Recourse Guaranty, of even date herewith, entered into by the
Management Shareholders in favor of the Holder and the Other Noteholders (the
“Guaranty”). The
Guaranty shall be secured by a pledge by the Management Shareholders of their
shares of Common Stock pursuant to a Stock Pledge Agreement of even date
herewith, entered into by the Management Shareholders, the Holder, the Other
Noteholders, and The Law Offices of Xxxxx X. Xxxxxxx, PC, a member of Leser,
Hunter, Taubman & Taubman, as collateral agent for the Holder and the Other
Noteholders (the “Stock Pledge
Agreement”).
4. Prepayment. This
Note may not be prepaid by the Issuer without the Holder’s written consent,
which may be granted or withheld in the Holder’s sole and absolute
discretion.
5. Transfer. Holder
may transfer this Note in compliance with applicable U.S. federal and state
and/or foreign securities laws and in accordance with Section 5.1 of the
Purchase Agreement.
6. Automatic
Conversion Upon Qualified Financing. At the closing of
a Qualified Financing on or prior to the Maturity Date, the principal amount of
this Note shall automatically convert into the securities sold in such financing
at a 65% discount to the price at which such securities are sold in such
financing. As used
herein, “Qualified
Financing” means the sale (or series of related sales) by the Company of
its capital stock, or debt or equity securities convertible into or exercisable
for its capital stock, in a capital raising transaction, for aggregate gross
proceeds to the Company of at least $20,000,000 or such lesser amount as shall
be approved in writing by the holder(s) of Notes evidencing at least 50% of the
principal amount of the Notes then outstanding.
7. Events of
Default. An “Event of Default” will occur
if:
(a) The
Issuer fails to pay (a) any principal of this Note or any Other Note when such
amount becomes due and payable in accordance with the terms hereof or thereof,
or (b) any interest on this Note or any Other Note, or any other payment of
money required to be made pursuant to this Note or any Other Note when such
payment becomes due and payable in accordance with the terms hereof or thereof;
or
(b) Any
representation or warranty by the Issuer or any Management Shareholder in any
Transaction Document or in any certificate, agreement or instrument executed and
delivered to the Holder or the Other Noteholders by the Issuer or any of its
subsidiaries, or by their respective accountants or officers, or by any
Management Shareholder pursuant to any Transaction Document is false, inaccurate
or misleading in any material respect on the date as of which made and the same
shall not have been cured within five (5) Business Days after written notice of
such default has been given by the Holder to the Company; or
(c) The
Issuer, any of its subsidiaries, or any Management Shareholder breaches or
defaults in the performance of any term, covenant, agreement, condition,
undertaking or provision of any Transaction Document, and such breach or
default, if capable of being cured, is not cured or waived within five (5)
Business Days after the Issuer, such subsidiary or such Management Shareholder,
as applicable, receives notice thereof; or
(d) The
Issuer, any of its subsidiaries, or any Management Shareholder (i) commences any
case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its assets, or (ii) is the debtor
named in any other case, proceeding or other action of a nature referred to in
clause (i) above which results in the entry of an order for relief or any such
adjudication or appointment and remains undismissed, undischarged or unbonded
for a period of sixty (60) days, or (iii) takes any action in furtherance of, or
indicating its consent to, approval of, or acquiescence to, any order,
adjudication or appointment of a nature referred to in clause (i) or (ii) above,
or (iv) shall generally not be paying, shall be unable to pay, or shall admit in
writing its inability to pay its debts as they become due, or (v) shall make a
general assignment for the benefit of its creditors; or
32
(e) On
or at any time after the date of this Note (i) any of the Transaction Documents
for any reason, other than a partial or full release in accordance with the
terms thereof, ceases to be in full force and effect or is declared to be null
and void, (ii) the Stock Pledge Agreement shall cease to provide the Holder and
the Other Noteholders a valid first priority security interest in the shares of
the Common Stock pledged thereunder; or
(f) Any
indebtedness for borrowed money of the Issuer or its subsidiaries in the
aggregate principal amount exceeding $25,000 (i) shall be duly declared to be,
or shall become, due and payable prior to the stated maturity date therefor, and
(ii) shall not be paid as and when the same becomes due and payable, including
any applicable grace period; or
(g) The
cessation of the Company’s business for more than thirty (30) days;
or
(h) There
shall occur (other than pursuant to the Reverse Merger Transaction) a change in
ownership or control of the Issuer effected through any of the following
transactions:
(i) a
merger, consolidation or reorganization approved by the stockholders of the
Issuer, unless securities representing more than fifty percent (50%) of the
total combined voting power of the voting securities of the Issuer are
immediately thereafter beneficially owned, directly or indirectly and in
substantially the same proportion, by the persons who beneficially owned the
Issuer’s outstanding voting securities immediately prior to such
transaction;
(ii) any
stockholder-approved transfer or other disposition of all or substantially all
of the assets of the Issuer (including a majority of the ownership interest,
direct or indirect, in any of its subsidiaries) or any subsidiary of the Issuer;
or
(iii) the
direct or indirect acquisition by any person or group (within the meaning of the
Exchange Act) of persons (other than the Issuer or a person that directly or
indirectly controls, is controlled by, or is under common control with the
Issuer) of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of outstanding securities possessing more than fifty
percent (50%) of the total combined voting power of the outstanding securities
of the Issuer pursuant to a tender or exchange offer made directly to the
stockholders of the Issuer which the Board recommends that such stockholders
accept.
8. Remedies. At
such time that an Event of Default has occurred and is continuing, this Note
shall automatically become immediately due and payable. Upon this
Note becoming due and payable under this Section 8, whether automatically
or by declaration (a “Default”), such Note
will forthwith mature and 150% of the entire unpaid principal amount of such
Note, plus all accrued and unpaid interest through the date of payment, shall
all be immediately due and payable, in each and every case without presentment,
demand, protest or further notice, all of which are hereby waived. If
any Default or Event of Default has occurred and is continuing, the Holder of
this Note may proceed to protect and enforce the rights of such Holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of the Purchase Agreement, the Registration Rights
Agreement or this Note, or for an injunction against a violation of any of the
terms hereof or thereof, or in aid of the exercise of any power granted hereby
or thereby or by law or otherwise.
9. Notices. Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder will be in writing and shall be delivered personally, by
nationally-recognized overnight courier or by facsimile machine confirmed
telecopy to the applicable addresses set forth in the Purchase Agreement (or to
such other address as a party may designate by written notice in accordance with
the provisions of this Section 9), and will be deemed given and effective on the
earliest of (a) the date of transmission if such notice or communication is
delivered by fax prior to 5:30 p.m. (Eastern Time) on a Business Day, (b) the
next Business Day after the date of transmission if such notice or communication
is delivered via fax on a day that is not a Business Day or later than 5:30 p.m.
(Eastern Time) on a Business Day, (c) the 1st
Business Day after the date of mailing if sent by U.S. nationally recognized
overnight courier service for next Business Day delivery, or (d) upon actual
receipt by the party to whom such notice is required to be given.
33
10. Maximum
Lawful Rate. In no
event shall the amount of interest due or payments in the nature of interest
payable hereunder exceed the maximum non-usurious interest permitted by
applicable law (the “Maximum
Lawful Rate”). If from any possible construction of any
document or from receipt of anything of value by Holder, interest would
otherwise be payable in excess of the Maximum Lawful Rate, any such construction
or receipt shall be subject to the provisions of this paragraph and such
document shall be automatically reformed and the interest payable shall be
automatically reduced to the Maximum Lawful Rate, without the necessity of
execution of any amendment or new document, and any interest in excess of the
Maximum Lawful Rate shall be applied to the reduction of the principal amount
owing under this Note, or refunded to Issuer or other payor thereof if and to
the extent such excessive amount exceeds such unpaid principal
amount.
11. Governing
Law: Jurisdiction. This Note shall
be governed by and construed in accordance with the laws of the State of New
York. The Issuer hereto irrevocably consents to the jurisdiction of
the United States federal courts and state courts located in the State of New
York and County of New York in any suit or proceeding based on or arising under
this Note or the transactions contemplated hereby and irrevocably agrees that
all claims in respect of such suit or proceeding may be determined in such
courts. The Issuer irrevocably waives the defense of an inconvenient
forum to the maintenance of such suit or proceeding in such
forum. The Issuer further agrees that service of process upon the
Issuer, mailed by the first class mail in accordance with Section 9 hereof
shall be deemed in every respect effective service of process upon the Issuer in
any suit or proceeding arising hereunder. Nothing herein shall affect
the right of the Holder to serve process in any other manner permitted by
law. The parties hereby waive all rights to a trial by
jury.
12. Miscellaneous.
(a) The
Issuer and every endorser of this Note, and every other person at any time
liable for the payment of the indebtedness evidenced by this Note, shall be
obligated, to the extent permitted by the laws of the State of New York, to pay
to the Holder all expenses of every kind and nature whatsoever incurred in the
enforcement of this Note or any rights hereunder (whether or not litigation is
commenced), including, but not limited to, reasonable attorneys’ fees
(collectively, the “Expenses”), and hereby agrees
to pay to the Holder on demand the amount of any and all Expenses.
(b) The
failure of the Holder to exercise any right or remedy granted to it hereunder on
any one or more instances shall not constitute a waiver of any Event of Default
by the Holder, and all such rights and remedies shall remain continuously in
force. No delay or omission in the exercise or enforcement by the
Holder of any rights or remedies shall be construed as a waiver of any right or
remedy of the Holder, and no exercise or enforcement of any such right or remedy
shall be held to exhaust any other right or remedy of the Holder.
(c) The
Issuer’s obligation to pay principal and interest shall be absolute and
unconditional and without regard to any defense, offset, or counterclaim which
may at any time be available to the Issuer which constitutes, or might be
construed to constitute, an equitable or legal discharge of the Issuer or but
for this provision might otherwise give rise to a right of offset; provided that
nothing contained in this Note shall be construed to prevent or restrict the
Issuer from asserting any rights which the Issuer may have against the Holder
under this Note or under any provision of law, by a separate action or
proceeding but not by abatement, attachment, recoupment, counterclaim, offset or
defense against the payments to be made by the Issuer under this
Note.
(d) All
covenants, agreements and undertakings in this Note binding upon the Issuer or
the Holder shall bind and inure to the benefit of their respective heirs,
executors, personal representatives, successors and permitted assigns, whether
so expressed or not.
34
SIGNED AND DELIVERED as of the
date first above written.
|
PERPETUAL
TECHNOLOGIES, INC.
|
|
|
By:
|
|
|
Name:
|
Xxx
Xx
|
|
Title: Chief
Executive OffiFORM OF
NOTE
|
|
35
Exhibit
B
To
FORM OF
WARRANT
THE
SALE OF THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
OF THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THIS WARRANT
AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE OFFERED,
SOLD, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT COVERING SUCH TRANSACTION UNDER APPLICABLE SECURITIES LAWS OR UNLESS
OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
PERPETUAL
TECHNOLOGIES, INC.
COMMON
STOCK PURCHASE WARRANT
|
No.
__________
|
February
12, 2010 (the “Issuance
Date”)
|
PERPETUAL TECHNOLOGIES, INC.,
a Delaware corporation (the “Company”), hereby
certifies that __________________ (the “Investor”) and its
transferees, designees, successors and assigns (collectively, the “Holder”), for value
received, is entitled to purchase from the Company that number of fully-paid,
non-assessable shares (each, a “Share” and
collectively, the “Shares”) of the
Company’s common stock, $.001 par value per Share (the “Common Stock”), as
set forth below, at the exercise price (the “Exercise Price”) as
set forth below. This Warrant shall be exercisable at any time and
from time to time during the five-year period commencing on the closing of a
Financing (as defined below) (the “Effective Date”);
provided, however, this Warrant shall be null, void, and unexercisable if: (i)
no Financing is consummated during the five-year period commencing on the
Issuance Date or (ii) if the Notes automatically convert as provided in Section
6 of the Notes. As used herein, “Financing” means the
first sale (or series of related sales) by the Company of its capital stock, or
debt or equity securities convertible into or exercisable for its capital stock,
in a capital raising transaction occurring after the earlier of the Maturity
Date (as defined in the Note) and the date the Note becomes due pursuant to a
Default (as defined in the Note) as provided in Section 8 of the Note , for
aggregate gross proceeds to the Company of at least $2,000,000. The
Exercise Price equals the price per share of the Common Stock (or Common Stock
equivalent if derivative securities are sold) issued by the Company in a
Financing, provided that if the Financing includes more than one type of
security, the Exercise Price shall be lowest price per share of the Common Stock
or Common Stock equivalent included in the Financing. The number of
Shares purchasable hereunder shall equal eight percent (8%) of the total number
of shares of Common Stock outstanding immediately after the closing of the
Financing, determined on a fully-diluted basis (for purposes of clarity, after
giving effect to the conversion or exercise of all outstanding derivative
securities), multiplied by a fraction, the numerator of which is the principal
amount of the Note purchased pursuant to the Purchase Agreement by the initial
Investor who received this Warranton the Issuance Date, and the denominator of
which is the aggregate principal amount of all of the Notes purchased pursuant
to the Purchase Agreement. The number of Shares purchasable hereunder
and the Exercise Price are subject to adjustment as provided in Section 4
hereof. Within five (5) days after the Effective Date, the Company
shall inform the Holder in writing as to the number of Shares then purchasable
hereunder and the then Exercise Price, which writing shall be accompanied by a
detailed calculation showing how the foregoing were determined.
Capitalized
terms used and not otherwise defined herein will have the respective meanings
given to such terms in the Note Purchase Agreement, dated as of February 12,
2010, among the Company, the Investor, and certain other investors (the “Other Investors”)
(the “Purchase
Agreement”).
36
1. Method of Exercise;
Payment.
(a) Cash
Exercise. The purchase rights represented by this Warrant may
be exercised by the Holder, in whole or in part, by the surrender of this
Warrant (with the notice of exercise form (the "Notice of Cash
Exercise") attached hereto as Exhibit A duly
executed) at the principal office of the Company, and by payment to the Company
of an amount equal to the Exercise Price multiplied by the number of the Shares
being purchased, which amount may be paid, at the sole election of the Holder,
by (i) wire transfer or certified check payable to the order of the Company,
(ii) cancellation by the Holder of indebtedness or other obligations of the
Company to the Holder, (iii) any other lawful consideration as the Company shall
determine, or (iii) a combination of (i), (ii) and (iii).
(b) Net Issue Exercise. In
lieu of exercising this Warrant pursuant to Section l(a) hereof, the Holder may
elect to receive, without the payment of any additional consideration, a number
of Shares equal to the value (as determined below) of this Warrant (or the
portion thereof being canceled) by surrender of this Warrant at the principal
office of the Company together with the Notice of Cashless Exercise annexed
hereto as Exhibit
C duly executed (the “Notice of Cashless Exercise,” together with the
Notice of Cash Exercise, the “Exercise Notice”). In such event, the
Company shall issue to the Holder a number of fully paid, non-assessable Shares
computed using the following formula:
X = Y (A-B)
A
|
Where X
|
=
|
the
number of Shares to be issued to the Holder.
|
|
Y
|
=
|
the
number of Shares subject to this Warrant in respect of which the net issue
election is made (i.e., the right
to exercise is being surrendered) pursuant to this
Section 1(b).
|
|
A
|
=
|
the
Current Market Value of one share of Common Stock (at the date of the net
issue election is made).
|
|
B
|
=
|
the
Exercise Price in effect at the time the net issue election is made
pursuant to this Section
1(b).
|
(c) Current Market
Value. Current Market Value is defined below. The
Board of Directors of the Company shall promptly respond in writing to an
inquiry by the Holder as to the Current Market Value.
(d) Stock
Certificates. In the event of any exercise of the rights
represented by this Warrant, as promptly as practicable on or after the date of
exercise and in any event within three (3) Business Days thereafter (the
“Delivery Date”), the Company at its expense shall issue and deliver to the
person or persons entitled to receive the same a certificate or certificates for
the number of Shares issuable upon such exercise. In the event this
Warrant is exercised in part, the Company at its expense will execute and
deliver a new Warrant of like tenor exercisable for the number of Shares for
which this Warrant may then be exercised.
(e) Compensation for Buy-In on
Failure to Timely Deliver Certificates Upon Exercise. In
addition to any other rights available to the Holder, if the Company fails to
cause its transfer agent to transmit to the Holder a certificate or certificates
representing the Shares pursuant to an exercise on or before the Delivery Date,
and if after such date the Holder is required by its broker to purchase (in an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Shares which the Holder anticipated
receiving upon such exercise (a “Buy-In”), then the
Company shall (1) pay in cash to the Holder the amount by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of Shares that the Company was required to deliver to the Holder in
connection with the exercise at issue times (B) the price at which the sell
order giving rise to such purchase obligation was executed, and (2) at the
option of the Holder, either reinstate the portion of the Warrant and equivalent
number of Shares for which such exercise was not honored or deliver to the
Holder the number of shares of Common Stock that would have been issued had the
Company timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (1) of the immediately
preceding sentence the Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In, together with applicable confirmations
and other evidence reasonably requested by the Company. Nothing
herein shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock upon
exercise of this Warrant as required pursuant to the terms
hereof
37
(f) Taxes. The
issuance of the Shares upon the exercise of this Warrant, and the delivery of
certificates or other instruments representing such Shares, shall be made
without charge by the Company to the Holder for any tax or other charge in
respect of such issuance.
2. Warrant.
(a) Exchange, Transfer and
Replacement. At any time prior to the exercise hereof, this
Warrant may be exchanged upon presentation and surrender to the Company, alone
or with other warrants of like tenor of different denominations registered in
the name of the same Holder, for another warrant or warrants of like tenor in
the name of the Holder exercisable for the aggregate number of Shares as the
warrant or warrants surrendered.
(b) Replacement of
Warrant. Upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction, or mutilation of this Warrant and,
in the case of any such loss, theft, or destruction, upon delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company,
or, in the case of any such mutilation, upon surrender and cancellation of this
Warrant, the Company, at its expense, will execute and deliver in lieu thereof,
a new Warrant of like tenor.
(c) Cancellation; Payment of
Expenses. Upon the surrender of this Warrant in connection
with any transfer, exchange or replacement as provided in this Section 2, this
Warrant shall be promptly canceled by the Company.
(d) Warrant
Register. The Company shall maintain, at its principal
executive offices (or at the offices of the transfer agent for the Warrant or
such other office or agency of the Company as it may designate by notice to the
Holder), a register for this Warrant (the “Warrant Register”) in
which the Company shall record the name and address of the person in whose name
this Warrant has been issued, as well as the name and address of each transferee
and each prior owner of this Warrant.
3. Rights and Obligations of
Holders of this Warrant. The Holder shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company, either at law
or in equity; provided, however, that in the
event any certificate representing Shares or other securities is issued upon
exercise of this Warrant, the recipient of such certificate shall, for all
purposes, be deemed to have become the holder of record of such securities (and
such securities will be deemed to have been issued) on the date on which this
Warrant, together with a duly executed Election to Purchase or Notice of
Cashless Exercise, as applicable, was surrendered and payment of the aggregate
Exercise Price, if applicable, was made, irrespective of the date of delivery of
such certificate.
