SUBSCRIPTION AGREEMENT
THIS
SUBSCRIPTION AGREEMENT
(this
“Agreement”),
dated
as of May ___, 2007, by and among Aprecia,
Inc., a Delaware corporation
(the
“Company”),
and
the subscribers identified on the signature page hereto (each a “Subscriber”
and
collectively “Subscribers”).
WHEREAS,
the
Company and the Subscribers are executing and delivering this Agreement in
reliance upon an exemption from securities registration afforded by the
provisions of Section 4(2), Section 4(6) and/or Regulation D (“Regulation
D”)
as
promulgated by the United States Securities and Exchange Commission (the
“Commission”)
under
the Securities Act of 1933, as amended (the “1933
Act”).
WHEREAS,
the
parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to the Subscribers, as provided herein,
and the Subscribers, in the aggregate, shall purchase for $170,000 (the
“Purchase
Price”)
$187,000 (the "Principal
Amount")
of
principal amount of secured promissory notes of the Company (“Note”
or
“Notes”),
a
form of which is annexed hereto as Exhibit
A;
and
share purchase warrants (the “Warrants”),
in
the form annexed hereto as Exhibit
B,
to
purchase shares of the Company’s $.0001 par value common stock (“Common
Stock”)
(the
“Warrant
Shares”).
The
Notes, the Warrants and the Warrant Shares are collectively referred to herein
as the "Securities";
and
WHEREAS,
the
aggregate proceeds of the sale of the Notes and the Warrants contemplated hereby
shall be held in escrow pursuant to the terms of a Funds Escrow Agreement to
be
executed by the parties substantially in the form attached hereto as
Exhibit
C
(the
“Escrow
Agreement”).
NOW,
THEREFORE,
in
consideration of the mutual covenants and other agreements contained in this
Agreement the Company and the Subscribers hereby agree as follows:
1. Closing
Date.
The
“Closing
Date”
shall
be the date that the Purchase Price is transmitted by wire transfer or otherwise
credited to or for the benefit of the Company. The consummation of the
transactions contemplated herein shall take place at the offices of Grushko
& Xxxxxxx, P.C., 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000,
upon the satisfaction or waiver of all conditions to closing set forth in this
Agreement. Subject to the satisfaction or waiver of the terms and conditions
of
this Agreement, on the Closing Date, each Subscriber shall purchase and the
Company shall sell to each Subscriber a Note in the Principal Amount designated
on the signature page hereto for the Purchase Price indicated thereon, and
Warrants as described in Section 2 of this Agreement.
2. Warrants.
On the
Closing Date, the Company will issue and deliver, in the aggregate, 500,000
Class A Warrants to the Subscribers. Two hundred and fifty thousand Class A
Warrant will be issued for each $85,000 of Purchase Price. The exercise price
to
acquire a Warrant Share upon exercise of a Class A Warrant shall be $0.18,
subject to reduction as described in the Class A Warrant. The Class A Warrants
shall be exercisable until five years after the issue date of the
Warrants.
3. Security
Interest.
On
or
about March 10, 2006, holder of promissory notes issued by the Company on that
date (“Prior
Subscribers”)
were
granted a security interest in assets of the Company. The security interest
was
memorialized in a Security Agreement dated March 10, 2006. The
Prior
Subscribers appointed a Collateral Agent to represent them collectively in
connection with the security interest. The appointment was pursuant to a
Collateral Agent Agreement. The Security Agreement is annexed hereto as
Exhibit
D.
The
Collateral Agent Agreement is annexed hereto as Exhibit
E.
The
Notes and all sums due under the Notes and the Transaction Documents (as defined
in Section 5(c) below) are included in the term “Obligations”
as
defined in the Security Agreement and are secured by the Collateral (as defined
in the Security Agreement) in the same manner and having the same priority
as
granted to the Prior Subscribers pursuant to the Security Agreements. The
Subscribers and the Prior Subscribers by their signatures on a “Consent
Agreement”
agree
that their interests in all Obligations are pari passu in proportion to their
relative Obligation amounts and of equal priority with each other. The
Subscribers and Prior Subscribers further agree that the Subscribers as of
the
Closing Date are parties to the Security Agreement and Collateral Agent
Agreement. The Subscribers and Prior Subscribers agree to execute such documents
and agreements as reasonably requested by the Company, Subscribers and Prior
Subscribers to memorialize the foregoing agreements, and hereby appoint the
Collateral Agent pursuant to the Collateral Agent. The Subscribers, Company
and
Prior Subscribers agree that the Collateral Agent Agreement dated as of March
10, 2006 is the Collateral Agent Agreement which shall govern the rights and
obligations of the Subscribers and Prior Subscribers in connection with the
Obligations and shall remain in full force and effect except as modified in
this
Agreement. The Company will execute all such documents reasonably necessary
in
the opinion of Subscribers to memorialize and further protect the security
interest described herein.
1
4. Subscriber's
Representations and Warranties.
Each
Subscriber hereby represents and warrants to and agrees with the Company only
as
to such Subscriber that:
(a) Organization
and Standing of the Subscribers.
If the
Subscriber is an entity, such Subscriber is a corporation, partnership or other
entity duly incorporated or organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or
organization.
(b) Authorization
and Power.
Each
Subscriber has the requisite power and authority to enter into and perform
this
Agreement and to purchase the Notes and Warrants being sold to it hereunder.
