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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of May
10, 2007, by and among THINKPATH INC., a corporation organized under the laws of
the province of Ontario, Canada (the "Company"), and the Buyers listed on
Schedule I attached hereto (individually, a "Buyer" or collectively "Buyers").
WITNESSETH:
WHEREAS, the Company and the Buyer(s) are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Regulation S ("Regulation S") and the other rules and regulations promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act"), and/or upon such other exemption from the
registration requirements of the 1933 Act as may be available with respect to
any or all of the investments in securities made hereunder;
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Buyer(s),
as provided herein, and the Buyer(s) shall purchase up to Eight Million Dollars
(US$8,000,000) of convertible debentures (the "Convertible Debentures"), in the
form attached hereto as Exhibit A, which shall be convertible into common shares
of the Company with no par value (the "Common Shares") (as converted, the
"Conversion Shares") for an aggregate purchase price of up to US$8,000,000, of
which Four Hundred Thousand Dollars (US$400,000) shall be released from escrow
on the First Closing Date (as defined herein) (the "First Closing"), and the
balance shall be released from escrow on such dates and in such amounts as
mutually agreed by the Company and the Buyer, none of which in any event shall
be for amounts less than $250,000 (the "Subsequent Closings") (each individually
referred to as a "Closing" collectively referred to as the "Closings"), for a
total purchase price of up to Eight Million Dollars (US$8,000,000), (the
"Purchase Price") in the respective amounts set forth opposite each Buyer(s)
name on Schedule I (the "Subscription Amount"), and
WHEREAS, the proceeds of the sale of the Convertible Debentures for
each Closing contemplated hereby shall be held in escrow pursuant to the terms
of an escrow agreement substantially in the form attached hereto as Exhibit B
(the "Escrow Agreement");
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement, the Company and the Buyer(s) hereby
agree as follows:
1. PURCHASE AND SALE OF CONVERTIBLE DEBENTURES.
(a) Purchase of Convertible Debentures. Subject to the
satisfaction (or waiver) of the terms and conditions of this Agreement, each
Buyer agrees, severally and not jointly, to purchase at the Closings and the
Company agrees to sell and issue to each Buyer, severally and not jointly, at
the Closings, up to the aggregate amount of Convertible Debentures corresponding
with the Subscription Amount set forth opposite each Buyer's name on Schedule I
hereto. Upon execution hereof by a Buyer, the Buyer shall wire transfer the
Subscription Amount for the
First Closing in same-day funds or a check payable to "James G. Dodrill II, P.A.
as Escrow Agent for ThinkPath Inc./Trafalgar Capital Investment Fund," which
Subscription Amount shall be held in escrow pursuant to the terms of the Escrow
Agreement (as hereinafter defined) and disbursed in accordance therewith.
Notwithstanding the foregoing, a Buyer may withdraw his Subscription Amount and
terminate this Agreement as to such Buyer at any time after the execution hereof
and prior to Closing (as hereinafter defined) upon the occurrence of an Event of
Default under the terms of the Convertible Debentures.
(b) Closing Date. The First Closing of the purchase and sale
of the Convertible Debentures shall take place at 10:00 a.m. Eastern Standard
Time on the date hereof, subject to notification of satisfaction of the
conditions to the First Closing set forth herein and in Sections 6 and 7 below
(or such later date as is mutually agreed to by the Company and the Buyer(s))
(the "First Closing Date"). All other Closings shall take place subject to
notification of satisfaction of the conditions to the other Closings set forth
in Sections 6 and 7 below (or such later dates as are mutually agreed to by the
Company and the Buyer(s)) on the dates and subject to the conditions set forth
in the second recital to this Agreement (the "Subsequent Closing Dates," and
together with the First Closing Date, the "Closing Dates"). The Closings shall
occur on their respective Closing Dates at the offices of James G. Dodrill II,
P.A., 5800 Hamilton Way, Boca Raton, FL 33496 (or such other place as is
mutually agreed to by the Company and the Buyer(s)).
(c) Escrow Arrangements; Form of Payment. Upon execution
hereof by Buyer(s) and pending the Closings, the Subscription Amount for the
First Closing shall be deposited in a non-interest bearing escrow account with
James G. Dodrill II, P.A., as escrow agent (the "Escrow Agent"), pursuant to the
terms of the Escrow Agreement. Subject to the satisfaction of the terms and
conditions of this Agreement, on each Closing Date, (i) the Escrow Agent shall
deliver to the Company in accordance with the terms of the Escrow Agreement such
aggregate proceeds for the Convertible Debentures to be issued and sold to such
Buyer(s), minus the fees and expenses as set forth herein which shall be paid
directly from the gross proceeds held in escrow, at each Closing by wire
transfer of immediately available funds, and (ii) the Company shall deliver to
each Buyer, Convertible Debentures which such Buyer(s) is purchasing on such
Closing Date in amounts indicated opposite such Buyer's name on Schedule I, duly
executed on behalf of the Company.
(d) "Closing Date Exchange Rate" means, as to each Closing
Date, the Euro to US dollar spot exchange rate as quoted in the London edition
of the Financial Times on such Closing Date.
(e) "Repayment Exchange Rate" means in relation to each date
of a Conversion Notice or date of a Redemption Notice, the Euro to US dollar
spot exchange rate as quoted by in the London edition of the Financial Times on
such date.
(f) If on the date of any notice of conversion (a "Conversion
Notice") or notice of redemption (a "Redemption Notice"), the Repayment Exchange
Rate is less than the corresponding Closing Date Exchange Rate for such
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Convertible Debenture, then the number of Conversion Shares to be issued shall
be increased by the same percentage as results from dividing the Closing Date
Exchange Rate by the relevant Repayment Exchange Rate. By way of example, if the
number of Conversion Shares to be issued in respect of a particular Conversion
Notice or Redemption Notice would, but for this Clause 1(f), be 1,000 and if the
Closing Date Exchange Rate is 1.80 and the relevant Repayment Exchange Rate is
1.75, then 1,029 Shares will be issued in relation to that Conversion Notice or
Redemption Notice, as the case may be.