4. Adjustments.
(a) Stock Dividends,
Reclassifications, Recapitalizations, Etc. In the event that,
on or after the Effective Date, the Company: (i) pays a dividend
in Common Stock or makes a distribution in Common Stock, (ii) subdivides
its outstanding Common Stock into a greater number of shares,
(iii) combines its outstanding Common Stock into a smaller number of shares
or (iv) increases or decreases the number of shares of Common Stock
outstanding by reclassification of its Common Stock (including a
recapitalization in connection with a consolidation or merger in which the
Company is the continuing corporation), then (1) the Exercise Price on the
record date of such division or distribution or the effective date of such
action shall be adjusted by multiplying such Exercise Price by a fraction, the
numerator of which is the number of shares of Common Stock actually issued and
outstanding immediately before such event and the denominator of which is the
number of shares of Common Stock actually issued and outstanding immediately
after such event, and (2) the number of shares of Common Stock for which
this Warrant may be exercised immediately before such event shall be adjusted by
multiplying such number by a fraction, the numerator of which is the Exercise
Price immediately before such event and the denominator of which is the Exercise
Price immediately after such event.
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(b) Cash Dividends and Other
Distributions. In the event the Company shall, at any time or
from time to time on or after the Effective Date, distribute to all holders of
Common Stock (including any such distribution made in connection with a
consolidation or merger in which the Company is the resulting or surviving
entity and the Common Stock is not changed or exchanged) cash, evidences of
indebtedness of the Company or another issuer, securities of the Company or
another issuer, or other assets (excluding dividends or other distributions of
Common Stock for which adjustment is made under Section 4(a)), or rights or
warrants to subscribe for or purchase securities of the Company (excluding those
in respect of which adjustments in the Exercise Price is made pursuant to
Section 4(d)), then in each such case the Exercise Price in effect thereafter
shall be determined by multiplying the Exercise Price in effect immediately
prior thereto by a fraction, the numerator of which shall be (x) the total
number of shares of Common Stock actually issued and outstanding on the business
day immediately prior to the date of such distribution multiplied by the Current
Market Value per share of Common Stock on such business day, less (y) the Fair
Market Value on such business day of said assets or evidences of indebtedness so
distributed or of such rights or warrants, and the denominator of which shall be
the total number of shares of Common Stock actually issued and outstanding on
such business day multiplied by such Current Market Value on such business
day. Such adjustment shall be made and shall be effective whenever
any such distribution is made.
(c) Additional
Stock.
(i) If on
or after the Effective Date, the Company shall issue any Additional Stock (as
defined below) at an exercise or conversion price less than the then current
Exercise Price or for a consideration per share less than the Exercise Price in
effect immediately prior to the issuance of such Additional Stock, the Exercise
Price shall automatically and forthwith be adjusted to a price equal to the
price paid per share for such Additional Stock.
(ii)
“Additional
Stock” shall mean any shares of Common Stock issued by the Company other
than:
(A) shares
of Common Stock issued pursuant to a transaction described in subsection (a) of
this Section 4;
(B) shares
of Common Stock issued pursuant to the exercise or conversion of derivative
securities outstanding on the Effective Date;
(C) shares
of Common Stock issued pursuant to the exercise of options granted under a stock
option plan approved by the stockholders and Board of Directors of the
Company;
(D) shares
of Common Stock issued pursuant to a restricted stock purchase plan approved by
the stockholders and Board of Directors of the Company (but only to the extent
that, at the time of issuance, the aggregate number of then issued and
outstanding shares of Common Stock granted pursuant to such plan (including the
shares issued pursuant to such grant) plus the aggregate number of shares of
Common Stock issuable upon the exercise of then outstanding options covered by
Section 4(c)(ii)(C), shall not exceed 15% of the number of shares of Common
Stock then actually issued and outstanding); and
(E) shares
of Common Stock issued or issuable (I) in a bona fide, firmly underwritten
public offering under the Securities Act of 1933, as amended (the “Securities Act”), or
(II) upon exercise of warrants or rights granted to underwriters in
connection with such a public offering.
39
(d) Options, Warrants,
etc. In case the Company shall, at any time or from time to
time on or after the Effective Date, issue or sell any options, warrants,
rights, or other securities, including debt, convertible into or exercisable or
exchangeable for Common Stock or any security convertible into or exercisable or
exchangeable for Common Stock (whether or not the right to exercise, convert, or
exchange any such securities is immediately exercisable, but excluding (1)
securities issued in transactions described in Section 4(b) and (2) options
granted on or after the Effective Date pursuant to a stock option plan approved
by the stockholders and Board of Directors of the Company, if such options would
otherwise be included in this Section 4(d) (but only to the extent that, at the
time of grant, the aggregate number of shares of Common Stock issuable upon
exercise of the options covered by the grant and then outstanding options
otherwise excluded hereby, plus the number of issued and outstanding shares
granted pursuant to a restricted stock purchase plan described in Section
4(c)(ii)(D), shall not exceed 15% of the number of shares of Common Stock then
actually issued and outstanding) for a consideration per share of Common Stock
(the “Exchange
Price”) initially payable and thereafter deliverable upon conversion,
exercise or exchange of such securities (determined as provided in Section 4(h)
below) less than the then current Exercise Price, then the Exercise Price shall
be immediately reset to equal such lower Exchange Price. If the
provisions of any securities convertible into, or exercisable or exchangeable
for, Common Stock or options, warrants or other rights to acquire Common Stock
are amended after the Effective Date so as to reduce the applicable conversion
price, exchange price or exercise price, such amendment shall be deemed to be a
new issuance of such securities.
(e) Notice of
Adjustment. Whenever the Exercise Price or the number of
shares of Common Stock and other property, if any, issuable upon exercise of
this Warrant is adjusted, as herein provided, the Company shall deliver to the
Holder in accordance with Section 9 a certificate of the Company’s Chief
Financial Officer setting forth, in reasonable detail, the event requiring the
adjustment and the method by which such adjustment was calculated (including a
description of the basis on which (i) the Board of Directors determined the Fair
Market Value of any evidences of indebtedness, other securities or property or
warrants, options or other subscription or purchase rights and (ii) the Current
Market Value of the Common Stock was determined, if either of such
determinations were required), and specifying the Exercise Price and number of
shares of Common Stock issuable upon exercise of this Warrant after giving
effect to such adjustment.
(f) Current Market
Value. “Current Market Value”
per share of Common Stock or any other security at any date means (i) if the
security is not registered under the Securities Exchange Act of 1934 and/or
traded on a national securities exchange, quotation system or bulletin board, as
amended (the “Exchange
Act”), (A) the value of the security, determined in good faith by the
Board of Directors of the Company and certified in a board resolution, based on
the most recently completed arm’s-length transaction between the Company and a
Person that is not an affiliate of the Company, or between any two such Persons,
and the closing of which occurs on such date or shall have occurred within the
six-month period preceding such date, or (B) if no such transaction shall have
occurred within the six-month period, the value of the security as determined by
an Independent Financial Expert or an agreed upon financial valuation model, or
(ii) if the security is registered under the Exchange Act and/or traded on a
national securities exchange, quotation system or bulletin board, the average of
the daily closing bid prices (or the equivalent in an over-the-counter market)
for each day on which the Common Stock or other security is traded for any
period on the principal securities exchange or other securities market on which
the Common Stock or other security is being traded during the period commencing
thirty (30) days before such date and ending on the date one day prior to such
date. “Person” means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
(g) “Fair Market Value”
means the amount, reasonably determined by the Company’s Board of Directors,
which a willing buyer, under no compulsion to buy, would pay a willing seller,
under no compulsion to sell, in an arm’s-length transaction, with no
consideration given for accounting treatment, minority investment discounts, or
discounts related to illiquidity or restrictions on transferability; provided,
however, if requested by the Holder, the Company (at its sole expense) shall
retain an Independent Financial Expert (chosen by the Company and reasonably
acceptable to the Holder) to render an opinion as to Fair Market Value, in which
case the determination of such Independent Financial Expert shall
govern. As used herein, “Independent Financial
Expert” shall mean a nationally recognized investment banking firm which
does not (and whose directors, officers, employees and affiliates do not) have a
direct or indirect financial interest in the Company or any of its subsidiaries,
and which has not been, and, at the time it is called upon to give independent
financial advice, does not provide any advice or opinions to the Company or any
of its subsidiaries, except as an Independent Financial Expert.
40
(h) Computations. For
purposes of any computation respecting consideration received pursuant to
Sections 4(c) and (d) above, the following shall apply:
(i) in
the case of the issuance of Common Stock for cash, the consideration shall be
the amount of such cash, provided that in no case shall any deduction be made
for any commissions, discounts or other expenses incurred by the Company for any
underwriting of the issue or otherwise in connection therewith;
(ii) in
the case of the issuance of Common Stock for a consideration in whole or in part
other than cash, the consideration other than cash shall be deemed to be the
Fair Market Value thereof; and
(iii) in
the case of the issuance of securities convertible into or exchangeable for
Common Stock, the aggregate consideration received therefor shall be deemed to
be the consideration received by the Company for the issuance of such securities
plus the additional minimum consideration, if any, to be received by the Company
upon the conversion or exchange thereof (the consideration in each case to be
determined in the same manner as provided in Sections 4(h)(i) and (ii)
above.
(i) All
calculations under this Section 4 shall be made to the nearest cent or to the
nearest one-hundredth of a Share, as the case may be.
(j)
In the event that at any time, as a result of an adjustment made pursuant to
Section 4(a), the Holder thereafter shall become entitled to receive any
securities of the Company, other than shares of Common Stock, thereafter the
number of such other securities so receivable upon exercise of this Warrant
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Shares
contained in Sections 4(a) to (i), inclusive.
(k) Irrespective
of any adjustments in the Exercise Price or the number or kind of securities
purchasable upon exercise of this Warrant, this Warrant may continue to express
the same price and number and kind of securities as were stated prior to such
adjustment.
(l) Upon
the termination, cancellation, or expiration of all of the securities
convertible into or exercisable or exchangeable for Common Stock referenced in
Section 4(d), the Exercise Price then in effect hereunder shall forthwith be
adjusted to the Exercise Price which would have been in effect at the time of
such termination, cancellation, or expiration had such rights, warrants, or
securities never been issued.
(m) If
an adjustment has been made under Section 4(d) upon the issuance of any
securities convertible into or exercisable or exchangeable for Common Stock,
then the subsequent issuance of Common Stock upon the actual exercise of such
securities shall be excluded from the adjustment provisions hereof.
(n) For
so long as this Warrant shall be outstanding, the Company shall not issue any
Additional Stock for no consideration.
5. Fractional
Shares. In lieu of issuance of a fractional Share upon any
exercise hereunder, the Company will issue an additional whole Share in lieu of
that fractional share, calculated on the basis of the Exercise
Price.
6. Compliance with Securities
Laws.
(a) The
Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and
the Shares to be issued upon exercise hereof are being acquired solely for the
Holder's own account and not as a nominee for any other party, and for
investment, and that the Holder will not offer, sell or otherwise dispose of
this Warrant or any Shares to be issued upon exercise hereof except pursuant to
an effective registration statement, or an exemption from registration, under
the Securities Act and any applicable state securities laws
41
(b) Legends. Except
as otherwise provided herein or in the Purchase Agreement, all such certificates
representing the Shares shall bear a restrictive legend to the effect that the
Shares represented by such certificate have not been registered under the
Securities Act and that the Shares may not be sold or transferred in the absence
of such registration or an exemption therefrom, such legend to be substantially
in the form of the bold-face language appearing at the top of Page 1 of this
Warrant.
(c) The
Company agrees to reissue this Warrant or certificates representing any of the
Shares, without the legend set forth above if at such time, prior to making any
transfer of any such securities, the Holder shall give written notice to the
Company describing the manner and terms of such transfer. Such
proposed transfer will not be effected until: (a) either (i) the Company has
received an opinion of counsel reasonably satisfactory to the Company, to the
effect that the registration of such securities under the Securities Act is not
required in connection with such proposed transfer, (ii) a registration
statement under the Securities Act covering such proposed disposition has been
filed by the Company with the Securities and Exchange Commission and has become
effective under the Securities Act and the Holder has represented that the
Shares have been or will be sold, (iii) the Company has received other evidence
reasonably satisfactory to the Company that such registration and qualification
under the Securities Act and state securities laws are not required, or (iv) the
Holder provides the Company with reasonable assurances that such security can be
sold pursuant to Rule 144 under the Securities Act; and (b) either (i) the
Company has received an opinion of counsel reasonably satisfactory to the
Company, to the effect that registration or qualification under the securities
or "blue sky" laws of any state is not required in connection with such proposed
disposition, or (ii) compliance with applicable state securities or "blue sky"
laws has been effected or a valid exemption exists with respect
thereto. The Company will respond to any such notice from a holder
within three (3) business days. In the case of any proposed transfer
under this Section 6(c), the Company will use reasonable efforts to comply with
any such applicable state securities or "blue sky" laws, but shall in no event
be required, (x) to qualify to do business in any state where it is not then
qualified, (y) to take any action that would subject it to tax or to the general
service of process in any state where it is not then subject, or (z) to comply
with state securities or “blue sky” laws of any state for which registration by
coordination is unavailable to the Company. The restrictions on
transfer contained in this Section 6(c) shall be in addition to, and not by way
of limitation of, any other restrictions on transfer contained in any other
section of this Warrant.
(d) Accredited Investor
Status. In no event may the Holder exercise this Warrant in
whole or in part unless the Holder is an “accredited investor” as defined in
Regulation D under the Securities Act.
7. Disposition of Warrant or
Shares. The Holder agrees that no public distribution of this
Warrant or the Shares will be made in violation of the provisions of the
Securities Act. Furthermore, it shall be a condition to the transfer
of this Warrant that any transferee thereof deliver to the Company his or its
written agreement to accept and be bound by all of the terms and conditions
contained in this Warrant.
8. Reorganization,
Reclassification, Consolidation, Merger or Sale of Assets. In case of any
capital reorganization or reclassification or other change of outstanding Common
Stock (other than as a result of a subdivision or combination), or in case of
any consolidation or merger of the Company with or into another Person (other
than a consolidation or merger in which the Company is the resulting or
surviving Person and which does not result in any reclassification, conversion,
cancellation or change of outstanding Common Stock), or in case of any sale or
other disposition to another Person of all or substantially all of the assets of
the Company (any of the foregoing, a “Transaction”), the
Company, or such successor or purchasing Person, as the case may be, shall
execute and deliver to the Holder, at least five Business Days prior to
effecting any Transaction, a certificate that the Holder shall have the right
thereafter to exercise this Warrant into the kind and amount of units or other
securities (of the Company or another issuer, as the case may be) or property or
cash receivable upon such Transaction by a holder of the number of Shares into
which this Warrant could have been exercised immediately prior to such
Transaction, provided that the Company shall structure such Transaction so that
the Holder shall be entitled to sell this Warrant in the
Transaction. Such certificate shall provide for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in Section 4 hereof and shall contain other terms identical to the terms
hereof. If, in the case of any such Transaction, the stock, other
securities, cash or property receivable thereupon by a holder of Common Stock
includes stock or other securities of a Person (other than the successor or
purchasing Persons and other than the Company) which controls or is controlled
by the successor or purchasing Person or which, in connection with such
Transaction, issues stock, securities, other property or cash to holders of
Common Units, then such certificate also shall be executed by such Person, and
such Person shall, in such certificate, specifically assume the obligations of
such successor or purchasing Person and acknowledge its obligations to issue
such stock, securities, other property or cash to the Holder upon exercise of
this Warrant as provided above. The provisions of this Section 8 similarly shall
apply to successive Transactions.
42
9. Notice of Certain
Transactions. In the event that the Company shall propose
(a) to pay any dividend payable in securities of any class to the holders
of its Common Stock or to make any other non-cash dividend or distribution to
the holders of its Common Stock, (b) to offer the holders of its Common
Stock rights to subscribe for or to purchase any securities convertible into
shares of Common Stock or shares of stock of any class or any other securities,
rights or options, (c) to effect any capital reorganization,
reclassification, consolidation or merger affecting the class of Common Stock,
as a whole, (d) to effect the voluntary or involuntary dissolution,
liquidation or winding-up of the Company, or (e) a Financing, the Company shall,
within the time limits specified below, send to the Holder a notice of such
proposed action or offer. Such notice shall be mailed to the Holder
at its address as it appears in the Warrant Register (as defined in
Section 2(d)), which shall specify the record date for the purposes of such
dividend, distribution or rights, or the date such issuance or event is to take
place and the date of participation therein by the holders of Common Stock, if
any such date is to be fixed, and shall briefly indicate the effect of such
action on the Common Stock and on the number and kind of any other shares of
stock and on other property, if any, and the number of shares of Common Stock
and other property, if any, issuable upon exercise of this Warrant and the
Exercise Price after giving effect to any adjustment pursuant to Section 4
which will be required as a result of such action. Such notice shall
be given as promptly as possible and (x) in the case of any action covered by
clause (a) or (b) above, at least ten (10) Business Days prior to the record
date for determining holders of the Common Stock for purposes of such action or
(y) in the case of any other such action, at least twenty (20) Business Days
prior to the date of the taking of such proposed action or the date of
participation therein by the holders of Common Stock, whichever shall be the
earlier.
9. Notices. Any
notice herein required or permitted to be given shall be in writing and shall be
delivered personally, by nationally-recognized overnight courier or by facsimile
machine confirmed telecopy to the applicable addresses set forth below (or to
such other address as a party may designate by written notice in accordance with
the provisions of this Section 9), and shall be deemed given and effective on
the earliest of (a) the date of transmission if such notice or communication is
delivered by fax prior to 5:30 p.m. (Eastern Time) on a business day, (b) the
next business day after the date of transmission if such notice or communication
is delivered via fax on a day that is not a business day or later than 5:30 p.m.
(Eastern Time) on a business day, (c) the 1st
business day after the date of mailing if sent by U.S. nationally recognized
overnight courier service for next business day delivery, or (d) upon actual
receipt by the party to whom such notice is required to be given. The addresses
for such communications shall be:
If to the
Company:
Perpetual
Technologies, Inc.
Shishan
Industrial Park
Nanhai
District, Foshan City, Guangdong Province, PRC
Attention: Mr. Ji Lie
Facsimile: _________________________
with a
copy to:
Guzov
Ofsink, LLC
000
Xxxxxxx Xxxxxx
Xxx Xxxx,
Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx,
Esq.
Facsimile: 212-688-7273
if to the
Holder: to
the Holder’s address as specified in the records of the Company
43
10. Registration
Rights. The Holder shall be entitled to the registration
rights as are contained in the Registration Rights Agreement of even date
herewith, by and among the Company, the Investor and the Other Investors, the
provisions of which are deemed incorporated herein by reference. In
furtherance and not in limitation of any other provision of this Warrant, if the
Company at any time shall list its Common Stock on any national securities
exchange, the Company will, at its expense, simultaneously list on such exchange
(and maintain such listing for so long as the Common Stock remains so listed)
all of the Shares from time to time issuable upon the exercise of the Warrants;
and the Company will so list on any national securities exchange and will so
register (and will maintain such listing for so long as the such Other
Securities (as hereinafter defined) remain so listed) any other securities (the
“Other
Securities”) which the Holder at any time shall be entitled to receive,
or shall have received, upon the exercise of this Warrant, in lieu of or in
addition to the Shares, or which at any time shall be issuable or shall have
been issued in exchange for or in replacement of Shares or such Other Securities
if and at the time that any Other Securities shall be listed on such national
securities exchange by the Company.
