Exhibit 10.13
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
BY AND AMONG
GEM MANAGEMENT, LTD.,
AND
SUCCESSWAY HOLDINGS LTD.
(THE "PURCHASERS")
AND
ACCORD ADVANCED TECHNOLOGIES, INC.
(THE "COMPANY")
DATED AS OF MAY___, 2001
TABLE OF CONTENTS
PAGE
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ARTICLE I. CERTAIN DEFINITIONS 1
Section I.1. Certain Definitions 1
ARTICLE II. PURCHASE OF DEBENTURES 5
Section II.1. Execution of Documents; Delivery of and Exchange for
the Initial Escrow Shares and Related Documents 5
Section II.2. Purchase and Delivery of Debentures; Closing 6
ARTICLE III. REPRESENTATIONS AND WARRANTIES 7
Section III.1. Representations and Warranties of the Company 7
Section III.2. Representations and Warranties of the Purchasers 10
ARTICLE IV. OTHER AGREEMENTS OF THE PARTIES 12
Section IV.1. Manner of Offering 12
Section IV.2. Furnishing of Information 12
Section IV.3. Notice of Certain Events 12
Section IV.4. Copies and Use of Disclosure Documents 12
Section IV.5. Modification to Disclosure Documents 12
Section IV.6. Integration 13
Section IV.7. Furnishing of Rule 144A Materials 13
Section IV.8. Solicitation Materials 13
Section IV.9. Subsequent Financial Statements 13
Section IV.10. Prohibition on Certain Actions 13
Section IV.11. Listing of Common Stock 13
Section IV.12. Escrow 14
Section IV.13. Conversion Procedures; Maintenance of Debenture
Escrow Shares 14
Section IV.14. Attorney-in-Fact 14
Section IV.15. Indemnification 14
Section IV.16. Exclusivity 16
Section IV.17. Blue Sky Qualification 16
Section IV.18. Purchasers' Ownership of Common Stock 16
Section IV.19. Purchasers' Rights if Trading in Common Stock is Suspended 17
Section IV.20. No Violation of Applicable Law 18
Section IV.21. Redemption Restrictions 18
Section IV.22. No Other Registration Rights 18
Section IV.23. Merger or Consolidation 19
Section IV.24. Registration of Underlying Shares 19
Section IV.25. Liquidated Damages 19
Section IV.26. Selling Restrictions; Short Sales 19
Section IV.27. Fees 20
ARTICLE V. TERMINATION 20
Section V.1. Termination by the Company or the Purchasers 20
Section V.2 Remedies
ARTICLE VI. LEGAL FEES AND DEFAULT INTEREST RATE 21
ARTICLE VII. MISCELLANEOUS 21
Section VII.1 Fees and Expenses
Section VII.2 Entire Agreement; Amendments 22
Section VII.3 Notices 22
Section VII.4 Amendments; Waivers 23
Section VII.5 Headings 23
Section VII.6 Successors and Assigns 23
Section VII.7 No Third Party Beneficiaries 23
Section VII.8 Governing Law; Venue; Service of Process 23
Section VII.9 Survival 23
Section VII.10 Counterpart Signatures 24
Section VII.11 Publicity 24
Section VII.12 Severability 24
Section VII.13 Limitation of Remedies 24
Section VII.14 Omnibus Provision 24
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SCHEDULES:
Schedule 1 List of Purchasers 26
Schedule 3.1(a) Subsidiaries 27
Schedule 3.1(c) Capitalization 28
Schedule 3.1(d) Equity and Equity Equivalent Securities 29
Schedule 3.1(e) Conflicts 30
Schedule 3.1(f) Required Consents and Approvals 31
Schedule 3.1(g) Litigation 32
Schedule 3.1(h) No Defaults or Violations 33
Schedule 5.1 Form 8-K Disclosure Obligations 34
EXHIBITS:
Exhibit A Form of Convertible Debenture A-1
Exhibit B Form of Registration Rights Agreement B-1
Exhibit C Conversion Procedures C-1
Exhibit D Form of Escrow Agreement D-1
Exhibit E Form of Power of Attorney E-1
Exhibit F Form of Legal Opinion F-1
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CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
THIS CONVERTIBLE DEBENTURE PURCHASE AGREEMENT, dated as of May __, 2001 is
by and among ACCORD ADVANCED TECHNOLOGIES, INC., a Nevada corporation with its
executive offices at 0000 Xxxxx Xxx Xxxxxx, Xxxxx, Xxxxxxx 00000, (the
"COMPANY"), and the purchasers listed on SCHEDULE 1 annexed hereto
(individually, the "PURCHASER" and collectively, the "PURCHASERS").
WHEREAS, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to acquire from the Company the Company's 2 % convertible
debentures, due ______, 2006, in the form of EXHIBIT A annexed hereto and made a
part hereof (the "DEBENTURES");
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
Section I.1. CERTAIN DEFINITIONS. As used in this Agreement, and unless the
context requires a different meaning, the following terms shall have the
following meanings:
"AFFILIATE" means, with respect to any Person, any Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person. For the purposes of this definition, "CONTROL" (including, with
correlative meanings, the terms "CONTROLLED BY" and "UNDER COMMON CONTROL WITH")
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities by contract or otherwise.
"AGREEMENT" shall mean this Convertible Debenture Purchase Agreement,
including all Exhibits and Schedules annexed hereto.
"ATTORNEY-IN-FACT" shall have the meaning set forth in SECTION 2.1(B)
hereof.
"BUSINESS DAY" means any day except Saturday, Sunday and any day which is a
legal holiday or a day on which banking institutions in the State of New York
are authorized or required by law or other government actions to close, between
the hours of 9:30 a.m. and 6:00 p.m. New York Time.
"CLOSING" shall have the meaning set forth in SECTION 2.2(B) hereof.
"CLOSING DATE" shall mean the date of Closing, as set forth in SECTION
2.2(B) hereof.
"COMMISSION" means the United States Securities and Exchange Commission.
"COMMON STOCK" means shares now or hereafter authorized of the class of
common stock, par value $.0001 per share, of the Company and stock of any other
class into which such shares may hereafter have been reclassified or changed.
"COMPANY" shall have the meaning set forth in the introductory paragraph.
"CONTROL PERSON" shall have the meaning set forth in SECTION 4.15(A)
hereof.
"DEBENTURES" shall have the meaning set forth in the recital.
"DEBENTURE ESCROW SHARES" means such number of shares of Common Stock
issued and delivered to the Escrow Agent, within seven (7) calendar days of the
Enperto Form 8-K Filing, in exchange for the Initial Escrow Shares in accordance
with the Stipulation and as shall equal two (2) times the quotient obtained by
dividing (x) the average of the three (3) lowest closing bid prices of the
Common Stock for the five (5) Trading Days immediately following the Enperto
Form 8-K filing by (y) $340,000, and as shall be delivered to the Escrow Agent
pursuant to this Agreement.
"DISCLOSURE DOCUMENTS" means (a) the Schedules required to be to furnished
to the Purchasers by or on behalf of the Company pursuant to SECTION 3.1 hereof
and (b) all reports required to be filed and as filed by the Company under the
Exchange Act with the Commission during the two years preceding the date hereof.
"ENPERTO FORM 8-K FILING" means the Company's filing with the Commission of
Form 8-K disclosing the Company's merger and plan of reorganization with Enperto
Mineral Pool in accordance with the Stipulation.
"EFFECTIVE DATE" shall mean the date on which the Registration Statement
shall have been declared effective by the Commission, which in no event shall be
later than ninety (90) calendar days after the Execution Date .
"ESCROW AGENT" means Xxxxxx Xxxxxxxxxx & Xxxxxxxx, LLP, 000 Xxxxx Xxxxxx,
0xx Xxxxx, Xxx Xxxx, XX 00000; Tel: 000-000-0000; Fax: 000-000-0000.
"ESCROW AGREEMENT" shall have the meaning set forth in SECTION 4.12 hereof.
"EVENT OF DEFAULT" shall have the meaning set forth in the Debentures and
shall also mean any one occurrence of any incident, matter or other event or
happening deemed to be a breach or default under the Stipulation or Section 5.1
hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXECUTION DATE" shall have the meaning set forth in SECTION 2.1(A) hereof.
"FULL CONVERSION SHARES" shall have the meaning set forth in SECTION 4.13
hereof.
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"GEM" means Global Emerging Markets, Ltd. with its registered address at
000 Xxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, XX 00000; Phone: 000-000-0000; Fax:
000-000-0000.
"XXXX" means GEM Advisors, Inc., with its registered address at 000 Xxxxx
Xxxxxx, 0xx Xxxxx, Xxx Xxxx, XX 00000; Phone: 000-000-0000; Fax: 000-000-0000.
"INDEMNIFIED PARTY" shall have the meaning set forth in SECTION 4.15(B)
hereof.
"INDEMNIFYING PARTY"shall have the meaning set forth in SECTION 4.15(B)
hereof.
"INITIAL ESCROW SHARES" means the two million (2,000,000) shares of the
Common Stock issued and delivered to the Escrow Agent in accordance with the
Stipulation.
"JUDGMENT" means the judgment obtained by the Purchasers against the
Company in the amount of $281,841.10 referred to in the Stipulation.
"KGL" means Xxxxxx Xxxxxxxxxx & Xxxxxxxx, LLP.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
encumbrance, charge or security interest of any kind in or on such asset or the
revenues or income thereon or therefrom.
"LIMITATION ON CONVERSION" shall have the meaning set forth in SECTION 4.18
hereof.
"LOSSES" shall have the meaning set forth in SECTION 4.15(A) hereof.
"MATERIAL" shall mean having a financial consequence in excess of $100,000.
"MATERIAL ADVERSE EFFECT" shall have the meaning set forth in SECTION
3.1(A) hereof.
"NASD" means the National Association of Securities Dealers, Inc.
"NASDAQ" shall mean the Nasdaq Stock Market, Inc.(R)
"NON-XXXXX FILINGS" shall have the meaning set forth in SECTION 4.2 hereof.
"NOTICE OF CONVERSION" shall have the meaning set forth in the Debentures
annexed hereto.
"OTCBB" shall mean the OTC Bulletin Board(R).
"PER SHARE MARKET VALUE" of the Common Stock means on any particular date
(a) the last sale price of shares of Common Stock on such date or, if no such
sale takes place on such date, the last sale price on the most recent prior
date, in each case as officially reported on the principal national securities
exchange on which the Common Stock is then listed or admitted to trading, or (b)
if the Common Stock is not then listed or admitted to trading on any national
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securities exchange, the closing bid price per share as reported by Nasdaq, or
(c) if the Common Stock is not then listed or admitted to trading on the Nasdaq,
the closing bid price per share of the Common Stock on such date as reported on
the OTCBB or if there is no such price on such date, then the last bid price on
the date nearest preceding such date, or (d) if the Common Stock is not quoted
on the OTCBB, the closing bid price for a share of Common Stock on such date in
the over-the-counter market as reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices) or if there is no such price on such date, then the last bid
price on the date nearest preceding such date, or (e) if the Common Stock is no
longer publicly traded, the fair market value of a share of Common Stock as
determined by an Appraiser (as defined in Section 4(c)(iv) of the Debenture)
selected in good faith by the holders of a majority of principal amount of
outstanding Debentures; PROVIDED, HOWEVER, that the Company, after receipt of
the determination by such Appraiser, shall have the right to select an
additional Appraiser, in which case, the fair market value shall be equal to the
average of the determinations by each such Appraiser.
"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"POWER OF ATTORNEY" means the power of attorney in the form of EXHIBIT E
annexed hereto.
"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.
"PURCHASE PRICE" shall have the meaning set forth in SECTION 2.2(A) hereof.
"PURCHASER" and "PURCHASERS" shall have the meaning set forth in the
introductory paragraph.
"REGISTRATION RIGHTS AGREEMENT" means the agreement to be entered into on
the Execution Date, in the form of EXHIBIT B annexed hereto, setting forth the
obligation of the Company with respect to registration of the Underlying Shares.
"REGISTRATION STATEMENT" shall have the meaning set forth in SECTION 2.1(A)
hereof.
"REQUIRED APPROVALS" shall have the meaning set forth in SECTION 3.1(F)
hereof.
"SATISFACTION OF JUDGMENT" means that document executed by the Purchasers
indicating that the Judgment has been paid.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHORT SALE" shall have the meaning set forth in SECTION 4.26 hereof.
"STIPULATION" means that Stipulation of Settlement entered into by and
among the Company and the Purchasers on even date herewith in connection with
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the action entitled GEM MANAGEMENT, LTD. AND SUCCESSWAY HOLDINGS LTD. v. ACCORD
ADVANCED TECHNOLOGIES, INC. (Case Xx. 00 XXX 00000 (XXX)) Xxxxxx Xxxxxx District
Court Southern District of New York, and incorporated herein by reference.
"SUBSIDIARIES" and "SUBSIDIARY" shall have the meanings set forth in
SECTION 3.1(A) hereof.
"TRADING DAY" means (a) a day on which the Common Stock is quoted on
Nasdaq, the OTCBB or the principal stock exchange on which the Common Stock has
been listed, or (b) if the Common Stock is not quoted on Nasdaq, the OTCBB or
any stock exchange, a day on which the Common Stock is quoted in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions of
reporting prices).
"TRANSACTION DOCUMENTS" means this Agreement and all of the Exhibits hereto
and all other documents, instruments and writings required to be delivered by
the Company on the Execution Date pursuant to this Agreement.
"UNDERLYING SHARES" means the shares of Common Stock into which the
Debentures are convertible in accordance with the terms hereof and the Debenture
and as shall be held in Escrow by the Escrow Agent pursuant to the terms hereof
and the Escrow Agreement, which shall initially be the Initial Escrow Shares and
upon exchange therefor as provided herein the Debenture Escrow Shares.
ARTICLE II
PURCHASE OF DEBENTURES
Section II.1. EXECUTION OF DOCUMENTS; DELIVERY OF AND EXCHANGE FOR THE
INITIAL ESCROW SHARES AND RELATED DOCUMENTS.
(1) As soon as practicable after the date on which all parties shall have
executed the Transaction Documents (the "EXECUTION DATE"), but in no event more
than 35 calendar days after the Execution Date, the Company shall, in accordance
with the terms hereof and of the Registration Rights Agreement, file a duly
completed registration statement on the appropriate form with the Commission to
register the resale of the Underlying Shares under the Securities Act (the
"REGISTRATION STATEMENT").
(2) Simultaneously with the execution and delivery of this Agreement, (i)
the parties shall execute and deliver the Registration Rights Agreement and the
Escrow Agreement; (ii) the Company shall execute and deliver to the Escrow Agent
(A) the Initial Escrow Shares, (B) the Debentures, and(C) the Power of Attorney;
(iii) the Company shall execute and deliver to the Purchasers and its counsel a
certificate of the President of the Company certifying that attached thereto is
a copy of resolutions duly adopted by the Board of Directors of the Company
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authorizing the Company to execute and deliver this Agreement and all other
Transaction Documents and to enter into the transactions contemplated hereby and
thereby and the appointment, pursuant to SECTION 4.14 hereof, of the
attorney-in-fact pursuant to a power of attorney in the form attached hereto as
EXHIBIT E hereto (the "ATTORNEY-IN-FACT"); (iv) the Company shall deliver to the
Purchasers the executed legal opinion of counsel to the Company, substantially
the form annexed hereto as EXHIBIT F, addressed to the Purchasers; and (v) the
Purchasers shall deliver to the Escrow Agent the Satisfaction of Judgment.
(c) Within seven (7) calendar days of the Enperto Form 8-K Filing, in
exchange for the Initial Escrow Shares in accordance with the Stipulation, the
Company shall deliver the Debenture Escrow Shares to the Escrow Agent pursuant
to this Agreement. If the Company fails to deliver the Debenture Escrow Shares
to the Escrow Agent pursuant to this Section 2.1(c), this Agreement shall be
terminated pursuant to SECTION 5.1 hereof and the Company will be required to
reissue the Initial Escrow Shares to the Purchasers in proportion to their
respective percentages set forth in SCHEDULE 1 hereto and deliver same to the
Purchasers pursuant to Section 2.1(d) hereof, which shares the Company shall
register under the Securities Act pursuant to the Registration Rights Agreement.
(d) Within two (2) Business Days from the date of termination of this
Agreement pursuant to SECTION 5.1 hereof, either the Company or the Purchasers
shall notify the Escrow Agent of same, and if the Company is the defaulting
party, the Escrow Agent shall, within two (2) Business Days of its receipt of
such notice, deliver the Satisfaction of Judgment and the Initial Escrow Shares
or the Debenture Escrow Shares, as the case may be, to the Purchasers, and the
Purchasers shall retain the Satisfaction of Judgment and Initial Escrow Shares
or the Debenture Escrow Shares, as the case my be, and any and all rights and
privileges thereunder without any condition or obligation to the Company.
(e) The Purchasers shall have piggyback registration rights with
respect to the Initial Escrow Shares or the Debenture Escrow Shares, as the case
my be, pursuant to the terms of this Agreement and the Registration Rights
Agreement.
Section II.2. PURCHASE AND DELIVERY OF DEBENTURES; CLOSING.
(3) Subject to the terms and conditions set forth in this Agreement, on the
Closing Date the Company shall sell to the Purchasers and the Purchasers shall,
severally and jointly, purchase from the Company the Debentures, to be allocated
to the Purchasers as set forth in SCHEDULE 1 annexed hereto, for the aggregate
principal amount of $340,000 (the "PURCHASE PRICE"), payment for which shall be
effected by the Escrow Agent's delivery to the Company of the Satisfaction of
Judgment. The Debentures shall have the respective rights, preferences and
privileges set forth in the form of Debenture annexed as EXHIBIT A hereto.
(4) The closing of the purchase and sale of the Debentures (the "CLOSING")
shall take place at the offices of the Escrow Agent no later than five (5)
Business Days after the Effective Date of the Registration Statement (the
"CLOSING DATE") in accordance with the terms hereof and of the Registration
Rights Agreement; PROVIDED, HOWEVER, that, time being of the essence, the
Effective Date of the Registration Statement shall be no later than one hundred
twenty (120) calendar days from the Execution Date, unless the Purchasers agree
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in writing in advance to an extension thereof, which writing shall set forth the
new Effective Date.
(5) At the Closing, the Escrow Agent shall deliver to the Purchasers the
original and duly executed Debentures registered in the names of the Purchasers
in the amounts set forth in SCHEDULE 1 hereto.
(6) At the Closing, the Company shall deliver to the Purchasers the
following:
(i) a certificate, dated the Closing Date, signed by the
Secretary or an Assistant Secretary of the Company and certifying (A) that
attached thereto are true, correct and complete copies of (1) the Company's
articles or certificate of incorporation, as amended to the date thereof, (2)
the Company's by-laws, as amended to the date thereof, (3) resolutions duly
adopted by the Board of Directors of the Company authorizing the execution and
delivery of this Agreement, the issuance and sale of the Debentures and the
Underlying Shares and (4) a certificate of good standing from the Secretary of
State of Nevada and (B) the incumbency of the officers executing this Agreement;
(ii) a certificate of the Company's President or Chief Executive
Officer, dated the Closing Date, certifying that the representations and
warranties of the Company contained in Article III hereof are true and correct
in all material respects on the Closing Date; and
(iii) all other documents, instruments and writings required to
have been delivered by the Company at or prior to the Closing pursuant to this
Agreement.
(7) Upon receipt by the Purchasers of those items set forth in SECTIONS
2.2(C) and 2.2(D) above and the complete performance of the Stipulation by the
Company, the Escrow Agent shall deliver to the Company the following:
(1) Satisfaction of Judgment; and
(2) all other documents, instruments, and writings required to have
been delivered by the Purchasers to the Company at or prior to the Closing
pursuant to this Agreement.