(g) If on the date of repayment of principal and accrued
interest (a "Repayment Date") or any date of repayment of interest only (an
"Interest Repayment Date"), the Cash Payment Date Exchange Rate, as defined
below is less than the Closing Date Exchange Rate, then the amount of cash
required to satisfy the amounts due at such time shall be increased by the same
percentage as results from dividing the Closing Date Exchange Rate by the
relevant Cash Payment Date Exchange Rate. "Cash Payment Date Exchange Rate"
means in relation to each Repayment Date or Interest Repayment Date the Euro to
US dollar spot exchange rate as quoted in the London edition of the Financial
Times on such date. By way of example, if the amount of cash required to repay
all amounts due on such date would, but for this Clause 1(g), be US$1,000 and if
the Closing Date Exchange Rate is 1.80 and the relevant Repayment Date Exchange
Rate is 1.75 then the amount of cash from the Cash Payment required to repay all
amounts due on such date will be US$1,028.57.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants, severally and not jointly, that, on
the date hereof and on the each date of purchase of a Convertible Debenture:
(a) Investment Purposes. Each Buyer is acquiring the
Convertible Debentures and, upon conversion of Convertible Debentures (as
defined herein), the Buyer will acquire the Conversion Shares, then issuable,
for its own account for investment only and not with a view towards, or for
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933 Act, applicable state
securities laws and applicable Canadian securities laws; provided, however, that
by making the representations herein, such Buyer reserves the right to dispose
of all or any part of the Conversion Shares at any time in accordance with or
pursuant to an effective registration statement covering such Conversion Shares
or an available exemption under the 1933 Act, including, without limitation,
Regulation S promulgated under the 1933 Act ("Regulation S"). Each Buyer further
represents that in consummating the transactions set forth herein: there is no
intent to place the Conversion Shares offshore in an attempt to evade
registration requirements with the result that the incidents of ownership never
leave the domestic market, or that all or a substantial portion of any economic
risk will be returned to the U.S. market during the restricted period under Rule
903 or that there is no reasonable expectation that the securities could be
viewed as actually coming to rest abroad. There is no intent on the part of the
Buyers to enter into the transactions contemplated hereby for the purpose of
"washing off" the resale restrictions through the use of Rule 904. Nothing
contained herein shall be deemed a representation or warranty by such Buyer to
hold the Conversion Shares for any period of time, except that the Buyer agrees
that in connection with the resale of any Conversion Shares under Regulation S
to comply with the offering restrictions set forth in Regulation S, including
Rule 903(b)(2), and to not sell any Conversion Shares during the distribution
compliance period as defined in Rule 903(b)(2) to a U.S. person or for the
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account or benefit of a U.S. person. Such Buyer is acquiring the Convertible
Debentures and the Conversion Shares hereunder in the ordinary course of its
business. Such Buyer does not have any agreement or understanding, directly or
indirectly, with any person to distribute any of the Convertible Debentures or
the Conversion Shares, in violation of United States federal or state securities
laws or applicable Canadian or provincial securities laws.
(b) Outside the United States and Not a U.S. Person. Each
Buyer is located outside the "United States," as such term is defined in
Regulation S, and is not a "U.S. person," as such term is defined in Regulation
S, and is not purchasing the Convertible Debenture by or on behalf a person
inside the United States or a U.S. Person. The purchase of the Convertible
Debenture was conducted in an "offshore transaction," as such term is defined in
Regulation S, such that when the offer to purchase the Convertible Debenture was
made, such Buyer was not a person within the United States, and at the time of
purchase, the Buyer is located outside the United States
(c) Reliance on Exemptions. Each Buyer understands that the
Convertible Debentures are being offered and sold to it in reliance on specific
exemptions or exclusions from the registration requirements of United States
federal and state securities laws and applicable Canadian securities laws and
that the Company is relying in part upon the truth and accuracy of, and such
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire such securities.
(d) Information. Each Buyer and its advisors (and his or, its
counsel), if any, have been furnished with all materials relating to the
business, finances and operations of the Company and information it deemed
material to making an informed investment decision regarding its purchase of the
Convertible Debentures and the Conversion Shares, which have been requested by
such Buyer. Each Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and its management. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
in Section 3 below. Each Buyer understands that its investment in the
Convertible Debentures and the Conversion Shares involves a high degree of risk.
Each Buyer is in a position regarding the Company, which, based upon its
economic bargaining power, enabled and enables such Buyer to obtain information
from the Company in order to evaluate the merits and risks of this investment.
Each Buyer has sought such accounting, legal and tax advice, as it has
considered necessary to make an informed investment decision with respect to its
acquisition of such securities.
(e) No Governmental Review. Each Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the
Convertible Debentures and the Conversion Shares or the fairness or suitability
of the investment in such securities, nor have such authorities passed upon or
endorsed the merits of the offering of such securities.
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(f) Transfer or Resale. Each Buyer understands that: (i) the
Convertible Debentures and the Conversion Shares have not been registered under
the 1933 Act or any applicable state securities laws, and may not be offered for
sale, sold, pledged, assigned or otherwise transferred unless (A) subsequently
registered thereunder, or (B) such Buyer shall have delivered to the Company an
opinion of counsel in a form reasonably acceptable to the Company to the effect
that such securities to be sold, assigned, pledged or otherwise transferred may
be sold, assigned or transferred pursuant to an exemption from such registration
requirements. The Company reserves the right to place stop transfer instructions
against the shares and certificates for the Convertible Debentures and the
Conversion Shares.