11. Successors and
Assigns. This Warrant shall be binding on and shall inure to
the benefit of the Holder and the Company and their respective heirs, executors,
personal representatives, successors and assigns.
12. Headings. The
headings of various sections of this Warrant have been inserted for reference
only and shall not affect the meaning or construction of any of the provisions
hereof.
13. Severability. If any
provision of this Warrant is held to be unenforceable under applicable law, such
provision shall be excluded from this Warrant, and the balance hereof shall be
interpreted as if such provision were so excluded.
14. Modification and
Waiver. This Warrant and any provision hereof may be amended,
waived, discharged or terminated only by an instrument in writing signed by the
Company and the Holder.
15. Specific
Enforcement. The Company and the Holder acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Warrant were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the Holder and the
Company shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Warrant and to enforce specifically the terms
and provisions hereof, this being in addition to any other remedy to which
either of them may be entitled by law or equity.
16. Assignment. This
Warrant may be transferred or assigned only in whole, if prior to the Effective
Date, or in whole or in part, if on or after the Effective Date, at any time and
from time to time by the then Holder by submitting this Warrant to the Company
together with a duly executed Assignment in substantially the form and substance
of the Form of Assignment which accompanies this Warrant, as Exhibit B
hereto, and, upon the Company’s receipt hereof, and in any event, within five
(5) business days thereafter, the Company shall issue in the name or names
specified by the Holder and, in the event of a partial transfer, in the name of
the Holder, a new Warrant or Warrants evidencing the right to purchase such
number of Shares as shall be equal to the number of Shares then purchasable
hereunder.
17. Limitation on
Exercise. Notwithstanding anything to the contrary contained herein, the
number of shares of Common Stock that may be acquired by the Holder upon
any exercise of this Warrant (or otherwise in respect hereof) shall be limited
to the extent necessary to insure that, following such exercise (or other
issuance), the total number of shares of Common Stock then beneficially owned by
the Holder and its affiliates and any other persons whose beneficial ownership
of Common Stock would be aggregated with the Holder’s for purposes of
Section 13(d) of the Exchange Act, does not exceed 4.999% of the total
number of issued and outstanding shares of Common Stock (including for such
purpose the shares of Common Stock issuable upon such exercise); provided, however, that upon a
holder of this Warrant providing the Company with sixty-one (61) days notice
(pursuant to Section 9 hereof) (the "Waiver Notice") that
such Holder would like to waive this Section 17 with regard to any or all shares
of Common Stock issuable upon exercise of this Warrant, this Section 17 will be
of no force or effect with regard to all or a portion of the Warrant referenced
in the Waiver Notice; provided, further, that this
provision shall be of no further force or effect during the sixty-one (61) days
immediately preceding the expiration of the term of this Warrant. For such
purposes, beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder. Each delivery of an Exercise Notice hereunder will
constitute a representation by the Holder that it has evaluated the limitation
set forth in this paragraph and determined that issuance of the full number of
Shares requested in such Exercise Notice is permitted under this paragraph. This
provision shall not restrict the number of shares of Common Stock which the
Holder may receive or beneficially own in order to determine the amount of
securities or other consideration that the Holder may receive in the event
of a merger or other business combination or reclassification involving the
Company.
44
18. Governing
Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law
thereof. Each party agrees that all Proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement (whether brought against a party hereto or its respective
Affiliates, employees or agents) will be commenced in the New York
Courts. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any Proceeding, any claim that it is not personally subject to the jurisdiction
of any New York Court, or that such Proceeding has been commenced in an improper
or inconvenient forum. Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in any such
Proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law. Each party
hereto hereby irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any Proceeding arising out of or
relating to this Agreement or the transactions contemplated
hereby. If either party shall commence a Proceeding to enforce any
provisions of this Agreement, then the prevailing party in such Proceeding shall
be reimbursed by the other party for its attorney’s fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
Proceeding.
19. Stock Fully Paid. The
Company covenants and agrees that all Shares will be duly authorized, validly
issued and fully paid and nonassessable and free from all taxes, liens and
charges created by or through the Issuer. The Company shall at all
times reserve and keep available for issuance upon the exercise of this Warrant
such number of its authorized but unissued shares of Common Stock as will from
time to time be sufficient to permit the exercise of this Warrant in full, and
shall take all action required to increase the authorized number of shares of
Common Stock if at any time there shall be insufficient authorized but unissued
shares of Common Stock to permit such reservation or to permit the exercise of
this Warrant in full.
20.
Reservation. If any shares of Common Stock required to
be reserved for issuance upon exercise of this Warrant or as otherwise provided
hereunder require registration or qualification with any governmental authority
under any federal or state law before such shares may be so issued, the Company
will in good faith use its best efforts as expeditiously as possible at its
expense to cause such shares to be duly registered or qualified. If
the Company shall list any shares of Common Stock on any securities exchange or
market it will, at its expense, list thereon, maintain and increase when
necessary such listing, of, all shares of Warrant Stock from time to time issued
upon exercise of this Warrant or as otherwise provided hereunder (provided that
such Warrant Stock has been registered pursuant to a registration statement
under the Securities Act then in effect), and, to the extent permissible under
the applicable securities exchange rules, all unissued Shares which are at any
time issuable hereunder, so long as any shares of Common Stock shall be so
listed. The Company will also so list on each securities exchange or
market, and will maintain such listing of, any other securities which the Holder
of this Warrant shall be entitled to receive upon the exercise of this Warrant
if at the time any securities of the same class shall be listed on such
securities exchange or market by the Company.
45
(c) Covenants. The
Company shall not by any action including, without limitation, amending the
Ceritifcate of Incorporation or the by-laws of the Company, or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate to protect the rights of the Holder
hereof against dilution (to the extent specifically provided herein) or
impairment. Without limiting the generality of the foregoing, the
Company will (i) not permit the par value, if any, of its Common Stock to exceed
the then effective Warrant Price, (ii) not amend or modify any provision of the
Articles of Incorporation or by-laws of the Company in any manner that would
adversely affect the rights of the Holders of the Warrants, (iii) take all such
action as may be reasonably necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock, free and
clear of any liens, claims, encumbrances and restrictions (other than as
provided herein) upon the exercise of this Warrant, and (iv) use its best
efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be reasonably
necessary to enable the Company to perform its obligations under this
Warrant.
(signature
page immediately follows)
46
IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly executed,
manually or by facsimile, by one of its officers thereunto duly
authorized.
|
PERPETUAL
TECHNOLOGIES, INC.
|
|||
|
Date:
February 12, 2010
|
By:
|
||
|
Name:
Xxx Xx
|
|||
|
Title: Chief
Executive Officer
|
|||
47
Exhibit
C
To
Note Purchase
Agreement
MANAGEMENT
SHAREHOLDERS
|
Name and Address
|
Number of Shares of Perpetual
Technologies, Inc. Common Stock
Being
Pledged
|
|
|
Bestyield
Group Limited
|
21,765,306
|
|
|
Proudlead
Limited
|
21,765,306
|
48
Exhibit
D
To
Note Purchase
Agreement
FORM OF NON-RECOURSE
GUARANTY
This
NON-RECOURSE GUARANTY is made as of the 12th day of
February, 2010, by each of the persons set forth on Schedule A attached
hereto (each a “Guarantor”) for the
benefit of the purchasers set forth on Schedule B attached
hereto (the “Purchasers”).
WITNESSETH:
WHEREAS,
on February 12, 2010, each of the Purchasers entered into a Note Purchase
Agreement (the “Note
Purchase Agreement”) with Perpetual Technologies Inc. (the “Company”), pursuant
to which the Purchasers are purchasing from the Company certain convertible
promissory notes (the “Notes”) and certain
warrants (“Warrants”);
WHEREAS,
the Company has entered into a reverse merger agreement (the “Reverse Merger
Agreement”) pursuant to which the Company acquired control of a British
Virgin Islands company (the “BVI Company”), the
owner of all of the outstanding capital stock of Technic
International, Inc., a Hong Kong company (“Technic”), and the
owner of all of the outstanding equity interests of Foshan SLP Special Materials
Company (“Foshan”), a limited
liability company organized under the laws of the People’s Republic of China
(“PRC”) (the
“Reverse Merger
Transaction”) and therefore Technic and Foshan became wholly-owned
subsidiaries of the Company;
WHEREAS,
each Guarantor is a stockholder of the Company, and will derive direct and
indirect economic benefits from the transactions contemplated under the Note
Purchase Agreement;
WHEREAS,
in order to induce the Purchasers to enter into the Note Purchase Agreement and
purchase the Notes from the Company, and as a condition thereto and in
consideration of the benefits which will accrue to the Guarantors as a result
thereof, each Guarantor desires to guarantee the Company’s obligations under the
Notes;
WHEREAS,
concurrently herewith, the Guarantors are entering into a stock pledge agreement
pursuant to which the Guarantors are pledging their shares of Company capital
stock (“Guarantor Shares”) as security for their obligations hereunder (the
“Stock Pledge
Agreement”); and
WHEREAS,
unless otherwise defined herein, defined terms shall have the respective
meanings set forth in the Note Purchase Agreement;
NOW,
THEREFORE, the Guarantors, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, hereby agree as follows:
1.
Each
Guarantor, jointly and severally, hereby unconditionally and irrevocably
guarantees to each of the Purchasers pari passu the due and
punctual payment and performance in full of all obligations and liabilities of
the Company to each Purchaser under the Notes (collectively, the “Obligations”).
49
2. This
Guaranty is irrevocable, continuing, indivisible and unconditional and shall
remain in full force and effect regardless of, and shall not discharged,
terminated, impaired, affected or modified in any manner by reason of (a) any
subordination, amendment, modification, extension, renewal, assignment or
transfer of the Notes or any other Transaction Document; (b) the assertion or
exercise by any Purchaser, or the failure of any Purchaser to assert or
exercise, any right, remedy, power or privilege under or in respect of this
Guaranty, the Note Purchase Agreement, the Notes, any other Transaction
Document, or the Obligations, or any waiver of any such right, remedy, power or
privilege; (c) the existence or continuance, or discontinuance, of the Company
as a legal entity; (d) the bankruptcy, insolvency, receivership, reorganization,
arrangement, readjustment, composition, liquidation or the like, of a Guarantor,
a Purchaser, or the Company, or the making by the Company, a Purchaser or a
Guarantor of an assignment for the benefit of creditors; (e) the acceptance,
alteration, release or substitution by Purchaser of any security for the
Obligations, whether provided by the Company, Guarantor or any other person, (f)
any waiver, consent, extension, indulgence or other action or inaction in
respect of this Guaranty, any other Transaction Document, or the Obligations;
(g) any lack of validity or enforceability of the Notes or any other Transaction
Document or any other agreement or instrument governing or evidencing any
Obligations; (h) the death or incompetency of a Guarantor, or the termination or
modification of a Guarantor’s relationship with the Company; or (i) any other
action or circumstances which might otherwise constitute a legal or equitable
discharge or defense of a surety, accommodation co-obligor, or guarantor,
whether or not such Guarantor shall have notice or knowledge of each or any of
the foregoing. This Guaranty is and shall be a direct and primary
obligation of each Guarantor, and may be enforced by any Purchaser without prior
resort to the Company or the exhaustion of any rights or remedies that any
Purchaser may have against the Company.
3. Notwithstanding
anything to the contrary herein, each Guarantor’s obligations under this
Guaranty are non-recourse to each Guarantor and are limited only to the
collateral pledged by such Guarantor under the Stock Pledge Agreement and any
payments or amounts realized, recovered or otherwise received by in respect of
the recovery of or realization on any such collateral.
4. Guarantor
hereby expressly waives the following: (a) acceptance and notice of acceptance
of this Guaranty by any Purchaser; (b) notice of extension of time of the
payment, performance and compliance with, or the renewal or alteration of the
terms and conditions of, any Obligations; (c) notice of any demand for payment,
notice of default or nonpayment as to any Obligations; (d) all other notices to
which the Guarantor might otherwise be entitled in connection with this Guaranty
or the Obligations; (e) trial by jury and the right thereto in any action or
proceeding of any kind or nature, arising on, under or by reason of, or relating
in any way to, this Guaranty or the Obligations; and (f) any and all defenses,
claims, setoffs and discharges of the Company, or any other obligor, pertaining
to the Obligations, except the defense of discharge by payment in
full.
5. Guarantor
has not and will not set up or claim any counterclaim, set-off or other
objection of any kind to any suit, action or proceeding at law, in equity, or
otherwise, that may be instituted or made under and by virtue of this
Guaranty. All remedies of the Purchasers by reason of or under this
Guaranty are separate and cumulative remedies, and it is agreed that no one of
such remedies shall be deemed in exclusion of any other remedies available to
the Purchasers.
6. Guarantor
represents and warrants that the Guarantor has full power and authority to
execute, deliver and perform this Guaranty, and that neither the execution,
delivery nor performance of this Guaranty will violate any law or regulation, or
any order or decree of any court or governmental authority, or will conflict
with, or result in the breach of, or constitute a default under, any agreement
or other instrument to which Guarantor is a party or by which Guarantor may be
bound, or will result in the creation or imposition of any lien, claim or
encumbrance upon any property of Guarantor.
7. This
Guaranty may not be changed or terminated orally. No modification or
waiver of any provision of this Guaranty shall be effective unless such
modification or waiver shall be in writing and signed by the Purchasers, and the
same shall then be effective only for the period and on the conditions and for
the specific instances and purposes specified in such writing. No
course of dealing between Guarantor and any Purchaser in exercising any rights
or remedies hereunder shall operate as a waiver or preclude the exercise of any
other rights or remedies hereunder.
8. This
Guaranty shall be construed in accordance with, and governed by, the laws of the
State of New York, without giving effect to such jurisdiction’s principles of
conflict of laws, except to the extent that the validity or the perfection of
the security interest hereunder, or remedies hereunder, in respect of any
particular collateral are governed by the laws of a jurisdiction other than the
State of New York.
50
9. This
Guaranty shall be binding upon Guarantors and their respective heirs, executors,
administrators, legal representatives, successors and assigns, and shall insure
to the benefit of the Purchasers and their respective heirs, executors,
administrators, legal representatives, successors and assigns.
10. Each
Guarantor hereby waives all rights that such Guarantor may now have or hereafter
acquire, whether by subrogation, contribution, reimbursement, recourse,
exoneration, contract or otherwise, to recover from the Company or from any
property of the Company any sums paid under this Guaranty or the Stock Pledge
Agreement.
11. Each
Guarantor will pay or reimburse the Purchasers for all costs, expenses and
reasonable attorneys’ fees paid or incurred by the Purchasers in endeavoring to
collect and enforce the Obligations and in enforcing this Guaranty.
12. If
any payment applied by the Purchasers to the Obligations is thereafter set
aside, recovered, rescinded or required to be returned for any reason
(including, without limitation, the bankruptcy, insolvency or reorganization of
the Company or any other obligor), the Obligations to which such payment was
applied shall for the purpose of this Guaranty be deemed to have continued in
existence, notwithstanding such application, and this Guaranty shall be
enforceable as to such Obligations as fully as if such application had never
been made.
13. This
Guaranty shall be effective upon delivery to the Purchasers, without further
act, condition or acceptance by the Purchasers. Any invalidity or
unenforceability of any provision or application of this Guaranty shall not
affect other lawful provisions and application thereof, and to this end the
provisions of this Guaranty are declared to be severable. This
Guaranty may not be waived, modified, amended, terminated, released or otherwise
changed except by a writing signed by the Guarantors and the
Purchasers. This Guaranty shall be governed by and construed in
accordance with the substantive laws (other than conflict laws) of the State of
New York. Each Guarantor hereby (i) consents to the personal
jurisdiction of the state and federal courts located in the State of New York in
connection with any controversy related to this Guaranty; (ii) waives any
argument that venue in any such forum is not convenient, (iii) agrees that
any litigation in connection with this Guaranty may be venued in the state or
federal courts located in the State of New York; and (iv) agrees that a
final judgment in any such suit, action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.
14. This
Guaranty may be executed in any number of counterparts, each of which shall be
deemed to be an original, and all of which together shall constitute one and the
same document. This Guaranty may be executed and delivered by
facsimile copies showing the signatures of the Guarantors, and those signatures
need not be affixed to the same copy. In the event that any signature
is delivered by facsimile transmission, such signature shall create a valid
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
[signatures
follow on next page]
51
IN
WITNESS WHEREOF, each Guarantor has executed this Non-Recourse Guaranty as of
the 12th day of
February, 2010.
|
Bestyield
Group Limited
|
|
|
By:
|
|
|
Name:
Xxx Xx
|
|
|
Title:
Director
|
|
|
Proudlead
Limited
|
|
|
By:
|
|
|
Name:
Wawai Law
|
|
|
Title:
Director
|
|
52
Exhibit
E
To
Note Purchase
Agreement
FORM OF STOCK PLEDGE
AGREEMENT
THIS
STOCK PLEDGE AGREEMENT (this "Agreement") is made
and entered into effective as of the 12th day of
February, 2010, by and among the stockholders of Perpetual Technologies, Inc., a
Delaware corporation (the “Company”) listed on
Schedule 1 attached hereto (each, a “Pledgor” and
collectively, the “Pledgors”), the
investors to that certain Note Purchase Agreement, dated as of February 12,
2010, (the “Purchase
Agreement”) listed on Schedule 2 attached hereto (collectively, the
“Secured
Parties”), and The Law Offices of Xxxxx X. Xxxxxxx, PC, a member of
Leser, Hunter, Taubman & Taubman as collateral agent for the Secured Parties
(“Collateral
Agent”).
BACKGROUND
A. Pursuant
to that certain Note Purchase Agreement, dated as of February 12, 2010, among
the Company and the Secured Parties (the “Purchase Agreement”),
the Company is selling, and the Secured Parties are purchasing, Secured
Convertible Promissory Notes of the Company (the “Notes”) and five year
warrants (“Warrants”) to
purchase shares of the Company’s common stock (“Common
Stock”).
B.
Each Pledgor owns the number of shares of Common Stock forth
opposite the name of such Pledgor on Schedule 2 (collectively, the “Shares”), and will
derive direct and indirect economic benefits from the transactions contemplated
under the Purchase Agreement.
C. In
order to induce the Secured Parties to enter into the Purchase Agreement and
purchase the Notes from the Company, and as a condition thereto and in
consideration of the benefits which will accrue to the Pledgors as a result
thereof, each Pledgor has guaranteed the Company’s obligations under the Notes
pursuant to a Non-Recourse Guaranty, dated the date hereof, in favor of the
Secured Parties (the “Guaranty”).
D. In
order to secure the timely payment and performance of all of the Pledgor’s
obligations and liabilities under the Guaranty, including without limitation all
fees, costs, and expenses in connection with any collection actions related
thereto (collectively, the “Obligations”), each
of the Pledgors desires to grant the Secured Parties a perfected and continuing
security interest in such Pledgor’s Shares.
