ACCOMMODATION AGREEMENT
ACCOMMODATION AGREEMENT dated as of July __, 2001 (the "Agreement"), by
and between XXXXXX PARTNERS, L.P., a Delaware limited partnership ("Buyer"), and
BIO PULSE INTERNATIONAL, INC., a Nevada corporation with its principal place of
business at 00000 Xxxxx Xxxxxx Xxxxxxx, Xxxxx 000, Xxxx Xxxx Xxxx, Xxxx 00000
(the "Company").
Recitals
A. The parties to the Agreement previously have entered into a Securities
Purchase Agreement dated as of November 21, 2000 (the "Purchase Agreement").
B. Under the Purchase Agreement, Buyer agreed to purchase from the Company
and the Company agreed to issue to Buyer a total of 353,636 shares (the
"Shares") of the Company's restricted common stock, par value $0.001 per share
("Common Stock"), and a warrant (the "Warrant") to purchase up to 189,318 shares
of Common Stock (the Common Stock issuable upon exercise of the Warrants being
referred to herein as the "Warrant Shares" and the Warrant Shares and the Shares
being referred to collectively as the "Registrable Securities").
C. Under the Purchase Agreement, the Company granted to Buyer certain
registration rights under which it is obligated to prepare, file and have
declared effective by the Securities and Exchange Commission ("SEC") a
registration statement (the "Original Registration Statement") covering all of
the Registrable Securities, which Original Registration Statement was filed by
the Company originally in December 2000, and was amended in February 2001. The
Original Registration Statement was not subsequently amended and has not been
declared effective by the SEC as of the date of this Agreement.
D. On January 24, 2001, the Company entered into a Securities Purchase
Agreement (the "Series B Agreement") with Hunts Drive, LLC, a Cayman Islands
limited liability company ("Hunts Drive"), under which the Company issued and
sold 3,000 shares of the Company's 7% Cumulative Convertible Redeemable
Preferred Stock, Series B (the "Series B Preferred") which are convertible into
Common Stock on the terms indicated therein. Simultaneously with its execution
of the Series B Agreement, the Company entered into a Registration Rights
Agreement with Hunts Drive pursuant to which the Company agreed to prepare and
file with the SEC a registration statement covering the Common Stock issuable
upon conversion of the Series B Preferred. The Company sought to register such
shares by amending the Original Registration Statement to include such shares,
which amendment was filed in February 2001. The Original Registration Statement
was not subsequently amended and has not been declared effective by the SEC as
of the date of this Agreement.
E. Pursuant to the Purchase Agreement, the Company is required to pay
damages to Buyer in the event that the Original Registration Statement was not
effective within the time periods specified in the Registration Rights
Agreement, and such Original Registration Statement was not declared effective
within such time period and is not effective as of the date hereof.
F. Pursuant to the Purchase Agreement, the Buyer obtained certain
anti-dilution rights that have been implicated by the Company's issuance of the
Series B Preferred.
G. Because of insufficient financing, the Company is not presently able to
proceed with further amendment to the Original Registration Statement.
H. Hunts Drive has agreed to provide $500,000 of debt financing to the
Company in the form of a promissory note (the "Note"), which financing will
allow the Company to proceed with amending the Original Registration Statement,
provided that the Company and Buyer execute and deliver this Agreement.
Agreement
NOW, THEREFORE, in consideration of the covenants and mutual promises
below and other good and valuable consideration, the receipt and legal
sufficiency of which the parties acknowledge by their signatures appearing
below, and intending to be legally bound hereby, the parties to this Agreement
hereby agree as follows:
1. Issuance of Accommodation Shares. In exchange for Buyer's execution
and delivery of this Agreement, and its waiver or amendment of or other
accommodations in relation to certain of the Company's covenants and obligations
under the Purchase Agreement, all as set forth herein, the Company agrees to
issue a total of Two Million (2,000,000) shares of restricted common stock (the
"Accommodation Shares") to Buyer upon the closing of the transactions
contemplated by this Agreement. Certificates representing the Accommodation
Shares shall be delivered to Buyer upon execution and delivery of this Agreement
by all parties.
a. Securities Law Compliance. Buyer acknowledges and agrees that the
Accommodation Shares are being issued without registration under the
Securities Act of 1933, as amended (the "Securities Act"), and are being
issued in reliance on an exemption from the registration requirements of
the Securities Act. To facilitate the availability of such exemption, and
recognizing that the Company will rely on the accuracy thereof, Buyer
represents and warrants as follows:
i. Buyer is acquiring the Accommodation Shares for Buyer's own
account for investment only and not as nominee or agent and not with a
view to, or for sale in connection with, a distribution of the
Accommodation Shares and with no present intention of selling,
transferring, granting a participation in or otherwise distributing,
the Accommodation Shares, all within the meaning of the Securities Act
and any applicable state, securities or blue sky laws.
ii. Buyer is not a party or subject to or bound by any contract,
undertaking, agreement or arrangement with any person to sell,
transfer or pledge the Accommodation Shares to any person, and has no
present intention to enter into such a contract, undertaking,
agreement or arrangement.