(8) The Escrow Agent shall retain and hold the Debenture Escrow Shares in
accordance with the terms of the Stipulation, this Agreement, the Debenture and
the Escrow Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section III.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby makes the following representations and warranties, all of which shall
survive the Closing, to the Purchasers:
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(9) ORGANIZATION AND QUALIFICATION. The Company is a corporation, duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. The Company has no subsidiaries other than as set forth
in SCHEDULE 3.1(A) hereto (individually, a "SUBSIDIARY" and collectively, the
"SUBSIDIARIES"). Each of the Subsidiaries is a corporation, duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, with the full corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. The
Company and each Subsidiary is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the nature of
the business conducted or property or assets 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 reasonably be expected to have,
individually or in the aggregate, a material adverse effect on (a) the results
of operations, assets, prospects, or financial condition of the Company and the
Subsidiaries, or (b) the Purchasers' rights under this Agreement, the Escrow
Agreement and the Debenture (a "MATERIAL ADVERSE EFFECT").
(10) AUTHORIZATION; ENFORCEMENT. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by this Agreement and each other Transaction Document and otherwise
to carry out its obligations hereunder and thereunder. The execution and
delivery of this Agreement and the other Transaction Documents by the Company
and the consummation by it of the transactions contemplated hereby and thereby
have been duly authorized by all necessary action on the part of the Company.
This Agreement and the other Transaction Documents have been duly executed and
delivered by the Company and constitutes 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 applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
(11) CAPITALIZATION. The authorized, issued and outstanding capital stock
of the Company and each of the Subsidiaries is set forth in SCHEDULE 3.1(C)
hereto. No shares of Common Stock are entitled to preemptive or similar rights.
Except as specifically set forth in SCHEDULE 3.1(C) hereto, there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or, except as a result of
the purchase and sale of the Debentures hereunder, securities, rights or
obligations convertible into or exchangeable for, or giving any person any right
to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock or
securities or rights convertible or exchangeable into shares of Common Stock.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective articles of incorporation, bylaws or other charter documents
or resolutions.
(12) ISSUANCE OF INITIAL ESCROW SHARES, DEBENTURES AND DEBENTURE ESCROW
SHARES. The Initial Escrow Shares, Debentures and Debenture Escrow Shares have
been duly and validly authorized for issuance, offer and sale pursuant to this
Agreement and, when issued and delivered in accordance with the terms hereof,
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shall be valid and binding obligations of the Company enforceable in accordance
with their respective terms. The Company has, and at all times while the
Debentures are outstanding has, and will continue to maintain an adequate
reserve of shares of Common Stock to enable it to perform its obligations under
this Agreement and the Debentures. When issued in accordance with the terms
hereof, the Initial Escrow Shares, Debentures and Debenture Escrow Shares will
be, and are, duly authorized, validly issued, fully paid and non-assessable.
Except as set forth in SCHEDULE 3.1(D) hereto, there is no equity or equity
equivalent security outstanding that is substantially similar to the Debentures,
including any security having a floating conversion price substantially similar
to the Debentures; PROVIDED, HOWEVER, that nothing contained in this SECTION
3.1(D) shall be deemed to permit any equity or equity equivalent security of the
Company to provide for a floating conversion price, other than any security
issued or that may be issued to any of the Purchasers or any of their respective
Affiliates or assigns, including, without limitation, GEM and XXXX.
(13) NO CONFLICTS. Except as set forth in SCHEDULE 3.1(E) hereto, the
execution, delivery and performance of this Agreement and the other Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby do not and will not (i) conflict with or violate
any provision of its or any Subsidiary's articles of incorporation, resolutions
or bylaws or (ii) be subject to obtaining any of the consents referred to in
SECTION 3.1(F) hereof, 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 is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the
Company is subject (including Federal and State securities laws and
regulations), or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected, except in the case of each of clauses (ii)
and (iii), such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect. The business of the Company or any of its
Subsidiaries is not being conducted in violation of any law, ordinance or
regulation of any governmental authority.
(14) CONSENTS AND APPROVALS. Except as set forth in SCHEDULE 3.1(F) hereto,
neither the Company nor any Subsidiary is required to obtain any consent,
permit, waiver, authorization or order of, or make any filing or registration
with, any court or other federal, State, local or other governmental authority
or other Person in connection with the execution, delivery and performance by
the Company of this Agreement, other than the applicable filings under State and
federal securities laws (collectively, the "REQUIRED APPROVALS").
(15) LITIGATION; PROCEEDINGS. Except as set forth in SCHEDULE 3.1(G)
hereto, there is no action, suit, notice of violation, proceeding, inquiry or
investigation pending or threatened against or affecting the Company or any of
its Subsidiaries or any of their respective properties before or by any court,
governmental or administrative agency or regulatory authority (Federal, State,
county, local or foreign) which (i) relates to or challenges the legality,
validity or timely enforceability of this Agreement or the Debentures or any
other Transaction Document, (ii) could, individually or in the aggregate, have a
Material Adverse Effect or (iii) could, individually or in the aggregate,
materially impair the ability of the Company to perform fully on a timely basis
its obligations under this Agreement and the other Transaction Documents.
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(16) NO DEFAULT OR VIOLATION. Except as set forth in SCHEDULE 3.1(H)
hereto, neither the Company nor any Subsidiary (i) is in default under or in
violation of any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound, except such conflicts or defaults as do not have a Material Adverse
Effect, (ii) is in violation of any order of any court, arbitrator or
governmental body, except for such violations as do not have a Material Adverse
Effect, or (iii) is in violation of any statute, rule or regulation of any
governmental authority which could (individually or in the aggregate) (x)
adversely affect the legality, validity or enforceability of this Agreement, (y)
have a Material Adverse Effect or (z) adversely impair the Company's ability or
obligation to perform fully on a timely basis its obligations under this
Agreement.
(17) CERTAIN FEES. No fees or commission will be payable by the Company to
any investment banker, broker, placement agent or bank with respect to the
consummation of the transactions contemplated hereby.
(18) DISCLOSURE DOCUMENTS. The Disclosure Documents are accurate in all
material respects and do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
(19) REPORTING COMPANY. The Company's Common Stock is registered under the
Exchange Act, the Company is subject to the reporting requirements of Section 13
or Section 15(d) of the Exchange Act, and the Company is current in its
reporting requirements.
Each of the Purchasers acknowledges and agrees that the Company makes no
representation or warranty with respect to the transactions contemplated hereby
other than those specifically set forth in SECTION 3.1 hereof.
Section III.2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each
Purchaser hereby represents and warrants to the Company as follows:
(20) ORGANIZATION AND QUALIFICATION. Such Purchaser is a corporation duly
incorporated and validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
(21) AUTHORIZATION; ENFORCEMENT. Such Purchaser has the requisite power and
authority to enter into and to consummate the transactions contemplated hereby
and under the other Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of this
Agreement and the purchase of the Debentures by such Purchaser hereunder have
been duly authorized by all necessary action on the part of such Purchaser. This
Agreement has been duly executed and delivered by such Purchaser or on its
behalf and constitutes the valid and legally binding obligation of the
Purchasers, enforceable against each of the Purchasers in accordance with its
terms; except as such enforceability may be limited by applicable bankruptcy,
insolvency, liquidation, fraudulent transfer, reorganization, moratorium laws
and remedies or by other equitable principles of general application or similar
laws relating to or affecting generally the enforcement of creditors' rights.
10
(22) INVESTMENT INTENT. Such Purchaser is acquiring the Debentures and the
Underlying Shares for its own account for investment purposes only and not with
a view to distributing or reselling such Debentures or Underlying Shares or any
part thereof or interest therein, without prejudice, however, to the Purchasers'
right, subject to the provisions of this Agreement, at all times to sell or
otherwise dispose of all or any part of such Debentures, Underlying Shares or in
compliance with applicable Federal and State securities laws.
(23) PURCHASER'S STATUS. At the time such Purchaser was offered the
Debentures it was, and at the date hereof, it is, and at the Closing Date, it
will be, an "accredited investor" as defined in Rule 501(a) under the Securities
Act.
(24) EXPERIENCE OF PURCHASER. Such Purchaser, either alone or together with
its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Debentures, and has so evaluated the
merits and risks of such investment.
(25) ABILITY OF PURCHASER TO BEAR RISK OF INVESTMENT. Such Purchaser is
able to bear the economic risk of an investment in the Debentures and, at the
present time, is able to afford a complete loss of such investment.
(26) PROHIBITED TRANSACTIONS. The Debentures to be purchased by such
Purchaser are not being acquired, directly or indirectly, with the assets of any
"employee benefit plan," within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended.
(27) ACCESS TO INFORMATION. Such Purchaser acknowledges receipt of the
Disclosure Documents and further acknowledges that it has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and conditions
of the offering of the Debentures and the merits and risks of investing in the
Debentures; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment in the Debenture;
and (iii) the opportunity to obtain such additional information which the
Company possesses or can acquire which is necessary to make an informed
investment decision with respect to the Debentures.
(28) RELIANCE. Such Purchaser understands and acknowledges that (i) the
Debentures are being offered and sold, and the Underlying Shares are being
offered, to it without registration under the Securities Act in a transaction
that is exempt from the registration provisions of the Securities Act and (ii)
the availability of such exemption, depends in part upon, and the Company will
rely upon the accuracy and truthfulness of, the foregoing representations, and
such Purchaser hereby consents to such reliance.
The Company acknowledges and agrees that each of the Purchasers makes no
representation or warranty with respect to the transactions contemplated hereby
other than those specifically set forth in SECTION 3.2 herein.
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ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
Section IV.1. MANNER OF OFFERING. The Debentures are being issued pursuant
to Rule 506 of Regulation D of the Securities Act. The Debentures and the
Underlying Shares will bear restrictions on transfer, and will carry a
restrictive legend with respect to the exemption from registration under the
Securities Act. The transfer and resale of the Debentures, and the Underlying
Shares may be made only pursuant to registration under the Securities Act or an
exemption from such registration.
Section IV.2. FURNISHING OF INFORMATION. As long as each of the Purchasers
owns any Debentures, Underlying Shares or Initial Escrow Shares, the Company
will furnish to each such Purchaser, promptly after they have been prepared, its
annual report and other reports and filings required by Section 13(a) or 15(d)
of the Exchange Act that are not available on XXXXX (the "Non-Xxxxx Filings").
Section IV.3. NOTICE OF CERTAIN EVENTS. The Company shall, on a continuing
basis, (i) advise each of the Purchasers promptly after obtaining knowledge of,
and, if requested by any of the Purchasers, confirm such advice in writing, of
(A) the issuance by any State securities commission of any stop order suspending
the qualification or exemption from qualification of the Debentures or the
Underlying Shares for offering or sale in any jurisdiction, or the initiation of
any proceeding for such purpose by any State securities commission or other
regulatory authority, or (B) any event that makes any statement of a material
fact made in the Disclosure Documents untrue or that requires the making of any
additions to or changes in the Disclosure Documents in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading, (ii) use its best efforts to prevent the issuance of any stop
order or order suspending the qualification or exemption from qualification of
the Debentures or the Underlying Shares under any State securities or Blue Sky
laws, and (iii) if at any time any State securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption from qualification of the Debentures or the Underlying Shares under
any such laws, use its best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time.
Section IV.4. COPIES AND USE OF DISCLOSURE DOCUMENTS. The Company shall
furnish each of the Purchasers, without charge, as many copies of the Non-Xxxxx
Filings and any amendments or supplements thereto as each Purchaser may
reasonably request. The Company consents to the use of the Disclosure Documents
and any amendments and supplements to any of them by each Purchaser in
connection with resales of the Debentures, the Underlying Shares or the Initial
Escrow Shares.
Section IV.5. MODIFICATION TO DISCLOSURE DOCUMENTS. If any event shall
occur as a result of which, in the reasonable judgment of the Company or any of
the Purchasers, it becomes necessary or advisable to amend or supplement any of
the Disclosure Documents in order to make the statements therein, in the light
of the circumstances at the time such Disclosure Document(s) were delivered to
any of the Purchasers, not misleading, or if it becomes necessary to amend or
supplement any of the Disclosure Documents to comply with applicable law, the
Company shall promptly prepare an appropriate amendment or supplement to each
such Document in form and substance reasonably satisfactory to both the
Purchasers and Company so that (i) as so amended or supplemented, each such
Document will not include an untrue statement of material fact or omit to state
12
a material fact necessary in order to make the statements therein, in the light
of the circumstances existing at the time it is delivered to any of the
Purchasers, not misleading and (ii) the Disclosure Documents will comply with
applicable law.
Section IV.6. INTEGRATION. The Company shall not and shall use its best
efforts to ensure that no Affiliate shall sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in Section
2 of the Securities Act) that would be integrated with the offer or sale of the
Debentures or the Underlying Shares in a manner that would require the
registration under the Securities Act of the sale of the Debentures to the
Purchasers.
Section IV.7. FURNISHING OF RULE 144A MATERIALS. The Company shall, for so
long as any of the Debentures or the Underlying Shares remain outstanding and
during any period in which the Company is not subject to Section 13 or 15(d) of
the Exchange's Act, make available to any registered holder of Debentures or the
Underlying Shares in connection with any sale thereof and any prospective
purchaser of such Debentures or Underlying Shares from such Person, the
following information in accordance with Rule 144A(d)(4) under the Securities
Act: a brief statement of the nature of the business of the Company and the
products and services it offers and the Company's most recent audited balance
sheet and profit and loss and retained earnings statements, and similar audited
financial statements for such part of the two preceding fiscal years as the
Company has been in operation.
Section IV.8. SOLICITATION MATERIALS. The Company shall not (i) distribute
any offering materials in connection with the offering and sale of the
Debentures or the Underlying Shares other than the Disclosure Documents and any
amendments and supplements thereto prepared in compliance herewith or (ii)
solicit any offer to buy or sell the Debentures or the Underlying Shares by
means of any form of general solicitation or advertising.
Section IV.9. SUBSEQUENT FINANCIAL STATEMENTS. The Company shall furnish to
the Purchasers, promptly after filing with the Commission, a copy of all
financial statements for any period subsequent to the period covered by the
financial statements included in the Disclosure Documents until the earlier of
the full conversion of the Debentures and the Maturity Date of the Debentures.
Section IV.10. PROHIBITION ON CERTAIN ACTIONS. Except as otherwise provided
in the Schedules to the Disclosure Documents, from the date hereof through the
Closing Date, the Company shall not and shall cause the Subsidiaries not to,
without the prior written consent of the Purchasers, (i) amend its certificate
or articles of incorporation, by-laws or other charter documents so as to
adversely affect any rights of the Purchasers; (ii) split, combine or reclassify
its outstanding capital stock; (iii) declare, authorize, set aside or pay any
dividend or other distribution with respect to the Common Stock; (iv) redeem,
repurchase or offer to repurchase or otherwise acquire shares of its Common
Stock; or (v) enter into any agreement with respect to any of the foregoing.
Section IV.11. LISTING OF COMMON STOCK. Except as otherwise provided in the
Schedules to the Disclosure Documents, the Company shall (a) use its best
efforts to maintain the listing of its Common Stock on the OTCBB until
expiration of the period during which the Debentures may be converted and (b)
shall provide to the Purchasers evidence of such listing.
13
Section IV.12. ESCROW. The Company and the Purchasers agree to execute and
deliver, simultaneously with the execution and delivery of this Agreement, the
escrow agreement attached hereto and made part hereof as EXHIBIT D (the "Escrow
Agreement").
Section IV.13. CONVERSION PROCEDURES; MAINTENANCE OF DEBENTURE ESCROW
SHARES. EXHIBIT C attached hereto and made a part hereof sets forth the
procedures with respect to the conversion of the Debentures including the form
of Notice of Conversion to be provided upon conversion, instructions as to the
procedures for conversion, the form of legal opinion, if necessary, that shall
be rendered to the Company and such other information and instructions as may be
reasonably necessary to enable each of the Purchasers or their permitted
transferee(s) to exercise the right of conversion smoothly and expeditiously.
The Company agrees that, at any time the conversion price of the Debentures is
such that the number of Debenture Escrow Shares is less than 200% of the number
of shares of Common Stock that would be needed to satisfy full conversion of all
of the Debentures given the then current conversion price (the "FULL CONVERSION
SHARES"), upon three (3) Business Days of its receipt by facsimile of notice of
such circumstance to the Company by the Purchasers and/or Escrow Agent, the
Company shall issue additional share certificates in the names of each of the
Purchasers in denominations of 10,000 shares, and deliver same to the Escrow
Agent, such that the new number of Debenture Escrow Shares is equal to 200% of
the Full Conversion Shares.
Section IV.14. ATTORNEY-IN-FACT. To effectuate the terms and provisions of
this Agreement, the Escrow Agreement and the Debenture, the Company hereby
agrees to give a power of attorney as is evidenced by EXHIBIT E annexed hereto.
All acts done under such power of attorney are hereby ratified and approved and
neither the Attorney-in-Fact nor any designee or agent thereof shall be liable
for any acts of commission or omission, for any error of judgment or for any
mistake of fact or law, as long as the Attorney-in-Fact is operating within the
scope of the power of attorney and this Agreement and its exhibits. The power of
attorney, being coupled with an interest, shall be irrevocable while any amount
remains unpaid under any of the Debentures, or any portion of this Agreement or
the Escrow Agreement remains unsatisfied. In addition, the Company shall give
the Attorney-in-Fact resolutions executed by the Board of Directors of the
Company which authorize future issuances of the Underlying Shares for the
Debentures, and which resolutions state that they are irrevocable while any
amount remains unpaid under any of the Debentures, or any portion of this
Agreement or the Escrow Agreement remains unsatisfied.
Section IV.15. INDEMNIFICATION.
(29) INDEMNIFICATION.
(1) The Company shall, notwithstanding termination of this Agreement
and without limitation as to time, indemnify and hold harmless GEM, XXXX and
each Purchaser and their respective officers, directors, agents, employees and
affiliates, each Person who controls GEM, XXXX or each such Purchaser (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) (each such Person, a "CONTROL PERSON") and the officers, directors, agents,
employees and affiliates of each such Control Person, to the fullest extent
permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, costs of preparation
and attorneys' fees) and expenses (collectively, "LOSSES"), as incurred, arising
14
out of, or relating to, a breach or breaches of any representation, warranty,
covenant or agreement by the Company under this Agreement, the other Transaction
Documents or the Debentures.
(2) Each Purchaser, severally and not jointly, shall notwithstanding
termination of this Agreement and without limitation as to time, indemnify and
hold harmless the Company, its officers, directors, agents and employees, each
Control Person and the officers, directors, agents and employees of each Control
Person, to the fullest extent permitted by application law, from and against any
and all Losses, as incurred, arising out of, or relating to, a breach or
breaches of any representation, warranty, covenant or agreement by such
Purchaser under this Agreement, the other Transaction Documents or the
Debentures.
(30) 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 promptly shall 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.
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 or
Parties unless: (1) the Indemnifying Party has agreed to pay such fees and
expenses; or (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 impeded 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 of the
claim against the Indemnified Party but will retain the right to control the
overall Proceedings out of which the claim arose and such counsel employed by
the Indemnified Party 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.
All fees and expenses of the Indemnified Party to which the Indemnified
Party is entitled hereunder (including reasonable fees and expenses to the
extent incurred in connection with investigating or preparing to defend such
Proceeding in a manner not inconsistent with this Section) shall be paid to the
15
Indemnified Party, as incurred, within ten (10) Business Days of written notice
thereof to the Indemnifying Party.
No right of indemnification under this Section 4.15 shall be available as
to a particular Indemnified Party if there is a non-appealable final judicial
determination that such Losses arise solely out of the negligence or bad faith
of such Indemnified Party in performing the obligations of such Indemnified
Party under this Agreement or a breach by such Indemnified Party of its
obligations under this Agreement.