E. The
continuing Security Interest, as hereinafter defined, in the Shares shall be
evidenced by this Agreement. Capitalized terms used but not defined
in this Agreement have the meanings set forth in the Purchase
Agreement.
F. The
Secured Parties have appointed the Collateral Agent as representative of and
agent for the Secured Parties for purposes of possession of the Shares pledged
hereunder.
NOW,
THEREFORE, for and in consideration of the mutual promises and covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
AGREEMENT
1. Recitals. The
parties hereto acknowledge that the aforementioned recitals are true and correct
and agree that such recitals, together with the definitions set forth therein
and in the preamble to this Agreement, are hereby incorporated into this
Agreement by this reference.
2. Additional
Shares. All references to the Shares shall be appropriately
adjusted to reflect any stock split, distribution, recapitalization or other
similar arrangement affecting the Shares after the date of this
Agreement. In the event that a Pledgor receives, or becomes entitled
to, any property (whether real or personal, tangible or intangible) in
connection with, related to, or in exchange for his Shares in any way, then any
such property shall be considered Shares under this Agreement.
53
3. Creation of Security
Interest. Each Pledgor hereby affirms, acknowledges, ratifies,
grants and assigns in favor of the Secured Parties a first, prior and sole lien
and security interest (the "Security Interest")
in his Shares, in all accessions, substitutions, replacements and proceeds
thereof, including, without limitation, whether by law, merger, exchange or
otherwise, and in all certificates or other instruments evidencing the same, to
secure the Obligations.
4.
Perfection of Security
Interest. The Security Interest in the Shares shall be
perfected by the Secured Parties, or the Collateral Agent, as agent for the
Secured Parties, taking possession of the certificates representing the Shares
(the “Certificates”). Simultaneously
with the execution of this Agreement, each Pledgor is delivering to the
Collateral Agent the Certificates evidencing his Shares, accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Secured Parties.
5. Proxy. Each
Pledgor hereby irrevocably constitutes and appoints each Secured Party and the
Collateral Agent, as agent for the Secured Parties, whether or not the Shares
have been transferred into the name of the Secured Parties, as such Pledgor's
proxy and attorney-in-fact with respect to his Shares, with full power to (a)
attend meetings of the holders of the Common Stock held after the date of this
Agreement, and to vote the Shares at those meetings in such manner as such
attorney-in-fact shall, in its sole and absolute discretion, deem appropriate,
(b) consent or withhold consent, in the sole and absolute discretion of such
attorney-in-fact, to any action for which consent of the shareholders of the
Company is or may be necessary or appropriate, and (c) do all things and
exercise all rights, powers, privileges and remedies to which an
owner of the Shares would be entitled, giving and granting unto such
attorney-in-fact full power of substitution and
revocation. Notwithstanding the provisions contained in the preceding
sentence (hereinafter referred to as the "Proxy Rights"),
neither the Collateral Agent, nor the Secured Parties, nor any of them, shall
have the right to perform, exercise, take or assert any of the Proxy Rights
unless and until there shall have occurred an Event of Default (as that term is
defined below). Except upon the occurrence and during the
continuation of an Event of Default, each Pledgor shall be entitled to exercise
any and all voting and/or consensual rights and powers accruing to an owner of
the Shares or any part thereof for any purpose. Each Pledgor hereby
revokes all proxies heretofore given and agrees not to grant any proxy to any
person or persons with respect to his Shares other than as granted herein for so
long as this Agreement is in force. The appointment of the Secured
Parties and the Collateral Agent as proxy and attorney-in-fact is coupled with
an interest and shall be irrevocable until all of the Obligations have been
satisfied. The Proxy Rights shall be effective, automatically and
without the necessity of any action (including any transfer of any Shares on the
record books of the Company) by any person (including the Company or any officer
or agent thereof), upon the occurrence and during the continuance of an Event of
Default. Notwithstanding the foregoing, neither the Collateral Agent
nor any Secured Party shall have any duty to exercise any Proxy Right or to
preserve the same and shall not be liable for any failure to do so or for any
delay in doing so.
6. Ordinary Care by the Secured
Parties. The Secured Parties and/or the Collateral Agent shall
use ordinary care in the custody and preservation of the Shares in their
possession.
7. Event of
Default. An event of default shall occur upon the happening of
any of the following (each, an “Event of
Default”):
(a) A
breach of the Guaranty or this Agreement by a Pledgor which, if
capable of being cured, is not cured within five (5) Business Days after written
notice thereof to such Pledgor;
(b) An
Event of Default under the Notes; or
(c) The
transfer or encumbrance, by any means, of any of the Shares or any interest in
the Shares other than in favor of the Secured Parties.
54
8. Remedies. Upon
the occurrence and during the continuation of an Event of Default, each Secured
Party (or the Collateral Agent acting on their behalf) shall be entitled to
exercise all of the rights, powers and remedies (whether vested in it by this
Agreement or by law) for the protection and enforcement of its rights in respect
of the Shares, and shall also be entitled, without limitation, to:
(a) at
their option, without notice to or demand upon any Pledgor, transfer and
register the Shares in the Secured Parties’ own names (or in the names of their
respective nominees), on a pro rata or any other basis agreed to by the Secured
Parties, and to exchange certificates or instruments representing or evidencing
Shares for certificates or instruments of smaller or larger
denominations;
(b) exercise
all the rights and remedies of a secured party under the Uniform Commercial Code
("UCC") in effect in the State of Delaware at the time, including the right to
sell the Shares at public or private sale as provided by and in accordance with
the UCC;
(c) to
instruct the Collateral Agent to deliver the Certificates to the Secured
Parties, to collect, receive and retain all sums owing the Secured Parties on
the Shares and endorse or execute for such purpose in the name of the Secured
Parties any instrument of payment or release received with respect thereto, such
endorsement and execution to be effective as that of the Pledgors for all
purposes, and to collect, receive and retain all dividends and other
distributions made on the Shares; and
(d) vote
any or all of the Shares (whether or not transferred into the name of the
Secured Parties) and give all consents, waivers and ratifications in respect of
the Shares and otherwise act with respect thereto as though it were the outright
owner thereof.
9. Covenants of each
Pledgor. During the term of this Agreement:
(a) No
Pledgor shall sell, assign, transfer, hypothecate, or otherwise dispose of,
grant an option or other right with respect to, or mortgage, pledge or otherwise
encumber his Shares or any interest therein, or contract to do any of the
foregoing.
(b) No
Pledgor shall take any action with respect to his Shares that is inconsistent
with the provisions or purpose of this Agreement or that would adversely affect
the rights of Secured Parties or the Collateral Agent under this
Agreement. Without limiting the foregoing, (i) each Pledgor agrees to
the maximum extent permitted by applicable law that following the occurrence and
during the continuance of an Event of Default he will not at any time plead,
claim or take the benefit of any appraisal, valuation, stay, extension,
moratorium or redemption law now or hereafter in force in order to prevent or
delay the enforcement of this Agreement, or the absolute sale of any or all of
the Shares or the possession thereof by any purchaser at any sale hereunder, and
such Pledgor waives the benefit of all such laws to the extent he lawfully may
do so, and (ii) each Pledgor agrees that he will not interfere with any right,
power and remedy of the Collateral Agent or the Secured Parties provided for in
this Agreement or now or hereafter existing at law or in equity or by statute or
otherwise, or the exercise or beginning of the exercise by the Collateral Agent
or the Secured Parties of any one or more of such rights, powers or
remedies.
(c) Each
Pledgor will, at his expense, promptly execute, acknowledge and deliver all such
instruments and take all such actions as the Secured Parties or the Collateral
Agent from time to time may reasonably request in order to ensure to the Secured
Parties the benefit of the Security Interest in and to the Shares intended to be
created by this Agreement, including the filing of any necessary financing
statements, which may be filed by the Collateral Agent or any Secured Party with
or (to the extent permitted by law) without the signature of such Pledgor, and
will cooperate with the Secured Parties and the Collateral Agent, at such
Pledgor’s expense, in obtaining all necessary approvals and making all necessary
filings under federal, state, local or foreign law in connection with the
Security Interest or any sale or transfer of the Shares.
55
(d) Each
Pledgor will defend the title to his Shares and the Security Interest of the
Secured Parties in his Shares against the claim of any person or entity, and
will maintain and preserve such Security Interest.
10. Collateral
Agent. The rights of the Secured Parties in the Shares may be
exercised by the Collateral Agent as agent for Secured Parties. In
such capacity, from time to time and at any time, Collateral Agent may in the
Collateral Agent’s sole discretion take any and all actions, exercise any and
all rights and remedies, give any and all waivers and forbearances, and make any
and all determinations and elections that the Secured Parties are entitled to
exercise under this Agreement and the Notes. Each Pledgor will be
entitled to rely solely on the actions of Collateral Agent as binding all
Secured Parties.
11. Termination of this Security
Interest and Agreement. This Agreement and the Security
Interest created hereby shall terminate immediately on the satisfaction of all
of the Obligations (the “Termination Date”), and the Collateral Agent shall then
immediately thereafter return to the Pledgors all certificates, and related
stock powers, with respect to the Shares directly or indirectly in its
possession or control.
12. Equitable
Relief. Each Pledgor agrees that a breach of any of its
covenants contained in this Agreement will cause irreparable injury to the
Secured Parties, that the Secured Parties shall have no adequate remedy at law
in respect of such breach and, as a consequence, agrees that each and every
covenant of such Pledgor contained in this Agreement shall be specifically
enforceable against such Pledgor, and such Pledgor hereby waives and agrees not
to assert any defenses against an action for specific performance of such
covenants except for a defense that the Obligations are not then due and payable
in accordance with the agreements and instruments governing and evidencing such
Obligations.
13. Pledgor’s Obligations Not
Affected. The obligations of each Pledgor under this Agreement
shall remain in full force and effect without regard to, and shall not be
impaired or affected by (a) any subordination, amendment, extension,
renewal, or modification of, or addition or supplement to, the Purchase
Agreement, the Notes, the Guaranty, any other Transaction Document, or the
Obligations, or any assignment or transfer of any thereof; (b) any exercise
or non-exercise by the Secured Parties of any right, remedy, power or privilege
under or in respect of this Agreement, the Purchase Agreement, the Notes, the
Guaranty, any other Transaction Document, or the Obligations, or any waiver of
any such right, remedy, power or privilege; (c) any waiver, consent,
extension, indulgence or other action or inaction in respect of this Agreement,
the Purchase Agreement, the Guaranty, the Obligations, or the Notes or the other
Transaction Documents; (d) any lack of validity or enforceability of the Notes,
the Purchase Agreement, any other Transaction Document or any other agreement or
instrument governing or evidencing any Obligations, (e) any bankruptcy,
insolvency, reorganization, arrangement, readjustment, composition, liquidation
or the like, of a Pledgor, a Secured Party, or the Company, or the making by the
Company, a Secured Party or a Pledgor of an assignment for the benefit of
creditors, (f) the existence or continuance, or discontinuance, of the Company
as a legal entity; (g) the death or incompetency of a Pledgor, or the
termination of modification of a Pledgor’s relationship with the Company; or
(h) the acceptance, alteration, release or substitution by a Secured Party
(or the Collateral Agent) of any security for the Obligations, whether provided
by the Company, Guarantor or any other person, whether or not such Pledgor shall
have notice or knowledge of any of the foregoing.
14. Miscellaneous
Provisions.
(a) Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed in the State of New York. The parties hereto
irrevocably consent to the jurisdiction of the United States federal courts and
state courts located in the State of New York and County of New York in any suit
or proceeding based on or arising under this Agreement or the transactions
contemplated hereby and irrevocably agree that all claims in respect of such
suit or proceeding may be determined in such courts. Each party
hereto irrevocably waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding in such forum. Each party
further agrees that service of process mailed by the first class mail in
accordance with paragraph (l) below shall be deemed in every respect
effective service of process in any suit or proceeding arising
hereunder. Nothing herein shall affect the right of a party hereto to
serve process in any other manner permitted by law. The parties
hereto agree that a final non-appealable judgment in any such suit or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on such
judgment or in any other lawful manner. The parties hereto
irrevocably waive any right to a trial by jury under applicable
law.
56
(b) Effect of Invalidity of
Particular Provisions. The unenforceability or invalidity of
any provision or provisions of this Agreement shall not render any other
provision or provisions herein contained unenforceable or invalid.
(c) Cumulative Rights, Powers
and Remedies. The rights, powers and remedies given to the
Secured Parties (and the Collateral Agent as agent for the Secured Parties) by
this Agreement shall be in addition to all rights, powers and remedies given the
Secured Parties by virtue of any statute or rule of law.
(d) Waiver. Any
forbearance, failure, or delay by the Secured Parties in exercising any right,
power or remedy under this Agreement shall not be deemed to be a waiver of such
right, power or remedy, and any single or partial exercise of any right, power
or remedy, under this Agreement shall not preclude the further exercise thereof;
and every right, power and remedy of the Secured Parties shall continue in full
force and effect until such right, power or remedy is specifically waived by an
instrument in writing executed by the Collateral Agent or the Secured
Parties.
(e) Binding Effect;
Assignment. This Agreement shall be binding upon the heirs,
executors, personal representatives, and successors of the Pledgors and shall
inure to the benefit of the Secured Parties, all future holders of the Notes (or
any note or other instrument issued in substitution or replacement thereof), and
their respective heirs, executors, and personal representatives, successors and
assigns. The Pledgees may not assign, sell, hypothecate or otherwise
transfer any interest in or obligation under this Agreement.
(f)
Entire
Agreement. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter of this Agreement, and
supersedes all agreements, representations, warranties, statements, promises and
understandings with respect to such subject matter. No party hereto
has in any way relied, nor shall in any way rely, upon any oral or written
agreements, representations, warranties, statements, promises or understandings
not specifically set forth herein.
(g) Amendments. Neither
this Agreement nor any term hereof may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the Pledgors
and the Secured Parties (or the Collateral Agent acting on their
behalf).
(h) Headings. The
headings in this Agreement are for purposes of reference only and shall not
limit or otherwise affect the meaning hereof.
(i)
Further
Assurances. The parties hereto agree that they shall sign such
additional and supplemental documents to implement the transactions contemplated
pursuant to this Agreement when requested to do so by any party to this
Agreement.
(j)
Counterparts and
Execution. This Agreement may be executed in counterparts,
each of which shall be regarded as the original and all of which shall
constitute one and the same Agreement. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.
(k) Reinstatement. This
Agreement shall remain in full force and effect and continue to be effective
should any petition be filed by or against a Pledgor for liquidation or
reorganization, should a Pledgor become insolvent or make an assignment for the
benefit of any creditor or creditors, or should a receiver or trustee be
appointed for all or any significant part of a Pledgor’s assets, and shall
continue to be effective or be reinstated, as the case may be, if at any time
payment and performance of the Obligations, or any part thereof, is, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored or
returned by any obligee of the Obligations, whether as a “voidable preference,”
“fraudulent conveyance,” or otherwise, all as though such payment or performance
had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Obligations shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.
57
(l)
Notices. Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder will be in writing and shall be delivered personally, by
nationally-recognized overnight courier or by facsimile machine confirmed
telecopy to, in the case of any Pledgor, the address of such Pledgor set forth
on such Pledgor’s signature page hereto and, in the case of the Collateral
Agent, The Law Offices of Xxxxx X. Xxxxxxx, PC, a member of Leser, Hunter,
Taubman & Taubman17 Xxxxx Xxxxxx, Xxxxx 00, Xxx Xxxx XX 00000 (or to such
other address as a party may designate by written notice in accordance with the
provisions of this Section), and will be deemed given and effective on the
earliest of (i) the date of transmission if such notice or communication is
delivered by fax prior to 5:30 p.m. (Eastern Time) on a Business Day, (ii) the
next Business Day after the date of transmission if such notice or communication
is delivered via fax on a day that is not a Business Day or later than 5:30 p.m.
(Eastern Time) on a Business Day, (iii) the 1st
Business Day after the date of mailing if sent by U.S. nationally recognized
overnight courier service for next Business Day delivery, or (iv) upon actual
receipt by the party to whom such notice is required to be given.
15. Representations, Warranties
and Covenants of Pledgor. Each Pledgor represents, warrants
and covenants to the Secured Parties as follows:
(a) Pledgor
is the record and beneficial owner of, and has good and marketable title to, his
Shares pledged hereunder, free of any and all liens, charges, encumbrances and
security interests of every kind and nature;
(b) Pledgor
has good right and legal authority to pledge the Shares owned by such Pledgor in
the manner hereby done or contemplated;
(c) No
authorization, approval, or other action by, and no notice to or filing with,
any third party, governmental authority or regulatory body is required for the
validity of the pledge by Pledgor of his Shares pursuant to this Agreement or
for the execution, delivery or performance of this Agreement by
Pledgor;
(d) This
Agreement constitutes the legal, valid and binding obligation of Pledgor,
enforceable against the Pledgor in accordance with its terms, and the pledge and
security interest effected hereby is effective to vest in the Secured Parties
their rights in the Shares as set forth herein;
(e) There
are no existing purchase agreements, warrants, options, or other rights,
agreements, arrangements or commitments of any character (whether or not
exercisable), or obligations (whether formal or informal, written or oral, firm
or contingent) or restrictions of any nature (other than restrictions on
transferability under federal securities laws), relating to his
Shares;
(f) Such
Pledgor is not a party to any agreement, arrangement or understanding, written
or oral, creating rights in respect of any his Shares in any person or entity or
relating to the voting of his Shares; and
(g) Such
Pledgor’s Shares represent the Pledgor’s entire ownership interest in the
Company.
All
representations, warranties and covenants made by each Pledgor contained in this
Agreement shall survive the execution, delivery and performance of this
Agreement until the Termination Date.