The
execution, delivery and performance of this Agreement by such Subscriber and
the
consummation by it of the transactions contemplated hereby and thereby have
been
duly authorized by all necessary corporate or partnership action, and no further
consent or authorization of such Subscriber or its Board of Directors,
stockholders, partners, members, as the case may be, is required. This Agreement
has been duly authorized, executed and delivered by Subscriber and constitutes,
or shall constitute when executed and delivered, a valid and binding obligation
of the Subscriber enforceable against the Subscriber in accordance with the
terms thereof.
(c) No
Conflicts.
The
execution, delivery and performance of this Agreement and the consummation
by
such Subscriber of the transactions contemplated hereby or relating hereto
do
not and will not (i) result in a violation of such Subscriber’s charter
documents or bylaws or other organizational documents or (ii) 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 or obligation to which such Subscriber is a party or by which its
properties or assets are bound, or result in a violation of any law, rule,
or
regulation, or any order, judgment or decree of any court or governmental agency
applicable to such Subscriber or its properties (except for such conflicts,
defaults and violations as would not, individually or in the aggregate, have
a
material adverse effect on such Subscriber). Such Subscriber is not required
to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or to purchase
the Securities in accordance with the terms hereof, provided that for purposes
of the representation made in this sentence, such Subscriber is assuming and
relying upon the accuracy of the relevant representations and agreements of
the
Company herein.
(d) Information
on Company.
The
Subscriber has been furnished with or has had access at the XXXXX Website of
the
Commission to the Company's Form SB-2 filed on November 13, 2006, as amended
thereafter and the financial statements included therein for the year ended
June
30, 2006, together with all subsequent filings made with the Commission
available at the XXXXX website (hereinafter referred to collectively as the
"Reports").
In
addition, the Subscriber has received in writing from the Company such other
information concerning its operations, financial condition and other matters
as
the Subscriber has requested in writing identified thereon as OTHER WRITTEN
INFORMATION (such other information is collectively, the "Other
Written Information"),
and
considered all factors the Subscriber deems material in deciding on the
advisability of investing in the Securities.
2
(e) Information
on Subscriber.
The
Subscriber is, and will be at the time of the exercise of the Warrants, an
"accredited
investor",
as
such term is defined in Regulation D promulgated by the Commission under the
1933 Act, is experienced in investments and business matters, has made
investments of a speculative nature and has purchased securities of United
States publicly-owned companies in private placements in the past and, with
its
representatives, has such knowledge and experience in financial, tax and other
business matters as to enable the Subscriber to utilize the information made
available by the Company to evaluate the merits and risks of and to make an
informed investment decision with respect to the proposed purchase, which
represents a speculative investment. The Subscriber has the authority and is
duly and legally qualified to purchase and own the Securities. The Subscriber
is
able to bear the risk of such investment for an indefinite period and to afford
a complete loss thereof. The information set forth on the signature page hereto
regarding the Subscriber is accurate.
(f) Purchase
of Notes and Warrants.
On the
Closing Date, the Subscriber will purchase the Notes, and Warrants as principal
for its own account for investment only and not with a view toward, or for
resale in connection with, the public sale or any distribution
thereof.
(g) Compliance
with Securities Act.
The
Subscriber understands and agrees that the Securities have not been registered
under the 1933 Act or any applicable state securities laws, by reason of their
issuance in a transaction that does not require registration under the 1933
Act
(based in part on the accuracy of the representations and warranties of
Subscriber contained herein), and that such Securities must be held indefinitely
unless a subsequent disposition is registered under the 1933 Act or any
applicable state securities laws or is exempt from such registration.
In
any
event, and subject to compliance with applicable securities laws, the Subscriber
may enter into lawful hedging transactions in the course of hedging the position
they assume and the Subscriber may also enter into lawful short positions or
other derivative transactions relating to the Securities, or interests in the
Securities, and deliver the Securities, or interests in the Securities, to
close
out their short or other positions or otherwise settle other transactions,
or
loan or pledge the Securities, or interests in the Securities, to third parties
that in turn may dispose of these Securities.
(h) Warrant
Shares Legend.
The
Warrant Shares shall bear the following or similar legend:
"THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW
OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO APRECIA, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
(i) Warrants
Legend.
The
Warrants shall bear the following or
similar legend:
"THIS
WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND
THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR ANY APPLICABLE
STATE
SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO APRECIA,
INC.
THAT SUCH REGISTRATION IS NOT REQUIRED."
3
(j) Note
Legend.
The
Note shall bear the following legend:
"THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THIS
NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO APRECIA, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
(k) Communication
of Offer.
The
offer to sell the Securities was directly communicated to the Subscriber by
the
Company. At no time was the Subscriber presented with or solicited by any
leaflet, newspaper or magazine article, radio or television advertisement,
or
any other form of general advertising or solicited or invited to attend a
promotional meeting otherwise than in connection and concurrently with such
communicated offer.
(l) Authority;
Enforceability.
This
Agreement and other agreements delivered together with this Agreement or in
connection herewith have been duly authorized, executed and delivered by the
Subscriber and are valid and binding agreements enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating
to
or affecting creditors’ rights generally and to general principles of equity;
and Subscriber has full corporate power and authority necessary to enter into
this Agreement and such other agreements and to perform its obligations
hereunder and under all other agreements entered into by the Subscriber relating
hereto.