(31) CONTRIBUTION. If a claim for indemnification under this Section
4.15(a) is unavailable to an Indemnified Party or is insufficient to hold such
Indemnified Party harmless for any Losses in respect of which this Section 4.15
would apply by its terms (other than by reason of exceptions provided in this
Section 4.15(c)), 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 benefits received by the Indemnifying Party
on the one hand and the Indemnified Party on the other and the relative fault of
the Indemnifying Party and Indemnified Party in connection with the actions 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 there was
a judicial determination that such Losses arise in part out of the negligence or
bad faith of the Indemnified Party in performing the obligations of such
Indemnified Party under this Agreement or the Indemnified Party's breach of its
obligations under this Agreement. The amount paid or payable by a party as a
result of any Losses shall be deemed to include any attorneys' or other fees or
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party.
(32) NON-EXCLUSIVITY. Except as otherwise provided in the Schedules to the
Disclosure Documents, the indemnity and contribution agreements contained in
this Section are in addition to any obligation or liability that the
Indemnifying Parties may have to the Indemnified Parties.
Section IV.16. EXCLUSIVITY. For a period of one (1) year from the date of
this Agreement, the Company shall not offer or issue any equity or equity
equivalent security that is substantially similar to the Debentures, including
any security with a floating conversion price, other that any equity or equity
equivalent security issued to GEM, XXXX, or any of their respective Affiliates.
Section IV.17. BLUE SKY QUALIFICATION. In accordance with the Registration
Rights Agreement, the Company shall qualify the Underlying Shares under the
securities or Blue Sky laws of such jurisdictions as any of the Purchasers may
reasonably request and shall continue such qualification at all times through
the second anniversary of the Closing Date; PROVIDED, HOWEVER, that neither the
Company nor its Subsidiaries shall be required in connection therewith to
qualify as a foreign corporation where they are not now so qualified or to take
any action that would subject the Company to general service of process in any
such jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
Section IV.18. PURCHASERS' OWNERSHIP OF COMMON STOCK. In addition to and
not in lieu of the limitations on conversion set forth in the Debentures, the
conversion and exercise rights of each of the Purchasers set forth in the
16
Debentures, shall be limited, solely to the extent required, from time to time,
such that, unless a Purchaser gives written notice 75 days in advance to the
Company of such Purchaser's intention to exceed the Limitation on Conversions as
defined herein, with respect to all or a specified amount of the Debentures and
the corresponding number of the Underlying Shares, in no instance shall the
maximum number of shares of Common Stock which the Purchasers (singularly,
together with any Persons who in the determination of such Purchasers, together
with such Purchasers, constitute a group as defined in Rule 13d-5 of the
Exchange Act) may receive in respect of any conversion of the Debentures,
exceed, at any one time, an amount equal to the remainder of (i) 4.99% of the
then issued and outstanding shares of Common Stock of the Company following such
conversion or exercise MINUS (ii) the number of shares of Common Stock of the
Company then owned by any of the Purchasers (including any shares of Common
Stock deemed beneficially owned due to ownership of the Debentures) (the
foregoing being herein referred to as the "LIMITATION ON CONVERSION"); PROVIDED,
HOWEVER, that the Limitation on Conversion shall not apply to any forced or
automatic conversion by the Company pursuant to Section 4(i) and Section 5 of
the Debentures; and, PROVIDED FURTHER, that if ten (10) Business Days shall have
elapsed from the time any Purchaser shall have declared an Event of Default and
the Company shall not have properly and fully cured such Event of Default, the
provisions of this Section 4.18 shall be null and void from and after such date.
The Company shall, promptly upon its receipt of a Notice of Conversion tendered
by any of the Purchasers (or their sole designee) under the Debentures, as
applicable, notify such Purchaser by telephone and by facsimile of the number of
shares of Common Stock outstanding on such date and the number of Underlying
Shares which would be issuable to such Purchaser (or its sole designee, as the
case may be) if the conversion requested in such Notice of Conversion were
effected in full, whereupon, notwithstanding anything to the contrary set forth
in the Debentures, such Purchaser may within one (1) Business Day of its receipt
of the Company notice required by this Section 4.18 by facsimile revoke such
conversion to the extent (in whole or in part) that such Purchaser determines
that such conversion would result in the ownership by such Purchaser of shares
of Common Stock in excess of the Limitation on Conversion.
Section IV.19. PURCHASERS' RIGHTS IF TRADING IN COMMON STOCK IS SUSPENDED.
Except as otherwise provided in the Schedules to the Disclosure Documents, in
the event that at any time after the Closing and during the period when the
Registration Statement is to remain effective under the Securities Act in
accordance with the Registration Rights Agreement, trading in the shares of the
Common Stock is suspended (and not reinstated within ten (10) Trading Days) on
such stock exchange or market upon which the Common Stock is then listed for
trading (other than as a result of the suspension of trading in securities on
such market generally or temporary suspensions pending the release of material
information), or the Common Stock is delisted from the OTCBB (and not reinstated
within ten (10) Trading Days), then, at the option of any of the Purchasers
exercisable by giving written notice to the Company, the Company shall redeem,
as applicable, all of the Debentures and Underlying Shares owned by such
Purchaser at an aggregate purchase price equal to the sum of:
(i) the product of (1) the average Per Share Market Value for the
five (5) Trading Days immediately preceding (a) the day of such notice, (b) the
date of payment in full of the repurchase price calculated under this SECTION
4.19, or (c) the day when the Common Stock was suspended, delisted or deleted
from trading, whichever is greater, multiplied by (2) the aggregate number of
Underlying Shares owned by such Purchaser;
17
(ii) the greater of (A) the outstanding principal amount and
accrued and unpaid interest on the Debentures owned by such Purchaser and (B)
the product of (1) the average Per Share Market Value for the five (5) Trading
Days immediately preceding (a) the day of such notice, (b) the date of payment
in full of the repurchase price calculated under this SECTION 4.19, or (c) the
day when the Common Stock was suspended, delisted or deleted from trading,
whichever is greater, multiplied by (2) the aggregate number of Underlying
Shares issuable upon the conversion of the outstanding Debentures owned by the
Purchaser;
(iii) the average Per Share Market Value for the five (5) Trading
Days immediately preceding (a) the day of such notice, (b) the date of payment
in full of the repurchase price calculated under this SECTION 4.19, or (c) the
day when the Common Stock was suspended, delisted or deleted from trading,
whichever is greater; and
(iv) interest on such amounts set forth in (i) - (iii) above
accruing from the seventh (7th) day after such notice until the repurchase price
under this Section 4.19 is paid in full, at the rate of twenty percent (20%) per
annum.
Section IV.20. NO VIOLATION OF APPLICABLE LAW. Notwithstanding any
provision of this Agreement to the contrary, if the redemption of the Debentures
or the Underlying Shares otherwise required under this Agreement, the Debenture
or the Registration Rights Agreement would be prohibited by the relevant
provisions of Nevada law, such redemption shall be effected as soon as it is
permitted under such law; PROVIDED, HOWEVER, that interest payable by the
Company with respect to any such redemption shall continue to accrue in
accordance with SECTION 4.19 hereof.
Section IV.21. REDEMPTION RESTRICTIONS. Notwithstanding any provision of
this Agreement to the contrary, if any redemption of Debentures or Underlying
Shares otherwise required under this Agreement, the Debenture or the
Registration Rights Agreement would be prohibited in the absence of consent from
any lender to the Company or any of the Subsidiaries, or by the holders of any
class of securities of the Company, the Company shall use its best efforts to
obtain such consent as promptly as practicable after any such redemption is
required. Interest payable by the Company with respect to any such redemption
shall continue to accrue in accordance with Section 4.19 until such consent is
obtained. Nothing contained in this Section 4.21 shall be construed as a waiver
by any of the Purchasers of any rights they may have by virtue of any breach of
any representation or warranty of the Company herein as to the absence of any
requirement to obtain any such consent.
Section IV.22. NO OTHER REGISTRATION RIGHTS. Except as otherwise provided
in the Schedules to the Disclosure Documents, during the period commencing on
the date hereof and ending on the Closing Date, the Company shall not file any
registration statement that provides for the registration of shares of Common
Stock to be sold by securityholders of the Company, other than the Purchasers
and/or their respective Affiliates or assigns, without the prior written consent
of the Purchasers or their assigns, provided, however, that the limitation on
the right to file registration statements contained in this Section 4.22 shall
not apply to registration statements relating solely to (i) employee benefit
plans, notwithstanding the inclusion of a resale prospectus for securities
received under any such employee benefit plan or (ii) business combinations not
otherwise prohibited by the terms of this Agreement or the Debentures.
18
Section IV.23. MERGER OR CONSOLIDATION. Except as otherwise provided in the
Schedules to the Disclosure Documents, until the earlier of (a) the full
conversion of the Debentures and (b) the Maturity Date of the Debentures (as
that term is defined in the Debenture), the Company and each Subsidiary will
not, in a single transaction or a series of related transactions, (i)
consolidate with or merge with or into any other Person, or (ii) permit any
other Person to consolidate with or merge into it, unless (w) either (A) the
Company shall be the survivor of such merger or consolidation or (B) the
surviving Person shall expressly assume by supplemental agreement all of the
obligations of the Company under the Debentures and this Agreement; (x)
immediately before and immediately after giving effect to such transactions
(including any indebtedness incurred or anticipated to be incurred in connection
with the transactions), no Default or Event of Default shall have occurred and
be continuing; (y) if the Company is not the surviving entity, such surviving
entity's common shares will be listed on either The New York Stock Exchange,
American Stock Exchange, Nasdaq National Market, Nasdaq SmallCap Market or the
OTCBB on or prior to the closing of such transaction(s) and (z) the Company
shall have delivered to each Purchaser an officers' certificate and opinion of
counsel, each stating that such consolidation, merger or transfer complies with
this Agreement, that the surviving Person agrees to be bound thereby and that
all conditions precedent in this Agreement relating to such transaction(s) have
been satisfied.
Section IV.24. REGISTRATION OF UNDERLYING SHARES. Pursuant to the terms of
the Registration Rights Agreement between the Company and the Purchasers, the
Company shall cause the Underlying Shares to be registered under the Securities
Act, and so long as any of the Debentures remain outstanding, the Company agrees
to keep such registration current with the Commission and with such states of
the United States as any of the holders of the Debentures shall reasonably
request in writing. All costs and expenses of registration shall be borne by the
Company.
Section IV.25. LIQUIDATED DAMAGES. The Company understands and agrees that
an Event of Default as contained in this Agreement, the Transaction Documents
and/or the Debenture will result in substantial economic loss to the Purchasers,
which loss will be extremely difficult to calculate with precision. Therefore,
if, for any reason, the Company fails to cure any Event of Default within the
time, if any, given to cure such Event of Default, as compensation and
liquidated damages for such default, and NOT as a penalty, the Company agrees to
pay the Purchasers an amount equal to the Purchase Price together with all
accrued interest thereon at the rate of 20% PER ANNUM and all reasonable costs
and expenses (including but not limited to reasonable attorney's fees,
accountant's fees, appraiser's fees and investigative fees) incurred in
enforcing this Section 4.25. The Company shall, upon demand, pay the Purchasers
such liquidated damages by wire transfer in immediately available funds to an
account designated by the Purchasers. Nothing herein shall limit the right of
any of the Purchasers to pursue actual damages (less the amount of any
liquidated damages received pursuant to the foregoing) for the Company's failure
to cure an Event of Default, consistent with the terms of this Agreement.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, THE
COMPANY'S OBLIGATIONS UNDER THIS SECTION SHALL SURVIVE ANY TERMINATION OF THIS
AGREEMENT.
Section IV.26. SELLING RESTRICTIONS; SHORT SALES.
(a) No Purchaser shall sell, on any day, Debenture Shares which, in
the aggregate for such Purchaser on such day, exceed fifteen percent (15%) of
the average daily trading volume of the Common Stock for the previous five (5)
Trading Days.
19
(b) Each Purchaser agrees for itself and no other Purchaser that it
will not enter into any Short Sales (as hereinafter defined) until the earlier
to occur of the date that such Purchaser no longer owns Debentures and the
Maturity Date. For purpose hereof, a "SHORT SALE" shall mean a sale of Common
Stock by such Purchaser that is marked as a short sale and that is made at a
time when there is no equivalent offsetting long position in the Common Stock by
such Purchaser. For the purposes of determining whether there is an equivalent
offsetting long position in the Common Stock held by a Purchaser, shares of
Common Stock issuable upon conversion of the Debentures shall be deemed to be
held long by such Purchaser with respect to the Underlying Shares for which a
Notice of Conversion is delivered within two (2) Trading Days following the
Trading Day that such short sale is entered into.
Section IV.27. FEES. The Company will pay fees and expenses to KGL for
document preparation in connection with the transactions contemplated hereby
regardless of whether such transactions are closed or otherwise completed in the
amount of $5,000 in cash on the Execution Date.
ARTICLE V
TERMINATION
Section V.1. TERMINATION BY THE COMPANY OR THE PURCHASERS. (a) This
Agreement shall be automatically terminated prior to Closing upon the occurrence
of any one of the following events:
(1) the Closing shall not have occurred on the Closing Date;
(2) the Company's Common Stock is not registered under Section 12 of
the Exchange Act;
(i) the Company is not current in its reporting obligations under
Section 13 or 15(d) of the Exchange Act;
(3) an event occurs prior to the Closing requiring the Company to
report such event to the SEC on Form 8-K and not otherwise set forth in SCHEDULE
5.1, PROVIDED, HOWEVER, such event shall only include the following items under
Form 8-K: Item 1; Item 2 to the extent that any event is reported under Item 2
that involves a change in the nature of the Company's business or a change of
control of the Company other than the Company's pending reorganization with
Enpetro Mineral Pool; Item 3; or Item 4 (provided further, that as to Item 4,
only if the event requires disclosure under Item 304 (a)(1)(iv) under Regulation
S-K of SB); or
(ii) trading in the Common Stock has been suspended, delisted, or
otherwise ceased by the Commission or the NASD or other exchange or the Nasdaq
(whether the National Market or otherwise), except for any suspension of trading
of limited duration solely to permit dissemination of material information
regarding the Company, and not reinstated within ten (10) Trading Days.
(b) This Agreement shall be terminated prior to Closing by either the
Purchasers or the Company if the other party breaches any provision of the
20
Stipulation or the Debenture and the breaching party fails to cure same within
three (3) Business Days of its receipt by facsimile of notice of such breach
from the non-breaching party.
(c) This Agreement may be terminated prior to Closing by the Company,
by giving written notice of such termination to the Purchasers, if any Purchaser
has materially breached any representation, warranty, covenant or agreement
contained in this Agreement or the Registration Rights Agreement and such breach
is not cured within ten (10) Business Days following receipt by such Purchaser
of notice of such breach and the other Purchasers decline to be substituted for
the breaching Purchaser's investment.
Section V.2 REMEDIES. Notwithstanding anything else contained herein to the
contrary, if an Event of Default has occurred pursuant to Section 5.1(a) or
Section 5.1(b), and only with respect to Section 5.1(b) has not been cured
within the notice period provided for therein, the defaulting party shall be
deemed in default hereof and all sums due shall accelerate and the
non-defaulting party shall be entitled to pursue all available rights without
further notice. The defaulting party shall pay all attorney's fees and costs
incurred in enforcing this Agreement, the Stipulation and/or the Debenture. In
addition, all unpaid amounts shall accrue interest at the rate of 20% PER ANNUM.
ARTICLE VI
LEGAL FEES AND DEFAULT INTEREST RATE
In the event any party hereto commences legal action to enforce its rights
under this Agreement, the Debentures or the Escrow Agreement, the non-prevailing
party shall pay all reasonable costs and expenses (including but not limited to
reasonable attorney's fees, accountant's fees, appraiser's fees and
investigative fees) incurred in enforcing such rights. In the event of an
uncured Event of Default by any party hereunder, interest shall accrue on all
unpaid amounts due the aggrieved party at the rate of 20% PER ANNUM.
ARTICLE VII
MISCELLANEOUS
Section VII.1 FEES AND EXPENSES. Except as set forth in this Agreement,
each party shall pay the fees and expenses of its advisers, counsel, accountants
and other experts, if any, and all other expenses incurred by such party
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement. The Company shall pay all stamp and other taxes and duties
levied in connection with the issuance of (a) the Debentures (and, upon
conversion thereof, the Underlying Shares) and (b) the Initial Escrow Shares
pursuant hereto. Each of the Purchasers shall be responsible for any taxes
payable by such Purchaser that may arise as a result of the investment hereunder
or the transactions contemplated by this Agreement or any other Transaction
Document. Whether or not the transactions contemplated hereby and thereby are
consummated or this Agreement is terminated, the Company shall pay (i) all
costs, expenses, fees and all taxes incident to and in connection with: (A) the
preparation, printing and distribution of the Registration Statement and all
amendments and supplements thereto (including, without limitation, financial
statements and exhibits), and all preliminary and final Blue Sky memoranda and
all other agreements, memoranda, correspondence and other documents prepared and
delivered in connection herewith, (B) the issuance and delivery of the
21
Debentures and, upon conversion thereof, the Underlying Shares, (C) the
exemption from registration of the Debentures and, upon conversion or exercise
thereof, the Underlying Shares for offer and sale to the Purchasers under the
securities or Blue Sky laws of the applicable jurisdiction, (D) furnishing such
copies of the Registration Statement, the preliminary and final prospectuses and
all amendments and supplements thereto, as may reasonably be requested for use
in connection with resales of the Debentures and, upon conversion thereof, the
Underlying Shares, and (E) the preparation of certificates for the Debentures
and, upon conversion, the Underlying Shares (including, without limitation,
printing and engraving thereof), (ii) all fees and expenses of counsel and
accountants of the Company and (iii) all expenses and fees of listing on
securities exchanges, if any.
Section VII.2 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with
the Stipulation and all of the Exhibits and Schedules annexed hereto, contains
the entire understanding of the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings, oral or written,
with respect to such matters. This Agreement shall be deemed to have been
drafted and negotiated by both parties hereto and no presumptions as to
interpretation, construction or enforceability shall be made by or against
either party in such regard.
Section VII.3 NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given upon facsimile transmission (with written transmission
confirmation report) at the number designated below (if delivered on a Business
Day during normal business hours where such notice is to be received), or the
first Business Day following such delivery (if delivered other than on a
Business Day during normal business hours where such notice is to be received)
whichever shall first occur. The addresses for such communications shall be:
If to the Company: Accord Advanced Technologies, Inc.
0000 Xxxxx Xxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxx Xxxxxx, President
Tel: (000) 000-0000
Fax: (000) 000-0000
With copies to: Xxxxxx Xxxxxx Xxxxx Xxxx & Xxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
If to the Purchasers: See Schedule 1 - Schedule of Purchasers
(attached hereto)
With copies to: Xxxxxx Xxxxxxxxxx & Xxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxx X. Xxxxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
22
If to Escrow Agent: Xxxxxx Xxxxxxxxxx & Xxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxx X. Xxxxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
or such other address as may be designated hereafter by notice given pursuant to
the terms of this SECTION 7.3.
Section VII.4 AMENDMENTS; WAIVERS. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and the Purchasers, or, in the case of a waiver,
by the party against whom enforcement of any such waiver is sought. No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
Section VII.5 HEADINGS. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
Section VII.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. The assignment by a party of this Agreement or any rights
hereunder shall not affect the obligations of such party under this Agreement.
Section VII.7 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.