58
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first written above.
|
PLEDGORS:
|
||
|
See
attached Signature Pages
|
||
|
SECURED
PARTIES
|
||
|
See
attached Signature Pages
|
||
|
COLLATERAL
AGENT:
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
59
PURCHASER
SIGNATURE
PAGE TO STOCK PLEDGE AGREEMENT
IN
WITNESS WHEREOF, the parties have executed this Stock Pledge Agreement as of the
date first written above.
|
NAME
OF INVESTING ENTITY
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
60
PLEDGOR SIGNATURE PAGE
TO STOCK PLEDGE AGREEMENT
1. Date:
February 12, 2010
2. The
Pledgor signing below represents that:
|
|
(a)
|
the
Pledgor’s representations and warranties contained in this Agreement are
complete and accurate and may be relied upon by the Secured Parties and
the Collateral Agent;
|
|
|
(b)
|
the
Pledgor will notify the Collateral Agent immediately of any change in any
of such representations and warranties, as well as any change to the
information contained in this signature
page;
|
|
|
(c)
|
the
Pledgor hereby accepts and adopts the provisions of this Agreement and
agrees to be bound thereby; and the Pledgor hereby assumes and agrees to
satisfy and discharge, as applicable, any and all obligations applicable
to the Pledgor under the Agreement;
|
|
|
(d)
|
the
Pledgor has delivered the Certificates evidencing his Shares, accompanied
by duly executed instruments of transfer or assignment in blank, all in
form and substance satisfactory to the Secured Parties Shares to the
Collateral Agent; and
|
|
|
(d)
|
the
Pledgor agrees to execute such further and other assurances and to do such
other acts as may reasonably be required to implement the intentions of
the Agreement.
|
IN
WITNESS WHEREOF, the undersigned has executed this Agreement on this 12th day of
February, 2010.
|
Name
and Address of Pledgor:
|
Bestyield Group Limited
|
|
|
Signature
of Pledgor:
Bestyield
Group Limited
|
By:
|
||
|
Ji
Lie
|
||
61
PLEDGOR SIGNATURE PAGE
TO STOCK PLEDGE AGREEMENT
1. Date:
February 12, 2010
2. The
Pledgor signing below represents that:
|
|
(a)
|
the
Pledgor’s representations and warranties contained in this Agreement are
complete and accurate and may be relied upon by the Secured Parties and
the Collateral Agent;
|
|
|
(b)
|
the
Pledgor will notify the Collateral Agent immediately of any change in any
of such representations and warranties, as well as any change to the
information contained in this signature
page;
|
|
|
(c)
|
the
Pledgor hereby accepts and adopts the provisions of this Agreement and
agrees to be bound thereby; and the Pledgor hereby assumes and agrees to
satisfy and discharge, as applicable, any and all obligations applicable
to the Pledgor under the Agreement;
|
|
|
(d)
|
the
Pledgor has delivered the Certificates evidencing his Shares, accompanied
by duly executed instruments of transfer or assignment in blank, all in
form and substance satisfactory to the Secured Parties Shares to the
Collateral Agent; and
|
|
|
(d)
|
the
Pledgor agrees to execute such further and other assurances and to do such
other acts as may reasonably be required to implement the intentions of
the Agreement.
|
IN
WITNESS WHEREOF, the undersigned has executed this Agreement on this 12th day of
February, 2010.
Name and Address of
Pledgor:
|
Proudlead
Limited
|
|
Signature of
Pledgor:
Proudlead
Limited
|
By:
|
62
Schedule
1
|
Name of Pledgor
|
Number of Shares Pledged
|
|
|
Bestyield
Group Limited
|
21,765,306
|
|
|
Proudlead
Limited
|
|
21,765,306
|
63
Exhibit
G
To
Note Purchase
Agreement
VOTING
AGREEMENT
VOTING
AGREEMENT, dated as of February 12, 2010 (this "Agreement"), by and among
Perpetual Technologies, Inc., a Delaware corporation (the "Company"), the stockholders
listed on the signature pages hereto under the heading "Stockholders" (each a "Stockholder" and collectively,
the "Stockholders"), and
the Investors (as defined below).
WHEREAS,
the Stockholders own and have the power and authority to vote an aggregate of
[_________] shares of Common Stock, which represent in the aggregate a majority
of the issued and outstanding capital stock of the Company entitled to vote;
and
WHEREAS,
in order to induce the Investors to enter into the Note Purchase Agreement and
to consummate the transactions contemplated thereby, and as a condition thereto,
each Stockholder desires to enter into this Agreement with respect to all the
shares of Common Stock and any other shares of capital stock of the Company
which carry voting rights, now owned and which may hereafter be acquired by the
Stockholder (including without limitation, via stock splits, stock dividends),
and any other securities of the Company which such Stockholder is currently
entitled to vote, or after the date hereof, becomes entitled to vote, at any
meeting of stockholders of the Company (collectively, the "Shares").
NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements contained herein, and intending to be legally bound hereby, the
parties hereto hereby agree as follows (unless otherwise defined herein
capitalized terms shall have the respective meanings set forth in the Note
Purchase Agreement):
ARTICLE
I
VOTING AGREEMENT OF THE
STOCKHOLDERS
SECTION
1.01. Voting
Agreement. Each Stockholder hereby agrees to take all such action
as may be necessary or appropriate to elect one representative to the Board of
Directors of each of the Company, BVI Company, Technic and Foshan as shall be
designated by the Majority in Interest (as defined below) (the “Noteholder Designee”), and to
maintain such Noteholder Designee as a director of each such company until time
as the Notes are no longer outstanding. Without limiting the
foregoing, each Stockholder agrees that at any meeting of the stockholders of
the Company for the election of directors, however called, and in any action by
written consent of the Company's stockholders, such Stockholder shall vote his
Shares: (a) to elect the Noteholder Designee as a director of the
Company, and (b) against any proposal or any other corporate action or agreement
that would result in a breach of any covenant, representation or warranty or any
other obligation or agreement of the Company under the Note Purchase Agreement
or any other Transaction Document (as defined in the Note Purchase Agreement)
or, except as provided in Section 1.02 hereof, which could result in the removal
of the Noteholder Designee prior to the time the Notes are no longer
outstanding. Each Stockholder acknowledges receipt and review of a copy of
the Note Purchase Agreement and the other Transaction Documents. The
Majority in Interest designates Xxxxx Xxxxxx as the initial Noteholder
Designee.
64
SECTION
1.02. The Noteholder Designee shall be
elected at any annual or special meeting of stockholders (or by written consent
in lieu of a meeting of stockholders) and shall serve until his or her
successor is elected and qualified or until his or her earlier death,
resignation or removal. The Stockholders shall vote all of their Shares to
cause the Noteholder Designee to be removed from his or her position as a
director during his or her term of office, when, and only when, such removal is
requested by Note holders holding Notes evidencing at least 51% of the principal
amount of the Notes then outstanding (the “Majority in Interest”).
In the event of any vacancy in the board seat to be filled by the Noteholder
Designee, the Company agrees to promptly nominate, and the Stockholders agree to
promptly vote their Shares, to elect such person as has been designated to fill
such position in the manner set forth in this Article 1.
ARTICLE
II
REPRESENTATIONS AND
WARRANTIES OF THE STOCKHOLDERS
Each
Stockholder hereby represents and warrants, severally but not jointly, to each
of the Investors as follows:
SECTION
2.01. Authority Relative to This
Agreement. Each Stockholder has all necessary power and authority
to execute and deliver this Agreement, to perform his or its obligations
hereunder, and to consummate the transactions contemplated hereby. Each
Stockholder has taken whatever steps necessary, including without limitation,
moving the Shares from a margin account to a cash account and/or delivering any
voting instructions or legal proxy to any necessary broker or agent, to ensure
that such Stockholder has the necessary power and authority to vote all of his
Shares or has properly empowered such broker or agent to vote in accordance
herewith. This Agreement has been duly executed and delivered by such
Stockholder and constitutes a legal, valid and binding obligation of such
Stockholder, enforceable against such Stockholder in accordance with its
terms.
SECTION
2.02. No Conflict.
(a) The execution and delivery of this Agreement by such Stockholder
does not, and the performance of this Agreement by such Stockholder shall not,
(i) conflict with or violate any federal, state or local law, statute,
ordinance, rule, regulation, order, judgment or decree applicable to any
Stockholder or by which such Stockholder’s Shares are bound or affected or (ii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or encumbrance on any of such Stockholder’s Shares
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which such
Stockholder is a party or by which such Stockholder or his Shares are
bound.
(b) The
execution and delivery of this Agreement by such Stockholder does not, and the
performance of this Agreement by such Stockholder shall not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental entity by such Stockholder.
65
SECTION
2.03. Title to the
Stock. As of the date hereof, such Stockholder is the owner of the
number and kind of shares of Shares set forth opposite its name on Appendix A attached
hereto, and is entitled to vote such Shares, without restriction, on all matters
brought before holders of capital stock of the Company. Such Shares are
all the securities of the Company owned, either of record or beneficially, by
such Stockholder, and are owned by such Stockholder free and clear of all
security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on such Stockholder's voting rights, charges and other
encumbrances of any nature whatsoever. Such Stockholder has not appointed
or granted any proxy, which appointment or grant is still effective, with
respect to such Stockholder’s Shares.
ARTICLE
III
COVENANTS
SECTION
3.01. No Disposition or
Encumbrance of Stock. Each Stockholder hereby covenants and agrees
that, for so long as the Notes are outstanding, such Stockholder shall not offer
or sell, transfer, tender, assign, hypothecate or otherwise dispose of, grant a
proxy or power of attorney with respect to, or create or permit to exist any
security interest, lien, claim, pledge, option, right of first refusal,
agreement, limitation on such Stockholder's voting rights, charge or other
encumbrance of any nature whatsoever ("Encumbrance") with respect to
his Shares, or directly or indirectly initiate, solicit or encourage any person
to take actions which could reasonably be expected to lead to the occurrence of
any of the foregoing.
SECTION
3.02. Company
Cooperation. The Company hereby covenants and agrees that it will
not, and each Stockholder irrevocably and unconditionally acknowledges and
agrees that the Company will not (and waives any rights against the Company in
relation thereto), recognize any Encumbrance or agreement on any of the
Shares. The Company shall take no actions to contravene the purpose of
this Agreement.
SECTION
3.03. Notices. The
Company shall provide the Investors and the Stockholders with reasonable prior
written notice, such that the Noteholder Designee can be included in the
intended mailing, of any intended mailing of notice to stockholders for a
meeting at which directors are to be elected, and the Majority in Interest shall
notify the Company in writing, prior to such mailing, of the person designated
by them as the Noteholder Designee. If the Majority in Interest fails
to provide notice to the Company as provided above, the existing member of the
Board serving as the Noteholder Designee shall be deemed to be the Noteholder
Designee for reelection to the Board of Directors.
ARTICLE
IV
MISCELLANEOUS
SECTION
4.01. Further
Assurances. Each Stockholder will execute and deliver such
further documents and instruments and take all further action as may be
reasonably necessary in order to consummate the transactions contemplated
hereby.
66
SECTION
4.02. Specific
Performance. The parties hereto agree that irreparable damage
would occur in the event any provision of this Agreement was not performed in
accordance with the terms hereof, and that any Investor (without being joined by
any other Investor) shall be entitled to specific performance of the terms
hereof (without the need to post any bond or other security or prove special
damages), in addition to any other remedy at law or in equity. Any
Investor shall be entitled to its attorneys' fees reasonably incurred in any
action brought to enforce this Agreement in which it is the prevailing
party.
SECTION
4.03. Entire
Agreement. This Agreement constitutes the entire agreement
among the Company and the Stockholders (other than the Note Purchase Agreement
and the other Transaction Documents) with respect to the subject matter hereof
and supersedes all prior agreements and understandings, both written and oral,
among the Company and the Stockholders with respect to the subject matter
hereof.
SECTION
4.04. Amendment. This
Agreement may not be amended except by an instrument in writing signed by all
the parties hereto.
SECTION
4.05. Severability. If
any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
SECTION
4.06. Governing
Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law
thereof. Each party agrees that all Proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement (whether brought against a party hereto or its respective
affiliates, employees or agents) will be commenced in the New York
Courts. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any proceeding, any claim that it is not personally subject to the jurisdiction
of any New York Court, or that such proceeding has been commenced in an improper
or inconvenient forum. Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in any such
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law. Each party
hereto hereby irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any proceeding arising out of or
relating to this Agreement or the transactions contemplated
hereby. If either party shall commence a proceeding to enforce any
provisions of this Agreement, then the prevailing party in such proceeding shall
be reimbursed by the other party for its attorney’s fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
proceeding.
67
SECTION
4.07. No
Revocation. The voting agreements contained herein are coupled
with an interest and may not be revoked, except by an amendment, modification or
termination effected in accordance with Section 4.04
hereof. Nothing in this Section 4.07 shall be construed as
limiting the provisions of Section 4.08 hereof.
SECTION
4.08. Termination. This
Agreement shall terminate immediately upon the earlier of the consummation of a
Qualified Financing (as defined in the Note Purchase Agreement), such time as
the Notes are paid in full, or upon the consent of all of the
Investors.
SECTION
4.09. Counterparts; Facsimile
Execution. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
together shall constitute one and the same document. This Agreement
may be executed and delivered by exchange of facsimile copies showing the
signatures of the parties, and those signatures need not be affixed to the same
copy. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
SECTION
4.10. Binding Effect;
Assignment. This Agreement shall be binding upon the heirs,
executors, personal representatives, and successors of the Stockholders and
shall inure to the benefit of the Investors, all future holders of the Notes (or
any note or other instrument issued in substitution or replacement thereof), and
their respective heirs, executors, and personal representatives, successors and
assigns.
68
[Signature
Page to Voting Agreement]
IN
WITNESS WHEREOF, each Stockholder and the Company has duly executed this
Agreement.
|
THE
COMPANY:
|
||
|
PERPETUAL
TECHNOLOGIES INC.
|
||
|
By:
|
||
|
Name: Xxx
Xx
|
||
|
Title: Chief
Executive Officer
|
||
|
Dated: February 12,
2010
|
||
|
Address:
|
||
|
Name
of Stockholders
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
|
Dated: February
12, 2010
|
||
|
Address:
|
||
|
Names
of Investors
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
|
Dated: February
12, 2010
|
||
|
Address:
|
||
69
APPENDIX
A
|
Stockholder
|
Common Stock Owned
|
|||
|
Bestyield
Group Limited
|
21,765,305 | |||
|
Proudlead
Limited
|
21,765,305 | |||
70
Exhibit
H
To
Note Purchase
Agreement
FORM OF ESCROW
AGREEMENT
This Escrow Agreement, dated as of,
February 12, 2010 (this “Agreement”), is
entered into by and between Perpetual Technologies, Inc., a Delaware
corporation (the “Company”), Interwest
Transfer Company, Inc. (the “Escrow Agent”), with
its principal offices located at 0000 Xxxxxx Xxxxxxxx Xxxx, Xxxxx
000, Xxxx Xxxx Xxxx, XX 00000 and LongBoard Capital Advisors (the “Lead
Investor”). The Company is sometimes referred to herein as the
Escrowing Party.
WITNESSETH:
WHEREAS, the Company, through Primary
Capital, LLC (the “Placement Agent”), proposes to make a private offering
pursuant to Regulation S and/or Rule 506 of Regulation D of the Securities Act
of 1933, as amended (the “Offering” and the
“Act,”
respectively) of $3,500,000 (the “Minimum Investment”) in secured convertible
promissory notes due February 2011 (the “Notes”) on a “best
efforts” basis pursuant to a Note Purchase Agreement (the “Purchase Agreement”)
among the Company and the investors that will be a party thereto (the “Investors”);
and
WHEREAS, the Company and the Investors
desire to deposit monies received from Investors pending one or more closings
under the Purchase Agreement (the “Escrowed Funds”) with
the Interwest Transfer Company, to be held in escrow until joint written
instructions are received by the Interwest Transfer Company from the Company and
the Placement Agent, from time to time, at which time the Escrow Agent will
disburse the Escrowed Funds in accordance with the instructions (each a “Closing”);
and
WHEREAS, Escrow Agent is willing to
hold the Escrowed Funds in escrow in subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the
mutual promises herein contained and intending to be legally bound, the parties
hereby agree as follows:
1. Appointment of Interwest
Transfer Company. The Company Agent hereby appoints Interwest
Transfer Company as escrow agent in accordance with the terms and conditions set
forth herein and the Interwest Transfer Company hereby accepts such
appointment.
2. Delivery of the Escrowed
Funds.
2.1 The
Company will direct Investors to deliver the Escrowed Funds to the Escrow Agent,
addressed to the following account of the Escrow Agent (the “Escrow
Account”):
Domestic
Wires
Account
Name: Interwest Transfer Co, Inc Escrow Agent F/B/O Perpetual
Technologies, Inc.
Bank: First
Utah Bank, 0000 Xxxxx 0000 Xxxx
Xxxx
Xxxx Xxxx Xxxx 00000
Account
No.: 00000000
ABA No:
000000000
71
International
Wires
SWIFT No.
: zfnbus55
Beneficiary
Bank: Zions Bank
000 Xxxxx
Xxxx Xxxxxx
Xxxx Xxxx
Xxxx Xxxx 00000
For
Credit to First Utah Bank Account # 086236379
0000
Xxxxx 0000 Xxxx
Xxxx Xxxx
Xxxx Xxxx 00000
ABA No:
000000000
Account
Name: For Further Credit to Interwest Transfer Co, Inc Escrow Agent
F/B/O Perpetual Technologies, Inc.
Account
No.: 00000000
2.2 (a)
All Investors’ checks shall be made payable to “Interwest Transfer Company,
Inc.” and shall be delivered to the Escrow Agent at the address set
forth on Exhibit
A hereto and shall be accompanied by a written account of subscription in
the form attached hereto as Exhibit B (the “Subscription
Information”) The Escrow Agent shall, upon receipt of Escrowed Funds
deposit such funds into the Escrow Account.
2.3 Any
checks which are received by Interwest Transfer Company that are made payable to
a party other than the Interwest Transfer Company shall be returned directly to
the Company together with any documents delivered therewith. Simultaneously with
each deposit, the Company shall provide the Escrow Agent with the Subscription
Information to include the name, address and taxpayer identification number of
each Investor. The Escrow Agent is not obligated, and may refuse, to accept
checks that are not accompanied by Subscription Information.
2.4 In
the event a wire transfer is received by the Escrow Agent and the Escrow Agent
has not received Subscription Information, the Escrow Agent shall notify the
Company. If the Escrow Agent does not receive the Subscription Information
relating to an Investor prior to close of business on the third business day
(days other than a Saturday or Sunday or other day on which the Escrow Agent is
not open for business in the State of Utah) after notifying Company of receipt
of said wire, the Escrow Agent shall return the funds to the
Investor.
3. Escrow Agent to Hold and
Disburse Escrowed Funds. The Escrow Agent will hold and
disburse the Escrowed Funds received by it pursuant to the terms of this Escrow
Agreement, as follows:
3.1 Prior
to any disbursement of the Escrowed Funds, the Escrow Agent shall allocate
$200,000 from the Escrowed Funds and hold such portion in a separate escrow
account (the “Interest
Account”) to pay the interest due on the Notes. Under the terms of the
Notes interest is payable at the rate of ten percent (10%) per annum on the last
business day of each fiscal quarter while the Note is outstanding and on the
Maturity Date (as defined in the Note). Accordingly on receipt of joint
instructions from the Company and the Placement Agent and the Lead Investor, in
substantially the form of Exhibit C hereto, the
Escrow Agent shall release funds from the Interest Account as directed in such
instructions. In addition on the occurrence and during the continuance of any
Event of Default (as defined in the Note), the outstanding principal of this
Note shall bear interest at the rate of fifteen percent (15%) per annum.
Accordingly on receipt of joint instructions from the Company, the Placement
Agent and the Lead Investor, in substantially the form of Exhibit D hereto,
following an Event of Default the Escrow Agent shall release funds form the
Interest Account as directed in such instructions.
3.2 So
long as the Minimum Investment is in the Escrow Account, upon receipt of joint
instructions from the Company, the Lead Investor and the Placement Agent, in
substantially the form of Exhibit E hereto, the
Escrow Agent shall release the Escrowed Funds as directed in such
instructions.
3.3 In
the event that (a) the Escrow Agent does not receive any instructions by a date
that is 90 days from the date of this Agreement or (b) the Minimum Investment is
not deposited in the Escrow Account prior to February 22, 2010, which ever is
earlier (the “Escrow
Termination Date”), all Escrowed Funds shall be returned to the parties
from which they were received, without interest thereon or deduction (except as
set forth in Section 7.3) therefrom.