(g) Legends. Each Buyer understands that the certificates or
other instruments representing the Convertible Debentures and the Conversion
Shares and all certificates issued in substitution thereof and in exchange
therefore shall bear restrictive legends in substantially the following forms
(and a stop transfer order may be placed against transfer of such share
certificates), until such time as it is no longer required under applicable
securities laws:
THE SECURITIES REPRESENTED HEREBY [AND THE SECURITIES ISSUABLE
UPON CONVERSION/EXERCISE HEREOF] HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES. THESE SECURITIES MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED UNLESS SUCH SECURITIES ARE
REGISTERED UNDER THE 1933 ACT AND APPLICABLE STATE SECURITIES
LAWS OR SUCH SECURITIES ARE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED IN A TRANSACTION THAT DOES NOT REQUIRE
REGISTRATION UNDER THE 1933 ACT OR ANY APPLICABLE STATE
SECURITIES LAW AND THE COMPANY WILL BE PROVIDED WITH OPINION
OF COUNSEL IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY OR
OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH EXEMPTIONS ARE AVAILABLE.
WITHOUT COMPLIANCE WITH ALL APPLICABLE CANADIAN SECURITIES
LEGISLATION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE TRADED
IN CANADA OR TO OR FOR THE BENEFIT OF A CANADIAN RESIDENT
UNTIL [FOUR MONTHS AND ONE DAY AFTER ISSUANCE].
The legends set forth above shall be removed and the Company within two (2)
business days shall issue a certificate without such legend to the holder of the
Conversion Shares upon which it is stamped, if, unless the legend is otherwise
required by state securities laws, (i) in connection with a sale transaction,
provided the Conversion Shares are registered under the 1933 Act and applicable
state securities laws or (ii) in connection with a sale transaction, after such
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holder provides the Company with an opinion of counsel, which opinion shall be
in form, substance and scope customary for opinions of counsel in comparable
transactions and reasonably acceptable to the Company, to the effect that a
public sale, assignment or transfer of the Conversion Shares may be made without
registration under the 1933 Act.
(h) Authorization, Enforcement. This Agreement has been duly
and validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable in accordance with its
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
(i) Receipt of Documents. Each Buyer and his or its counsel
has received and read in their entirety: (i) this Agreement and each
representation, warranty and covenant set forth herein, the Escrow Agreement,
the Pledge Agreement and the Irrevocable Transfer Agent Instructions (as defined
herein), (ii) all due diligence and other information necessary to verify the
accuracy and completeness of such representations, warranties and covenants;
(iii) the Company's publicly available information on the SEC's website and (iv)
answers to all questions each Buyer submitted to the Company regarding an
investment in the Company; and each Buyer has relied on the information
contained therein and any other publicly available information regarding the
Company and has not been furnished any other documents, literature, memorandum
or prospectus.
(j) Due Formation of Corporate and Other Buyers. If the
Buyer(s) is a corporation, trust, partnership or other entity that is not an
individual person, it has been formed and validly exists and has not been
organized for the specific purpose of purchasing the Convertible Debentures and
is not prohibited from doing so.
(k) No Legal Advice From the Company. Each Buyer acknowledges,
that it had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with his or its own legal counsel and investment
and tax advisors. Each Buyer is relying solely on such counsel and advisors and
not on any statements or representations of the Company or any of its
representatives or agents for legal, tax or investment advice with respect to
this investment, the transactions contemplated by this Agreement or the
securities laws of any jurisdiction.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants as of the date hereof and as of
each date of purchase of a Debenture to each of the Buyers that:
(a) Organization and Qualification. The Company and its
subsidiaries are corporations duly organized and validly existing in good
standing under the laws of the jurisdiction in which they are incorporated, and
have the requisite corporate power to own their properties and to carry on their
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business as now being conducted. Each of the Company and its subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company and its subsidiaries taken as a whole.
(b) Authorization, Enforcement, Compliance with Other
Instruments. (i) The Company has the requisite corporate power and authority to
enter into and perform its obligations under this Agreement, the Escrow
Agreement, the Pledge Agreement, the Irrevocable Transfer Agent Instructions and
any related agreements, and to issue the Convertible Debentures and the
Conversion Shares in accordance with the terms hereof and thereof, (ii) the
execution and delivery of this Agreement, the Escrow Agreement, the Pledge
Agreement, the Irrevocable Transfer Agent Instructions and any related
agreements by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including, without limitation, the issuance of
the Convertible Debentures the Conversion Shares and the reservation for
issuance and the issuance of the Conversion Shares issuable upon conversion or
exercise thereof, have been duly authorized by the Company's Board of Directors
and no further consent or authorization is required by the Company, its Board of
Directors or its shareholders, (iii) this Agreement, the Escrow Agreement, the
Pledge Agreement, the Irrevocable Transfer Agent Instructions and any related
agreements have been duly executed and delivered by the Company, (iv) this
Agreement, the Escrow Agreement, the Pledge Agreement, the Irrevocable Transfer
Agent Instructions and any related agreements constitute the valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of creditors' rights and remedies. The authorized officer of the Company
executing this Agreement, the Escrow Agreement, the Pledge Agreement, the
Irrevocable Transfer Agent Instructions and any related agreements knows of no
reason why the Company cannot perform any of the Company's other obligations
under such documents.