Section VII.8 GOVERNING LAW; VENUE; SERVICE OF PROCESS. The parties hereto
acknowledge that the transactions contemplated by this Agreement and the
exhibits hereto bear a reasonable relation to the State of New York. The parties
hereto agree that the internal laws of the State of New York shall govern this
Agreement and the exhibits hereto, including, but not limited to, the
enforcement of the amount of interest to be charged on the outstanding principal
amount of the Debentures and as to all issues related to usury. Any action to
enforce the terms of this Agreement or any of its exhibits shall be brought
exclusively in the State and/or federal courts situate in the County and State
of New York. Service of process in any action by Purchasers to enforce the terms
of this Agreement may be made by serving a copy of the summons and complaint, in
addition to any other relevant documents, by commercial overnight courier to the
Company at its principal address set forth in this Agreement.
Section VII.9 SURVIVAL. The representations and warranties of the Company
and the Purchasers contained in Article III and the agreements and covenants of
the parties contained in Article IV and this Article VII shall survive the
Closing (or any earlier termination of this Agreement).
23
Section VII.10 COUNTERPART SIGNATURES. This Agreement may be executed in
two or more counterparts, all of which when taken together 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, it being understood
that both parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid and 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 page were an original thereof.
Section VII.11 PUBLICITY. The Company and the Purchasers shall consult with
each other in issuing any press releases or otherwise making public statements
with respect to the transactions contemplated hereby and neither party shall
issue any such press release or otherwise make any such public statement without
the prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, unless counsel for the disclosing party deems such public
statement to be required by applicable federal and/or State securities laws.
Except as otherwise required by applicable law or regulation, the Company will
not disclose to any third party the names of the Purchasers.
Section VII.12 SEVERABILITY. In case any one or more of the provisions of
this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affected or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
Section VII.13 LIMITATION OF REMEDIES. With respect to claims by the
Company or any person acting by or through the Company for remedies at law or at
equity relating to or arising out of a breach of this Agreement, liability, if
any, shall, in no event, include loss of profits or incidental, indirect,
exemplary, punitive, special or consequential damages of any kind.
Section VII.14 OMNIBUS PROVISION. Anything contained herein, the Debentures
notwithstanding, in the event that the Common Stock ceases to be listed for
trading by the OTCBB, then any reference thereto in this Agreement or the
Debentures, shall be deemed to be a reference to the over-the-counter market
reported by the National Quotation Bureau Incorporated (or similar organization
or agency succeeding to its functions of reporting prices).
[SIGNATURE PAGE FOLLOWS]
24
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first indicated above.
Company:
ACCORD ADVANCED TECHNOLOGIES, INC.
By:
-----------------------------------
Name:
Title:
Purchasers:
GEM MANAGEMENT, LTD.
By:
-----------------------------------
Name:
Title:
SUCCESSWAY HOLDINGS LTD.
By:
-----------------------------------
Name:
Title:
25
EXHIBIT A
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER RULE 506 OF REGULATION D PROMULGATED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED, SOLD, PLEDGED, TRANSFERRED, ASSIGNED, HYPOTHECATED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION OR EXCLUSION FROM THE
REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS.
No. _________
US $340,000
2% CONVERTIBLE DEBENTURE DUE MAY ___, 2006
THIS DEBENTURE is one of a duly authorized issue of Debentures of Accord
Advanced Technologies, Inc., a Nevada corporation (the "Company"), designated as
its 2% Convertible Debentures, due May __, 2006 (the "Debentures"), in an
aggregate principal amount of up to US$340,000.
FOR VALUE RECEIVED, the Company promises to pay to [NAME], or its
registered assigns (the "Holder"), the principal sum of Three Hundred Forty
Thousand Dollars (US $340,000), on or prior to May __, 2006 (the "Maturity
Date") and to pay interest to the Holder on the principal sum at the rate of two
percent (2%) per annum. Interest shall accrue daily commencing on the Original
Issue Date (as defined in Section 1 below) in the form of cash, common stock of
the Company or additional Debentures selected by the Company subject to the
provisions of Section 2(b) hereof, until payment in full of the principal sum,
together with all accrued and unpaid interest, has been made or duly provided
for. If at any time after the Original Issue Date an Event of Default has
occurred and is continuing, interest shall accrue at the rate of twenty percent
(20%) per annum from the date of the Event of Default and the applicable cure
period through and including the date of payment. Interest due and payable
hereunder shall be paid to the person in whose name this Debenture (or one or
more successor Debentures) is registered on the records of the Company regarding
registration and transfers of the Debentures (the "Debenture Register");
PROVIDED, HOWEVER, that the Company's obligation to a transferee of this
Debenture shall arise only if such transfer, sale or other disposition is made
in accordance with the terms and conditions hereof and of the Convertible
Debenture Purchase Agreement (the "Purchase Agreement") by and among the Company
and the Purchasers (as such term is defined in the Purchase Agreement), dated as
of May __, 2001, as amended from time to time. A transfer of the right to
receive principal and interest under this Debenture shall be transferable only
through an appropriate entry in the Debenture Register as provided herein.
This Debenture is subject to the following additional provisions:
A-1
SECTION 1. DEFINITIONS. Capitalized terms used and not otherwise defined
herein shall have the meanings given such terms in the Purchase Agreement. As
used in this Agreement, the following terms shall have the following meanings:
"Adjusted Conversion Price" means the lesser of the Fixed Conversion Price
or the Floating Conversion Price one day prior to the record date set for the
determination of stockholders entitled to receive dividends, distributions,
rights or warrants as provided for in Sections 4(c)(ii), (iii) and (iv).
"Conversion Date" shall have the meaning set forth in Section 4(a) hereof.
"Conversion Ratio" means, at any time, a fraction, the numerator of which
is the principal amount represented by any Debenture plus accrued but unpaid
interest thereon, and the denominator of which is the Conversion Price at such
time.
"Fixed Conversion Price" shall have the meaning set forth in Section 4(c)
hereof.
"Floating Conversion Price" shall have the meaning set forth in Section
4(c) hereof.
"Junior Securities" means the Common Stock, all other equity securities of
the Company and all other debt that is subordinated to the Debenture by its
terms.
"Notice of Conversion" shall have the meaning set forth in Section 4(a)
hereof.
"Original Issue Date" shall mean the date of the first issuance of this
Debenture regardless of the number of transfers hereof.
SECTION 2. DENOMINATIONS OF DEBENTURES; INTEREST ON DEBENTURES. The
Debentures are issuable in denominations of One Thousand Dollars (US$1,000.00)
and integral multiples of One Thousand Dollars (US$1,000.00) in excess thereof.
The Debentures are exchangeable for an equal aggregate principal amount of
Debentures of different authorized denominations, as requested by the Holder
surrendering the same, but shall not be issuable in denominations of less than
integral multiplies of One Thousand Dollars (US$1,000.00). No service charge to
the Holder will be made for such registration of transfer or exchange.
SECTION 3. EVENTS OF DEFAULT AND REMEDIES.
I. "Event of Default," when used herein, means any one of the following
events (whatever the reason and whether any such event shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):
(a) any default in the payment of the principal of or interest on this
Debenture as and when the same shall become due and payable either at the
Maturity Date, by acceleration, conversion, or otherwise;
A-2
(b) the Company shall fail to observe or perform any other covenant,
agreement or warranty contained in, or otherwise commit any breach of, this
Debenture, and such failure or breach shall not have been remedied within five
(5) Business Days after the date on which written notice of such failure or
breach shall have been given;
(c) the occurrence of any event or breach or default by the Company under
the Purchase Agreement, the Stipulation, the Registration Rights Agreement, or
any other Transaction Document and such failure or breach shall not have been
remedied within the cure period, if any, provided for therein;
(d) the Company or any of its subsidiaries shall commence a voluntary case
under the United States Bankruptcy Code as now or hereafter in effect or any
successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced
against the Company under the Bankruptcy Code and the petition is not
controverted within thirty (30) days, or is not dismissed within sixty (60)
days, after commencement of the case; or a "custodian" (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or any substantial
part of the property of the Company or the Company commences any other
proceeding under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Company or there
is commenced against the Company any such proceeding which remains undismissed
for a period of sixty (60) days; or the Company is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or the Company suffers any appointment of any custodian
or the like for it or any substantial part of its property which continues
undischarged or unstayed for a period of thirty (30) days; or the Company makes
a general assignment for the benefit of creditors; or the Company shall fail to
pay, or shall state that it is unable to pay, or shall be unable to pay, its
debts generally as they become due; or the Company shall call a meeting of its
creditors with a view to arranging a composition or adjustment of its debts; or
the Company shall by any act or failure to act indicate its consent to, approval
of or acquiescence in any of the foregoing; or any corporate or other action is
taken by the Company for the purpose of effecting any of the foregoing;
(e) except as otherwise provided in the Schedules to the Disclosure
Documents, the Company shall default in any of its obligations under any
mortgage, indenture or instrument under which there may be issued, or by which
there may be secured or evidenced, any indebtedness of the Company in an amount
exceeding One Hundred Thousand Dollars ($100,000.00), whether such indebtedness
now exists or shall hereafter be created and such default shall result in such
indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise become due and payable;
(f) the Company shall have its Common Stock deleted or delisted, as the
case may be, from the OTCBB or other national securities exchange or market on
which such Common Stock is listed for trading or suspended from trading thereon,
and shall not have its Common Stock relisted or have such suspension lifted, as
the case may be, within five (5) Trading Days of such deletion or delisting;
(g) notwithstanding anything herein to the contrary, the Company shall fail
to deliver to the Escrow Agent share certificates representing the shares of
Common Stock to be issued upon conversion of the Debentures within three (3)
A-3
Business Days pursuant to the Company's receipt of facsimile notice by the
Escrow Agent to the Company that additional shares of Common Stock are required
to be placed in escrow pursuant to Section 4.13 of the Purchase Agreement,
Article 2 of the Escrow Agreement, and/or Section 4(b) of this Debenture;
(h) the Company shall issue a press release, or otherwise make publicly
known, that it is not honoring a properly executed Notice of Conversion (as
defined in Section 4(a) hereof) for any reason whatsoever;
(i) the Registration Statement which is the subject of the Registration
Rights Agreement annexed as Exhibit B to the Purchase Agreement is no longer
effective as required under the Registration Rights Agreement and the Company
does not cause such Registration Statement to become effective within twenty
(20) Business Days of its not being effective; or
(j) except as otherwise provided in the Schedules to the Disclosure
Documents, the Company issues or enters into an agreement to issue any equity or
equity equivalent security with a floating conversion price substantially
similar to the Debentures other than any securities issued at any time or from
time to time to the Purchasers or any of their respective Affiliates or assigns
including, without limitation, GEM and GEM A, during the period commencing on
the date hereof and ending on the first anniversary of the date hereof.
II. (a) If any Event of Default occurs and continues, beyond a cure period,
if any, then the Holder may, by notice to the Company, accelerate all of the
payments due under this Debenture by declaring all amounts so due under this
Debenture, whereupon the same shall become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
waived by the Company, and the Holder may immediately and without expiration of
any grace period enforce any and all of its rights and remedies hereunder and
all other remedies available to it under applicable law. Such declaration may be
rescinded and annulled by Holder at any time prior to payment hereunder. No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon. This shall include, but not be limited to the
right to temporary, preliminary and permanent injunctive relief without the
requirement of posting any bond or undertaking.
(b) Holder may thereupon proceed to protect and enforce its rights either
by suit in equity and/or by action at law or by other appropriate proceedings
whether for the specific performance (to the extent permitted by law) of any
covenant or agreement contained in this Debenture or in aid of the exercise of
any power granted in this Debenture, and proceed to enforce the payment of any
of the Debentures held by it, and to enforce any other legal or equitable right
of such Holder.
(c) Except as expressly provided for herein, the Company specifically (i)
waives all rights it may have (A) to notice of nonpayment, notice of default,
demand, presentment, protest and notice of protest with respect to any of the
obligations hereunder or the shares of Common Stock and (B) notice of acceptance
hereof or of any other action taken in reliance hereon, notice and opportunity
to be heard before the exercise by Holder of the remedies of self-help, set-off,
or other summary procedures and all other demands and notices of any type or
description except for cure periods; and (ii) releases Holder, its officers,
A-4
directors, agents, employees and attorneys from all claims for loss or damage
caused by any act or failure to act on the part of Holder, its officers,
attorneys, agents, directors and employees except for gross negligence or
willful misconduct.
(d) As a non-exclusive remedy, upon the occurrence of an Event of Default,
the Holder may convert the remaining principal amount of the Debenture and
accrued interest thereon at the lesser of the Fixed Conversion Price or the
Floating Conversion Price upon giving a Notice of Conversion to the Company.
Except as otherwise provided herein, the Company shall not have the right to
object to the conversion or the calculation of the applicable conversion price,
and the Escrow Agent shall release the shares of Common Stock from escrow upon
notifying the Company of the conversion.
III. To effectuate the terms and provision of this Debenture, the Holder
may give notice of any default to the Attorney-in-Fact as set forth herein and
give a copy of such notice to the Company and its counsel, simultaneously, and
request the Attorney-in-Fact to comply with the terms of this Debenture and the
Purchase Agreement and all agreements entered into pursuant to the Purchase
Agreement on behalf of the Company.
SECTION 4. CONVERSION
(a) The unpaid principal amount of this Debenture shall be convertible into
shares of Common Stock at the Conversion Ratio as defined below, and subject to
the Limitation on Conversion described in Section 4.18 of the Purchase
Agreement, AT THE OPTION OF THE HOLDER in whole or in part, at any time,
commencing on the Original Issue Date. The resale of such shares of Common Stock
shall be registered under the Securities Act, pursuant to the Registration
Rights Agreement. Any conversion under this Section 4(a) shall be for a minimum
principal amount of $10,000.00 of Debentures plus the interest accrued and due
thereon. The Holder shall effect conversions by surrendering the Debenture to be
converted to the Escrow Agent, together with the form of notice attached hereto
as Appendix 1 ("Notice of Conversion") in the manner set forth in Section 4(j)
hereof. Each Notice of Conversion shall specify the principal amount of
Debenture to be converted, and the date on which such conversion is to be
effected (the "Conversion Date"). Subject to Section 4 hereof, each Notice of
Conversion, once given, shall be irrevocable. If the Holder is converting less
than all of the principal amount represented by the Debenture(s) tendered by the
Holder in the Notice of Conversion, the Company shall deliver to the Holder a
new Debenture for such principal amount as has not been converted within two (2)
Business Days of the Conversion Date. In the event that the Escrow Agent holds
the Debentures on behalf of the Holder, the Company agrees that in lieu of
surrendering the Debenture upon every partial conversion, the Escrow Agent shall
give the Company and the Holder written notice of the amount of the Debenture
left unconverted. Upon conversion in full of the Debenture or upon the Maturity
Date, the Escrow Agent shall return the Debenture to the Company for
cancellation.
(b) Not later than two (2) Business Days after the Conversion Date, the
Escrow Agent shall deliver to the Holder (i) a certificate or certificates which
shall be free of restrictive legends and trading restrictions, representing the
number of shares of Common Stock being acquired upon the conversion of the
Debenture, and once the Debenture so converted in part shall have been
surrendered to the Company, the Company shall deliver to the Holder a Debenture
in the principal amount of the Debenture not yet converted; PROVIDED, HOWEVER,
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that the Company shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon conversion of the Debenture, until the
Debenture is either delivered for conversion to the Escrow Agent or the Company
or any transfer agent for the Debentures or Common Stock, or the Holder notifies
the Company that such Debenture has been lost, stolen or destroyed and provides
an affidavit of loss and an agreement reasonably acceptable to the Company
indemnifying the Company from any loss incurred by it in connection with such
loss, theft or destruction. In the case of a conversion pursuant to a Notice of
Conversion, if such certificate or certificates are not delivered by the date
required under this Section 4(b), the Holder shall be entitled, upon providing
written notice to the Company at any time on or before its receipt of such
certificate or certificates thereafter, to rescind such conversion, in which
event, the Company shall immediately return the Debenture tendered for
conversion.
The Company agrees that at any time the conversion price of the Debentures
is such that the number of Debenture Escrow Shares is less than 200% of the Full
Conversion Shares, upon three (3) Business Days of the Company's receipt by
facsimile of notice of such circumstance from the Purchasers and/or the Escrow
Agent, the Company shall issue share certificates in the names of each of the
Purchasers in denominations of 10,000 shares and deliver the same to the Escrow
Agent, in such number that the new number of Debenture Escrow Shares is equal to
200% of the Full Conversion Shares.
(c) (i) The conversion price for each Debenture in effect on any
Conversion Date shall be the LESSER of (x) $0.35 (the "Fixed Conversion Price")
or (y) sixty-five percent (65%) of the average closing bid price of the Common
Stock for the three (3) Trading Days immediately preceding the Conversion Date
(the" Floating Conversion Price"). The conversion of the Debentures is subject
to the Limitation on Conversion set forth in Section 4.18 of the Purchase
Agreement.