72
4. Exculpation and
Indemnification of Escrow Agent
4.1 The
Escrow Agent shall have no duties or responsibilities other than those expressly
set forth herein. The Escrow Agent shall have no duty to enforce any
obligation of any person to make any payment or delivery, or to direct or cause
any payment or delivery to be made, or to enforce any obligation of any person
to perform any other act. The Escrow Agent shall be under no liability to
the other parties hereto or anyone else, by reason of any failure, on the part
of any party hereto or any maker, guarantor, endorser or other signatory of a
document or any other person, to perform such person’s obligations under any
such document. Except for amendments to this Escrow Agreement referenced
below, and except for written instructions given to the Escrow Agent by the
Escrowing Parties relating to the Escrowed funds, the Escrow Agent shall not be
obligated to recognize any agreement between or among any of the Escrowing
Parties, notwithstanding that references hereto may be made herein and whether
or not it has knowledge thereof.
4.2 The Escrow
Agent shall not be liable to the Company, any Investor or to anyone
else for any action taken or omitted by it, or any action suffered by it to be
taken or omitted, in good faith and acting upon any order, notice, demand,
certificate, opinion or advice of counsel (including counsel chosen by the
Escrow Agent), statement, instrument, report, or other paper or document (not
only as to its due execution and the validity and effectiveness of its
provisions, but also as to the truth and acceptability of any information
therein contained), which is believed by the Escrow Agent to be genuine and to
be signed or presented by the proper person or persons.
The Escrow Agent shall not be bound by any of the terms thereof,
unless evidenced by written notice delivered to the Escrow Agent signed by the
proper party or parties and, if the duties or rights of the Escrow Agent are
affected, unless it shall give its prior written consent thereto.
4.3 The Escrow
Agent shall not be responsible for the sufficiency or accuracy of the form, or
of the execution, validity, value or genuineness of, any document or property
received, held or delivered to it hereunder, or of any signature or endorsement
thereon, or for any lack of endorsement thereon, or for any description therein;
nor shall the Escrow Agent be responsible or liable to the Company, any
Investor, the Placement Agent or to anyone else in any respect on account of the
identity, authority or rights, of the person executing or delivering or
purporting to execute or deliver any document or property or this Escrow
Agreement. The Escrow Agent shall have no responsibility with respect to the use
or application of the Escrowed Funds pursuant to the provisions
hereof.
4.4 The
Escrow Agent shall have the right to assume, in the absence of written notice to
the contrary from the proper person or persons, that a fact or an event, by
reason of which an action would or might be taken by the Escrow Agent, does not
exist or has not occurred, without incurring liability to
the Company, any Investor, the Placement Agent or to anyone else for
any action taken or omitted to be taken or omitted, in good faith and in the
exercise of its own best judgment, in reliance upon such
assumption.
4.5 To
the extent that the Escrow Agent becomes liable for the payment of taxes,
including withholding taxes, in respect of income derived from the investment of
the Escrowed Funds, or any payment made hereunder, the Escrow Agent may pay such
taxes; and the Escrow Agent may withhold from any payment of the Escrowed Funds
such amount as the Escrow Agent estimates to be sufficient to provide for the
payment of such taxes not yet paid, and may use the sum withheld for that
purpose. The Escrow Agent shall be indemnified and held harmless against
any liability for taxes and for any penalties in respect of taxes, on such
investment income or payments in the manner provided in Section 4.6
4.6 The Escrow
Agent will be indemnified and held harmless by the Company from and
against all expenses, including all counsel fees and disbursements, or loss
suffered by the Escrow Agent in connection with any action, suit or proceedings
involving any claim, or in connection with any claim or demand, which in any
way, directly or indirectly, arises out of or relates to this Escrow Agreement,
the services of the Escrow Agent hereunder, except for claims relating to gross
negligence by Escrow Agent or breach of this Escrow Agreement by the Escrow
Agent, or the monies or other property held by it hereunder. Promptly
after the receipt of the Escrow Agent of notice of any demand or claim or the
commencement of any action, suit or proceeding, the Escrow Agent shall, if a
claim in respect thereof is to be made against an Escrowing Party, notify each
of them thereof in writing, but the failure by the Escrow Agent to give such
notice shall not relieve any such party from any liability which an Escrowing
Party may have to the Escrow Agent hereunder. Notwithstanding any
obligation to make payments and deliveries hereunder, the Escrow Agent may
retain and hold for such time as it deems necessary such amount of monies or
property as it shall, from time to time, in its sole discretion, seem sufficient
to indemnify itself for any such loss or expense and for any amounts due it
under Section 7.
73
4.7 In
the event that the Escrow Agent shall be uncertain as to its duties or rights
hereunder or shall receive instructions, claims or demands which, in its
opinion, are in conflict with any of the provisions of this Agreement, it shall
be entitled to refrain from taking any action, other than to keep safe the
subscriptions and subscription payments received, until the questions regarding
its duties and rights are clarified to its satisfaction or it shall be directed
otherwise by a final judgment of a court of competent jurisdiction.
4.8 No
provision of this Agreement shall require the Escrow Agent to risk or advance
its own funds or otherwise incur any financial liability or potential financial
liability in the performance of its duties or the exercise of its rights under
this Agreement.
4.9 Notwithstanding
any other provision of this Agreement, the Escrow Agent shall not be obligated
to perform any obligation hereunder and shall not incur any liability for the
nonperformance or breach of any obligation hereunder to the extent that the
Escrow Agent is delayed in performing, unable to perform or breaches such
obligation because of acts of God, war, terrorism, fire, floods, strikes,
electrical outages, equipment or transmission failures, or other causes
reasonably beyond its control.
4.10 IN
NO EVENT SHALL THE ESCROW AGENT BE LIABLE, DIRECTLY OR INDIRECTLY, FOR ANY SPECIAL, INDIRECT OR
CONSEQUENTIAL LOSSES OR DAMAGES OF ANY KIND WHATSOEVER (INCLUDING BUT NOT
LIMITED TO LOST PROFITS), EVEN IF THE ESCROW AGENT HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH LOSSES OR DAMAGES AND REGARDLESS OF THE FORM OF
ACTION.
4.11 For
purposes hereof, the term “expense or loss” shall include all amounts paid or
payable to satisfy any claim, demand or liability, or in settlement of any
claim, demand, action, suit or proceeding settled with the express written
consent of the Escrow Agent, and all costs and expenses, including, but not
limited to, counsel fees and disbursements, paid or incurred in investigating or
defending against any such claim, demand, action, suit or
proceeding.
4.12 In
the event this Agreement, the Escrowed Funds or the Escrow Agent becomes the
subject of litigation, or if the Escrow Agent shall desire to do so for any
other reason, the Company and the Lead Investor each authorize the Escrow Agent,
at its option, to deposit the Escrowed Funds with the clerk of the court in
which the litigation is pending, or a court of competent jurisdiction if no
litigation is pending, and thereupon the Escrow Agent shall be fully relieved
and discharged of any further responsibility with regard thereto. The Company
also authorizes the Escrow Agent, if it receives conflicting claims to the
Escrow Funds, is threatened with litigation or if the Escrow Agent shall desire
to do so for any other reason, to interplead all interested parties in any court
of competent jurisdiction and to deposit the Escrowed Funds with the clerk of
that court and thereupon the Escrow Agent shall be fully relieved and discharged
of any further responsibility hereunder to the parties from which they were
received.
5. Termination of Agreement and
Resignation of Escrow Agent
5.1 This
Escrow Agreement shall terminate upon disbursement of all of the Escrowed Funds,
provided that the rights of the Escrow Agent and the obligations of
the Company under Section 4 shall survive the termination
hereof.
5.2 The Escrow
Agent may resign at any time and be discharged from its duties as Escrow Agent
hereunder by giving the Company at least five (5) business days written notice
thereof (the “Notice
Period”). As soon as practicable after its resignation, the Escrow
Agent shall, if it receives notice from the Company within the Notice Period,
turn over to a successor escrow agent appointed by the Company all Escrowed
Funds (less such amount as the Escrow Agent is entitled to retain pursuant to
Section 7) upon presentation of the document appointing the new escrow agent and
its acceptance thereof. If no new agent is so appointed within the Notice
Period, the Escrow Agent shall return the Escrowed Funds to the parties from
which they were received without interest or deduction (except as set forth in
Section 7.3).
74
6. Form of Payments by Escrow
Agent
6.1 Any
payments of the Escrowed Funds by the Escrow Agent pursuant to the terms of this
Escrow Agreement shall be made by wire transfer unless directed to be made by
check by the Escrowing Parties.
6.2 All
amounts referred to herein are expressed in United States Dollars and all
payments by the Escrow Agent shall be made in such dollars.
7. Compensation. Escrow
Agent shall be entitled to the following compensation from the
Company:
7.1 Documentation
Fee: The Company shall pay a documentation fee to the Escrow Agent
of $1,500, out of the first Closing.
7.2 Closing
Fee: The Company shall pay a fee of $150 to the Escrow Agent
at each Closing. For purposes of this Section 7.2, a Closing shall mean
each time the Escrow Agent receives joint instructions from the Company, the
Lead Investor and the Placement Agent to disburse Escrowed Funds in
accordance with the terms of this Agreement.
7.3 Refunding Fee.
The parties agree that if Escrow Agent returns the Escrowed Funds
pursuant to Section 3.3 or 5.2, the Escrow Agent shall retain $25 for
each investor to whom Escrowed Funds are being returned together with all of
their out of pocket expenses such as wire fees.
7.4 Interest. The parties hereby
agree that Escrow Agent shall retain 100% of the interest earned during the time
the Escrowed Funds are held in escrow hereunder.
8. Notices.
Any notice herein required or permitted to be given shall be in
writing and shall be delivered personally, by nationally-recognized overnight
courier or by facsimile machine confirmed telecopy to the applicable addresses
set forth below (or to such other address as a party may designate by written
notice in accordance with the provisions of this Section 8), and shall be deemed
given and effective on the earliest of (a) the date of transmission if such
notice or communication is delivered by fax prior to 5:30 p.m. (Eastern Time) on
a business day, (b) the next business day after the date of transmission if such
notice or communication is delivered via fax on a day that is not a business day
or later than 5:30 p.m. (Eastern Time) on a business day, (c) the
first business day after the date of mailing if sent by U.S.
nationally recognized overnight courier service for next business day delivery,
or (d) upon actual receipt by the party to whom such notice is required to be
given. The addresses for such communications shall be as set forth in
Exhibit A
hereto.
9. Further
Assurances From time to time on and after the date hereof,
the Company shall deliver or cause to be delivered to the Escrow
Agent such further documents and instruments and shall do and cause to be done
such further acts as the Escrow Agent shall reasonably request (it being
understood that the Escrow Agent shall have no obligation to make any such
request) to carry out more effectively the provisions and purposes of this
Escrow Agreement, to evidence compliance herewith or to assure itself that it is
protected in acting hereunder.
10. Consent to Service of
Process Each of the parties to this Agreement hereby
irrevocably consents to the jurisdiction of the courts of the State of Utah and
of any Federal court located in such state in connection with any action, suit
or proceedings arising out of or relating to this Escrow Agreement or any action
taken or omitted hereunder, and waives personal service of any summons,
complaint or other process and agrees that the service thereof may be made in
the manner set forth in section 8 above.
75
11. Miscellaneous
11.1 This
Escrow Agreement shall be construed without regard to any presumption or other
rule requiring construction against the party causing such instrument to be
drafted. The terms “hereby,” “hereof,” “hereunder,” and any
similar terms, as used in this Escrow Agreement, refer to the Escrow Agreement
in its entirety and not only to the particular portion of this Escrow Agreement
where the term is used. The word “person” shall mean any natural person,
partnership, corporation, government and any other form of business of legal
entity. All words or terms used in this Escrow Agreement, regardless of
the number or gender in which they were used, shall be deemed to include any
other number and any other gender as the context may require. This Escrow
Agreement shall not be admissible in evidence to construe the provisions of any
prior agreement.
11.2 This
Escrow Agreement and the rights and obligations hereunder of the Company may not
be assigned. This Escrow Agreement and the rights and obligations
hereunder of the Escrow Agent may be assigned by the Escrow Agent. This
Escrow Agreement shall be binding upon and inure to the benefit of each party’s
respective successors, heirs and permitted assigns. No other person shall
acquire or have any rights under or by virtue of this Escrow Agreement. This
Escrow Agreement may not be changed orally or modified, amended or supplemented
without an express written agreement executed by the Escrow Agent and all
Escrowing Parties. This Escrow Agreement is intended to be for the sole benefit
of the parties hereto and their respective successors, heirs and permitted
assigns, and none of the provisions of this Escrow Agreement are intended to be,
nor shall they be construed to be, for the benefit of any third
person.
11.3 This
Escrow Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of Utah. The representations and warranties contained
in this Escrow Agreement shall survive the execution and delivery hereof and any
investigations made by any party. The headings in this Escrow Agreement
are for purposes of reference only and shall not limit or otherwise affect any
of the terms thereof.
12. Execution of
Counterparts This Escrow Agreement may be executed in a number of
counterparts, by facsimile, each of which shall be deemed to be an original as
of those whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Escrow Agreement shall become
binding when one or more of the counterparts hereof, individually or taken
together, are signed by all the parties.
76
IN WITNESS WHEREOF, the parties have
executed and delivered this Escrow Agreement on the day and year first above
written.
|
ESCROW
AGENT:
|
||
|
INTERWEST
TRANSFER COMPANY, INC.
|
||
|
By:
|
||
|
Xxxxxx
Xxxxxx, Vice-President
|
||
|
PERPETUAL
TECHNOLOGIES, INC
|
||
|
By:
|
||
|
Mr.
Xxx Xx, Director
|
||
|
LONG
BOARD CAPITAL ADVISORS
|
||
|
By:
|
||
|
Xxxxx
Xxxxxx
|
||
77
EXHIBIT
A
PARTIES
TO AGREEMENT
Perpetual
Technologies, Inc.
Attention:
Mr. Xxx Xx
Address:
Shishan Industrial Park, Shishan District
NanHai
City, Guangdong
People’s
Republic of China
|
Mr.
Xxx Xx
|
|
Interwest
Transfer Company, Inc.
0000
Xxxxxx Xxxxxxxx Xxxx, Xxxxx 000
Xxxx
Xxxx Xxxx, XX 00000
Tele:
(000) 000-0000
|
Xxxxxx
Xxxxxx, Vice-President
|
|
Longboard
Capital Advisors
|
Xxxxx
Xxxxxx - President
|
|
78
EXHIBIT
B
SUBCRIPTION
INFORMATION
|
Name
of Subscriber
|
||||
|
Address
of Subscriber
|
||||
|
Amount
of Securities
|
||||
|
Subscribed
|
||||
|
US
Dollar Amount
|
||||
|
Submitted
|
||||
|
Taxpayer
ID Number/
|
||||
|
Social
Security Number
|
||||
79
EXHIBIT
C
INTEREST
RELEASE REQUEST
Pursuant to that certain Escrow
Agreement, dated as of February 12, 2010, by and between Perpetual Technologies,
Inc., a Delaware corporation (the “Company”), Interwest Transfer Company, Inc.
(the “Escrow Agent”), LongBoard Capital Advisors (the “Lead
Investor”) and Primary Capital, LLC (the “Placement Agent”), the Escrow Agent
shall allocate $200,000 from the Escrowed Funds and hold such portion in a
separate escrow account (the “Interest Account”) to pay the interest due on the
Notes. Under the terms of the Notes interest is payable at the rate of ten
percent (10%) per annum on the last business day of each fiscal quarter while
the Note is outstanding and on the Maturity Date (as defined in the Note). The
Company, the Lead Investor and the Placement Agent hereby request releasing
funds from the Interest Account in the amount and manner described below from
[Bank Name and account number], styled Interwest Transfer Company, Inc. escrow
account.
|
Please
disburse to:
|
|||
|
Amount
to disburse:
|
|||
|
Form
of distribution:
|
|||
|
Payee:
|
|||
|
Name:
|
|||
|
Address:
|
|||
|
City/State:
|
|||
|
Zip:
|
|||
|
Bank:
|
|||
|
Statement
of event or condition which calls for this request for
disbursement:
|
Disbursement
approved by:
Perpetual
Technologies, Inc.
|
Xxx
Xx
|
Date
|
||
|
Primary
Capital, LLC
|
|||
|
Xxxx
Xxxxxxx
|
Date
|
||
|
Longboard
Capital Advisors
|
|||
|
Xxxxx
Xxxxxx
|
|
Date
|
80
EXHIBIT
D
EVENT
OF DEFAULT RELEASE REQUEST
Pursuant to that certain Escrow
Agreement, dated as of February 12, 2010, by and between Perpetual Technologies,
Inc., a Delaware corporation (the “Company”), Interwest Transfer Company, Inc.
(the “Escrow Agent”), LongBoard Capital Advisors (the “Lead
Investor”) and Primary Capital, LLC (the “Placement Agent”), the Escrow Agent
shall allocate $200,000 from the Escrowed Funds and hold such portion in a
separate escrow account (the “Interest Account”) to pay the interest due on the
Notes. In addition on the occurrence and during the continuance of any Event of
Default (as defined as defined in the Note), the outstanding principal of this
Note shall bear interest at the rate of eighteen percent (18%) per annum. The
Company, the Lead Investor and the Placement Agent hereby requests releasing
funds form the Interest Account in the amount and manner described below from
[Bank Name and account number], styled Interwest Transfer Company, Inc. escrow
account.
|
Please
disburse to:
|
|||
|
Amount
to disburse:
|
|||
|
Form
of distribution:
|
|||
|
Payee:
|
|||
|
Name:
|
|||
|
Address:
|
|||
|
City/State:
|
|||
|
Zip:
|
|||
|
Bank:
|
|||
|
Statement
of event or condition which calls for this request for
disbursement:
|
Disbursement
approved by:
Perpetual
Technologies, Inc.
|
Xxx
Xx
|
Date
|
||
|
Primary
Capital, LLC
|
|||
|
Xxxx
Xxxxxxx
|
Date
|
||
|
Longboard
Capital Advisors
|
|||
|
Xxxxx
Xxxxxx
|
|
Date
|
81
EXHIBIT
E
DISBURSEMENT
REQUEST
Pursuant to that certain Escrow
Agreement, dated as of February 12, 2010, by and between Perpetual
Technologies, Inc., a
Delaware corporation (the “Company”), Interwest
Transfer Company, Inc. (the “Escrow Agent”),
LongBoard Capital Advisors (the “Lead Investor”) and Primary Capital,
LLC (the “Placement Agent”), the Company, the Lead Investor and Primary Capital
LLC hereby requests disbursement of funds in the amount and manner described
below from [Bank Name and account number], styled Interwest Transfer Company,
Inc. escrow account.
|
Please
disburse to:
|
|||
|
Amount
to disburse:
|
|||
|
Form
of distribution:
|
|||
|
Payee:
|
|||
|
Name:
|
|||
|
Address:
|
|||
|
City/State:
|
|||
|
Zip:
|
|||
|
Bank:
|
|||
|
Statement
of event or condition which calls for this request for
disbursement:
|
Disbursement
approved by:
Perpetual
Technologies, Inc.
|
Xxx
Xx
|
Date
|
||
|
Primary
Capital, LLC
|
|||
|
Xxxx
Xxxxxxx
|
Date
|
||
|
Longboard
Capital Advisors
|
|||
|
Xxxxx
Xxxxxx
|
|
Date
|
82
Exhibit
I
To
Note Purchase
Agreement
FORM OF REGISTRATION RIGHTS
AGREEMENT
This
Registration Rights Agreement (this "Agreement") is made and
entered into as of February 12, 2010, by and among Perpetual Technologies, Inc.,
a Delaware corporation (the "Company"), and the investors
signatory hereto (each an "Investor" and collectively,
the "Investors").