(c) Capitalization. The authorized capital stock of the
Company consists of an unlimited number of Common Shares and 1,000,000 preferred
shares of the Company (the "Preferred Shares"). As of the date hereof, the
Company has 8,376,287 Common Shares and 105 Preferred Shares issued and
outstanding. All of such outstanding shares have been validly issued and are
fully paid and nonassessable. No Common Shares are subject to preemptive rights
or any other similar rights or, to the knowledge of the Company, any liens or
encumbrances. As of the date of this Agreement and except as set forth on
Schedule 3(c) to this Agreement, (i) there are no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, (ii) there are no outstanding debt
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securities and (iii) there are no agreements or arrangements under which the
Company or any of its subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act and (iv) there are no outstanding
registration statements and there are no outstanding comment letters from the
SEC or any other regulatory agency. There are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Convertible Debentures as described in this Agreement. The
Company has furnished to the Buyer true and correct copies of the Company's
Articles of Incorporation, as amended and as in effect on the date hereof (the
"Articles of Incorporation"), and the Company's By-laws, as in effect on the
date hereof (the "By-laws"), and the terms of all securities convertible into or
exercisable for Common Shares and the material rights of the holders thereof in
respect thereto other than stock options issued to employees and consultants.
(d) Issuance of Securities. The Convertible Debentures are
duly authorized and, upon issuance in accordance with the terms hereof, shall be
duly issued, fully paid and nonassessable, are free from all taxes, liens and
charges with respect to the issue thereof. The Conversion Shares issuable upon
conversion of the Convertible Debentures have been duly authorized and reserved
for issuance. Upon conversion of the Convertible Debentures in accordance with
the terms thereof, the Conversion Shares will be duly issued, fully paid and
nonassessable.
(e) No Conflicts. The execution, delivery and performance of
this Agreement, the Irrevocable Transfer Agent Instructions, the Pledge
Agreement and the Escrow Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby will not (i) result in a
violation of the Articles of Incorporation or the By-laws or (ii), to the best
knowledge of the Company, conflict with or constitute a default (or an event
which 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, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including United States federal and state
securities laws and regulations and the rules and regulations of The National
Association of Securities Dealers Inc.'s OTC Bulletin Board on which the Common
Shares are quoted) applicable to the Company or any of its subsidiaries or by
which any property or asset of the Company or any of its subsidiaries is bound
or affected. To the best knowledge of the Company, neither the Company nor its
subsidiaries is in violation of any term of or in default under its Articles of
Incorporation or By-laws or their organizational charter or by-laws,
respectively, or, any material contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its subsidiaries. The business of the
Company and its subsidiaries is not being conducted, and shall not be conducted
in violation of any material law, ordinance, or regulation of any governmental
entity. Except as specifically contemplated by this Agreement and as required
under the 1933 Act and any applicable state securities laws, the Company is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under or contemplated by this
Agreement in accordance with the terms hereof. All consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to
the date hereof, except for any required post-Closing notice filings under
applicable United States federal or state securities laws, if any.
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(f) SEC Documents: Financial Statements. Since January 1,
2005, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC under of the Securities
Exchange Act of 1934, as amended (the "1934 Act") (all of the foregoing filed
prior to the date hereof or amended after the date hereof and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein, being hereinafter referred to as the "SEC
Documents"). The Company has delivered to the Buyers or their representatives,
or made available through the SEC's website at http://www.sec.gov, true and
complete copies of the SEC Documents. As of their respective dates, the
financial statements of the Company disclosed in the SEC Documents (the
"Financial Statements") complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto. Such financial statements have been prepared in
accordance with U.S. generally accepted accounting principles, consistently
applied, 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 may exclude footnotes or may be
condensed or summary statements) and, fairly present in all material respects
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). No other
information provided by or on behalf of the Company to the Buyer which is not
included in the SEC Documents, including, without limitation, information
referred to in this Agreement, contains any untrue statement of a material fact
or omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(g) [reserved]
(h) Absence of Litigation. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending against or
affecting the Company, the Common Shares or any of the Company's subsidiaries,
wherein an unfavorable decision, ruling or finding would (i) have a material
adverse effect on the transactions contemplated hereby (ii) adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, this Agreement or any of the documents
contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents, have a material adverse effect on the business, operations,
properties, financial condition or results of operations of the Company and its
subsidiaries taken as a whole.
(i) Acknowledgment Regarding Buyer's Purchase of the
Convertible Debentures. The Company acknowledges and agrees that the Buyer(s) is
acting solely in the capacity of an arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that the Buyer(s) is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any advice given by the Buyer(s) or any
of their respective representatives or agents in connection with this Agreement
and the transactions contemplated hereby is merely incidental to such Buyer's
purchase of the Convertible Debentures or the Conversion Shares. The Company
further represents to the Buyer that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation by the Company and
its representatives.
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(j) Foreign Private Issuer; Directed Selling Efforts. The
Company is a "foreign private issuer," as such term is defined in Rule 405 under
the 1933 Act, with no "substantial U.S. market interest," as such term is
defined in Regulation S, in the Convertible Debentures or the Conversion Shares.
None of the Company, any of its affiliates, any distributor or any person acting
on its or their behalf has engaged in any "directed selling efforts," as such
term is defined in Rule 902 of Regulation S in connection with the transactions
contemplated hereby. The Company, its affiliates and any person acting on its or
their behalf have complied and will comply with the offering restrictions
requirements of Regulation S. The Company has not entered and will not enter
into any contractual arrangement with respect to the distribution of the
Convertible Debentures or the Conversion Shares. In making the sales of
Convertible Notes contemplated hereby, the Company has implemented the offering
restrictions required by Rule 903(b)(2). The Company has offered and sold the
Convertible Notes to persons who are not U.S. persons.
(k) Employee Relations. Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened. None of the
Company's or its subsidiaries' employees is a member of a union relating to his
or her employment by the Company or its subsidiaries as the case may be.