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iii. The Company has advised Buyer that the Accommodation Shares
have not been registered under the Securities Act or under the laws of
any state on the basis that the issuance thereof is exempt from such
registration, and the Company's reliance on the availability of such
exemption is, in part, based upon the accuracy and truthfulness of
Buyer's representations contained herein.
iv. Buyer understands and acknowledges that the Common Stock is
registered under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and that the Company files quarterly, annual and other
reports under the Exchange Act containing financial and other
information about the Company. Buyer has had an opportunity to obtain
such reports and other information as it has deemed appropriate
respecting the Company, its business, plans and financial condition,
and any other materials or information Buyer has deemed relevant in
making the decision to acquire the Accommodation Shares. Buyer has had
a reasonable opportunity to ask questions of the Company and its
representatives, and the Company has answered all inquiries that Buyer
or Buyer's representatives have put to it. Buyer has taken all the
steps necessary to evaluate the merits and risks of an investment as
proposed hereunder.
v. Buyer or Buyer's representative has such knowledge and
experience in finance, securities, investments and other business
matters so as to be able to protect the interests of Buyer in
connection with this transaction.
vi. Buyer understands that an investment in the Company resulting
from Buyer's acquisition of the Accommodation Shares involves
substantial risk, and Buyer can afford to bear such risks, including,
but not limited to, the risk of loss of Buyer's entire investment.
vii. Buyer is not acquiring the Accommodation Shares as a result
of or subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or
broadcast over television or radio (and is not aware of the existence
of any of the above), or presented at any seminar or meeting, or any
solicitation of a subscription by a person other than a representative
of the Company with which Buyer had a pre-existing relationship in
connection with investments in securities generally.
viii. The Accommodation Shares have not been registered under the
Securities Act, and have issued on the basis of the statutory
exemption provided by Section 4(2) of the Securities Act, relating to
transactions by an issuer not involving any public offering and under
similar exemptions under certain state securities laws. Buyer
acknowledges that Buyer has been informed by the Company of, or is
otherwise familiar with, the nature of the limitations imposed by the
Securities Act and the rules and regulations thereunder on the
transfer of securities. In particular, Buyer agrees that no sale,
assignment, or transfer of any of the Accommodation Shares shall be
valid or effective, and the Company shall not be required to give any
effect to any such sale, assignment or transfer, unless (i) the sale,
assignment or transfer of such securities is registered under the
Securities Act, it being understood that the Accommodation Shares are
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not currently registered for sale and that the Company has no
obligation or intention to so register such securities, or (ii) such
securities are sold, assigned or transferred in accordance with all
the requirements and limitations of Rule 144 under the Securities Act,
or (iii) such sale, assignment or transfer is otherwise exempt from
registration under the Securities Act. Buyer further understands that
an opinion of counsel and other documents may be required to transfer
the Accommodation Shares, and the Company will use its best efforts to
assist Buyer in any request to remove any restrictive legend on the
certificates representing the Accommodation Shares when permissible
under Rule 144, including without limitation instructing the Company's
counsel to promptly issue any customary opinion to the Company's
transfer agent with respect thereto. Buyer acknowledges that each
certificate or certificates evidencing any Accommodation Shares shall
bear the following or a substantially similar legend and such other
legends as may be required by state blue sky laws:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES
LAWS OF ANY STATE. THESE SECURITIES MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF REGISTRATION,
OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION, UNDER THE
SECURITIES ACT OF 1933 AND APPROPRIATE STATE SECURITIES LAWS.
FURTHERMORE, NO OFFER, SALE, TRANSFER, PLEDGE OR HYPOTHECATION IS TO
TAKE PLACE UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO IT, THAT AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.