This
Agreement is made in connection with the Note Purchase Agreement, dated as of
February 12, 2010, by and among the Company and the Investors (the "Purchase
Agreement").
The
Company and the Investors hereby agree as follows:
6. Definitions. Capitalized terms used
and not otherwise defined herein that are defined in the Purchase Agreement will
have the respective meanings given such terms in the Purchase Agreement.
As used in this Agreement, the following terms have the respective meanings set
forth in this Section 1:
“Advice” has the meaning set
forth in Section 8(d).
"Commission" means the Securities and Exchange
Commission.
“Common Stock” means the common
stock, par value per share of $0.001, of the Company.
"Effective Date" means, as to
a Registration Statement, the date on which such Registration Statement is first
declared effective by the Commission.
"Effectiveness Period" means,
as to any Registration Statement required to be filed pursuant to this
Agreement, the period commencing on the Effective Date of such Registration
Statement (which shall not be later than one hundred and eighty (180)
days after the date such registration statement is filed with the Commission )
and ending on the earliest to occur of (a) the second anniversary of
such Effective Date (which period shall be extended for the period of time equal
to any period during which the Holders of Registrable Securities must refrain
from selling any securities included in such Registration Statement in
accordance with the provisions of Section 8(d) below), (b) such time as all of
the Registrable Securities covered by such Registration Statement have been
publicly sold by the Holders of the Registrable Securities included therein, or
(c) such time as all of the Registrable Securities covered by such Registration
Statement may be sold by the Holders without volume restrictions pursuant to
Rule 144, in each case as determined by the counsel to the Company pursuant to a
written opinion letter to such effect, addressed and acceptable to the Company's
transfer agent and the affected Holders. For purposes of Section 2(b),
“Effectiveness Date” means with respect to each subsequent Registration
Statement filed pursuant thereto, the earlier of (A) the ninetieth (90th) day
following the filing date of such Registration Statement (or in the event such
Registration Statement receives a “full review” by the Commission, the one
hundred twentieth (120th) day
following such filing date) or (B) the date which is within three (3) Business
Days after the date on which the Commission informs the Company (i) that the
Commission will not review such Registration Statement or (ii) that the Company may
request the acceleration of the effectiveness of such Registration Statement and
the Company makes such request; provided that, if the
Effectiveness Date falls on a Saturday, Sunday or any other day which shall be a
legal holiday or a day on which the Commission is authorized or required by law
or other government actions to close, the Effectiveness Date shall be the
following Business Day.
"Exchange Act" means the
Securities Exchange Act of 1934, as amended.
"Holder" or "Holders" means the holder or
holders, as the case may be, from time to time of Registrable Securities.
A holder of securities that are convertible into or exercisable for Registrable
Securities shall be deemed to be a Holder of such Registrable
Securities.
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“Initiating Holders” means any
Holder or Holders of 50% or greater of the Registrable Securities then
outstanding. The determination of such percentage shall include shares of
Common Stock issuable upon exercise of the Warrants even if such exercise has
not yet been effected.
“Initial Public Offering” shall
mean an underwritten initial public offering by the Company of its Common Stock
with anticipated gross proceeds of at least $20,000,000.
“Indemnified Party” has the
meaning set forth in Section 7(c).
“Indemnifying Party” has the
meaning set forth in Section 7(c).
“Losses” has the meaning set
forth in Section 7(a).
“Majority in Interest” means
the Initiating Holder or, if more than one, those Initiating Holders holding a
majority of the Registrable Securities then held by all Initiating
Holders.
“Maturity Date” has the meaning
set forth in the Notes.
“New York Courts” means the
state and federal courts sitting in the City of New York, Borough of
Manhattan.
“Notes” mean the 10%
convertible promissory notes in the aggregate principal amount of $4,000,000
Notes purchased by the Investors pursuant to the Purchase
Agreement.
“Note Shares” means the shares
of Common Stock or other securities issued or issuable to the Investors on
conversion of the Notes.
"Proceeding" means an action,
claim, suit, investigation or proceeding (including, without limitation, an
investigation or partial proceeding, such as a deposition), whether commenced or
threatened.
“Prospectus” means the
prospectus included in a Registration Statement (including, without limitation,
a prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Securities covered by a Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
“Qualified Financing” has the
meaning set forth in the Notes.
“Registrable Securities”
means: (i) the Note Shares, (ii) the Warrant Shares, and (iii) any securities
issued or issuable upon any stock split, dividend or other distribution,
recapitalization or similar event, or any exercise price adjustment with respect
to any of the securities referenced in (i) and (ii) above; provided, however, that
following such time as any of the securities described in clauses (i), or (ii)
above have been (x) sold by a Holder pursuant to a Registration Statement or (y)
may be sold by a Holder without volume restrictions pursuant to Rule 144, as
determined by the counsel to the Company pursuant to a written opinion letter to
such effect, addressed and acceptable to the Company's transfer agent and the
affected Holder, then such securities shall cease to be considered
“Registrable Securities” for purposes of this Agreement .
"Registration Statement" means
any registration statements required to be filed under this Agreement, including
in each case the Prospectus, amendments and supplements to such registration
statements or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference therein.
"Rule 144" means Rule 144
promulgated by the Commission pursuant to the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such
Rule.
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"Rule 415" means Rule 415
promulgated by the Commission pursuant to the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such
Rule.
"Rule 424" means Rule 424
promulgated by the Commission pursuant to the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such
Rule.
"Securities Act" means the
Securities Act of 1933, as amended.
“Shell Shares” shall mean the
shares of Common Stock listed on Schedule I.
"Warrants" mean the Warrants
issued to the Investors pursuant to the Purchase Agreement.
"Warrants Shares" means the
shares of Common Stock issued or issuable to the Investors on exercise of the
Warrants.
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2. Qualified
Financing.
Subject
to Section 4(b), if the Company proposes to file a Registration Statement with
the Commission in connection with Qualified Financing, then the Company shall
include in that Registration Statement for resale all of the Note Shares;
provided, however, that if the Qualified Financing for which the Company is
filing such Registration Statement occurs after the Maturity Date of the Notes,
the Company shall include the Warrant Shares in such Registration Statement, for
an offering to be made on a continuous basis pursuant to Rule 415 (the “First
Registration Statement”). Such Registration Statement shall cover to the
extent allowable under the Securities Act and the rules promulgated thereunder
(including Rules 415 and 416), such indeterminate number of additional shares of
Common Stock resulting from stock splits, stock dividends or similar
transactions with respect to the Note Shares.
(b) In
the event that the Company is unable to register for resale under Rule 415 all
of the applicable Registrable Securities, depending upon the timing as
contemplated above in Section 2(a), due to limits imposed by the Commission’s
interpretation of Rule 415 (a “Rule 415 Cutback”),
then the Company shall be obligated to include in such Registration Statement
only such limited portion of the applicable Registrable Securities as the
Commission shall permit. Any exclusion of applicable Registrable
Securities shall be made pro rata among the Holders in proportion to the number
of applicable Registrable Securities held by such persons; provided, however, that the
Shell Shares shall be omitted from such Registration Statement or any subsequent
registration statement prior to the omission of any Registrable
Securities. In the event the Commission does
not permit the Company to register all of the applicable Registrable Securities
in the First Registration Statement, the Company shall use its best efforts to
register the applicable Registrable Securities, subject to the terms of this
Section 2(b), that were not registered in the First Registration Statement, as
promptly as possible and in a manner permitted by the Commission, whether by
filing a subsequent registration statement as soon as the Commission permits the
Company to do so, providing demand registration rights, or otherwise (the “415
Subsequent Registration Statements,” together with the 415 Cutback, the “415
Registration Procedure”).
(c) If
at any time after the Company proposes to file the First Registration Statement
and prior to the effective date of such First Registration Statement, the
Company shall determine for any reason not to register or to delay such
registration, the Company may, at its election, give written notice of such
determination to the Holders and (i) in the case of a determination not to
register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay expenses in accordance with Section 6 hereof), and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities being registered pursuant to this Section 2(c) for the
same period as the delay in registering such other securities.
(d) In
the case of an underwritten public offering, if the managing underwriter(s) or
underwriter(s) should reasonably object to the inclusion of the Registrable
Securities in any Registration Statement, then if the Company after consultation
with the managing underwriter should reasonably determine that the inclusion of
such Registrable Securities would materially adversely affect the offering
contemplated in such Registration Statement, and based on such determination
recommends inclusion in such registration statement of fewer or none of the
Registrable Securities of the Holders, then (x) the number of Registrable
Securities of the Holders included in such Registration Statement shall be
reduced pro-rata among such Holders (based upon the number
of Registrable Securities requested to be included in the registration), if the
Company after consultation with the underwriter(s) recommends the inclusion of
fewer Registrable Securities, or (y) none of the Registrable Securities of the
Holders shall be included in such Registration Statement, if the Company after
consultation with the underwriter(s) recommends the inclusion of none of such
Registrable Securities; provided, however, that if
securities are being offered for the account of other persons or entities as
well as the Company, such reduction shall not represent a greater fraction of
the number of Registrable Securities intended to be offered by the Holders than
the fraction of similar reductions imposed on such other persons or entities
(other than the Company).
(e) In
the event that the applicable Registrable Securities are not registered as a
result of Section 2(c) or 2(d) above, or if the Company files a Registration
Statement including the Registrable Securities that is later withdrawn, the
Company agrees to register such applicable Registrable Securities as soon as
possible thereafter in a manner permitted by the
Commission and the managing underwriter if any.
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3.
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Demand Registration
Rights
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(a) Demand Registration.
In the event that:
(x) the
Registrable Securities shall have been included in a Registration Statement
under Section 2 and such Registration Statement is not declared effective within
6 months of the date of filing or is withdrawn prior thereto; or
(y) the
Company shall have filed a Registration Statement within 6 months of the date of
this Agreement, but such registration statement did not include the Registrable
Securities (for reasons other than as a result of Rule 415); or
(z) the
Company has not filed a Registration Statement within 6 months of the date of
this Agreement
then, the
Initiating Holders may (A) in the case of (x) or (z) above, at any time after
the earlier of the end of the six month period or withdrawal or (B) in the case
of (y) above, at any time after the earlier of the time such Registration
Statement is declared effective or is withdrawn, request
(“Demand Notice”) that the Company effect any registration, qualification or
compliance with respect to (x) Warrant Shares (in the event that a Qualified
Financing shall not have occurred prior to the maturity date of the Notes) or
(y) Note Shares (in the event that a Qualified Financing shall have occurred
prior to the maturity date of the Notes) with an anticipated
aggregate offering price, before deduction of standard underwriting discounts
and commissions, in excess of $1,000,000 in the following manner:
(i) promptly give written
notice of the proposed registration, qualification or compliance to all other
Holders, but in no event more than three (3) Business Days after receipt of a
Demand Notice (the “Additional Holder Notice”); and
(ii) within 30 calendar days of the
Demand Notice (the “Demand File Date” and such 30 day time period being referred
to as the “Demand Period”) effect all such registrations, qualifications and
compliances (including, without limitation, the execution of an undertaking to
file post-effective amendments, appropriate qualifications under the applicable
blue sky or other state securities laws and appropriate compliance with
exemptive regulations issued under the Securities Act and any other governmental
requirements or regulations) as requested in the Demand Notice and as would
permit or facilitate the sale and distribution of all or such portion of such
Initiating Holder's or Initiating Holders' Registrable Securities as are
specified in the Demand Notice, together with all or such portion of
the Registrable Securities of any Holder or Holders joining in such request as
are specified in a written request from such Holder(s) given to the Company
within fifteen (15) calendar days after such Holder’s receipt of the Additional
Holder Notice(the Joining Holder Notice); provided that the
Company shall not be obligated to take any action to effect such registration,
qualification or compliance pursuant to this Section 3(a):
(A) in any
particular jurisdiction in which the Company would be required to execute a
general qualification or compliance unless the Company is already subject to
service in such jurisdiction and except as required by the Securities Act;
or
(B) after the Company has
effected two (2) such registrations pursuant to this Section 3(a) and such
registrations have been declared or ordered effective, and all such shares
offered pursuant to each such registration shall have been sold
pursuant thereto.
Nowthwithstanding
the foregoing, if the Company shall furnish to the Holder a
certificate signed by the Chief Executive Officer of the Company stating that in
the good faith judgment of the Board of Directors it would be
materially detrimental to the Company and its shareholders for such Registration
Statement to be filed during the Demand Period because such action (x) would
materially interfere with a significant acquisition, corporate reorganization or
other similar transaction involving the Company, (y) would require premature
disclosure of material information that the Company has a bona fide business
purpose for preserving as confidential, or (z) would render the Company unable
to comply with requirements under the Securities Act or Exchange Act, and it is
therefore essential to defer the filing of such Registration Statement, then the
Company shall have an additional period of not more than thirty (30) calendar
days after the expiration of the Demand Period within which to file such
Registration Statement; and provided, further, the Company
may not utilize this deferral right more than twice under this Agreement and
such deferrals may not be used consecutively without the prior written consent
of the Initiating Holder, which shall not be unreasonably
withheld.
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(b) Underwriting. If the
Initiating Holders intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise the
Company as part of their request made pursuant to this Section 3 and the Company
shall include such information in the written notice referred to in Section 3
(a). In such event, the underwriter shall be selected by the
Majority in Interest, and shall be reasonably acceptable to the Company.
The right of any Holder to registration pursuant to this Section 3(b) shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by the Majority in Interest and such Holder) to the
extent provided herein. The Company shall (together with all Holders
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form with the underwriter or
underwriters. Notwithstanding any other provision of this Section 3, if
the underwriter advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, the Initiating
Holders shall so advise all Holders, and the number of shares of Registrable
Securities that may be included in the registration and underwriting (which
shall be determined in good faith by the managing underwriter) shall be
allocated among all Holders thereof in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities held by such Holders and
requested to be included by them. No Registrable Securities excluded from
the underwriting by reason of the managing underwriter's marketing limitation
shall be included in such registration. If any Holder of Registrable
Securities disapproves of the terms of the underwriting, such Holder may elect
to withdraw therefrom by written notice to the Company, the underwriter and the
Initiating Holders. Any Registrable Securities which are excluded from the
underwriting by reason of the underwriter's marketing limitation or withdrawn
from such underwriting shall be withdrawn from such registration.
(c) Company Inclusion. The
Company shall be entitled to include in any Registration Statement referred to
in this Section 3, for sale in accordance with the method of disposition
specified by the Initiating Holders, shares of Common Stock to be sold by the
Company for its own account, except as and to the extent that, in the opinion of
the managing underwriter (if such method of disposition shall be an underwritten
public offering), such inclusion would adversely affect the marketing of the
Registrable Securities to be sold. To the extent that the managing
underwriter in any such underwritten public offering requires the exclusion of
any securities from such offering, securities sought to be sold by the Company
shall be so excluded prior to excluding any Registrable Securities.
(d) In
the event that the Company receives a Rule 415 comment from the Commission
regarding a Registration Statement filed pursuant to this Section 3, the Company
shall follow the 415 Registration Procedure set forth in Section 2(b)
above.
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4.
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Company
Registration.
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(a) Registration.
If at any time or from time to time, the Company shall determine to
register any of its securities, for its own account or the account of any of its
shareholders (other than (i) a registration in connection with an
Initial Public Offering (ii) a registration on Form S-8 (or any successor form)
relating solely to employee stock option or purchase plans, or (iii) a
registration on Form S-4 (or any successor form) relating solely to a Rule 145
transaction, the Company will:
(i) promptly give to each Holder
written notice thereof (“Registration Notice); and
(ii) include in such registration (and
compliance), and in any underwriting involved therein, all the Registrable
Securities specified in a written request(s), made within fifteen (15) calendar
days after the Holders’ receipt of the Registration Notice, by any Holder or
Holders, except as set forth in subsection 4(b) below.
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(b) Underwriting.
If the subject registration for the Registration Notice is a registered public
offering involving an underwriting, the Company shall so advise the Holders in
the Registration Notice. In such event, the right of any Holder to
registration pursuant to Section 4(a) shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein.
All Holders proposing to distribute their securities through such underwriting
shall (together with the Company and the other shareholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any other provision of this
Section 4, if the managing underwriter determines that marketing factors require
a limitation of the number of shares to be underwritten, the underwriter may
exclude some or all Registrable Securities from such registration and
underwriting. The number of Registrable Securities to be included in such
registration shall be allocated as follows: first, for the account of the
Company, all shares of Common Stock proposed to be sold by the Company, and
second, for the account of any Holders or other stockholders of the Company
participating in such registration, the number of shares of Common Stock or
other Registrable Securities requested to be included in the registration by
such Holders and other stockholders in proportion, as nearly as practicable, to
the respective amounts of securities that are requested to be included in such
registration by such Holders and other stockholders. The Company shall so
advise all Holders and the other holders distributing their securities through
such underwriting of any such limitation, and the number of shares of
Registrable Securities held by Holders that may be included in the
registration. If any Holder disapproves of the terms of any such
underwriting, such Holder may elect to withdraw therefrom by written notice to
the Company and the managing underwriter. Any securities excluded or
withdrawn from such underwriting shall be withdrawn from such
registration. The Company shall have the right to terminate or
withdraw any registration initiated by it under this Section 4 prior to the
effectiveness of such registration, whether or not a Holder has elected to
include Registrable Securities in such registration, without thereby incurring
any liability to the Holders of the Registrable Securities; provided however,
that the Company notifies all Holders who requested inclusion of his/her
Registrable Securities of such termination or withdrawal.
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5.
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Registration
Procedures.