(l) Intellectual Property Rights. The Company and its
subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. The Company and its subsidiaries do not have any
knowledge of any infringement by the Company or its subsidiaries of trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service mark registrations, trade secret or other
similar rights of others, and, to the knowledge of the Company, there is no
claim, action or proceeding being made or brought against, or to the Company's
knowledge, being threatened against, the Company or its subsidiaries regarding
trademark, trade name, patents, patent rights, invention, copyright, license,
service names, service marks, service mark registrations, trade secret or other
infringement; and the Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
(m) Environmental Laws. The Company and its subsidiaries are
(i) in compliance in all material respects with any applicable foreign, federal,
state and local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), (ii) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii), to the best
knowledge of the Company, are in compliance with all terms and conditions of any
such permit, license or approval.
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(n) Title. Any real property and facilities held under lease
by the Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made of such property and buildings by the Company and its
subsidiaries.
(o) Insurance. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
subsidiaries are engaged. Neither the Company nor any such subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its subsidiaries, taken as a whole.
(p) Regulatory Permits. The Company and its subsidiaries
possess all material certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary to
conduct their respective businesses, and neither the Company nor any such
subsidiary has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.
(q) Internal Accounting Controls. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with U.S. generally accepted accounting principles and to maintain
asset accountability, and (iii) the recorded amounts for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(r) No Material Adverse Breaches, etc. Neither the Company nor
any of its subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is reasonably expected in the future
to have a material adverse effect on the business, properties, operations,
financial condition or results of operations of the Company or its subsidiaries.
Neither the Company nor any of its subsidiaries is in breach of any contract or
agreement which breach, in the judgment of the Company's officers, has or is
reasonably expected to have a material adverse effect on the business,
properties, operations, financial condition or results of operations of the
Company or its subsidiaries.
(s) Tax Status. The Company and each of its subsidiaries (i)
has made and filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject and
(unless and only to the extent that the Company and each of its subsidiaries has
set aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes), and (ii) has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
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returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim.
(t) Certain Transactions. Except as disclosed in the SEC
documents and for arm's length transactions pursuant to which the Company makes
payments in the ordinary course of business upon terms no less favorable than
the Company could obtain from third parties and other than the grant of stock
options disclosed in the SEC Documents, none of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company (other than for 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 knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(u) Fees and Rights of First Refusal. The Company is not
obligated to offer the securities offered hereunder on a right of first refusal
basis or otherwise to any third parties including, but not limited to, current
or former shareholders of the Company, underwriters, brokers, agents or other
third parties that has not been waived.
(v) Exempt Offering. The offer and sale of the Convertible
Debentures and the Conversion Shares and the Conversion in the manner
contemplated by this Agreement will be excluded from the registration
requirements of the Securities Act.
(w) Investment Company. The Company is not, and will not be as
a result of the issuance of the Convertible Debentures or the Conversion Shares,
an "investment company," as such term is defined in the United States Investment
Company Act of 1940, as amended.
4. COVENANTS.
(a) Best Efforts. Each party shall use its best efforts to
timely satisfy each of the conditions to be satisfied by it as provided in
Sections 6 and 7 of this Agreement.
(b) Reporting Status. Until the earlier of (i) the date as of
which the Buyer(s) may sell all of the Conversion Shares, without restriction
pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto),
or (ii) the date on which (A) the Buyer(s) shall have sold all the Conversion
Shares and (B) none of the Convertible Debentures are outstanding (the
"Registration Period"), the Company shall file in a timely manner all reports
required to be filed with the SEC pursuant to the 1934 Act and the regulations
of the SEC thereunder, the Company shall not terminate its status as an issuer
required to file reports under the 1934 Act, even if the 1934 Act or the rules
and regulations thereunder would otherwise permit such termination, and the
Company shall maintain its listing on the Over-The-Counter Bulletin Board (the
"OTCBB") or any other U.S. national securities exchange.
(c) Use of Proceeds. The Company will use the proceeds from
the sale of the Convertible Debentures for general corporate and working capital
purposes.
-12-
(d) Reservation of Shares. The Company shall take all action
reasonably necessary to at all times have authorized, and reserved for the
purpose of issuance, such number of Common Shares as shall be necessary to
effect the issuance of the Conversion Shares. If at any time the Company does
not have available such Common Shares as shall from time to time be sufficient
to effect the conversion of all of the Conversion Shares of the Company, the
Company shall call and hold a special meeting of the shareholders within thirty
(30) days of such occurrence, for the sole purpose of increasing the number of
shares authorized. The Company's management shall recommend to the shareholders
to vote in favor of increasing the number of Common Shares authorized.
Management shall also vote all of its shares in favor of increasing the number
of authorized Common Shares.
(e) Fees and Expenses.
(i) Each of the Company and the Buyer(s) shall pay
all costs and expenses incurred by such party in connection
with the negotiation, investigation, preparation, execution
and delivery of this Agreement, the Escrow Agreement, the
Pledge Agreement, the Irrevocable Transfer Agent
Instructions,. The Company shall pay the Buyer a transaction
fee of four percent (4%) of the Purchase Price, which shall be
paid directly from the proceeds of and proportionally upon
each Closing.
(ii) The Company shall pay the Buyer a facility fee
of $200,000, which shall be paid as follows: (a) at Closing,
the Company will issue to Buyer a certificate equal to 4.99%
of the outstanding Common Shares, which shall be credited
towards the facility fee at a price of $0.08 per share, (b)
ninety days after Closing, the Company shall issue to Buyer an
additional certificate equal to 4.99% of the then outstanding
Common Shares, which shall be credited towards the facility
fee at a price per share equal to the Conversion Price as
defined in the Convertible Debentures and (c) upon the
Company's receipt of additional (other than the First Closing)
$600,000 of gross proceeds, the Company shall issue to Buyer a
compensation debenture, in the form attached hereto as Exhibit
E, in the amount remaining following the reduction of the
facility fee for credit of the shares issued in (a) and (b)
above.