(ii) If the Company, at any time while any of the Debentures is
outstanding, (a) shall pay a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock payable in shares of its capital
stock (whether payable in shares of its Common Stock or of capital stock of any
class), (b) subdivide outstanding shares of Common Stock into a larger number of
shares, (c) combine outstanding shares of Common Stock into a smaller number of
shares, or (d) issue by reclassification any shares of capital stock of the
Company, the Fixed Conversion Price as applied in Section 4(c)(i) shall be
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock of the Company outstanding before such event and the denominator
of which shall be the number of shares of Common Stock outstanding after such
event. Any adjustment made pursuant to this Section 4(c)(ii) shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or reclassification;
(iii) Except as otherwise provided in the Schedules to the Disclosure
Documents, if, at any time while any Debentures are outstanding, the Company
issues or sells shares of Common Stock, or options, warrants or other rights to
subscribe for or purchase shares of Common Stock (excluding shares of Common
Stock issuable upon exercise of options, warrants or conversion rights granted
prior to the date hereof) and at a price per share less than the Per Share
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Market Value of the Common Stock at the issue date mentioned below, the Fixed
Conversion Price shall be multiplied by a fraction, the numerator of which shall
be the number of shares of Common Stock (excluding treasury shares, if any)
outstanding on the date of issuance of such shares, options, warrants or rights
plus the number of shares which the aggregate offering price of the total number
of shares so offered would purchase at such Per Share Market Value, and the
denominator of which shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such rights or
warrants plus the number of additional shares of Common Stock offered for
subscription or purchase. Such adjustment shall be made whenever such rights or
warrants are issued, and shall become effective immediately after the record
date for the determination of stockholders entitled to receive such rights or
warrants. However, upon the expiration of any right or warrant to purchase
Common Stock, the issuance of which resulted in an adjustment in the conversion
price designated in Section 4(c)(i) pursuant to this Section 4(c)(iii), if any
such right or warrant shall expire and shall not have been exercised, the Fixed
Conversion Price shall immediately upon such expiration be recomputed and
effective immediately upon such expiration be increased to the price which it
would have been (but reflecting any other adjustments in the conversion price
made pursuant to the provisions of this Section 4 after the issuance of such
rights or warrants) had the adjustment of the conversion price made upon the
issuance of such rights or warrants been made on the basis of offering for
subscription or purchase only that number of shares of Common Stock actually
purchased upon the exercise of such rights or warrants actually exercised;
(iv) If, at any time while Debentures are outstanding, the Company
distributes to all holders of Common Stock (and not to holders of Debentures)
evidences of Company indebtedness or assets, or rights or warrants to subscribe
for or purchase any security (excluding those referred to in Section 4(c)(iii)
above), then, in each such case, the conversion price at which each Debenture
shall thereafter be convertible shall be determined by multiplying (A) the Fixed
Conversion Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction, the numerator of which shall be the Per Share Market Value of the
Common Stock determined as of the record date mentioned above less the then fair
market value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of Common Stock
as determined by the Board of Directors in good faith and the denominator of
which shall be the Per Share Market Value of the Common Stock on such record
date; PROVIDED, HOWEVER, that in the event of a distribution exceeding ten
percent (10%) of the net assets of the Company, such fair market value shall be
determined by a nationally recognized or major regional investment banking firm
or firm of independent certified public accountants of recognized standing
(which may be the firm that regularly examines the financial statements of the
Company) (an "Appraiser") selected in good faith by the holders of a majority of
the principal amount of the Debentures then outstanding; and PROVIDED, FURTHER,
that the Company, after receipt of the determination by such Appraiser, shall
have the right to select an additional Appraiser, in which case the fair market
value shall be equal to the average of the determinations by each such
Appraiser. In either case the adjustments shall be described in a statement
provided to the Holder and all other holders of Debentures of the portion of
assets or evidences of indebtedness so distributed or such subscription rights
applicable to one share of Common Stock. Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately after the
record date mentioned above;
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(v) All calculations under this Section 4 shall be made to the nearest
1/1000th of a cent or the nearest 1/1000th of a share, as the case may be. Any
calculation over .005 shall be rounded up to the next cent or share and any
calculation less than .005 shall be rounded down to the previous cent or share;
(vi) In the event the conversion price is not adjusted pursuant to
Section 4(c)(ii), (iii), (iv), or (v), within two (2) Business Days following
the occurrence of an event described therein, the Holder shall have the right to
require the Company to redeem the Debentures at 120% of par value and
simultaneously pay such amount and all accrued interest and dividends to the
Holder pursuant to the written instructions provided by the Holder;
(vii) Whenever the Fixed Conversion Price is adjusted pursuant to
Section 4(c)(ii),(iii), (iv) or (v), or this Debenture is redeemed pursuant to
Section 4(c)(vi), the Company shall within two (2) days after the determination
of the new Fixed Conversion Price mail and fax to the Holder and to each other
holder of Debentures, a notice ("Company Notice of Conversion") setting forth
the Fixed Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment;
(viii) Except as otherwise provided in the Schedules to the Disclosure
Documents, in case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person, the sale or
transfer of all or substantially all of the assets of the Company or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, then each holder of Debentures then
outstanding shall have the right thereafter to convert such Debentures only into
the shares of stock and other securities and property receivable upon or deemed
to be held by holders of Common Stock following such reclassification,
consolidation, merger, sale, transfer or share exchange (except in the event the
property is cash, then the Holder shall have the right to convert the Debentures
and receive cash in the same manner as other stockholders), and the Holder shall
be entitled upon such event to receive such amount of securities or property as
the holder of shares of the Common Stock into which such Debentures could have
been converted immediately prior to such reclassification, consolidation,
merger, sale, transfer or share exchange would have been entitled. The terms of
any such consolidation, merger, sale, transfer or share exchange shall include
such terms so as to continue to give to the Holder the right to receive the
securities or property set forth in this Section 4(c)(viii) upon any conversion
following such consolidation, merger, sale, transfer or share exchange. This
provision shall similarly apply to successive reclassifications, consolidations,
mergers, sales, transfers or share exchanges;
(ix) If:
(A) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(B) the Company shall declare a special non-recurring cash
dividend on or a redemption of its Common Stock; or
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(C) the Company shall authorize the grant to all holders of the
Common Stock rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights;
or
(D) the approval of any stockholders of the Company shall be
required in connection with any reclassification of the
Common Stock of the Company (other than a subdivision or
combination of the outstanding shares of Common Stock), any
consolidation or merger to which the Company is a party, any
sale or transfer of all or substantially all of the assets
of the Company, or any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or
property; or
(E) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding-up of the affairs of the
Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Debentures, and shall cause to be mailed and faxed
to the Holder and each other holder of Debentures at their last addresses
appearing in the Debenture Register at least thirty (30) calendar days prior to
the applicable record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined, or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation or winding-up
is expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding-up; PROVIDED, HOWEVER, that the failure to
mail such notice or any defect therein or in the mailing thereof shall not
affect the validity of the corporate action required to be specified in such
notice;
(d) If at any time conditions shall arise by reason of action or inaction
taken by the Company, which action or inaction, in the opinion of the Board of
Directors of the Company, is not adequately covered by the other provisions
hereof and which might materially and adversely affect the rights of the Holder
and all other holders of Debentures (different or distinguishable from the
effect generally on rights of holders of any class of the Company's capital
stock), the Company shall, at least thirty (30) calendar days prior to the
effective date of such action, mail and fax a written notice to each holder of
Debentures briefly describing the action contemplated and the material adverse
effects of such action on the rights of such holders, and an Appraiser selected
by the holders of majority in principal amount of the outstanding Debentures
shall give its opinion as to the adjustment, if any (not inconsistent with the
standards established in this Section 4), of the conversion price (including, if
necessary, any adjustment as to the securities into which Debentures may
thereafter be convertible) and any distribution which is or would be required to
preserve without diluting the rights of the holders of Debentures; PROVIDED,
HOWEVER, that the Company, after receipt of the determination by such Appraiser,
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shall have the right to select an additional Appraiser, in which case the
adjustment shall be equal to the average of the adjustments recommended by each
such Appraiser. The Board of Directors of the Company shall make the adjustment
recommended forthwith upon the receipt of such opinion or opinions or the taking
of any such action contemplated, as the case may be; PROVIDED, HOWEVER, that no
such adjustment of the conversion price shall be made which, in the opinion of
the Appraiser(s) giving the aforesaid opinion or opinions, would result in an
increase of the conversion price above the conversion price then in effect.
(e) The Company covenants and agrees that it shall, at all times, reserve
and keep available out of its authorized and unissued Common Stock solely for
the purpose of issuance upon conversion of Debentures as herein provided, free
from preemptive rights or any other actual contingent purchase rights of persons
other than the holders of Debentures, times such number of shares of Common
Stock as shall be issuable (taking into account the adjustments and restrictions
of Section 4(c) and Section 4(d) hereof) upon the conversion of the aggregate
principal amount of all outstanding Debentures. The Company covenants that all
shares of Common Stock that shall be so issuable shall, upon issuance, be duly
and validly authorized and issued and fully paid and non-assessable.
(f) No fractional shares of Common Stock shall be issuable upon a
conversion hereunder and the number of shares to be issued shall be rounded up
to the nearest whole share. If a fractional share interest arises upon any
conversion hereunder, the Company shall eliminate such fractional share interest
by issuing to the Holder an additional full share of Common Stock.
(g) The issuance of a certificate or certificates for shares of Common
Stock upon conversion of Debentures shall be made without charge to the Holder
for any documentary stamp or similar taxes that may be payable in respect of the
issuance or delivery of such certificate, provided that the Company shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate upon conversion in a name
other than that of the Holder and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
(h) Debentures converted into Common Stock shall be canceled upon
conversion.
(i) On the Maturity Date, the unconverted principal amount of the
Debentures and all interest due thereon shall either be paid off in full by the
Company or, if payment in full is not received within five (5) Business Days
after the Maturity Date, convert automatically into shares of Common Stock at
the lesser of the Fixed Conversion Price and the Floating Conversion Price as
set forth in Section 4(c)(i).
(j) Each Notice of Conversion shall be given by facsimile and mail to the
Escrow Agent no later than 4:00 p.m. New York Time. Upon receipt of such Notice
of Conversion, the Escrow Agent shall forward such Notice of Conversion to the
Company by facsimile by the end of the Business Day on which such notice is
received by the Escrow Agent, assuming such receipt by 4:00 p.m. New York Time,
and if received by the Escrow Agent thereafter, on the next Business Day, at the
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facsimile number and address of the Company set forth in Section 10 hereof. Any
such notice shall be deemed given and effective upon the transmission of such
facsimile at the facsimile number specified in this Section 4(j) (with printed
confirmation of transmission), and if to the Company, with a copy to the Escrow
Agent. In the event that a Notice of Conversion is sent after 4:00 p.m. on any
Business Day or at any time on a day that is not a Business Day, notice will be
deemed to have been given the next following Business Day.
SECTION 5. REDEMPTION OF DEBENTURES. At any time after the Execution Date
the Company shall have the option to redeem any unconverted amount of the
Debentures upon no less that seven (7) days written notice given to the Holder
with a copy to the Escrow Agent at one hundred twenty percent (120%) of the
unconverted amount of the Debenture plus accrued interest.
SECTION 6. ABSOLUTE PAYMENT OBLIGATION; LIMITATION ON PREPAYMENT. Except as
expressly provided herein, no provision of this Debenture shall alter or impair
the obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Debenture at the time, place, and rate, and
in the coin or currency, herein prescribed. This Debenture is a direct
obligation of the Company. This Debenture ranks PARI PASSU with all other
Debentures now or hereafter issued under the terms set forth herein. The Company
may not prepay any portion of the outstanding principal amount on the Debentures
except in accordance with Section 5 hereof.
SECTION 7. NO RIGHTS OF STOCKHOLDERS. Except as otherwise provided herein,
this Debenture shall not entitle the Holder to any of the rights of a
stockholder of the Company, including without limitation, the right to vote, to
receive dividends and other distributions, or to receive any notice of, or to
attend, meetings of stockholders or any other proceedings of the Company, unless
and to the extent converted into shares of Common Stock in accordance with the
terms hereof.
SECTION 8. LOSS, THEFT, MUTILATION OR DESTRUCTION. If this Debenture shall
be mutilated, lost, stolen or destroyed, the Company shall execute and deliver,
in exchange and substitution for and upon cancellation of a mutilated Debenture,
or in lieu of or in substitution for a lost, stolen or destroyed debenture, a
new Debenture for the principal amount of this Debenture so mutilated, lost,
stolen or destroyed but only upon receipt of an affidavit of such loss, theft or
destruction of such Debenture, and, if requested by the Company, an agreement to
indemnity the Company in form reasonably acceptable to the Company.
SECTION 9. GOVERNING LAW. This Debenture 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. Any action to
enforce the terms of this Debenture, the Purchase Agreement or any other
Transaction Document shall be exclusively brought in the state and/or federal
courts in the State and County of New York. Service of process in any action by
the Holder to enforce the terms of this Debenture may be made by serving a copy
of the summons and complaint, in addition to any other relevant documents, by
commercial overnight courier to the Company at its address set forth in the
Purchase Agreement.
SECTION 10. NOTICES. Except as otherwise provided in Section 4(j) hereof,
all notices or other communications required or permitted to be given hereunder
shall be deemed duly given and received if in writing upon facsimile
transmission (with written transmission confirmation report) at the number
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designated below for the Company and at the facsimile number for the Holder set
forth in the Debenture Register (in each case, if delivered on a Business Day
during normal business hours where such notice is to be received), or the first
Business Day following such delivery (if delivered other than on a Business Day
during normal business hours where such notice is to be received) whichever
shall first occur. The addresses for such communications shall be:
If to the Company: Accord Advanced Technologies, Inc.
0000 Xxxxx Xxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxx Xxxxxx, President
Tel: (000) 000-0000
Fax: (000) 000-0000
With copies to: Xxxxxx Xxxxxx Xxxxx Xxxx & Xxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
If to the Holder: To the address or facsimile number set forth in the
Company's register of Debenture Holders
With copies to: Xxxxxx Xxxxxxxxxx & Xxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxx X. Xxxxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
If to Escrow Agent: Xxxxxx Xxxxxxxxxx & Xxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxx X. Xxxxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
or such other address as may be designated hereafter by notice given pursuant to
the terms of this SECTION 10.
SECTION 11. WAIVER. Any waiver by the Company or the Holder of a breach of
any provision of this Debenture shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Debenture. The failure of the Company or the Holder to insist
upon strict adherence to any term of this Debenture on one or more occasions
shall not be considered a waiver or deprive that party of the right thereafter
to insist upon strict adherence to that term or any other term of this
Debenture. Any waiver must be in writing.
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SECTION 12. INVALIDITY. If any provision of this Debenture is held to be
invalid, illegal or unenforceable, the balance of this Debenture shall remain in
effect, and if any provision is held to be inapplicable to any person or
circumstance, it shall nevertheless remain applicable to all other persons and
circumstances.
SECTION 13. PAYMENT DATES. Whenever any payment or other obligation
hereunder shall be due on a day other than a Business Day, such payment shall be
made on the next following Business Day.
SECTION 14. TRANSFER; ASSIGNMENT. This Debenture may not be transferred or
assigned, in whole or in part, at any time, except in compliance by the
transferor and the transferee with applicable federal and state securities laws.
SECTION 15. FEES OF ENFORCEMENT. In the event any Party commences legal
action to enforce its rights under this Debenture, the non-prevailing party
shall pay all reasonable costs and expenses (including but not limited to
reasonable attorney's fees, accountant's fees, appraiser's fees and
investigative fees) incurred in enforcing such rights.
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized as of the date first above
indicated.
ACCORD ADVANCED TECHNOLOGIES, INC.
Attest: By:
------------------- ---------------------------------
Name:
Title:
X-00
XXXXXXXX 0
XXXXXX OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert the Debenture)
Except as provided by Section 4(b) of the Debenture, the undersigned hereby
irrevocably elects to convert the above Debenture No. ________ into shares of
Common Stock, $.0001 par value per share (the "Common Stock"), of Accord
Advanced Technologies, Inc. (the "Company") according to the provisions hereof,
as of the date written below. If shares are to be issued in the name of a person
other than undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. A fee of $350 will
be charged by the Escrow Agent to the Holder for each conversion. No other fees
will be charged to the Holder, except for transfer taxes, if any.
Conversion calculations:
---------------------------------------------------------
Date to Effect Conversion
---------------------------------------------------------
Principal Amount of Debentures to be Converted
---------------------------------------------------------
Interest to be Converted or Paid
---------------------------------------------------------
Applicable Conversion Price (Pursuant to Section 4(c)(v))
---------------------------------------------------------
Number of Shares to be Issued Upon Conversion
---------------------------------------------------------
Signature
---------------------------------------------------------
Name
---------------------------------------------------------
Address
APP-1
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of May ___, 2001, by and between Accord Advanced Technologies, Inc., a
Nevada corporation, with its principal place of business at 0000 Xxxxx Xxx
Xxxxxx, Xxxxx, Xxxxxxx 00000 (the "Company"); and Gem Management, Ltd., a
corporation with offices at 00 Xxxx Xxxxxx, Xx. Xxxxxx XX0 XXX Xxxxxx and
Successway Holdings Ltd., a corporation with offices at 39/F. Shun Tak Centre
West Tower, 200 Connaught Rd. Central Hong Kong, China (referred to herein
individually, as the "Purchaser" or collectively, as the "Purchasers").
Simultaneously with the execution of this Agreement, the Purchasers and the
Company have entered into a Convertible Debenture Purchase Agreement, dated as
of the date hereof (the "Purchase Agreement") incorporated herein by reference,
pursuant to which the Purchasers have agreed to purchase the Debentures of the
Company.
The Company and the Purchasers hereby agree as follows:
1. DEFINITIONS. Capitalized terms used and not otherwise defined herein
shall have the meanings given such terms in the Purchase Agreement. As used in
this Agreement, the following terms shall have the following meanings:
"EFFECTIVE DATE" shall mean, with respect to a Registration Statement, the
date on which the Registration Statement shall have been declared effective by
the Commission, which in no event shall be later than one hundred twenty (120)
calendar days after the Execution Date.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in Section 2(a).
"ESCROW AGREEMENT" means the escrow agreement, by and among the Company,
KGL and the Purchasers, entered into on the date hereof, which is incorporated
herein by reference.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXECUTION DATE" means the day the Purchase Agreement, the Stipulation and
the other Transaction Documents are executed by the parties.
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"FILING DATE" means the day the Registration Statement is filed with the
Commission, which date shall be as soon as practicable, but in no event more
than 35 calendar days, after the Execution Date.
"HOLDER" or "HOLDERS" means the holder or holders, as the case may be, from
time to time of Registrable Securities.
"INDEMNIFIED PARTY" shall have the meaning set forth in Section 5(c)
hereof.
"INDEMNIFYING PARTY" shall have the meaning set forth in Section 5(c)
hereof.
"INSPECTORS" shall have the meaning set forth in Section 3(m) hereof.
"LOSSES" shall have the meaning set forth in Section 5(a) hereof.
"NEW YORK COURTS" shall have the meaning set forth in Section 7(g) hereof.
"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"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 the 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 the
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.
"RECORDS" shall have the meaning set forth in Section 3(m) hereof.
"REGISTRABLE SECURITIES" means the Underlying Shares; PROVIDED, HOWEVER,
that in order to account for adjustments in the conversion and exercise ratios,
Registrable Securities shall include a number of shares of Common Stock equal to
no less than two (2) times the number of shares of Common Stock into which the
Debentures are convertible in full.
"REGISTRATION STATEMENT" means the registration statement, contemplated by
Section 2(a) hereof, including the Prospectus, amendments and supplements to
such registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.
B-2
"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.
"RULE 158" means Rule 158 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 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.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"UNDERLYING SHARES" shall mean the shares of Common Stock into which the
Debentures are convertible in accordance with the Purchase Agreement and the
Debentures.
"UNDERWRITTEN REGISTRATION" or "UNDERWRITTEN OFFERING" means a registration
in connection with which securities of the Company are sold to an underwriter
for sale to the public pursuant to an effective registration statement.
2. SHELF REGISTRATION.
(a) As soon as practicable, but not more than 35 calendar days after
the Execution Date, the Company shall prepare and file with the Commission a
"Shelf" Registration Statement covering the issuance or resale of all
Registrable Securities for an offering to be made on a continuous basis pursuant
to Rule 415. The Registration Statement shall be on Form S-3 or another
appropriate form permitting registration of Registrable Securities for issuance
to or resale by the Holders in the manner or manners designated by them
(including, without limitation, public or private sales and one or more
Underwritten Offerings). Except as otherwise provided in the Schedules to the
Disclosure Documents, the Company shall (i) not permit any securities other than
the Registrable Securities to be included in the Registration Statement except
as provided for in Section 7(b) hereof and (ii) use its best efforts to cause
the Registration Statement to be declared effective under the Securities Act as
promptly as practicable after the filing thereof, but in any event on or prior
to the Effective Date, and to keep such Registration Statement continuously
effective under the Securities Act until the date which is five years after the
date of this Agreement or such earlier date when all Registrable Securities
covered by such Registration Statement have been sold or may be sold pursuant to
Rule 144 as determined by the counsel to the Company pursuant to a written
opinion letter, addressed to the Holders, to such effect (the "EFFECTIVENESS
PERIOD"); PROVIDED, HOWEVER, that the Company shall not be deemed to have used
its best efforts to keep the Registration Statement effective during the
Effectiveness Period if it voluntarily takes any action to suspend the
effectiveness of the Registration Statement under the Securities Act during the
Effectiveness Period, unless the Company, after consultation with its counsel,
determines that such action is required under applicable law or the Company has
filed a post-effective amendment to the Registration Statement and the
Commission has not declared it effective. Should the Registration Statement not
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relate to the maximum number of Registrable Securities acquired by (or
potentially acquirable by) the Holders upon conversion of the Debentures
(because of the indeterminable number of shares of Common Stock issuable upon
conversion thereof), the Company shall be required to file a separate
registration statement (utilizing Rule 462 promulgated under the Securities Act,
where applicable) relating to such Registrable Securities which then remain
unregistered. The provisions of this Agreement shall relate to such separate
registration statement as if it were an amendment to such Registration
Statement.