(m) Restricted
Securities.
Subscriber understands that the Securities have not been registered under the
1933 Act and such Subscriber will not sell, offer to sell, assign, pledge,
hypothecate or otherwise transfer any of the Securities unless pursuant to
an
effective registration statement under the 1933 Act, or unless an exemption
from
registration is available. Notwithstanding anything to the contrary contained
in
this Agreement, such Subscriber may transfer (without restriction and without
the need for an opinion of counsel) the Securities to its Affiliates (as defined
below) provided that each such Affiliate is an “accredited investor” under
Regulation D and such Affiliate agrees to be bound by the terms and conditions
of this Agreement. For the purposes of this Agreement, an “Affiliate”
of
any
person or entity means any other person or entity directly or indirectly
controlling, controlled by or under direct or indirect common control with
such
person or entity. Affiliate includes each subsidiary of the Company. For
purposes of this definition, “control”
means
the power to direct the management and policies of such person or firm, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise.
(n) No
Governmental Review.
Each
Subscriber understands that no United States federal or state agency or any
other governmental or state agency has passed on or made recommendations or
endorsement of the Securities or the suitability of the investment in the
Securities nor have such authorities passed upon or endorsed the merits of
the
offering of the Securities.
(o) Correctness
of Representations.
Each
Subscriber represents as to such Subscriber that the foregoing representations
and warranties are true and correct as of the date hereof and, unless a
Subscriber otherwise notifies the Company prior to the Closing Date shall be
true and correct as of the Closing Date.
4
(p) Survival.
The
foregoing representations and warranties shall survive the Closing Date for
a
period of three years.
5. Company
Representations and Warranties.
The
Company represents and warrants to and agrees with each Subscriber
that:
(a) Due
Incorporation.
The
Company is a corporation or other entity duly incorporated or organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has the requisite corporate power to own
its
properties and to carry on its business as presently
conducted. The Company is duly qualified as a foreign corporation to do business
and is in good standing in each jurisdiction where the nature of the business
conducted or property owned by it makes such qualification necessary, other
than
those jurisdictions in which the failure to so qualify would not have a Material
Adverse Effect. For purposes of this Agreement, a “Material
Adverse Effect”
shall
mean a material adverse effect on the financial condition, results of
operations, properties or business of the Company and its Subsidiaries taken
as
a whole. For purposes of this Agreement, “Subsidiary”
means,
with respect to any entity at any date, any corporation, limited or general
partnership, limited liability company, trust, estate, association, joint
venture or other business entity of which more than 30% of (i) the
outstanding capital stock having (in the absence of contingencies) ordinary
voting power to elect a majority of the board of directors or other managing
body of such entity, (ii) in the case of a partnership or limited liability
company, the interest in the capital or profits of such partnership or limited
liability company or (iii) in the case of a trust, estate, association,
joint venture or other entity, the beneficial interest in such trust, estate,
association or other entity business is, at the time of determination, owned
or
controlled directly or indirectly through one or more intermediaries, by such
entity. As of the Closing Date, the Company will not have any
Subsidiaries.
(b) Outstanding
Stock.
All
issued and outstanding shares of capital stock of the Company has been duly
authorized and validly issued and are fully paid and
non-assessable.
(c) Authority;
Enforceability.
This
Agreement, the Note, the Warrants, Security Agreement, Collateral Agent
Agreement, the Escrow Agreement, and any other agreements delivered together
with this Agreement or in connection herewith (collectively “Transaction
Documents”)
have
been duly authorized, executed and delivered by the Company and are valid and
binding agreements of the Company enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity. The Company
has
full corporate power and authority necessary to enter into and deliver the
Transaction Documents and to perform its obligations thereunder.
(d) Additional
Issuances.
There
are
no outstanding agreements or preemptive or similar rights affecting the
Company's common stock or equity and no outstanding rights, warrants or options
to acquire, or instruments convertible into or exchangeable for, or agreements
or understandings with respect to the sale or issuance of any shares of common
stock or equity of the Company or Subsidiaries or other equity interest in
the
Company except as described on Schedule
5(d).
The
Common Stock of the Company on a fully diluted basis outstanding as of the
last
Business Day preceding the Closing Date is set forth on Schedule
5(d).
(e) Consents.
No
consent, approval, authorization or order of any court, governmental agency
or
body or arbitrator having jurisdiction over the Company, or any of its
Affiliates, the OTC Bulletin Board (the “Bulletin
Board”)
nor
the Company's shareholders is required for the execution by the Company of
the
Transaction Documents and compliance and performance by the Company of its
obligations under the Transaction Documents, including, without limitation,
the
issuance and sale of the Securities. The Transaction Documents and the Company’s
performance of its obligations thereunder has been approved unanimously by
the
Company’s directors.
5
(f) No
Violation or Conflict.