(iii) The Company has agreed to pay a structuring fee
to Buyer of Twenty Thousand Dollars (US$20,000), one-half of
which has been paid prior to the execution of this Agreement
and one-half of which shall be paid directly from the proceeds
of the First Closing.
(f) Corporate Existence. So long as any of the Convertible
Debentures remain outstanding, the Company shall not directly or indirectly
consummate any merger, reorganization, restructuring, reverse stock split
consolidation, sale of all or substantially all of the Company's assets or any
similar transaction or related transactions (each such transaction, an
"Organizational Change") unless, prior to the consummation an Organizational
Change, the Company obtains the written consent of each Buyer. In any such case,
the Company will make appropriate provision with respect to such holders' rights
and interests to ensure that the provisions of this Section 4(f) will thereafter
be applicable to the Convertible Debentures.
-13-
(g) Transactions With Affiliates. So long as any Convertible
Debentures are outstanding, the Company shall not, and shall cause each of its
subsidiaries not to, enter into, amend, modify or supplement, or permit any
subsidiary to enter into, amend, modify or supplement any agreement,
transaction, commitment, or arrangement with any of its or any subsidiary's
officers, directors, person who were officers or directors at any time during
the previous two (2) years, shareholders who beneficially own five percent (5%)
or more of the Common Shares, or Affiliates (as defined below) or with any
individual related by blood, marriage, or adoption to any such individual or
with any entity in which any such entity or individual owns a five percent (5%)
or more beneficial interest (each a "Related Party"), except for (a) customary
employment arrangements and benefit programs on reasonable terms, (b) any
investment in an Affiliate of the Company, (c) any agreement, transaction,
commitment, or arrangement on an arms-length basis on terms no less favorable
than terms which would have been obtainable from a person other than such
Related Party, (d) any agreement transaction, commitment, or arrangement which
is approved by a majority of the disinterested directors of the Company (for
purposes hereof, any director who is also an officer of the Company or any
subsidiary of the Company shall not be a disinterested director with respect to
any such agreement, transaction, commitment, or arrangement). "Affiliate" for
purposes hereof means, with respect to any person or entity, another person or
entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or entity, or
(iv) shares common control with that person or entity. "Control" or "controls"
for purposes hereof means that a person or entity has the power, direct or
indirect, to conduct or govern the policies of another person or entity.
(h) Transfer Agent. The Company covenants and agrees that, in
the event that the Company's agency relationship with its transfer agent should
be terminated for any reason prior to a date which is two (2) years after the
Closing Date, the Company shall immediately appoint a new transfer agent and
shall require that the new transfer agent execute and agree to be bound by the
terms of the Irrevocable Transfer Agent Instructions.
(i) Restriction on "Short" Position. Neither the Buyer nor any
of its affiliates have an open short position in the Common Shares, and the
Buyer agrees that it shall not, and that it will cause its affiliates not to,
engage in any short sales with respect to the Common Shares as long as any
Convertible Debentures shall remain outstanding.
(j) Restriction on Issuance of the Capital Stock. So long as
any Convertible Debentures are outstanding, and other than the transaction
proposed with Surge Capital, the Company shall not, without the prior written
consent of the Buyer(s), (i) issue or sell shares of Common Shares or Preferred
Shares without consideration or for a consideration per share less than the bid
price of the Common Shares determined immediately prior to its issuance, (ii)
issue any Preferred Shares, warrant, option, right, contract, call, or other
security instrument granting the holder thereof, the right to acquire Common
Shares without consideration or for a consideration less than such Common
Shares' bid price value determined immediately prior to it's issuance, (iii)
enter into any security instrument granting the holder a security interest in
any and all assets of the Company, or (iv) file any registration statement on
Form S-8 related to anything other than shares underlying an employee benefit
plan that has been or will be granted or awarded to employees and/or directors
of the Company and its subsidiaries.
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5. TRANSFER AGENT INSTRUCTIONS.
The Company shall enter into irrevocable transfer agent instructions in
substantially the form attached hereto as Exhibit D (the "Irrevocable Transfer
Agent Instructions") and shall pay the law offices of James G. Dodrill II, P.A.
a cash fee of One Hundred Dollars ($100) for every occasion they act pursuant to
the Irrevocable Transfer Agent Instructions.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the
Convertible Debentures to the Buyer(s) at the Closings is subject to the
satisfaction, at or before the Closing Dates, 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:
(a) Each Buyer shall have executed this Agreement, the Pledge
Agreement, the Escrow Agreement and the Irrevocable Transfer Agent Instructions
and delivered the same to the Company.
(b) The Buyer(s) shall have delivered to the Escrow Agent the
Purchase Price for Convertible Debentures in respective amounts as set forth
next to each Buyer as outlined on Schedule I attached hereto and the Escrow
Agent shall have delivered the net proceeds to the Company by wire transfer of
immediately available U.S. funds pursuant to the wire instructions provided by
the Company.
(c) The representations and warranties of the Buyer(s) shall
be true and correct in all material respects as of the date when made and as of
the Closing Dates as though made at that time (except for representations and
warranties that speak as of a specific date), and the Buyer(s) 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 Buyer(s) at or prior to the Closing Dates.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer(s) hereunder to purchase the Convertible
Debentures at each Closing is subject to the satisfaction, at or before each
Closing Date, of each of the following conditions:
(a) The Company shall have executed this Agreement, the
Convertible Debenture, the Pledge Agreement, the Escrow Agreement and the
Irrevocable Transfer Agent Instructions delivered the same to the Buyer(s).
(b) The trading in the Common Shares on the OTCBB shall not
have been suspended for any reason.