(b) If the Holders of a majority of the Registrable Securities so
elect and inform the Company in writing a reasonable time prior to the Filing
Date, an offering of Registrable Securities pursuant to the Registration
Statement may be effected in the form of an Underwritten Offering. In such
event, and if the managing underwriter or the representative of the several
underwriters (the "Representative") advises the Company and such Holders in
writing that, in the Representative's opinion, the number of Registrable
Securities proposed to be sold in such offering exceeds the number of
Registrable Securities which can be sold in such offering, there shall be
included in such Underwritten Offering the amount of such Registrable Securities
which, in the opinion of such Representative, can be sold, and such amount shall
be allocated PRO RATA among the Holders proposing to sell Registrable Securities
in such Underwritten Offering.
(c) If any of the Registrable Securities are to be sold in an
Underwritten Offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the Holders of
a majority of the Registrable Securities included in such offering, with the
approval of the Company, which shall not be unreasonably withheld or delayed. No
Holder may participate in any Underwritten Offering hereunder unless such Holder
(i) agrees to sell its Registrable Securities on the basis provided in any
underwriting agreements approved by the Persons entitled hereunder to approve
such arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such arrangements.
(d) If the Registration Statement is not filed by the Filing Date, the
Company shall immediately upon such thirtieth day pay the Purchasers a Liquidity
Payment (as defined below in this Section). If the Registration Statement is not
declared effective by the Commission by the Effective Date, then the Company
shall pay the Purchasers a Liquidity Payment, in the amount equal to four
percent (4%) per annum of the total initial principal amount of the Debentures
(a "LIQUIDITY PAYMENT"), on the last day of each 30-day period or part thereof
following such ninetieth (90th) day until the Registration Statement shall have
been declared effective by the Commission.
3. REGISTRATION PROCEDURES. In connection with the Company's registration
obligations hereunder, the Company shall:
(1) Prepare and file with the Commission within the time period set
forth in SECTION 2 a Registration Statement on Form S-3 or another appropriate
form permitting registration of Registrable Securities for issuance to the
Holders and the resale thereof in accordance with the method or methods of
distribution thereof as specified by the Holders, and use its best efforts to
cause the Registration Statement to become effective and remain effective as
provided herein; PROVIDED, HOWEVER that, subject only to the provision by the
Holders to the Company in writing of information requested in writing by the
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Company relating to the Holders' proposed method of distribution of Registrable
Securities and such other information required by law, not less than ten (10)
days prior to the filing of the Registration Statement or any related Prospectus
or any amendment (pre or post effective) or supplement thereto (including any
document that would be incorporated or deemed to be incorporated therein by
reference), the Company shall (i) furnish to the Holders, their counsel and any
managing underwriters, copies of all such documents proposed to be filed, which
documents (other than those incorporated or deemed to be incorporated by
reference) will be subject to the review of such Holders, their counsel and such
managing underwriters, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall
be necessary, in the opinion of the respective counsel to such Holders and such
underwriters, to conduct a reasonable investigation within the meaning of the
Securities Act. The Holders shall have five (5) Business Days after receipt of
the Registration Statement or any related Prospectus or any amendment or
supplement thereto to comment on or object to the filing of such documents. The
Company shall not file the Registration Statement or any such Prospectus or any
amendments or supplements thereto without including any comments reasonably
requested by the Holders and shall not file any such documents to which the
Holders of a majority of the Registrable Securities, their counsel, or any
managing underwriters, shall object; PROVIDED, HOWEVER, that the counting of
days for determining whether the Company has complied with the Filing Date and
Effective Date requirements for purposes of this Agreement shall not include any
days during the period commencing with such objection and ending when the Person
objecting subsequently consents to the filing of such documents. On the date of
effectiveness of any Registration Statement, the Company shall furnish an
opinion, dated as of such date, from counsel representing the Company addressed
to the Holders of the Registrable Securities and in form, scope and substance as
is customarily given in an underwritten public offering. The Company shall also
use its best efforts to cause to be furnished on the date of effectiveness of
any Registration Statement, a letter, dated such date, from the Company's
independent certified public accountants in form and substance as is customarily
given by independent certified public accountants to underwriters in an
underwritten public offering, addressed to the Holders of the Registrable
Securities;
(2) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective for the
applicable time 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 (or any similar provisions then in
force) promulgated under the Securities Act; (iii) respond as promptly as
practicable to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto; and (iv) comply with the
provisions of the Securities Act and the Exchange Act with respect to the
registration of all Registrable Securities covered by the Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the Holders thereof set forth in the Registration Statement as so
amended or in such Prospectus as so supplemented.
(3) Notify the Holders of Registrable Securities to be sold, their
counsel and any managing underwriters immediately (and, in the case of (i)(A)
below, not less than three (3) Business Days prior to such filing) and (if
requested by any such Person) confirm such notice in writing no later than one
(1) Business Day following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to the Registration Statement is proposed
to be filed; and (B) with respect to the Registration Statement or any
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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 the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time the Registration Statement becomes stale and is no
longer effective; (v) 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 (vi) of the
occurrence of any event that makes any statement made in the 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 the Registration Statement, Prospectus or other
documents so that, in the case of the 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.
(4) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of the
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;
(5) If requested by any Representative or the Holders of a majority of
the Registrable Securities to be sold in connection with an Underwritten
Offering, (i) promptly incorporate in a Prospectus supplement or post-effective
amendment to the Registration Statement such information as such managing
underwriters and such Holders reasonably agree should be included therein and
(ii) make all required filings of such Prospectus supplement or such
post-effective amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such Prospectus supplement or
post-effective amendment; PROVIDED, HOWEVER, that the Company shall not be
required to take any action pursuant to this Section 3(e) unless in the opinion
of counsel for the Company such action is required by applicable law.
(6) Furnish to each Holder, its counsel and any Representative,
without charge, at least one complete copy of each Registration Statement and
each amendment thereto, including financial statements and schedules, all
documents incorporated or deemed to be incorporated therein by reference, and
all exhibits to the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the Commission;
(7) Promptly deliver to each Holder, its counsel, and any
Representative, without charge, as many copies of the Prospectus or Prospectuses
(including each form of prospectus forming part of the effective Registration
Statement) and each amendment or supplement thereto as such Persons may
reasonably request; and the Company hereby agrees to respond in writing to a
written request from the Purchasers with respect to the effectiveness of such
Prospectus.
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(8) Prior to any public offering of Registrable Securities, use its
reasonable best efforts to register or qualify or cooperate with the selling
Holders, any Representative and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Holder, Representative or underwriter requests in writing, 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 a Registration Statement; PROVIDED, HOWEVER, that the
Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action that would
subject it to general service of process in any such jurisdiction where it is
not then so subject or subject the Company to any tax in any such jurisdiction
where it is not then so subject.
(9) Cooperate with the Holders and the Representative to facilitate
the timely preparation and delivery of certificates representing Registrable
Securities to be sold, which certificates shall be free of all restrictive
legends, except as required by applicable law, and to enable such Registrable
Securities to be in such denominations and registered in such names as any such
Representative or Holders may request at least three (3) Business Days prior to
any sale of Registrable Securities;
(10) Upon the occurrence of any event contemplated by Section 3(c)(vi)
hereof, as promptly as practicable, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement 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, neither the Registration Statement nor such 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.
(11) Use its best efforts to cause all Registrable Securities relating
to such Registration Statement to be listed or quoted on the Nasdaq National
Market, the Nasdaq SmallCap Market and any other securities exchange, market or
over-the-counter bulletin board, if any, on which similar securities issued by
the Company are then listed or quoted to the extent required by the rules of
such exchange, market or other quotation system.
(12) If the Registrable Securities are included in a Registration
Statement filed in connection with an Underwritten Offering, the Company shall,
(i) make such representations and warranties to such Holders as it agrees to
make to the underwriters in such Underwritten Public Offerings, and confirm the
same if and when requested; (ii) enter into an indemnification agreement which
shall contain indemnification provisions and procedures no less favorable to the
selling Holders, than those set forth in SECTION 5 and (iii) deliver such
documents and certificates as may be reasonably requested by the Holders of a
majority of the Registrable Securities being sold, their counsel and any
Representative to evidence the continued validity of the representations and
warranties made pursuant to clause 3(1)(i).
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(13) Make available for inspection by (i) Holders of the Registrable
Securities, (ii) any underwriter participating in any disposition pursuant to
the Registration Statement, (iii) one firm of attorneys and one firm of
accountants or other agents retained by the Holders, and (iv) one firm of
attorneys retained by all the Holders (collectively, the "Inspectors") all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the "Records"), as shall be reasonably
deemed necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; PROVIDED, HOWEVER, that each Inspector shall
hold in confidence and shall not make any disclosure (except to an Investor) of
any Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (b) the release of such
Records is ordered pursuant to a subpoena or other order from a court or
government body of competent jurisdiction, or (c) the information in such
Records has been made generally available to the public other than by disclosure
in violation of this or any other agreement. The Company shall not be required
to disclose any confidential information in such Records to any Inspector until
and unless such Inspector shall have entered into confidentiality agreements (in
form and substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of this Section 3(m). Each Holder of
Registrable Securities agrees that it shall, upon learning that disclosure of
such Records is sought in or by a court or government body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein shall be deemed to limit the Holders' ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.
(14) Comply with all applicable rules and regulations of the
Commission and make generally available to its security holders earning
statements satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 not later than forty-five (45) days after the end of any 12-month
period (or ninety (90) days after the end of any 12-month period if such period
is a fiscal year) (i) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to underwriters in a firm commitment or best
efforts Underwritten Offering and (ii) if not sold to underwriters in such an
offering, commencing on the first (1st) day of the first (1st) fiscal quarter of
the Company after the effective date of the Registration Statement.
(15) At such time as the Registration Statement has been declared
effective by the Commission covering a resale of any Registrable Securities, the
Company shall cause its legal counsel to deliver to its transfer agent an
opinion, subject to the holders of any Registrable Securities making such
representations and warranties to Company counsel as it may require, certifying
that such Registrable Securities may be sold by the Holders pursuant to such
Registration Statement with the purchasers thereof receiving share certificates
without restrictive legend, which opinion shall remain effective so long as such
Registration Statement remains in full force and effect. In the event that, at
any time, such Registration Statement ceases to be effective, the Company shall
immediately deliver written notice thereof to its transfer agent and the Holders
stating that the opinion of the Company's legal counsel may no longer be relied
upon by its transfer agent (unless and until an additional or amended, as
applicable, Registration Statement is so declared effective (with respect to the
resale of such Registrable Securities)).
B-8
(16) Provide a CUSIP number for all Registrable Securities, not later
than the effective date of the Registration Statement.
(17) The Company shall take all such other actions as any Holder of
Registrable Securities or the underwriters, if any, may reasonably request in
order to expedite or facilitate the disposition of the Registration Securities.
The Company may require each selling Holder and the underwriters to furnish
to the Company such information regarding the distribution of such Registrable
Securities and the Holder as is required by law to be disclosed in the
Registration Statement and as may otherwise be reasonably requested by the
Company, including, without limitation, information necessary for the Company to
respond to the comments from the Commission and/or state securities authorities,
and the Company may exclude from such registration the Registrable Securities of
any such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request, and such Holder shall be deemed to
have violated this Registration Rights Agreement for purposes of Section 5.1 of
the Purchase Agreement.
If the Registration Statement refers to any Holder by name or otherwise as
the holder of any securities of the Company, then such Holder shall have the
right to require (i) the inclusion therein of language, in form and substance
reasonably satisfactory to such Holder and the Company, to the effect that the
ownership by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the Company's
securities covered thereby and that such ownership does not imply that such
Holder will assist in meeting any future financial requirements of the Company,
or (ii) if such reference to such Holder by name or otherwise is not required by
the Securities Act or any similar federal statute then in force, the deletion of
the reference to such Holder in any amendment or supplement to the Registration
Statement filed or prepared subsequent to the time that such reference ceases to
be required.
Each Purchaser covenants and agrees that (i) it will not offer or sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
SECTION 3(G) hereof and notice from the Company that such Registration Statement
and any post-effective amendments thereto have become effective as contemplated
by SECTION 3(C) hereof and (ii) each Purchaser and its officers, directors or
Affiliates, if any, will comply with the prospectus delivery requirements of the
Securities Act as applicable to them in connection with sales of Registrable
Securities pursuant to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable Securities that,
upon receipt of a written notice from the Company of the occurrence of any event
of the type described in SECTION 3(C)(II), 3(C)(III), 3(C)(IV), 3(C)(V) or
3(C)(VI) hereof, such Holder will forthwith discontinue disposition of such
Registrable Securities until such Holder's receipt of copies of the supplemented
Prospectus and/or amended Registration Statement contemplated by SECTION 3(J)
hereof, or until it is advised in writing by the Company that the use of the
applicable Prospectus may be resumed, and, in either case, has received copies
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of any additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement.
4. REGISTRATION EXPENSES.
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company whether or not
the Registration Statement is filed or becomes effective and whether or not any
Registrable Securities are sold pursuant to the 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 with respect to filings (A) required to be made with the
National Association of Securities Dealers, Inc. and (B) in compliance with
state securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel for the underwriters or Holders in connection with Blue
Sky qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as the Representative, if any, or Holders of a majority of
Registrable Securities may designate)), (ii) printing expenses (including,
without limitation, expenses of printing certificates for Registrable Securities
and of printing prospectuses if the printing of prospectuses is requested by the
Representative, if any, or by the holders of a majority of the Registrable
Securities included in the Registration Statement), (iii) messenger, telephone
and delivery expenses, (iv) fees and disbursements of counsel for the Company,
(v) fees and disbursements of all independent certified public accountants
referred to in SECTION 3(A)(II), (vi) Securities Act liability insurance, if the
Company so desires such insurance, and (vii) 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, the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange on which similar securities issued by the
Company are then listed.
(b) Notwithstanding anything contained to the contrary herein, the
Holders shall be responsible for the cost of underwriting discounts and
commissions if any, applicable to the Registrable Securities and the fees and
expenses of counsel to any of the Holders.
5. INDEMNIFICATION.
(1) INDEMNIFICATION BY THE COMPANY. The Company shall, notwithstanding
termination of this Agreement and without limitation as to time, indemnify and
hold harmless each Holder, the officers, directors, agents (including any
underwriters retained by such Holder in connection with the offer or sale of
Registrable Securities), brokers, investment advisors 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) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, costs of preparation
and attorneys' fees) and expenses (collectively, "LOSSES"), as incurred, arising
out of or relating to any untrue or alleged untrue statement of a material fact
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contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to 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, except solely to the extent that (i) such untrue statements or
omissions are based solely upon information regarding such Holder furnished in
writing to the Company by or on behalf of such Holder expressly for use therein,
which information was relied on by the Company for use therein or (ii) such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was furnished in writing to the
Company by or on behalf of such Holder expressly for use therein. The Company
shall notify the Holders promptly of the institution, threat or assertion of any
Proceeding of which the Company is aware in connection with the transactions
contemplated by this Agreement.
(2) INDEMNIFICATION BY HOLDERS. In connection with the Registration
Statement, each Holder shall furnish to the Company in writing such information
as the Company reasonably requests for use in connection with the Registration
Statement or any Prospectus and agrees, severally and not jointly, to indemnify
and hold harmless the Company, their 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 determined by a court of
competent jurisdiction in a final judgment not subject to appeal or review)
arising solely out of or based solely upon any untrue statement of a material
fact contained in the Registration Statement, any Prospectus, or any form of
prospectus, or arising solely out of or based solely upon any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading solely to the extent, and only to the extent, that (i)
such untrue statement or omission is contained in any information furnished in
writing by such Holder to the Company specifically for inclusion in the
Registration Statement or such Prospectus and such information was relied upon
by the Company for use in the Registration Statement, such Prospectus or such
form of prospectus, or (ii) such information relates to such Holder or such
Holder's proposed method of distribution of Registrable Securities and was
furnished in writing by or on behalf of such Holder to the Company specifically
for inclusion in the Registration Statement or such Prospectus and such
information was relied upon by the Company for use in the Registration
Statement, such Prospectus or such form of prospectus. In addition, the
foregoing shall not inure to the benefit of any Holder if a copy of the
Prospectus (as then amended or supplemented) was furnished by the Company to
such Holder and was not sent or given by or on behalf of such Holder to such
Holder's purchaser of Registrable Securities if required by law to have been so
delivered.
(3) 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 promptly shall 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.
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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 or
Parties unless: (1) the Indemnifying Party has agreed to pay such fees and
expenses; or (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 of the
claim against the Indemnified Party but will retain the right to control the
overall Proceedings out of which the claim arose, and counsel employed by the
Indemnified Party 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.
All fees and expenses of the Indemnified Party to which the Indemnified
Party is entitled hereunder (including reasonable fees and expenses to the
extent incurred in connection with investigating or preparing to defend such
Proceeding in a manner not inconsistent with this Section) shall be paid to the
Indemnified Party, as incurred, within ten (10) Business Days of written notice
thereof to the Indemnifying Party;
(d) CONTRIBUTION. If a claim for indemnification under SECTION 5(A) or
5(B) is unavailable to an Indemnified Party or is insufficient to hold such
Indemnified Party harmless for any Losses in respect of which this Section would
apply by its terms (other than by reason of exceptions provided in this
Section), 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, (i) in such proportion as is appropriate to reflect
the relative benefits received by the Indemnifying Party on the one hand and the
Indemnified Party on the other from the distribution of the Registrable
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also 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 benefits received by the
Indemnified Party and the Indemnifying Party, as the case may be, shall be
deemed to be in the same proportion as the total net proceeds received by the
Company from the initial sale of the Registrable Securities by the Company to
the Purchasers pursuant to the Purchase Agreement bear to gain, if any, realized
by the selling Holder upon the resale thereof. 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
B-12
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. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in SECTION 5(C), any attorneys' or other fees or expenses incurred by such party
in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this SECTION 5(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 5(D), noHolder 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. 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.
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.
6. RULE 144.
The Company shall file the reports required to be filed by it under the
Securities Act and the Exchange Act in a timely manner and, if at any time the
Company is not required to file such reports, they will, upon the request of any
Holder, make publicly available other information so long as necessary to permit
sales of its securities pursuant to Rule 144. The Company further covenants that
it will take such further action as any Holder may reasonably request, all to
the extent required from time to time to enable such Holder to sell Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rule 144. Upon the request of any Holder, the
Company shall deliver to such Holder a written certification of a duly
authorized officer as to whether it has complied with such requirements.
7. MISCELLANEOUS.
(a) REMEDIES. In the event of a breach by the Company or by a Holder
of any of their respective 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, after the Closing, to specific performance of its rights under
this Agreement. The Company and each Holder agree that, after the Closing,
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, it shall waive the defense that a remedy at law would
be adequate.
B-13
(b) NO PIGGYBACK ON REGISTRATIONS. Except as provided in Section 4.22
of the Purchase Agreement, neither the Company nor any of its security holders
(other than the Holders in such capacity pursuant hereto) may include securities
of the Company in the Registration Statement other than the Registrable
Securities and the Company shall not enter into any agreement providing any such
right to any of its security holders.
(c) AMENDMENTS AND WAIVERS. This Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the Holder or
Holders of 51% or more of the shares of (i) Registrable Securities issued at
such time plus (ii) Registrable Securities issuable upon exercise or conversion
of any Debentures that have not been fully converted or exercised as of the date
such consent is sought. Each Holder of any Registrable Securities at the time or
thereafter outstanding shall be bound by any consent authorized by this Section
7(c), whether or not such Registrable Securities shall have been marked to
indicate such consent.
(d) NOTICES. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be deemed to have been
received (a) upon hand delivery (receipt acknowledged) or delivery by telex
(with correct answer back received), telecopy or facsimile (with transmission
confirmation report) at the address or number designated below (if delivered on
a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be
received) or (b) on the second (2nd) business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company: Accord Advanced Technologies, Inc.