Assuming the representations and warranties of the Subscribers in Section 4
are
true and correct, neither the issuance and sale of the Securities nor the
performance of the Company’s obligations under this Agreement and all other
agreements entered into by the Company relating thereto by the Company
will:
(i) violate,
conflict with, result in a breach of, or constitute a default (or an event
which
with the giving of notice or the lapse of time or both would be reasonably
likely to constitute a default) under (A) the articles or certificate of
incorporation, charter or bylaws of the Company, (B) to the Company's knowledge,
any decree, judgment, order, law, treaty, rule, regulation or determination
applicable to the Company of any court, governmental agency or body, or
arbitrator having jurisdiction over the Company or over the properties or assets
of the Company or any of its Affiliates, (C) the terms of any bond, debenture,
note or any other evidence of indebtedness, or any agreement, stock option
or
other similar plan, indenture, lease, mortgage, deed of trust or other
instrument to which the Company or any of its Affiliates is a party, by which
the Company or any of its Affiliates is bound, or to which any of the properties
of the Company or any of its Affiliates is subject, or (D) the terms of any
"lock-up" or similar provision of any underwriting or similar agreement to
which
the Company, or any of its Affiliates is a party except the violation, conflict,
breach, or default of which would not have a Material Adverse Effect;
or
(ii) result
in
the creation or imposition of any lien, charge or encumbrance upon the
Securities or any of the assets of the Company or any of its Affiliates except
as described herein; or
(iii) result
in
the activation of any anti-dilution rights or a reset or repricing of any debt
or security instrument of any other creditor or equity holder of the Company,
nor result in the acceleration of the due date of any obligation of the Company;
or
(iv) result
in
the triggering of any piggy-back registration rights of any person or entity
holding securities of the Company or having the right to receive securities
of
the Company.
(g) The
Securities.
The
Securities upon issuance:
(i) are,
or
will be, free and clear of any security interests, liens, claims or other
encumbrances, subject to restrictions upon transfer under the 1933 Act and
any
applicable state securities laws;
(ii) have
been, or will be, duly and validly authorized and on the date of issuance of
the
Warrant Shares upon exercise of the Warrants will be duly and validly issued,
fully paid and non-assessable and if registered pursuant to the 1933 Act and
resold pursuant to an effective registration statement will be free trading
and
unrestricted;
(iii) will
not
have been issued or sold in violation of any preemptive or other similar rights
of the holders of any securities of the Company;
(iv) will
not
subject the holders thereof to personal liability by reason of being such
holders; and
(v) assuming
the representations warranties of the Subscribers as set forth in Section 4
hereof are true and correct, will not result in a violation of Section 5 under
the 1933 Act.
(h) Litigation.
There
is no pending or, to the best knowledge of the Company, threatened action,
suit,
proceeding or investigation before any court, governmental agency or body,
or
arbitrator having jurisdiction over the Company, or any of its Affiliates that
would affect the execution by the Company or the performance by the Company
of
its obligations under the Transaction Documents. There is no pending or, to
the
best knowledge of the Company, basis for or threatened action, suit, proceeding
or investigation before any court, governmental agency or body, or arbitrator
having jurisdiction over the Company, or any of its Affiliates which litigation
if adversely determined would have a Material Adverse Effect.
6
(i) No
Market Manipulation.
The
Company and its Affiliates have not taken, and will not take, directly or
indirectly, any action designed to, or that might reasonably be expected to,
cause or result in stabilization or manipulation of the price of the Common
Stock to
facilitate the sale or resale of the Securities or affect the price at which
the
Securities may be issued or resold.
(j) Information
Concerning Company.
The
Reports and Other Written Information contain all material information relating
to the Company and its operations and financial condition as of their respective
dates which information is required to be disclosed therein. Since the date
of
the financial statements included in the Reports, and except as modified in
the
Other Written Information or in the Schedules hereto, there has been no Material
Adverse Event relating to the Company's business, financial condition or affairs
not disclosed in the Reports. The Reports and Other Written Information do
not
contain any 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,
taken
as a whole, not misleading in light of the circumstances when made.
(k) Stop
Transfer.
The
Company will not issue any stop transfer order or other order impeding the
sale,
resale or delivery of any of the Securities, except as may be required by any
applicable federal or state securities laws and unless contemporaneous notice
of
such instruction is given to the Subscriber.
(l) Defaults.
The
Company is not in violation of its articles of incorporation or bylaws. The
Company is (i) not in default under or in violation of any other material
agreement or instrument to which it is a party or by which it or any of its
properties are bound or affected, which default or violation would have a
Material Adverse Effect,
(ii)
not in default with respect to any order of any court, arbitrator or
governmental body or subject to or party to any order of any court or
governmental authority arising out of any action, suit or proceeding under
any
statute or other law respecting antitrust, monopoly, restraint of trade, unfair
competition or similar matters, or (iii) to the Company’s knowledge not in
violation of any statute, rule or regulation of any governmental authority
which
violation would have a Material Adverse Effect.
(m) No
Integrated Offering.
Neither
the Company, nor any of its Affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales of any security
or
solicited any offers to buy any security under circumstances that would cause
the offer of the Securities pursuant to this Agreement to be integrated with
prior offerings by the Company for purposes of the 1933 Act or any applicable
stockholder approval provisions, including, without limitation, under the rules
and regulations of the OTC Bulletin Board (“Bulletin
Board”)
which
would impair the exemptions relied upon in this Offering or the Company’s
ability to timely comply with its obligations hereunder. Nor will the Company
nor any of its Affiliates take any action or steps that would cause the offer
or
issuance of the Securities to be integrated with other offerings which would
impair the exemptions relied upon in this Offering or the Company’s ability to
timely comply with its obligations hereunder. The Company will not conduct
any
offering other than the transactions contemplated hereby that will be integrated
with the offer or issuance of the Securities, which would impair the exemptions
relied upon in this Offering or the Company’s ability to timely comply with its
obligations hereunder.