-15-
(c) The representations and warranties of the Company shall be
true and correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
3 above, in which case, such representations and warranties shall be true and
correct without further qualification) as of the date when made and as of the
Closing Dates as though made at that time (except for representations and
warranties that speak as of a specific date) 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 Dates. If requested
by the Buyer, the Buyer shall have received a certificate, executed by the
President of the Company, dated as of the Closing Dates, to the foregoing effect
and as to such other matters as may be reasonably requested by the Buyer
including, without limitation, an update as of the Closing Dates regarding the
representation contained in Section 3(c) above.
(d) The Company shall have executed and delivered to the
Buyer(s) the Convertible Debentures in the respective amounts set forth opposite
each Buyer(s) name on Schedule I attached hereto.
(e) The Buyer(s) shall have received an opinion of counsel
from Jolie Kahn, Esq. counsel to the Company in a form satisfactory to the
Buyer(s) with such counsel opining that the offer and sale of the Convertible
Debentures, and the issuance of the Conversion Shares does not require
registration under the 1933 Act, is exempt from registration pursuant to
Regulation S and that the transaction qualifies as a "Category 2" transaction
pursuant to Rule 903(b)(2) of the Securities Act Rules. Buyers and the Company
expressly agree that such counsel may expressly rely on the representations,
warranties and covenants set forth herein in giving such opinion.
(f) The Company shall have provided to the Buyer(s) a
certificate of good standing from the jurisdiction in which the Company is
incorporated.
(g) As of the Closing Date, the Company shall have reserved
out of its authorized and unissued Common Shares, solely for the purpose of
effecting the conversion of the Convertible Debentures, shares of Common Shares
to effect the conversion of all of the Convertible Debentures then outstanding.
(h) [reserved]
(i) The Irrevocable Transfer Agent Instructions, in form and substance
satisfactory to the Buyer, shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
(j) The Company shall have provided to the Buyer an
acknowledgement, to the satisfaction of the Buyer, from the Company's
independent certified public accountants as to its ability to provide all
consents required in order to file a registration statement in connection with
this transaction.
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8. INDEMNIFICATION.
(a) In consideration of the Buyer's execution and delivery of
this Agreement and acquiring the Convertible Debentures and the Conversion
Shares hereunder, and in addition to all of the Company's other obligations
under this Agreement, the Company shall defend, protect, indemnify and hold
harmless the Buyer(s) and each other holder of the Convertible Debentures and
the Conversion Shares, and all of their officers, directors, employees and
agents (including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Buyer
Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Buyer Indemnitee is a
party to the action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the "Indemnified
Liabilities"), incurred by the Buyer Indemnitees or any of them as a result of,
or arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in this Agreement, the
Convertible Debentures, the Pledge Agreement, the Escrow Agreement or any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in this
Agreement, the Convertible Debentures, the Pledge Agreement, the Escrow
Agreement or any other certificate, instrument or document contemplated hereby,
or (c) any cause of action, suit or claim brought or made against such Buyer
Indemnitee and arising out of or resulting from the execution, delivery,
performance or enforcement of this Agreement or any other instrument, document
or agreement executed pursuant hereto by any of the Buyer Indemnities (other
than a cause of action, suit or claim brought or made against a Buyer Indemnitee
by such Buyer Indemnitee's owners, investors or affiliates), (d) any transaction
financed or to be financed in whole or in part, directly or indirectly, with the
proceeds of the issuance of the Convertible Debentures or (e) the status of the
Buyer or holder of the Convertible Debentures or the Conversion Shares, as a
Buyer of Convertible Debentures in the Company. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities, which is permissible under applicable law.
(b) In consideration of the Company's execution and delivery
of this Agreement, and in addition to all of the Buyer's other obligations under
this Agreement, the Buyer shall defend, protect, indemnify and hold harmless the
Company and all of its officers, directors, employees and agents (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Company Indemnitees") from
and against any and all Indemnified Liabilities incurred by the Indemnitees or
any of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Buyer(s) in this Agreement, instrument or document contemplated hereby or
thereby executed by the Buyer(s), (b) any breach of any covenant, agreement or
obligation of the Buyer(s) contained in this Agreement, the Pledge Agreement,
the Escrow Agreement or any other certificate, instrument or document
contemplated hereby or thereby executed by the Buyer(s), or (c) any cause of
action, suit or claim brought or made against such Company Indemnitee based on
material misrepresentations or due to a material breach and arising out of or
resulting from the execution, delivery, performance or enforcement of this
Agreement, the Pledge Agreement, the Escrow Agreement or any other instrument,
-17-
document or agreement executed pursuant hereto by any of the Company
Indemnities. To the extent that the foregoing undertaking by each Buyer may be
unenforceable for any reason, each Buyer shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.
(c) Promptly after receipt by a Buyer Indemnitee or a Company
Indemnitee, as the case may be (the "Indemnified Party"), of notice of the
commencement of any cause of action, suit or claim brought or made against such
Indemnified Party for which such Indemnity Party is entitled to indemnification
under this Section 8, such Indemnified Party shall, deliver to the indemnifying
party a written notice of the commencement thereof, and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume control of the defense thereof with counsel mutually satisfactory to
the indemnifying party and the Indemnified Party. In any such proceeding, any
Indemnified Party may retain its own counsel, but, except as provided in the
following sentence, the fees and expenses of that counsel will be at the expense
of that Indemnified Party, unless (i) the indemnifying party and the Indemnified
Party, as applicable, shall have mutually agreed to the retention of that
counsel, (ii) the indemnifying party does not assume the defense of such
proceeding in a timely manner or (iii) in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel for the
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Party and any
other party represented by such counsel in such proceeding. The Company shall
pay reasonable fees for not more than one separate legal counsel for the
Buyer(s). The Indemnified Party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or claim
by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the Indemnified Party which relates to such
action or Claim. The indemnifying party shall keep the Indemnified Party fully
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. No indemnifying party shall be liable for any
settlement of any action, claim or proceeding effected without its prior written
consent; provided, however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall, without
the prior written consent of the Indemnified Party, consent to entry of any
judgment or enter into any settlement or other compromise with respect to any
pending or threatened action or claim in respect of which indemnification or
contribution may be or has been sought hereunder (whether or not the Indemnified
Party is an actual or potential party to such action or claim) which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim. Following indemnification as provided for hereunder, the indemnifying
party shall be subrogated to all rights of the Indemnified Party with respect to
all third parties, firms or corporations relating to the matter for which
indemnification has been made. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Party under this Section 8, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action.