0000 Xxxxx Xxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxx Xxxxxx, President
Tel: (000) 000-0000
Fax: (000) 000-0000
With copies to: Xxxxxx Xxxxxx Xxxxx Xxxx & Xxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
If to the Purchasers: See Schedule 1 - Schedule of Purchasers
(attached to the Purchase Agreement)
B-14
With copies to: Xxxxxx Xxxxxxxxxx & Xxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxx X. Xxxxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
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.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder.
(f) 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.
(g) GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York without regard to principles thereof relating to the
conflict of laws. Each of the Company and each Holder hereby irrevocably submits
to the jurisdiction of any New York state court sitting in the City and county
of New York or any federal court sitting in the City and County of New York
(collectively, the "New York Courts") in respect of any Proceeding arising out
of or relating to this Agreement and irrevocably accepts for itself and in
respect of its property, generally and unconditionally, jurisdiction of the New
York Courts. Each of the Company and each Holder irrevocably waives to the
fullest extent it may effectively do so under applicable law any objection that
it may now or hereafter have to the laying of the venue of any such Proceeding
brought in any New York Court and any claim that any such Proceeding brought in
any New York Court has been brought in an inconvenient forum.
(h) CUMULATIVE REMEDIES. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
(i) 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
B-15
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(j) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(k) SHARES HELD BY THE COMPANY AND ITS AFFILIATES. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than a Purchaser or transferees or successors or assigns
thereof if such Persons are deemed to be Affiliates solely by reason of their
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
Company:
ACCORD ADVANCED TECHNOLOGIES, INC.
By:
-----------------------------------
Name:
Title:
Purchasers:
GEM MANAGEMENT, LTD.
By:
-----------------------------------
Name:
Title:
SUCCESSWAY HOLDINGS LTD.
By:
-----------------------------------
Name:
Title:
B-16
EXHIBIT C
CONVERSION PROCEDURE
1. At any time and from time to time during the term of this Agreement, any
Holder may deliver to the Escrow Agent written notice (a "NOTICE OF CONVERSION")
that it has elected to convert the Debentures registered in the names of such
Holder in whole or in part in accordance with the terms of the Debenture, and
the Notice of Conversion shall be in the form annexed as APPENDIX 1 to the
Debenture. A fee of $350 shall accompany every Notice of Conversion delivered to
the Escrow Agent;
2. Holder shall send by fax the executed Notice of Conversion to the Escrow
Agent by 4:00 p.m. New York Time on the Conversion Date. The Escrow Agent shall
send the Notice of Conversion by facsimile to the Company by the end of the
Business Day on the Conversion Date;
3. The Company shall have two (2) Business Days from the transmission of
the Notice of Conversion by the Escrow Agent to object only to the calculation
of the number of Debenture Escrow Shares to be released. If the Company fails to
object to the calculation of the number of Debenture Escrow Shares to be
released within said time, then the Company shall be deemed to have waived any
objections to said calculation and to have directed Escrow Agent to release
same. The Company's only basis for any objection hereunder shall be to the
calculation of the number of Debenture Escrow Shares to be released. In the
event of such an objection, the parties shall have one (1) Business Day to agree
on the number of Debenture Escrow Shares to be released pursuant to said
Conversion. In the event that the parties cannot agree on the number of
Debenture Escrow Shares to be released in said time, then the Company shall
commence a legal action in the appropriate State or federal court in the State
and County of New York, within five (5) Business Days of the transmittal of the
Notice of Conversion by the Escrow Agent to the Company. If the Company does not
commence such legal action within said five (5) Business Days, the Escrow Agent
shall release the number of shares stated in the Notice of Conversion to the
Holder and the Company's objection shall be deemed withdrawn and waived with
prejudice. If the Escrow Agent does not receive said objection notice within the
time period set forth above from the Company, the Escrow Agent shall release
from escrow and deliver to the Holder certificates or instruments representing
the number of Escrow Shares issuable to the Holder in accordance with such
conversion on the second Business Day from the transmittal to the Company of the
Notice of Conversion. In the event that the certificates evidencing the
Debenture Escrow Shares held by the Escrow Agent are not in denominations
appropriate for such delivery to the Holder, the Escrow Agent shall request the
Company to cause its transfer agent and registrar to reissue certificates in
smaller denominations. The Escrow Agent shall, however, immediately release to
the requesting Holder certificates representing such lesser number of shares as
the denominations in its possession will allow that is closest to but no more
than the actual number to be released to such Holder. Upon receipt of the
reissued shares in lesser denominations from the Company's transfer agent, the
Escrow Agent shall release to such Holder the balance of the shares due to such
Holder;
C-1
4. Holder shall send the original Debenture and Notice of Conversion to the
Escrow Agent via FedEx or other commercial overnight courier, along with a fee
of $350, with instructions regarding names and amount of certificates for the
issuance of the Underlying Shares, and instructions as to the re-issuance of the
balance of the Debentures, if conversion is not in full. However, if the Escrow
Agent is holding the Debenture, the Notice of Conversion may be faxed to the
Escrow Agent and the fee may be transmitted via wire transfer. In the event that
the Escrow Agent has custody of the Debenture, the Escrow Agent shall notify the
Company and the Holder in writing of the balance of the Debentures remaining and
the Company and the Holder shall acknowledge such notice in writing, in lieu of
the issuance of new Debentures for the balance;
5. Company will issue the new Debentures (if any) and will send such new
Debentures by overnight courier within five (5) Business Days to the Escrow
Agent. The Escrow Agent shall send the Common Shares to the Holder in accordance
with Holder's instructions within two (2) Business Days of receipt of the Notice
of Conversion and will send the new Debentures (if any) to the Holder upon
receipt;
6. The Escrow Agent agrees to notify the Company in writing by facsimile
each time the Escrow Agent releases Escrow Shares to the Holder. Until any such
release and notification are given to the Company, the Debenture Escrow Shares
shall not be deemed to be validly issued and outstanding shares of capital stock
of the Company. Such notification shall be given when the Escrow Agent delivers
the Notice of Conversion to the Company; and
7. The Company agrees that, at any time the conversion price of the
Debentures is such that the number of Debenture Escrow Shares is less than 200%
of the number of shares of Common Stock that would be needed to satisfy full
conversion of all of the Debentures given the then current conversion price (the
"Full Conversion Shares"), upon five (5) days written notice of such
circumstance to the Company by a Holder and/or Escrow Agent, it will issue
additional share certificates, in the names of all Holders and deliver same to
the Escrow Agent, such that the new number of Debenture Escrow Shares is equal
to 200% of the Full Conversion Shares.
C-2
EXHIBIT D
ESCROW AGREEMENT
ESCROW AGREEMENT (this "Agreement"), dated as of May ___, 2001, by and
amongAccord Advanced Technologies, Inc., a Nevada corporation with its principal
place of business at(the "Company"); Xxxxxx Xxxxxxxxxx & Xxxxxxxx, LLP with its
principal place of business at 000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000 (the "Escrow
Agent"); and Gem Management, Ltd., a corporation with offices at 00 Xxxx Xxxxxx,
Xx. Xxxxxx XX0 XXX Xxxxxx and Successway Holdings Ltd., a corporation with
offices at 39/F. Shun Tak Centre West Tower, 200 Connaught Rd. Central Hong
Kong, China (referred to herein individually, as the "Purchaser" and
collectively, as the "Purchasers").
RECITALS
A. Simultaneously with the execution of this Agreement, the Purchasers and
the Company entered into a Stipulation and a Convertible Debenture Purchase
Agreement (the "Purchase Agreement"), both dated as of the date hereof and
incorporated herein by reference, and pursuant to which the Purchasers have
agreed to purchase certain debentures of the Company (the "Debentures"), and the
Company has granted the Escrow Agent a power of attorney (the "Power of
Attorney").
B. The Escrow Agent is willing to act as escrow agent pursuant to the terms
of this Agreement with respect to the purchase of the Debentures.
C. All capitalized terms used but not defined herein shall have the
meanings ascribed thereto in the Purchase Agreement.
NOW, THEREFORE, IT IS AGREED:
1. PROCEDURE FOR ESCROW. The procedures of the escrow shall be governed by
the provisions of Article 2 of the Purchase Agreement and Exhibit C thereto.
2. TERMS OF ESCROW. The terms of the escrow shall be governed by Article 4
of the Purchase Agreement and Articles 3 and 4 of the Debentures.
3. DUTIES AND OBLIGATIONS OF THE ESCROW AGENT.
(a) The parties hereto agree that the duties and obligations of the
Escrow Agent shall be only those obligations herein specifically provided and no
other. The Escrow Agent's duties are those of a depositary only, and the Escrow
Agent shall incur no liability whatsoever, except as a direct result of its
willful misconduct or gross negligence in the performance of its duties
hereunder;
D-1
(b) The Escrow Agent may consult with counsel of its choice, and shall
not be liable for any action taken, suffered or omitted to be taken by it in
accordance with the advice of such counsel;
(c) The Escrow Agent shall not be bound in any way by the terms of any
other agreement to which the Purchasers and the Company are parties, whether or
not the Escrow Agent has knowledge thereof, and the Escrow Agent shall not in
any way be required to determine whether or not any other agreement has been
complied with by the Purchasers and the Company, or any other party thereto. The
Escrow Agent shall not be bound by any modification, amendment, termination,
cancellation, rescission or supersession of this Agreement unless the same shall
be in writing and signed jointly by the Purchasers and the Company and agreed to
in writing by the Escrow Agent;
(d) If 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, the
Escrow Agent shall be entitled to refrain from taking any action other than
keeping safely the Consideration (as defined below) or taking certain action
until the Escrow Agent is directed otherwise in writing jointly by the
Purchasers and the Company or by a final judgment of a court of competent
jurisdiction;
(e) The Escrow Agent shall be fully protected in relying upon any
written notice, demand, certificate or document which the Escrow Agent, in good
faith, believes to be genuine. The Escrow Agent shall not be responsible for the
sufficiency or accuracy of the form, execution, validity or genuineness of
documents or securities now or hereafter deposited hereunder or of any
endorsement thereon, or for any lack of endorsement thereon, or for any
description therein; nor shall the Escrow Agent be responsible or liable in any
respect on account of the identity, authority or rights of the persons executing
or delivering or purporting to execute or deliver any such document, security or
endorsement;
(f) The Escrow Agent shall not be required to institute legal
proceedings of any kind and shall not be required to defend any legal
proceedings which may be instituted against it or in respect of the
Consideration;
(g) If the Escrow Agent at any time, in its sole discretion, deems it
necessary or advisable to relinquish custody of the Debentures, the Initial
Escrow Shares or the Debenture Escrow Shares, as the case may be (to the extent
delivered to the Escrow Agent pursuant hereto, the "Consideration"), it may do
so by delivering the same to another Person that agrees to act as escrow agent
hereunder and whose substitution for the Escrow Agent is agreed upon in writing
by the Purchasers and the Company. If no such escrow agent is selected within
three (3) days after the Escrow Agent gives notice to the Purchasers and the
Company of the Escrow Agent's desire to so relinquish custody of the
Consideration and resign as Escrow Agent, then the Escrow Agent may do so by
delivering the Consideration to the clerk or other proper officer of a state or
federal court of competent jurisdiction situate in the State and County of New
York. The fee of any court officer shall be borne by the Company. Upon such
D-2
delivery, the Escrow Agent shall be discharged from any and all responsibility
or liability with respect to the Consideration and this Agreement and each of
the Company and the Purchasers shall promptly pay all monies it may owe to the
Escrow Agent for its services hereunder, including, but not limited to,
reimbursement of its out-of-pocket expenses pursuant to paragraph (i) below;
(h) This Agreement shall not create any fiduciary duty on the Escrow
Agent's part to the Purchasers or the Company, nor disqualify the Escrow Agent
from representing either party hereto in any dispute with the other, including
any dispute with respect to the Consideration; PROVIDED, HOWEVER, that in the
event of such dispute, the Escrow Agent shall have the right to commence an
interpleader action in any court of competent jurisdiction of the State of New
York or of the United States located in the County and State of New York,
deposit the Consideration with such court;
(i) The parties acknowledge and agree that the Escrow Agent is counsel
to the Purchasers. The parties agree to, and agree not to object to, the Escrow
Agent's engagement as Escrow Agent hereunder;
(j) Upon the performance of this Agreement, the Escrow Agent shall be
deemed released and discharged of any further obligations hereunder.
4. INDEMNIFICATION.
(1) The Purchasers hereby indemnify and hold free and harmless the
Escrow Agent from any and all losses, expenses, liabilities and damages
(including but not limited to reasonable attorney's fees, and amounts paid in
settlement) resulting from claims asserted by the Company against the Escrow
Agent with respect to the performance of any of the provisions of this
Agreement;
(2) The Company hereby indemnifies and holds free and harmless the
Escrow Agent from any and all losses, expenses, liabilities and damages
(including but not limited to reasonable attorney's fees, and amount paid in
settlement) resulting from claims asserted by the Purchasers against the Escrow
Agent with respect to the performance of any of the provisions of this
Agreement;
(3) The Purchasers and the Company, jointly and severally, hereby
indemnify and hold the Escrow Agent harmless from and against any and all
losses, damages, taxes, liabilities and expenses that may be incurred by the
Escrow Agent, arising out of or in connection with its acceptance of appointment
as the Escrow Agent hereunder and/or the performance of its duties pursuant to
this Agreement, the Purchase Agreement, the Debentures and the Power of
Attorney, including, but not limited to, all legal costs and expenses of the
Escrow Agent incurred defending itself against any claim or liability in
connection with its performance hereunder, provided that the Escrow Agent shall
not be entitled to any indemnity for any losses, damages, taxes, liabilities or
expenses that directly result from its willful misconduct or gross negligence in
its performance as Escrow Agent hereunder
D-3
(4) In the event of any legal action or proceeding involving any of
the parties to this Agreement which is brought to enforce or otherwise
adjudicate any of the rights or obligations of the parties hereunder, the
non-prevailing party or parties shall pay the legal fees of the prevailing party
or parties and the legal fees, if any, of the Escrow Agent.
5. MISCELLANEOUS.
(1) All notices, including Notices of Conversion and Notices of
Exercise, objections, requests, demands and other communications sent to any
party hereunder shall be deemed duly given if (x) in writing and sent by
facsimile transmission to the Person for whom intended if addressed to such
Person at its facsimile number set forth below or such other facsimile number as
such Person may designate by notice given pursuant to the terms of this Section
5 and (y) the sender has confirmation of transmission:
If to the Company: Accord Advanced Technologies, Inc.
0000 Xxxxx Xxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxx Xxxxxx, President
Tel: (000) 000-0000
Fax: (000) 000-0000
With copies to: Xxxxxx Xxxxxx Xxxxx Xxxx & Xxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
If to the Purchasers: At the fax numbers set forth in the
Purchase Agreement.
If to the Escrow Agent: Xxxxxx Xxxxxxxxxx & Xxxxxxxx, LLP
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxx X. Xxxxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
D-4
(2) This Agreement has been prepared, negotiated and delivered in the
State of New York and shall be governed by and construed and enforced in
accordance with the laws of the State of New York applicable to contracts
entered into and performed entirely within New York, without giving effect to
the principles of New York law relating to the conflict of laws.
(3) This Agreement may be executed in two or more counterparts, all of
which when taken together 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, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and 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
page were an original thereof.
(4) This Agreement shall be binding upon and inure to the benefit of
the parties and their successors and permitted assigns. The assignment by a
party of this Agreement or any rights hereunder shall not affect the obligations
of such party under this Agreement.
6. TERMINATION OF ESCROW. The term of this Escrow Agreement shall begin
upon the date hereof and shall continue until terminated upon the earlier to
occur of (i) delivery of the Initial Escrow Shares and the Satisfaction of
Judgment to the Purchasers, (ii) conversion of the full amount of the
Debentures, (iii) the last to occur of the Maturity Date of the Debentures, and
(iv) the written agreement of the parties to terminate this Agreement. Upon the
termination of this Escrow Agreement, the Escrow Agent shall return any of the
Consideration then held by it to the Company pursuant to the Purchase Agreement,
the Stipulation and the other Transaction Documents.
[ SIGNATURE PAGE FOLLOWS ]
D-5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed the day and year first above written.
Escrow Agent: The Company:
Xxxxxx Xxxxxxxxxx & Xxxxxxxx, LLP Accord Advanced Technologies, Inc.
By: By:
------------------------------- -------------------------------
Name: Name:
Title: Title:
Purchasers:
Gem Management, Ltd.
By:
-------------------------------
Name:
Title:
Successway Holdings Ltd.
By:
-------------------------------
Name:
Title:
D-6
EXHIBIT E
FORM 26/33-DPOA/S-97
Power of Attorney; Statutory Short Form, Revised 1/1/97 * (with Affidavit of
Effectiveness (C)
CONSULT YOUR LAWYER BEFORE SIGNING THIS INSTRUMENT
- THIS INSTRUMENT SHOULD BE USED BY LAWYERS ONLY
DURABLE GENERAL POWER OF ATTORNEY
NEW YORK STATUTORY SHORT FORM
THE POWERS YOU GRANT BELOW CONTINUE TO BE EFFECTIVE
SHOULD YOU BECOME DISABLED OR INCOMPETENT
CAUTION: THIS IS AN IMPORTANT DOCUMENT IT GIVES THE PERSON WHOM YOU DESIGNATE
(YOUR "AGENT") BROAD POWERS TO HANDLE YOUR PROPERTY DURING YOUR LIFETIME WHICH
MAY INCLUDE POWERS TO MORTGAGE, SELL, OR OTHERWISE DISPOSE OF ANY REAL OR
PERSONAL PROPERTY WITHOUT ADVANCE NOTICE TO YOU OR APPROVAL BY YOU. THESE POWERS
WILL CONTINUE TO EXIST EVEN AFTER YOU BECOME DISABLED OR INCOMPETENT. THESE
POWERS ARE EXPLAINED MORE FULLY IN NEW YORK GENERAL OBLIGATIONS LAW, ARTICLE 5,
TITLE 15, SECTION 5-1502A THROUGH 5-1503 WHICH EXPRESSLY PERMIT THE USE OF ANY
OTHER OR DIFFERENT FORM OF POWER OF ATTORNEY.
THIS DOCUMENT DOES NOT AUTHORIZE ANYONE TO MAKE MEDICAL OR OTHER HEALTH CARE
DECISIONS. YOU MAY EXECUTE A HEALTH CARE PROXY TO DO THIS.
(IF THERE IS ANYTHING ABOUT THIS FORM THAT YOU DO NOT UNDERSTAND, YOU SHOULD ASK
A LAWYER TO EXPLAIN IT TO YOU.)
THIS is intended to constitute a DURABLE GENERAL POWER OF ATTORNEY pursuant to
Article 5, Title 15 of the New York General Obligations Law:
Accord Advanced Technologies, Inc. (INSERT YOUR NAME AND ADDRESS)
does hereby appoint: ___________________________________________________________
(IF 1 PERSON IS TO BE APPOINTED AGENT, INSERT THE NAME AND
ADDRESS OF YOUR AGENT ABOVE)
Xxxx X. Xxxxxxxxxx residing at 000 Xxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxx,
XX 00000-0000
Xxxxxx X. Xxxxxx residing at 000 Xxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxx,
XX 00000-0000
Xxxx X. Xxxxxxxx residing at 000 Xxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxx,
XX 00000-0000
(IF 2 OR MORE PERSONS ARE TO BE APPOINTED AGENTS BY YOU INSERT THEIR
NAMES AND ADDRESSES ABOVE.)
my attorney(s)-in-fact TO ACT (If more than one agent is designated, CHOOSE ONE
of the following two choices by putting your initials in ONE of the blank spaces
to the left of your choice;)
[X] Each agent may SEPARATELY act.
[ ] All agents must act TOGETHER.