(n) No
General Solicitation.
Neither
the Company, nor any of its Affiliates, nor to its knowledge, any person acting
on its or their behalf, has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D under the 0000 Xxx)
in
connection with the offer or sale of the Securities.
(o) No
Undisclosed Liabilities.
The
Company has no liabilities or obligations which are material, individually
or in
the aggregate, which are not disclosed in the Reports and Other Written
Information, other than those incurred in the ordinary course of the Company
businesses since June 30, 2006 and which, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect,
except
as disclosed on Schedule
5(o).
7
(p) No
Undisclosed Events or Circumstances.
Since
June 30, 2006, no event or circumstance has occurred or exists with respect
to
the Company or its businesses, properties, operations or financial condition,
that, under applicable law, rule or regulation, requires public disclosure
or
announcement prior to the date hereof by the Company but which has not been
so
publicly announced or disclosed in the Reports.
(q) Capitalization.
The
authorized and outstanding capital stock of the Company as of the date of this
Agreement and the Closing Date (not including the Securities) are set forth
on
Schedule
5(d).
Except
as set forth on Schedule
5(d),
there
are no options, warrants, or rights to subscribe to, securities, rights or
obligations convertible into or exchangeable for or giving any right to
subscribe for any shares of capital stock of the Company or any of its
Subsidiaries. All of the outstanding shares of Common Stock of the Company
have
been duly and validly authorized and issued and are fully paid and
non-assessable.
(r) Dilution.
The
Company's executive officers and directors understand the nature of the
Securities being sold hereby and recognize that the issuance of the Securities
will have a potential dilutive effect on the equity holdings of other holders
of
the Company’s equity or rights to receive equity of the Company. The board of
directors of the Company has concluded, in its good faith business judgment
that
the issuance of the Securities is in the best interests of the Company. The
Company specifically acknowledges that its obligation to issue the Warrant
Shares upon exercise of the Warrants, is binding upon the Company and
enforceable regardless of the dilution such issuance may have on the ownership
interests of other shareholders of the Company or parties entitled to receive
equity of the Company.
(s) No
Disagreements with Accountants and Lawyers.
There
are no disagreements of any kind presently existing, or reasonably anticipated
by the Company to arise, between the Company and the accountants and lawyers
formerly or presently employed by the Company, including but not limited to
disputes or conflicts over payment owed to such accountants and lawyers, nor
have there been any such disagreements during the two years prior to the Closing
Date.
(t) Investment
Company.
Neither
the Company nor any Affiliate of the Company is an “investment company” within
the meaning of the Investment Company Act of 1940, as amended.
(u) Foreign
Corrupt Practices.
Neither
the Company, nor to the knowledge of the Company, any agent or other person
acting on behalf of the Company, has (i) directly or indirectly, used any funds
for unlawful contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from corporate funds, (iii)
failed to disclose fully any contribution made by the Company (or made by any
person acting on its behalf of which the Company is aware) which is in violation
of law, or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
(v) Reporting
Company.
The
Company is a publicly-held company subject to reporting obligations pursuant
to
Section 13 of the Securities Exchange Act of 1934, as amended (the "1934
Act")
and
has a class of common stock registered pursuant to Section 12(g) of the 1934
Act. Pursuant to the provisions of the 1934 Act, the Company has timely filed
all reports and other materials required to be filed thereunder with the
Commission during the preceding twelve months.
(w) Listing.
The
Company's common stock is quoted on the Bulletin Board. The Company has not
received any oral or written notice that its common stock is not eligible nor
will become ineligible for quotation on the Bulletin Board nor that its common
stock does not meet all requirements for the continuation of such quotation.
The
Company satisfies all the requirements for the continued quotation of its common
stock on the Bulletin Board.
8
(x) DTC
Status.
The
Company’s transfer agent is a participant in and the Common Stock is eligible
for transfer pursuant to the Depository Trust Company Automated Securities
Transfer Program. The name, address, telephone number, fax number, contact
person and email address of the Company transfer agent is set forth on
Schedule
5(y)
hereto.
(y) Correctness
of Representations.
The
Company represents that the foregoing representations and warranties are true
and correct as of the date hereof in all material respects, and, unless the
Company otherwise notifies the Subscribers prior to the Closing Date, shall
be
true and correct in all material respects as of the Closing Date.
(z) Survival.
The
foregoing representations and warranties shall survive the Closing Date for
a
period of three years.
6. Regulation
D Offering.
The
offer and issuance of the Securities to the Subscribers is being made pursuant
to the exemption from the registration provisions of the 1933 Act afforded
by
Section 4(2) or Section 4(6) of the 1933 Act and/or Rule 506 of Regulation
D
promulgated thereunder. On the Closing Date, the Company will provide an opinion
reasonably acceptable to Subscriber from the Company's legal counsel opining
on
the availability of an exemption from registration under the 1933 Act as it
relates to the offer and issuance of the Securities and other matters reasonably
requested by Subscribers. A form of the legal opinion is annexed hereto as
Exhibit
F.
The
Company will provide, at the Company's expense, such other legal opinions in
the
future as are reasonably necessary for the issuance and resale of the Common
Stock issuable upon exercise of the Warrants pursuant to an effective
registration statement, Rule 144 under the 1933 Act or an exemption from
registration.