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9. GOVERNING LAW: MISCELLANEOUS.
(a) Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Florida without regard
to the principles of conflict of laws. The parties further agree that any action
between them shall be heard in Broward County, Florida and expressly consent to
the jurisdiction and venue of the State Court sitting in Broward County, Florida
and the United States District Court for the Southern District of Florida for
the adjudication of any civil action asserted pursuant to this paragraph.
(b) Counterparts. This Agreement may be executed in two or
more identical counterparts, all of which 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 party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
(c) Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(d) 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 in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
(e) Entire Agreement, Amendments. This Agreement supersedes
all other prior oral or written agreements between the Buyer(s), the Company,
their affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.
(f) Notices. Any notices, consents, waivers, or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon confirmation of receipt, when sent
by facsimile; (iii) three (3) days after being sent by U.S. certified mail,
return receipt requested, or (iv) one (1) day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
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If to the Company, to: ThinkPath Inc.
55 University Avenue, Suite 505
Toronto, Ontario Canada M5J 2H7
Attn: Mr. Declan French, CEO
Telephone:
Facsimile:
With a copy to: Gersten Savage LLP
600 Lexington Avenue - 9th Floor
New York, NY 10022
Telephone: 212 -752-9700
Facsimile: 212 980-5192
If to the Buyer(s), to its address and facsimile number on Schedule I,
with copies to the Buyer's counsel as set forth on Schedule I. Each party shall
provide five (5) days' prior written notice to the other party of any change in
address or facsimile number.
(g) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns. Neither the Company nor any Buyer shall assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other
party hereto.
(h) No Third Party Beneficiaries. 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.
(i) Survival. Unless this Agreement is terminated under
Section 9(m), the representations and warranties of the Company and the Buyer(s)
contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4, 5 and 9, and the indemnification provisions set forth in Section 8,
shall survive the Closing for a period of two (2) years following the date on
which the Convertible Debentures are converted in full. The Buyer(s) shall be
responsible only for its own representations, warranties, agreements and
covenants hereunder.
(j) Publicity. The Company and the Buyer(s) shall have the
right to approve, before issuance any press release or any other public
statement with respect to the transactions contemplated hereby made by any
party; provided, however, that the Company shall be entitled, without the prior
approval of the Buyer(s), to issue any press release or other public disclosure
with respect to such transactions required under applicable securities or other
laws or regulations (the Company shall use its best efforts to consult the
Buyer(s) in connection with any such press release or other public disclosure
prior to its release and Buyer(s) shall be provided with a copy thereof upon
release thereof).
-20-
(k) 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.
(l) No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
[REMAINDER PAGE INTENTIONALLY LEFT BLANK]
-21-
IN WITNESS WHEREOF, the Buyers and the Company and the Buyer have
caused this Securities Purchase Agreement to be duly executed as of the date
first written above.
COMPANY:
THINKPATH INC.
By:
Name: Declan French
Title: Chief Executive Officer
BUYER:
TRAFALGAR CAPITAL SPECIALIZED
INVESTMENT FUND, LUXEMBOURG
BY: TRAFALGAR CAPITAL SARL
ITS: GENERAL PARTNER
By:
Name: Andrew Garai
Title: Chairman of the Board
-22-
SCHEDULE I
SCHEDULE OF BUYERS
ADDRESS/FACSIMILE AMOUNT OF
NAME SIGNATURE NUMBER OF BUYER SUBSCRIPTION
- ------------------------------------------------------------------------------------------------------------------
8-10 Rue Mathias Hardt Up to
Trafalgar Capital Specialized By: Trafalgar Capital Sarl BP 3023 $ 8,000,000
Investment Fund, Luxembourg Its: General Partner L-1030 Luxembourg
Facsimile:
011-44-207-405-0161
By: and
------------------------
Name: Andrew Garai 001-786-323-1651
Its: Chairman of the Board
- -------------------------------------------------------------------------------------------------------------------
Buyer's Counsel:
James G. Dodrill II, P.A.
5800 Hamilton Way
Boca Raton, FL 33496
Telephone: (561) 862-0529
Facsimile: (561) 892-7787
EXHIBIT A
FORM OF CONVERTIBLE DEBENTURES
EXHIBIT B
FORM OF ESCROW AGREEMENT
EXHIBIT C
FORM OF PLEDGE AGREEMENT
EXHIBIT D
FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
EXHIBIT E
FORM OF COMPENSATION DEBENTURE
SCHEDULE I
SCHEDULE OF BUYERS
NAME SIGNATURE ADDRESS/FACSIMILE AMOUNT OF
NUMBER OF BUYER SUBSCRIPTION
- -----------------------------------------------------------------------------------------------------------------
Up to
Trafalgar Capital Specialized By: Trafalgar Capital Sarl 8-10 Rue Mathias Hardt US$ 8,000,000
Investment Fund, Luxembourg
Its: General Partner BP 3023
Luxembourg L-1030
By:
Name:
Its: Portfolio Manager
Buyer's Counsel:
James G. Dodrill II, P.A.
5800 Hamilton Way
Boca Raton, FL 33496
Telephone: (561) 862-0529
Facsimile: (561) 892-7787