(IF NEITHER BLANK SPACE IS INITIALED, THE AGENTS WILL BE
REQUIRED TO ACT TOGETHER)
IN MY NAME, PLACE AND XXXXX in any way which I myself could do, if I were
personally present, with respect to the following matters as each of them is
defined in Title 15 of Article 5 of the New York General Obligations Law to the
extent that I am permitted by law to act through an agent:
(DIRECTIONS: INITIAL IN THE BLANK SPACE TO THE LEFT OF YOUR CHOICE ANY ONE OR
MORE OF THE FOLLOWING LETTERED SUBDIVISIONS AS TO WHICH YOU WANT TO GIVE YOUR
AGENT AUTHORITY. IF THE BLANK SPACE TO THE LEFT OF ANY PARTICULAR LETTERED
SUBDIVISION IS NOT INITIALED, NO AUTHORITY WILL BE GRANTED FOR MATTERS THAT ARE
INCLUDED IN THAT SUBDIVISION. ALTERNATIVELY, THE LETTER CORRESPONDING TO EACH
POWER YOU WISH TO GRANT MAY BE WRITTEN OR TYPED ON THE BLANK LINE IN SUBDIVISION
"(Q)", AND YOU MAY THEN PUT YOUR INITIALS IN THE BLANK SPACE TO THE LEFT OF
SUBDIVISION "(Q)" IN ORDER TO GRANT EACH OF THE POWERS SO INDICATED)
[ ] (A) real estate transactions;
[ ] (B) chattel and goods transactions;
[ ] (C) bond, share and commodity transactions;
[ ] (D) banking transactions;
[ ] (E) business operating transactions;
[ ] (F) insurance transactions;
[ ] (G) estate transactions;
[ ] (H) claims and litigation;
[ ] (I) personal relationships and affairs;
[ ] (J) benefits from military service;
[ ] (K) records, reports and statements;
[ ] (L) retirement benefit transactions;
[ ] (M) making gifts to my spouse, children and more remote descendants,
and parents, not to exceed in the aggregate $10,000 to each of such
persons in any year;
[ ] (N) tax matters;
[ ] (O) all other matters;
[ ] (P) full and unqualified authority to my attorney(s)-in-fact to delegate
any or all of the foregoing powers to any person or persons whom my
attorney(s)-in-fact shall select;
[X] (Q) each of the matters identified by the following letters: C and E
(SPECIAL PROVISIONS AND LIMITATIONS MAY BE INCLUDED IN THE STATUTORY SHORT FORM
DURABLE POWER OF ATTORNEY ONLY IF THEY CONFORM TO THE REQUIREMENTS OF SECTION
5-1503 OF THE NEW YORK GENERAL OBLIGATIONS LAW.)
--------------------------------------------------------------------------------
SEE ATTACHMENT A
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SPECIAL ADDITIONAL PROVISIONS: The powers granted under (A) through (C) above
shall include the sale of a cooperative housing unit and are enlarged so that
all fixtures and articles of personal property which at the time of such
transaction are or which may thereafter be attached to or used in connection
with the real or personal property may be included in the agreements or other
instruments to be executed and delivered in connection with any transactions and
which may be described in said instruments with more particularity. This Power
of Attorney is not subject to question because an instrument executed hereunder
fails to recite or recites only nominal consideration paid therefore and any
person dealing with the subject matter of such instrument may do so as if full
consideration had been expressed therein.
THIS DURABLE POWER OF ATTORNEY SHALL NOT BE AFFECTED BY MY SUBSEQUENT DISABILITY
OR INCOMPETENCE.
If every agent named above is unable or unwilling to serve, I appoint
_____________________________ residing at _____________________________
(INSERT NAME AND ADDRESS OF SUCCESSOR)
to be my agent for all purposes hereunder. JUD 134
E-1
TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, I HEREBY AGREE THAT ANY THIRD PARTY
RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT
HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO
SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OF SUCH REVOCATION
OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND I FOR MYSELF
AND FOR MY HEIRS, EXECUTORS, LEGAL REPRESENTATIVES AND ASSIGNS, HEREBY AGREE TO
INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL
CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY
HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.
THIS DURABLE GENERAL POWER OF ATTORNEY MAY BE REVOKED BY ME AT ANY TIME.
IN WITNESS WHEREOF I have hereunto signed my name this ____ day of ____, 20__
ACCORD ADVANCED TECHNOLOGIES, INC.
(YOU SIGN HERE:) -> By: ___________________________________ President
(SIGNATURE OF PRINCIPAL)
THE STATUTE REQUIRES THAT THIS INSTRUMENT BE ACKNOWLEDGED BY THE PRINCIPAL. NO
EXPRESS PROVISION IS MADE FOR PROOF BY SUBSCRIBING WITNESS.
STATE OF __________ COUNTY OF __________ ) SS.:
On the ____ day of ____, 20__, before me personally came __________________ to
be known to be the individual described in and who executed the foregoing
instrument and acknowledged that he executed same.
STATE OF __________ COUNTY OF __________ ) SS.:
On the ____ day of ____, 20__, before me personally came __________________ to
be known to be the individual described in and who executed the foregoing
instrument and acknowledged that he executed same.
AFFIDAVIT OF EFFECTIVENESS(C)
STATE OF __________ COUNTY OF __________ ) SS.:
__________________ , RESIDING AT __________________ BEING DULY SWORN DOES DEPOSE
AND SAY THAT I AM THE ATTORNEY-IN-FACT UNDER THE ABOVE POWER OF ATTORNEY. THAT
SAID POWER OF ATTORNEY IS A VALID AND SUBSISTING POWER WHICH HAS NOT BEEN
REVOKED BY THE DEATH OF THE PRINCIPAL(S) OR OTHERWISE; THAT I HAVE NO ACTUAL
KNOWLEDGE OF A REVOCATION OF THE FOREGOING POWER; AND, I WARRANT AND REPRESENT
THAT I HAVE FULL AND UNQUALIFIED AUTHORITY TO EXECUTE THE __________________
[DEED, MORTGAGE, ETC.] KNOWING THAT __________________, WILL RELY UPON THE
REPRESENTATIONS MADE HEREIN AS INDUCEMENT TO ACCEPT SUCH INSTRUMENT(S) AND THIS
POWER OF ATTORNEY AS EVIDENCE OF MY AUTHORITY TO ACT.
_______________________________________________________________ ATTORNEY IN FACT
SWORN AND SUBSCRIBED TO BEFORE ME THIS ____ DAY OF ____, 20__
(NOTARY AFFIX STAMP AT RIGHT)
DURABLE GENERAL POWER OF ATTORNEY DISTRICT
SECTION
REVISED STATUTORY SHORT FORM BLOCK
LOT
TITLE NO. __________________________________________________ COUNTY OR TOWN
__________________________________________________
[GRAPHIC] YOUR TITLE EXPERTS ______________________________
______________________________
______________________________
______________________________
RECORDED AT THE REQUEST OF
RETURN BY MAIL TO:
________________________________________________________________________________
RESERVED FOR RECORDING OFFICE USE
________________________________________________________________________________
E-2
DURABLE POWER OF ATTORNEY
NEW YORK STATUTORY SHORT FORM
DATED MAY ___, 2001,
BY ACCORD ADVANCED TECHNOLOGIES , INC. ("DESIGNOR")
ATTACHMENT A
The attached power of attorney is limited by and subject to the terms and
conditions of the Convertible Debenture Purchase Agreement by and among Accord
Advanced Technologies, Inc. (the "Company"), and Gem Management, Ltd. and
Successway Holdings Ltd.(collectively, the "Purchasers") dated May ___, 2001
(the "Purchase Agreement"), the Registration Rights Agreement by and among the
Company and the Purchasers dated May ___, 2001 (the "Registration Rights
Agreement"), the Escrow Agreement by and among the Company, Xxxxxx Xxxxxxxxxx &
Xxxxxxxx, LLP, and the Purchasers dated May __, 2001 (the "Escrow Agreement"),
and, to be issued upon the closing of, and in accordance with, the Purchase
Agreement, the 2% Convertible Debentures in the principal amount of US$340,000
(the "Debentures"), and such power of attorney can only be acted upon to enforce
the rights of the Purchasers and their successors and assigns under Section 4.14
of the Purchase Agreement, Section 4 of the Debentures, and to grant the
appointed agents the power to issue opinions of counsel in substantially the
same form as the opinions contained in Exhibit F to the Purchase Agreement, all
including, but not limited to, the issuance and delivery of shares of Common
Stock, removing stop transfer orders and restrictions, and replenishing the
Escrow Account under the aforementioned documents.
This power of attorney shall expire upon the full and complete satisfaction
of all of the Company's obligations under the Stipulation, the Purchase
Agreement, the Registration Rights Agreement, the Escrow Agreement, and the
Debentures.
IN WITNESS WHEREOF I have hereunto signed my name this ______ day of May,
2001.
Accord Advanced Technologies, Inc.
By: ___________________________________
Signed and sworn to before me on
__________________, 2001
Notary Public
E-3
EXHIBIT F
May ___, 2001
To the Parties Listed As "Purchasers"
in the "Purchase Agreement"
RE: ACCORD ADVANCED TECHNOLOGIES, INC.
Ladies and Gentlemen:
We have acted as counsel to Accord Advanced Technologies, Inc., a Nevada
corporation (the "Company"), in connection with the Convertible Debenture
Purchase Agreement, dated as of May ___, 2001, among you and the Company (the
"Purchase Agreement"), and the transactions contemplated thereby. Capitalized
terms used and not otherwise defined herein shall have the respective meanings
given to such terms in the Purchase Agreement. The Purchase Agreement, the
Debentures, the Registration Rights Agreement, the Escrow Agreement and the
Power of Attorney are hereinafter referred to collectively as the "Transaction
Documents."
In addition to the Transaction Documents, we have examined such other
documents, records and legal matters as in our judgment are necessary or
appropriate to enable us to render the opinions expressed below, including,
without limitation, the Company's certificate of incorporation and by-laws, each
as in effect on the date hereof (the "Certificate of Incorporation" and the
"By-Laws, respectively). We have also relied on the certificates furnished by
officers of the Company as of the date hereof. We have, without independent
verification, relied upon and assumed the accuracy of such certificates as to
factual matters and have not attempted to verify independently the statements
contained therein; however, nothing has come to our attention that would cause
us to question the accuracy of such statements.
We have also relied, without independent verification, on the
representations and warranties as to factual matters of the Company and the
Purchasers contained in the Purchase Agreement and on certificates of
governmental officials. In all such examinations, we have assumed: (i) the
genuineness of signatures of all persons other than the signatures of persons
signing on behalf of the Company; (ii) the authenticity of all documents
submitted to us as originals; (iii) the validity of all applicable laws,
statutes, ordinances, rules and regulations, and the proper indexing and
accuracy of all records and documents which are public records; and (iv) the
conformity to authentic original documents of all documents submitted to us as
certified, conformed or photostatic copies.
Based upon the foregoing and subject to the assumptions, limitations,
qualifications and exceptions stated herein, we are of the opinion that as of
the date hereof:
(1) Each of the Company and its Subsidiaries is a corporation, duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. To our knowledge, the Company has no subsidiaries other
than the Subsidiaries. Each of the Company and the Subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation in
F-1
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, would not individually or
in the aggregate have a material adverse effect.
(2) The Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by each of the Transaction
Documents, and to otherwise carry out its obligations thereunder. The execution
and delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company. Each of the
Transaction Documents has been duly executed and delivered by the Company and
constitutes the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights or by other equitable principles of general application.
(3) The Company has duly authorized and reserved for issuance such number
of shares of its common stock, par value $0.0001 per share (the "Common Stock"),
as are issuable upon conversion of the Debentures (the "Underlying Shares"),
assuming conversion of the Debentures in full on the date hereof, and to the
extent that the number of the Underlying Shares may exceed the aggregate number
of the Debenture Escrow Shares deposited in escrow pursuant to the Escrow
Agreement (such excess shares, if any, the "Excess Shares"), all as required
pursuant to the Debentures and the Purchase Agreement. The Debentures are
validly issued, fully paid and non-assessable. The Initial Escrow Shares, and
the Debenture Escrow Shares when delivered in exchange for the Initial Escrow
Shares pursuant to the Purchase Agreement, are validly issued, fully paid and
non-assessable. The Excess Shares, when issued pursuant to the terms of the
Debentures and the Purchase Agreement will be validly issued, fully paid and
non-assessable.
(4) The Debentures have been duly authorized and, when paid for in
accordance with the terms of the Purchase Agreement and the other Transaction
Documents, shall have been validly issued, fully paid and non-assessable.
(5) No shares of the Common Stock are entitled to preemptive or similar
rights. To our knowledge, except as specifically disclosed in Schedule 3.1(c) to
the Purchase Agreement, there are no outstanding options, warrants, script
rights to subscribe to, registration rights, calls or commitments of any
character whatsoever relating to, or, except as a result of the purchase and
sale of the Debentures, securities, rights or obligations convertible into or
exchangeable for, or giving any person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings, or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock, except as otherwise provided in the
Purchase Agreement.
(6) To our knowledge, other than the Required Approvals, neither the
Company nor any Subsidiary is required to obtain any consent, waiver,
authorization or order of, or make any filing or registration with, any court of
other federal, state, local or other governmental authority or other person in
F-2
connection with the execution, delivery and performance by the Company of the
Transaction Documents.
(7) The execution and delivery of the Transaction Documents by the Company
and its performance of and compliance with the terms of the Transaction
Documents, including, without limitation, the issuance of the Debentures, the
Initial Escrow Shares and the Debenture Escrow Shares do not, and its issuance
of Excess Shares, if any, will not, violate any provision of the Certificate of
Incorporation or the By-Laws or, to our knowledge, any provision of any
applicable federal or state law, rule or regulation. To our knowledge, except as
disclosed in Schedule 3.1(e) to the Purchase Agreement, the execution, delivery
and performance of and compliance with the Transaction Documents, and the
issuance of the Debentures, the Initial Escrow Shares and the Debenture Escrow
Shares have not resulted, and will not result, nor will the issuance of any
Excess Shares result, in any violation of, or constitute a default under (or an
event which with the passage of time or the giving of notice or both would
constitute a default under), any contract, agreement, instrument, judgment or
decree binding upon the Company or any Subsidiary and known to us which,
individually or in the aggregate, would have a material adverse effect on the
business or financial condition of the Company and its Subsidiary. To the best
of our knowledge, the business of the Company and its Subsidiaries is not being
conducted in violation of any law, ordinance or regulation of any governmental
authority the result of which would have a material adverse effect on the
business of the Company and its Subsidiaries.
(8) To our knowledge, the Company has filed all reports required to be
filed by it under the Securities Exchange Act of 1934, as amended ("the Exchange
Act"), including Section 13(a) or 15(d) thereof, for the two years preceding the
date hereof (or such shorter period as the Company was required by law to file
such material) (collectively, the "Disclosure Documents") on a timely basis, or
has received a valid extension of such time of filing, except as otherwise
described in the Purchase Agreement. To the best of our knowledge, as of their
respective dates, the Disclosure Documents complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Securities and Exchange Commission promulgated
thereunder.
(9) Assuming the accuracy of the representations and warranties of the
Company set forth in Section 3.1 of the Purchase Agreement and of the Purchasers
set forth in Section 3.2 of the Purchase Agreement, the offer, issuance and sale
of the Debentures and the offer and issuance of the Initial Escrow Shares and
the Debenture Escrow Shares pursuant to the Purchase Agreement are and the sale
of the Initial Escrow Shares, the Debenture Escrow Shares and the offer,
issuance and sale of the Excess Shares, if any, will be, exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), by reason of Rule 506 of Regulation D promulgated under
Section 4(2) of the Securities Act.
These opinions are limited to the matters expressly stated herein and are
rendered solely for your benefit and may not be quoted or relied upon for any
other purpose or by any other person.
The opinions expressed herein are subject to the following assumptions,
limitations, qualifications and exceptions:
F-3
(a) We have assumed that each of the Purchasers subscribing to the
Transaction Documents has the legal right, capacity and power to enter into and
perform all of its obligations under each of the Transaction Documents.
Furthermore, we have assumed the due authorization by each of the Purchasers of
all requisite action and the due execution and delivery of the Transaction
Documents, and that the Transaction Documents are the valid and binding
agreements of the Purchasers enforceable against them in accordance with their
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors' rights or by
other equitable principles of general application.
(b) Our opinions on the binding effect and enforceability of any
obligation are subject to limitations resulting from the effects of (i)
bankruptcy, insolvency, reorganization, receivership, moratorium, fraudulent
conveyance, arrangement and assignment for the benefit of creditors laws and
similar laws or judicially developed doctrines, and (ii) general principles of
equity, whether applied by a court of law or equity.
(c) We disclaim any opinion as to (i) the validity or enforceability
under Federal securities laws of any indemnification and contribution provisions
of the Registration Rights Agreement or any other documents, (ii) any provisions
in any documents which purport to waive any procedural due process rights, and
(iii) any provisions relating to choice of governing law, which choice may
depend upon factual circumstances and the laws of other jurisdictions.
(d) Enforcement of your rights and remedies may be limited by laws and
judicial decisions which have imposed duties and standards of conduct
(including, without limitation, obligations of good faith, fair dealing and
reasonableness), and in this regard we have assumed that you will exercise your
rights and remedies under the Transaction Documents, to the extent required by
such laws and judicial decisions, in good faith and in circumstances and a
manner which are commercially reasonable.
(e) Requirements set forth in any of the Transaction Documents to the
effect that any provision thereof may be waived only in writing may not be
valid, binding or enforceable to the extent that an oral agreement or an implied
agreement by practice or course of conduct modifying such requirements has been
or may be created.
(f) We express no opinion as to the enforceability of any remedies
provided for under any of the Transaction Documents to the extent such remedies
would have the effect of compensating the party entitled to the benefit of such
remedies in amounts in excess of the actual loss suffered by such party.
(g) Whenever our opinion with respect to the existence or absence of
facts is indicated to be based on our knowledge, we are referring to the actual
current knowledge of partners and associates of ___________________________ who
have had substantive involvement in the representation of the Company in
connection with this transaction. We have not undertaken any independent
investigation to determine the existence or absence of such facts (and have not
caused to be made any review of any court files or indices) and no inferences as
to our knowledge concerning such facts should be drawn from the fact that such
representation has been undertaken by us.
F-4
(h) Our opinions are limited to the matters expressly set forth herein
and to laws and facts existing on the date hereof an no opinion is to be implied
or inferred beyond the matters expressly so stated.
(i) Our examination of law relevant to the matters covered by this
opinion is limited to the laws of the State of New York, the General Corporation
Law of the State of Nevada and the federal law of the United States, and we
express no opinion as to the effect on the matters covered by this opinion of
the laws of any other jurisdiction. To the extent that the governing law with
respect to any matters covered by this opinion is the law of any jurisdiction
other than the States of New York or Nevada or federal law of the United States,
we have assumed that the law of such other jurisdiction is identical to New York
or Nevada law. We express no opinion as to the effect on the transactions
described herein, in the Transaction Documents and in the other agreements and
materials referred to herein of the laws of any jurisdiction other than the
States of New York or Nevada and the federal law of the United States. As
members of the bar of the State of Texas, we do not purport to be experts on the
law of any other State of the United States or the jurisdiction of any foreign
country.
(j) In furnishing the opinion regarding the valid existence and good
standing of the Company and its Subsidiaries and the qualification of the
Company and its Subsidiaries to do business, we have relied solely upon the good
standing certificates attached to this letter.
This opinion is given as of the date hereof and we assume no obligation to
update or supplement this opinion to reflect any facts or circumstances which
may hereafter come to our attention or any changes in laws which may hereafter
occur.
Sincerely yours,
[____________________]
By: /s/ Xxxx Xxxxx
-----------------
Xxxx Xxxxx
F-5