7. Broker’s
Fee.
The
Company on the one hand, and each Subscriber (for himself only) on the other
hand, agree to indemnify the other against and hold the other harmless from
any
and all liabilities to any persons claiming brokerage commissions or finder’s
fees on account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby or in connection with any investment in the Company at
any
time, whether or not such investment was consummated and arising out of such
party’s actions. The Company represents that there are no other parties entitled
to receive fees, commissions, or similar payments in connection with the
Offering except Palladium Capital Advisors, LLC (“Broker”)
as
more fully described on Schedule
7.
The
Broker is a non-exclusive broker in connection with the Offering.
8. Subscriber’s
Legal Fees.
The
Company shall pay to Grushko & Xxxxxxx, P.C., a fee of $20,000
(“Subscriber’s
Legal Fees”)
as
reimbursement for services rendered to the Subscribers in connection with this
Agreement and the purchase and sale of the Notes and Warrants (the “Offering”).
The
Subscriber’s Legal Fees will be payable out of funds held pursuant to the Escrow
Agreement. Grushko & Xxxxxxx, P.C. will be reimbursed at Closing for all UCC
searches, filing fees, and estimated printing and shipping costs for the closing
statements to be delivered to Subscribers.
9. Covenants
of the Company.
The
Company covenants and agrees with the Subscribers as follows:
(a) Stop
Orders.
The
Company will advise the Subscribers, within twenty-four hours after it receives
notice of issuance by the Commission, any state securities commission or any
other regulatory authority of any stop order or of any order preventing or
suspending any offering of any securities of the Company, or of the suspension
of the qualification of the Common Stock of the Company for offering or sale
in
any jurisdiction, or the initiation of any proceeding for any such
purpose.
9
(b) Listing/Quotation.
The
Company shall promptly secure the quotation or listing of the Warrant Shares
upon each national securities exchange, or automated quotation system upon
which
they are or become eligible for quotation or listing (subject to official notice
of issuance) and shall maintain same so long as any Warrants are outstanding.
The Company will maintain the quotation or listing of its Common Stock on the
American Stock Exchange, Nasdaq Capital Market, Nasdaq Global Market, Nasdaq
Global Select Market, Bulletin Board, or New York Stock Exchange (whichever
of
the foregoing is at the time the principal trading exchange or market for the
Common Stock (the “Principal
Market”)),
and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market, as applicable.
The Company will provide the Subscribers copies of all notices it receives
notifying the Company of the threatened and actual delisting of the Common
Stock
from any Principal Market. As of the date of this Agreement and the Closing
Date, the Bulletin Board is and will be the Principal Market.
(c) Market
Regulations.
The
Company shall notify the Commission, the Principal Market and applicable state
authorities, in accordance with their requirements, of the transactions
contemplated by this Agreement, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Securities to the
Subscribers and promptly provide copies thereof to Subscriber.
(d) Filing
Requirements.
From
the
date of this Agreement and until the last to occur of (i) two (2) years after
the Closing Date, (ii) until all the Warrant Shares have been resold or
transferred by all the Subscribers pursuant to the Registration Statement or
pursuant to Rule 144, without regard to volume limitations or (iii) the Notes
are no longer outstanding (the date of occurrence of the first such event being
the “End
Date”),
the
Company will (A) cause its Common Stock to be registered under Section 12(b)
or
12(g) of the 1934 Act, (B) comply in all respects with its reporting and filing
obligations under the 1934 Act, (C) voluntarily comply with all reporting
requirements that are applicable to an issuer with a class of shares registered
pursuant to Section 12(g) of the 1934 Act, if Company is not subject to such
reporting requirements, and (D) comply with all requirements related to any
registration statement filed pursuant to this Agreement. The Company will use
its best efforts not to take any action or file any document (whether or not
permitted by the 1933 Act or the 1934 Act or the rules thereunder) to terminate
or suspend such registration or to terminate or suspend its reporting and filing
obligations under said acts until the End Date. Until the End Date, the Company
will continue the listing or quotation of the Common Stock on a Principal Market
and will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market. The Company
agrees to timely file a Form D with respect to the Securities if required under
Regulation D and to provide a copy thereof to each Subscriber promptly after
such filing.
(e) Use
of
Proceeds.
The
proceeds of the Offering must be employed by the Company for the purposes set
forth on Schedule
9(e)
hereto.
Except as set forth on Schedule
9(e),
the
Purchase Price may not and will not be used for accrued and unpaid officer
and
director salaries, payment of financing related debt, redemption of outstanding
notes or equity instruments of the Company nor non-trade obligations outstanding
on a Closing Date. For so long as any Notes are outstanding, the Company will
not prepay any financing related debt obligations nor redeem any equity
instruments of the Company.
(f) Reservation.
Prior
to the Closing, the Company undertakes to reserve, pro rata,
on
behalf of each holder of a Warrant, from its authorized but unissued common
stock, the
amount of Warrant Shares issuable upon exercise of the Warrants. Failure to
have
sufficient shares reserved pursuant to this Section 9(f) at any time shall
be a
material default of the Company’s obligations under this Agreement and an Event
of Default under the Note.
(g) Taxes.