b. Registration; Lock-up Covenant. One million (1,000,000) of the
Accommodation Shares (the "Registrable Accommodation Shares") shall be
included, pursuant to a pre-effective amendment thereto, in the Original
Registration Statement, and shall be saleable thereunder upon the
effectiveness of the Original Registration Statement, provided that Buyer
agrees that, in consideration of the Company's issuance and registration of
the Registrable Accommodation Shares, Buyer covenants and agrees that,
without the prior written consent of the Company and Hunts Drive, Buyer
shall not offer, sell, contract to sell, sell short, or grant any option
with respect to any of the Registrable Accommodation Shares or any of the
Company's Common Stock, except for the 353,636 Shares presently included on
the Original Registration Statement and acquired by Buyer in November 2000,
except as follows: Buyer may sell (i) Five Hundred Thousand (500,000) of
the Registrable Accommodation Shares at any time following that date which
is the fifth (5th) month anniversary of the effectiveness of the Original
Registration Statement, and (ii) the remaining Five Hundred Thousand
(500,000) of the Registrable Accommodation Shares (together with any
portion of the amount of Registrable Accommodation Shares saleable but not
sold under clause (i), above), following that date which shall be the tenth
(10th) month anniversary of the effectiveness of the Original Registration
Statement. Buyer's agreement regarding restrictions on resales as set forth
in this Subsection 1(b) shall not have any application to (i) any of the
Accommodation Shares other than the Registrable Accommodation Shares or
(ii) to the Shares acquired by Buyer in November 2000, and shall terminate
and have no further force or effect as of the eighth (8th) month
anniversary of the date of this Agreement if by such date the Original
Registration Statement shall not have been declared effective. Buyer's
rights and the Company's obligations with respect to the registration of
the Registrable Accommodation Shares as set forth in this subsection 1(b)
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shall be as set forth in Section 2.5 of the Purchase Agreement, provided
that no fees or penalties shall accrue under subsections 2.5(a) or 2.5(b)
of the Purchase Agreement with respect to the Registrable Accommodation
Shares. All of Buyer's rights hereunder shall terminate and have no further
force or effect upon the date that Buyer becomes eligible to sell all of
the Accommodation Shares under Rule 144 under the Securities Act without
restriction or volume limitation and the Company is and remains current in
all its required filings with the SEC under the Exchange Act and the
Company has complied with all reasonable requests of Buyer to assist in the
removal of restrictive legends on certificates representing the
Accommodation Shares in question.
2. Waiver of First Rights. To the extent not previously waived in
connection with the transactions between the Company and Hunts Drive, including
in addition to the sale of the Series B Preferred the Company's execution and
delivery of that certain Private Equity Credit Agreement by and between the
Company and Hunts Drive and dated as of January 24, 2001, but subject to the
terms, conditions and covenants contained herein, Buyer hereby waives its rights
to maintain its percentage ownership interest under Section 2.4 of the Purchase
Agreement.
3. Waiver of Penalties and Fees. Subject to the terms, conditions and
covenants contained herein, Buyer hereby waives any penalties and interest that
have or may have accrued under Subsections 2.5(a) or 2.5(b) of the Purchase
Agreement because of any failure of the Company in respect of the filing the
Original Registration Statement, responding to comments from SEC staff, or in
accomplishing the effectiveness of the Original Registration Statement prior to
the date hereof or as may accrue under such sections between the date hereof and
October 1, 2001, provided that such fees and penalties shall again commence
accruing October 1, 2001 if by such date the Original Registration Statement has
not been declared effective by the SEC, and any such newly accruing fees or
penalties shall be due and payable thereafter as set forth in the Purchase
Agreement.
4. Waiver of Tag Along Rights. Buyer acknowledges that, as a condition to
its advancement of additional debt financing, Hunts Drive is requiring Xxxxxxxx
Xxxxxxx and Xxxxx Xxxxxxx, who each are affiliates of the Company, to pledge up
to 2,000,000 shares of Common Stock to secure the Company's obligations with
respect to the Note. To the extent such pledge or any subsequent foreclosure of
its security interest in the pledged Common Stock would give rise to the
exercise by Buyer of its rights under Section 2.3 of the Purchase Agreement,
Buyer hereby waives such rights.
5. Waiver and Termination of Anti-Dilution Rights. Buyer agrees to waive
any past claims arising under or with respect to Section 2.8 of the Purchase
Agreement with respect to the Hunts Drive transactions referenced in this
Agreement or otherwise, and Buyer further agrees to terminate all of its rights
under Section 2.8 of the Purchase Agreement as to all transactions of the
Company occurring hereafter.
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6. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
7. Headings. The headings in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
8. Severability. If any provision of this Agreement shall for any reason be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision hereof, and this Agreement shall be construed as if
such invalid or unenforceable provision were not contained herein.
9. Entire Agreement. This Agreement is the final expression of, and
contains the entire Agreement between, the parties with respect to the subject
matter hereof, and supersedes all prior understandings with respect thereto. The
parties to this Agreement expressly intend to amend certain terms of the
Purchase Agreement, and intend that the terms of this Agreement shall control in
the event of any disagreement between the terms of this Agreement and the
Purchase Agreement.
10. Limited Effect of Modification. Except to the extent specifically
modified or amended by this Agreement the terms and conditions of the Purchase
Agreement shall not be amended, modified, superceded or affected in any way and
shall continue to have full force and effect on the parties thereto. Nothing
herein shall, except as expressly set forth herein, affect the validity and
enforceability of the Purchase Agreement, the shares of Common Stock and
Warrants issued thereunder, or rights of Buyer in connection therewith.
11. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Utah, without regard to choice of law
principles.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the ____ day of July, 2001.
BIO PULSE INTERNATIONAL, INC.
By:
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Its:
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XXXXXX PARTNERS, L.P.
By:
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Its:
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