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In
connection with the Company's registration obligations hereunder, the Company
shall:
6.1 (i) Prepare
and file with the Commission such Registration Statements in order to
register for sale under the Securities Act all of the Registrable Securities, to
use its reasonable best efforts to cause such Registration Statements to become
effective, and, as expeditiously as possible, to prepare and file such
amendments, including post-effective amendments as may be necessary to keep the
Registration Statements continuously effective as to the applicable Registrable
Securities for its Effectiveness Period; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424; (iii) respond as
promptly as reasonably possible to any comments received from the Commission
with respect to each Registration Statement or any amendment thereto; and (iv)
comply in all material respects with the provisions of the Securities Act and
the Exchange Act with respect to the Registration Statement(s) and the
disposition of all Registrable Securities covered by each Registration
Statement;
6.2 Notify
the Holders as promptly as reasonably possible (i)(A) when a Prospectus or any
Prospectus supplement or post-effective amendment to a Registration Statement is
proposed to be filed; (B) when the Commission notifies the Company whether there
will be a "review" of such Registration Statement and whenever the Commission
comments in writing on such Registration Statement; and (C) with respect to each
Registration Statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the Commission or any other Federal or state
governmental authority for amendments or supplements to a Registration Statement
or Prospectus or for additional information; (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of a Registration
Statement covering any or all of the Registrable Securities or the initiation of
any Proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (v) of the occurrence of any event or passage of time that makes
the financial statements included in a Registration Statement ineligible for
inclusion therein or any statement made in such Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to such
Registration Statement, Prospectus or other documents so that, in the case of
such Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any 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;
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6.3 Use
its reasonable best efforts to avoid the issuance of, or, if issued, obtain the
withdrawal of (i) any order suspending the effectiveness of a Registration
Statement, or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment;
6.4 Prior
to any public offering of Registrable Securities, register or qualify such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of all jurisdictions within the United States as any Holder may request, to keep
each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the Registration Statement(s);
6.5 Cooperate
with the Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered to a transferee
pursuant to the Registration Statement(s), which certificates shall be free, to
the extent permitted by the Purchase Agreement or applicable law, of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Holders may
request;
6.6 Upon
the occurrence of any event contemplated by Section 5(c)(v), as promptly as
reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the affected Registration Statements or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, no Registration Statement nor any Prospectus will
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading;
6.7 As
expeditiously as possible, furnish to each selling Holder of Registrable
Securities such reasonable numbers of copies of the Registration Statement, each
amendment and supplement thereto, Prospectus, and such other documents as the
selling Holder of Registrable Securities may reasonably request in order to
facilitate the public sale or other disposition of the Registrable
Securities;
6.8 Use
its reasonable best efforts to cause all such Registrable Securities to be
listed on each securities exchange, if applicable, on which similar securities
issued by the Company are then listed;
6.9 In
the event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement in customary form with the managing
underwriter of such offering;
6.10 In
the event of any underwritten public offering, if requested by the underwriter,
obtain a cold comfort letter from the Company’s independent public accountants
in customary form and covering such matters of the type customarily covered by
cold comfort letters, addressed to the selling Holders of Registrable
Securities;
6.11 enter
into such customary agreements (including underwriting agreements in customary
form) and take all such other actions as the holders of a majority of the
Registrable Securities being sold or the underwriters, if any, reasonably,
request in order to expedite or facilitate the disposition of such Registrable
Securities (including, without limitation, effecting a stock split or a
combination of shares); and,
6.12 take
such other actions as shall be reasonably requested by any Holder consistent
with the terms of this Agreement.
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6.
Registration
Expenses. All
fees and expenses incidental to the performance of or compliance with this
Agreement by the Company shall be borne by the Company whether or not any
Registrable Securities are sold pursuant to a Registration Statement. The
fees and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with any
trading market on which the Common Stock is then listed for trading, and (B) in
compliance with applicable state securities or Blue Sky laws), (ii) printing
expenses (including, without limitation, expenses of printing certificates for
Registrable Securities and of printing Prospectuses), (iii) messenger, telephone
and delivery expenses, (iv) fees and disbursements of counsel for the Company,
(v) Securities Act liability insurance, if the Company so desires such
insurance, and (vi) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions contemplated by
this Agreement. In addition, the Company shall be responsible for all of
its internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
Indemnification.
6.13 Indemnification by the
Company. The Company shall, notwithstanding any termination of this
Agreement, indemnify and hold harmless each Holder, the officers, directors,
agents, investment advisors, partners, members and employees of each of them,
each person who controls any such Holder (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act), the officers, directors,
agents and employees of each such controlling person, and any underwriter of
each seller of Registrable Securities, from and against any and all losses,
claims, damages, liabilities, costs (including, without limitation, costs of
preparation and investigation and attorneys' fees reasonably incurred) and
expenses (collectively, "Losses"), as incurred, arising
out of or relating to (i) any violations by the Company of the Securities Act,
Exchange Act or any state securities law or any rule or regulation thereunder in
connection with the performance of its obligations to register securities under
this Agreement or (ii) any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, any Prospectus or any form of
Prospectus or in any amendment or supplement thereto or in any preliminary
Prospectus, or any omission or alleged omission of a material fact required to
be stated therein or necessary to make the statements therein (in the case of
any Prospectus or form of Prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, provided however, that
the Company will not be liable in any such case to the extent that any such
claim, loss, damage or liability arise out of or based on any untrue
statement or omission based upon written information furnished to the Company by
a Holder or underwriter specifically for use therein.
6.14 Indemnification by
Holders. Each Holder shall, severally and not jointly, if Registrable
Securities held by or issuable to such Holder are included in the securities as
to which such registration is being effected, indemnify and hold harmless the
Company, its directors, officers, agents and employees, each Person who controls
the Company (within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act), and the directors, officers, agents or employees of
such controlling Persons, to the fullest extent permitted by applicable law,
from and against all Losses, as incurred, arising solely out of or based solely
upon: (x) such Holder's failure to deliver the Prospectus provided to it by the
Company in compliance with the prospectus delivery requirements of the
Securities Act or (y) any untrue statement of a material fact contained in any
Registration Statement, any Prospectus, or any form of Prospectus, or in any
amendment or supplement thereto, or any omission of a material fact required to
be stated therein or necessary to make the statements therein not misleading to
the extent, but only to the extent that, (1) such untrue statements or omissions
is made in such Registration Statement or Prospectus in reliance upon and in
conformity with written information furnished to the Company by
a Holder specifically for use therein. In no event shall the
liability of any selling Holder hereunder be greater in amount than the dollar
amount of the net proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification
obligation.
6.15 Conduct of Indemnification
Proceedings. If any Proceeding shall be brought or asserted against any
person entitled to indemnity hereunder (an "Indemnified Party"), such
Indemnified Party shall promptly notify the Person from whom indemnity is sought
(the "Indemnifying
Party") in writing, and the Indemnifying Party shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided that the failure of any Indemnified
Party to give such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except (and only) to the
extent that it shall be finally determined by a court of competent jurisdiction
(which determination is not subject to appeal or further review) that such
failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.
91
An
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party
unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for
any settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding.
6.16 Contribution.
(i) If
a claim for indemnification under Section 7(a) or 7(b) is unavailable to an
Indemnified Party (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission.
(ii) The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 7(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 7(d), (A) no Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission, and
(B) the Company shall be liable and responsible for any amount in excess of
such proceeds; provided, however, 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. Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party or parties under this Section 7, notify such
party or parties from whom such contribution may be sought, but the omission so
to notify such party or parties from whom such contribution may be sought shall
not relieve such party from any other obligation it or they may have thereunder
or otherwise under this Section 7, except to the extent the party against whom
contribution may be sought is prejudiced as a result of such failure to give
notice. No party shall be liable for contribution with respect to any
action, suit, proceeding or claim settled without its prior written consent,
which consent shall not be unreasonably withheld.
92
(e) Indemnification with Respect
to Underwritten Offering. In the event that Registrable Securities
are sold pursuant to a Registration Statement in an underwritten offering
pursuant to Section 2, the Company agrees to enter into an underwriting
agreement containing customary representations and warranties with respect to
the business and operations of an issuer of the securities being registered and
customary covenants and agreements to be performed by such issuer, including
without limitation customary provisions with respect to indemnification by the
Company of the underwriters of such offering. To the extent that the
provisions on indemnification contained in the underwriting agreements entered
into among the selling Holders, the Company and the underwriters in connection
with the underwritten public offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall be controlling as
to the Registrable Securities included in the public offering.
The
indemnity and contribution agreements contained in this Section are in addition
to any liability that the Indemnifying Parties may have to the Indemnified
Parties.
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7.
|
Miscellaneous.
|
7.1 Remedies. In
the event of a breach or threatened breach by: (1) the Company including but not
limited to if the Company shall (i) fail to register Registrable Securities
after it shall have been requested to do so by a Holder or otherwise required to
do so in accordance with Section 3 or Section 4 of this Agreement, (ii) fail to
perform any of its obligations hereunder and as a result of such failure Holders
have not been able to sell their Registrable Securities, or (iii) act or fail to
act in any manner such that one or more Holders have been delayed in the sale of
their Registrable Securities, which delay is not expressly permitted by this
Agreement; or (2) by a Holder of any of their obligations under this Agreement,
each Holder or the Company, as the case may be, in addition to being entitled to
exercise all rights granted by law and under this Agreement, including recovery
of damages, will be entitled to specific performance of its rights under this
Agreement without the need to post any bond or other security or to prove
special damages. The Company and each Holder agree that monetary damages
would not provide adequate compensation for any losses incurred by reason of a
breach by it of any of the provisions of this Agreement and hereby further
agrees that, in the event of any action for specific performance in respect of
such breach or threatened breach, it shall waive the defense that a remedy at
law would be adequate.
7.2 Failure to File Registration
Statement and Other Events. The Company and the Holders agree that
the Holders will suffer damages if the Registration Statement is not filed in
accordance with the terms hereof and is not maintained in effect during the
Effectiveness Period. If a Registration Statement is not filed on
the Demand File Date (unless due to and in accordance with Section 3(b) hereof)
or does not remain effective during the Effectiveness Period, then the Company
shall pay to the Investors a cash amount that shall be equal to two percent (2%)
of the aggregate principal amount of the Note for each month (or part thereof)
following the Demand File Date that the Registration Statement shall not have
been duly filed with the SEC, and/or for each month (or part thereof) following
the Effective Date that the Registration Statement shall not continue to be
effective (the “Late
Registration Payment”). Such Late Registration Payment shall be
paid to the Investors within 30 days after the end of each month in which such
Late Registration Payment shall be payable, and until the Company shall have
complied with the filing and effective provisions of this Agreement.
Notwithstanding the foregoing, the aggregate amount of the Late Registration
Payment shall not exceed ten percent (10%) of the aggregate principal amount of
the Notes. Without limiting any of the other rights of the holders of
Registrable Securities hereunder, the failure by the Company to timely make any
or all of such Late Registration Payments shall constitute an Event of Default
under the Notes. No liquidated damages under this Section 8(c) shall
payable with respect to any shares required to be omitted as a result of the
operation of Rule 415.
7.3 Compliance.
Each Holder covenants and agrees that it will comply with the prospectus
delivery requirements of the Securities Act as applicable to it in connection
with sales of Registrable Securities pursuant to the Registration
Statement.
7.4 Discontinued
Disposition. Each Holder agrees by its acquisition of such
Registrable Securities that, upon receipt of a notice from the Company of the
occurrence of any event of the kind described in Section 5(c)(ii)-(v), such
Holder will forthwith discontinue disposition of such Registrable Securities
under the Registration Statement until such Holder's receipt of the copies of
the supplemented Prospectus and/or amended Registration Statement or until it is
advised in writing (the "Advice") by the Company that
the use of the applicable Prospectus may be resumed, and, in either case, has
received copies of any additional or supplemental filings that are incorporated
or deemed to be incorporated by reference in such Prospectus or Registration
Statement. The Company may provide appropriate stop orders to enforce the
provisions of this paragraph.
93
7.5 Rule 144
Compliance. As long as any Holder owns any Registrable Securities,
the Company will apply its best efforts to file with the SEC in a timely manner
(or obtain extensions in respect thereof and file within the applicable grace
period) all reports and other documents required of the Company under the
Securities Act and Exchange Act and, if the Company is not required to file
reports pursuant to Section 13(a) or 15 (d) of the Exchange Act, it will prepare
and furnish to the Holders and make publicly available in accordance with Rule
144(c) promulgated under the Securities Act annual and quarterly financial
statements, together with a discussion and analysis of such financial statements
in form and substance substantially similar to those that would otherwise be
required to be included in reports required by Section 13(a) or 15(d) of the
Exchange Act, as well as any other information required thereby, in the time
period that such filings would have been required to have been made under the
Exchange Act.
7.6 Amendments and
Waivers. The provisions of this Agreement, including the provisions
of this Section 8(f), may not be amended, modified or supplemented, and waivers
or consents to departures from the provisions hereof may not be given, unless
the same shall be in writing and signed by the Company and the Holders of no
less than a majority of the then outstanding Registrable Securities.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
certain Holders and that does not directly or indirectly affect the rights of
other Holders may be given by Holders of at least a majority of the Registrable
Securities to which such waiver or consent relates; provided, further
that no amendment or waiver to any provision of this Agreement relating to
naming any Holder or requiring the naming of any Holder as an underwriter may be
effected in any manner without such Holder’s prior written consent.
7.7 Notices. Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile (provided the sender receives a
machine-generated confirmation of successful transmission) at the facsimile
number specified in this Section prior to 6:30 p.m. (New York City time) on a
trading day, (b) the next trading day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section on a day that is not a trading day or later than 6:30
p.m. (New York City time) on any trading day, (c) the trading day following the
date of mailing, if sent by U.S. nationally recognized overnight courier service
for next trading day delivery, or (d) upon actual receipt by the party to whom
such notice is required to be given. The address for such notices and
communications shall be as follows:
|
If
to the Company:
|
Perpetual
Technologies, Inc
|
Shishan
Industrial Park
Nanhai
District, Foshan City, Guangdong Province, PRC
Attention: Mr. Ji Lie
|
|
With
a copy to:
|
Guzov
Ofsink LLC
|
000
Xxxxxxx Xxxxxx
Xxx Xxxx,
XX 00000
Attn.: Xxxxxx Xxxxxx,
Esq.
|
|
If
to a Investor:
|
To
the address set forth under such Investor's name on the signature pages
hereto.
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If to any
other Person who is then the registered Holder:
|
|
To
the address of such Holder as it appears in the stock transfer books of
the Company
|
or such
other address as may be designated in writing hereafter, in the same manner, by
such Person.
7.8 Successors and
Assigns. This Agreement shall inure to the benefit of and be
binding upon the heirs, executors, personal representatives, successors and
permitted assigns of each of the parties. The Company may not assign its
rights or obligations hereunder without the prior written consent of each
Holder.
94
7.9 Execution and
Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same
agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
7.10 Governing Law.
All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. Each party agrees that all
Proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement (whether brought against a party
hereto or its respective Affiliates, employees or agents) will be commenced in
the New York Courts. Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the New York Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any New York Court, or that such Proceeding has been commenced
in an improper or inconvenient forum. Each party hereto hereby irrevocably
waives personal service of process and consents to process being served in any
such Proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any Proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby. If either party shall
commence a Proceeding to enforce any provisions of this Agreement, then the
prevailing party in such Proceeding shall be reimbursed by the other party for
its attorney’s fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Proceeding.
7.11 Cumulative
Remedies. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.
7.12 Severability. If any
term, provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their reasonable efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of
the parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.
7.13 Headings. The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.
7.14 Independent Nature of
Investors' Obligations and Rights. The obligations of each Investor
under this Agreement are several and not joint with the obligations of each
other Investor, and no Investor shall be responsible in any way for the
performance of the obligations of any other Investor under this Agreement.
Nothing contained herein or in any Transaction Document, and no action taken by
any Investor pursuant thereto, shall be deemed to constitute the Investors as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Investors are in any way acting in concert or as a
group with respect to such obligations or the transactions contemplated by this
Agreement or any other Transaction Document. Each Investor acknowledges
that no other Investor will be acting as agent of such Investor in enforcing its
rights under this Agreement. Each Investor shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement, and it shall not be necessary for any
other Investor to be joined as an additional party in any Proceeding for such
purpose. The Company acknowledges that each of the Investors has been
provided with the same Registration Rights Agreement for the purpose of closing
a transaction with multiple Investors and not because it was required or
requested to do so by any Investor.
95
7.15 Selection of
Underwriter.
In the case of any registration effected pursuant to this Agreement, the
Company shall have the right to designate the managing underwriter in any
underwritten offering, subject to the approval of the Majority in Interest,
which approval shall not be unreasonably withheld.
7.16 Mergers, Etc. The Company shall not,
directly or indirectly, enter into any merger, consolidation, or reorganization
in which the Company shall not be the surviving corporation unless the proposed
surviving corporation shall, prior to such merger, consolidation, or
reorganization, agree in writing to assume the obligations of the Company to the
Holders of Registrable Securities under this Agreement, and, for that purpose,
references hereunder to “Registrable Securities” shall be deemed to be
references to the securities that the Holders of Registrable Securities would be
entitled to receive in exchange for Registrable Securities under any such
merger, consolidation, or reorganization; provided, however, the provisions of
this Agreement shall not apply in the event of any merger, consolidation, or
reorganization in which the Company is not the surviving corporation if all
Holders of Registrable Securities are entitled to receive in exchange for their
Registrable Securities consideration consisting solely of (i) cash,
(ii) securities of the acquiring corporation that under the Securities Act
may be immediately sold to the public without registration, or
(iii) securities of the acquiring corporation that the acquiring
corporation has agreed to register within ninety (90) days of completion of the
transaction, for resale to the public pursuant to the Securities
Act.
7.17 Information by
Holder. The Holder or Holders of Registrable Securities included in
any registration shall promptly furnish to the Company such information
regarding such Holder or Holders and the distribution proposed by such Holder or
Holders as the Company may reasonably request in writing and as shall be
required in connection with any registration referred to herein
7.18 Transfer of
Rights. The
rights to cause the Company to register Registrable Securities of a Holder and
keep information available granted to a Holder by the Company under Section 2, 3
or 4 of this Agreement may be assigned by a Holder to any partner or shareholder
of such Holder, to any other Holder, or to a transferee or assignee; provided,
that the Company is given written notice by the Holder at the time of or within
a reasonable time after said transfer, stating the name and address of said
transferee or assignee and identifying the securities with respect to which such
registration rights are being assigned; and provided further that any transferee
to whom rights under this Agreement are transferred shall, as a condition to
such transfer, deliver to the Company a written instrument by which such
transferee agrees to be bound by the obligations imposed upon the Investors
under this Agreement to the same extent as if such transferee were an Investor
hereunder and be deemed an Investor hereunder.
(s) Shell Shares.
The Holders hereby acknowledge and agree
that contemporaneously with the execution of this Agreement the
Company shall be entering into a registration rights agreement with the holders
of the Shell Shares wherein the holders of the Shell Shares will be granted
substantially similar rights to those granted to the Holders in this
Agreement. The rights of the Shell Shares’ holders shall be
pari passu with the
rights of the Holders granted herein, except that consistent with and as
required by the terms of this Agreement, in the event of a Rule 415 Cutback, all
of the Registrable Securities shall be registered prior to the registration of
any Shell Shares.
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96
IN
WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as
of the date first written above.
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PERPETUAL
TECHNOLOGIES INC.
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By:
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Name:
Xxx Xx
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Title:
Chief Executive Officer
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97
IN WITNESS WHEREOF, the parties have
executed this Registration Rights Agreement as of the date first written
above.
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NAME
OF INVESTING ENTITY
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| By: |
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| Name: | |||
| Title: | |||
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ADDRESS
FOR NOTICE
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|||
|
c/o:
|
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|
Street:
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|||
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City/State/Zip:
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|||
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Attention:
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Tel:
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Fax:
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Email:
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98
Schedule
I
Shell
Shares
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Name
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Amount
of Shares
|
|
|
Total
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99