From
the date of this Agreement and until the End Date, the Company will promptly
pay
and discharge, or cause to be paid and discharged, when due and payable, all
lawful taxes, assessments and governmental charges or levies imposed upon the
income, profits, property or business of the Company; provided, however, that
any such tax, assessment, charge or levy need not be paid if the validity
thereof shall currently be contested in good faith by appropriate proceedings
and if the Company shall have set aside on its books adequate reserves with
respect thereto, and provided, further, that the Company will pay all such
taxes, assessments, charges or levies forthwith upon the commencement of
proceedings to foreclose any lien which may have attached as security
therefore.
10
(h) Insurance.
From
the date of this Agreement and until the End Date, the Company will keep its
assets which are of an insurable character insured by financially sound and
reputable insurers against loss or damage by fire, explosion and other risks
customarily insured against by companies in the Company’s line of business, in
amounts sufficient to prevent the Company from becoming a co-insurer and not
in
any event less than one hundred percent (100%) of the insurable value of the
property insured less reasonable deductible amounts; and the Company will
maintain, with financially sound and reputable insurers, insurance against
other
hazards and risks and liability to persons and property to the extent and in
the
manner customary for companies in similar businesses similarly situated and
to
the extent available on commercially reasonable terms.
(i) Books
and Records.
From the
date of this Agreement and until the End Date, the Company will keep true
records and books of account in which full, true and correct entries will be
made of all dealings or transactions in relation to its business and affairs
in
accordance with generally accepted accounting principles applied on a consistent
basis.
(j) Governmental
Authorities.
From the
date of this Agreement and until the End Date, the Company shall duly observe
and conform in all material respects to all valid requirements of governmental
authorities relating to the conduct of its business or to its properties or
assets.
(k) Intellectual
Property.
From
the date of this Agreement and until the End Date, the Company shall maintain
in
full force and effect its corporate existence, rights and franchises and all
licenses and other rights to use intellectual property owned or possessed by
it
and reasonably deemed to be necessary to the conduct of its business, unless
it
is sold for value.
(l) Properties.
From the
date of this Agreement and until the End Date, the Company will keep its
properties in good repair, working order and condition, reasonable wear and
tear
excepted, and from time to time make all necessary and proper repairs, renewals,
replacements, additions and improvements thereto; and the Company will at all
times comply with each provision of all leases to which it is a party or under
which it occupies property if the breach of such provision could reasonably
be
expected to have a Material Adverse Effect.
(m) Confidentiality/Public
Announcement.
From the
date of this Agreement and until the End Date, the Company agrees that except
in
connection with a Form 8-K, it will not disclose publicly or privately the
identity of the Subscribers unless expressly agreed to in writing by a
Subscriber or only to the extent required by law and then only upon five days
prior notice to Subscriber. In any event and subject to the foregoing, the
Company undertakes to file a Form 8-K or make a public announcement describing
the Offering not later than the first business day after the Closing Date.
In
the Form 8-K or public announcement, the Company will specifically disclose
the
amount of common stock outstanding immediately after the Closing.
(n) Non-Public
Information.
The
Company covenants and agrees that except for the Reports, Other Written
Information and schedules and exhibits to this Agreement, which information
thereon will be publicly disclosed not later than the Actual Effective date,
neither it nor any other person acting on its behalf will at any time provide
any Subscriber or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto
such
Subscriber shall have agreed in writing to receive such information. The Company
understands and confirms that each Subscriber shall be relying on the foregoing
representations in effecting transactions in securities of the
Company.
11
(o) Negative
Covenants.
So long
as a Note is outstanding, without the consent of the Subscriber, the Company
will not and will not permit any of its Subsidiaries to directly or
indirectly:
(i) create,
incur, assume or suffer to exist any pledge, hypothecation, assignment, deposit
arrangement, lien, charge, claim, security interest, security title, mortgage,
security deed or deed of trust, easement or encumbrance, or preference, priority
or other security agreement or preferential arrangement of any kind or nature
whatsoever (including any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing,
and
the filing of, or agreement to give, any financing statement perfecting a
security interest under the Uniform Commercial Code or comparable law of any
jurisdiction) (each, a “Lien”)
upon
any of its property, whether now owned or hereafter acquired except for: (i)
the
Excepted Issuances (as defined in Section 12 hereof, (ii) (a) Liens imposed
by
law for taxes that are not yet due or are being contested in good faith and
for
which adequate reserves have been established in accordance with generally
accepted accounting principles; (b) carriers’, warehousemen’s, mechanics’,
material men’s, repairmen’s and other like Liens imposed by law, arising in the
ordinary course of business and securing obligations that are not overdue by
more than 30 days or that are being contested in good faith and by appropriate
proceedings; (c) pledges and deposits made in the ordinary course of business
in
compliance with workers’ compensation, unemployment insurance and other social
security laws or regulations; (d) deposits to secure the performance of bids,
trade contracts, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case in the
ordinary course of business; (e) Liens created with respect to the financing
of
the purchase of new property in the ordinary course of the Company’s business up
to the amount of the purchase price of such property; (f) easements, zoning
restrictions, rights-of-way and similar encumbrances on real property imposed
by
law or arising in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the value of the
affected property, and (g) as disclosed on Schedule
9(o)
hereto
(each of (a) through (g), a “Permitted
Lien”)
and
(iii) indebtedness for borrowed money which is not senior or pari passu in
right
of payment to the payment of the Notes;
(ii) amend
its
certificate of incorporation, bylaws or its charter documents so as to adversely
affect any rights of the Subscriber;
(iii) repay,
repurchase or offer to repay, repurchase or otherwise acquire or make any
dividend or distribution in respect of any of its Common Stock, preferred stock,
or other equity securities other than to the extent permitted or required under
the Transaction Documents;
(iv) engage
in
any transactions with any officer, director, employee or any Affiliate of the
Company, including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest
or
is an officer, director, trustee or partner, in each case in excess of $25,000
other than (i) for payment of salary or consulting fees for services rendered,
(ii) reimbursement for expenses incurred on behalf of the Company, (iii) as
set
forth in the Use of Proceeds Schedule
9(e)
attached
hereto and (iv) for other employee benefits, including stock option agreements
under any stock option plan of the Company; or
(v) prepay
or
redeem any financing related debt or past due obligations outstanding as of
the
Closing Date.
(p) Offering
Restrictions.
For so
long as the Notes are outstanding, except for the Excepted Issuances, the
Company will not enter into any equity line of credit or similar agreement,
nor
issue nor agree to issue any floating or variable priced equity linked
instruments nor any of the foregoing or equity with price reset rights.
The
only
officer, director, employee and consultant stock option or stock incentive
plan
currently in effect or contemplated by the Company is described on Schedule
5(d).
No
other plan will be adopted nor may any options or equity not included in such
plan be issued for so long as any sum is outstanding under the
Notes.
12
(q) Limited
Standstill.
The
Company will deliver to the Subscribers on or before the Closing Date and
enforce the provisions of an irrevocable lockup agreement (“Lockup
Agreement”)
in the
form annexed hereto as Exhibit
G,
with
the Chief Executive Officer of the Company.
(r) Seniority.
Except
for Permitted Liens and as otherwise provided for herein, until the Notes are
fully satisfied or converted, the Company shall not grant nor allow any security
interest to be taken in the assets of the Company or any Subsidiary; nor issue
any debt, equity or other instrument which would give the holder thereof
directly or indirectly, a right in any assets of the Company or any Subsidiary,
superior to any right of the Note holder in or to such assets.
(s) DTC
Program.
At all
times that Warrants are outstanding, the Company will employ as the transfer
agent for the Common Stock and Warrant Shares a participant in the Depository
Trust Company Automated Securities Transfer Program.
10. Covenants
of the Company and Subscriber Regarding Indemnification.
(a) The
Company agrees to indemnify, hold harmless, reimburse and defend the
Subscribers, the Subscribers' officers, directors, agents, Affiliates, control
persons, and principal shareholders, against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of
any
nature, incurred by or imposed upon the Subscriber or any such person which
results, arises out of or is based upon (i) any material misrepresentation
by
Company or breach of any warranty by Company in this Agreement or in any
Exhibits or Schedules attached hereto, or other agreement delivered pursuant
hereto; or (ii) after any applicable notice and/or cure periods, any breach
or
default in performance by the Company of any covenant or undertaking to be
performed by the Company hereunder, or any other agreement entered into by
the
Company and Subscriber relating hereto.
(b) Each
Subscriber agrees to indemnify, hold harmless, reimburse and defend the Company
and each of the Company’s officers, directors, agents, Affiliates, control
persons against any claim, cost, expense, liability, obligation, loss or damage
(including reasonable legal fees) of any nature, incurred by or imposed upon
the
Company or any such person which results, arises out of or is based upon (i)
any
material misrepresentation by such Subscriber in this Agreement or in any
Exhibits or Schedules attached hereto, or other agreement delivered pursuant
hereto; or (ii) after any applicable notice and/or cure periods, any breach
or
default in performance by such Subscriber of any covenant or undertaking to
be
performed by such Subscriber hereunder, or any other agreement entered into
by
the Company and Subscribers, relating hereto.
(c) In
no
event shall the liability of any Subscriber or permitted successor hereunder
or
under any Transaction Document or other agreement delivered in connection
herewith be greater in amount than the dollar amount of the net proceeds
actually received by such Subscriber upon the sale of Registrable Securities
(as
defined herein).
(d) The
procedures set forth in Section 11.6 shall apply to the indemnification set
forth in Sections 10(a) and 10(b) above.
11.1. Registration
Rights.
The
Company hereby grants the following registration rights to holders of the
Securities. If the Company at any time proposes to register any of its
securities under the 1933 Act for sale to the public, whether for its own
account or for the account of other security holders or both, except with
respect to registration statements on Forms X-0, X-0 or another form not
available for registering the Warrant Shares and the other shares of Common
Stock held by or purchaseable by Subscriber as set forth on Schedule
11.1
(“Registrable
Securities”)
for
sale to the public, provided the Registrable Securities are not otherwise
registered for resale by the Subscribers or Holder pursuant to an effective
registration statement, each such time it will give at least fifteen (15) days'
prior written notice to the record holder of the Registrable Securities of
its
intention so to do. Upon the written request of the holder, received by the
Company within ten (10) days after the giving of any such notice by the Company,
to register any of the Registrable Securities not previously registered, the
Company will cause such Registrable Securities as to which registration shall
have been so requested to be included with the securities to be covered by
the
registration statement proposed to be filed by the Company, all to the extent
required to permit the sale or other disposition of the Registrable Securities
so registered by the holder of such Registrable Securities (the “Seller”
or
“Sellers”).
Unless instructed in writing to the contrary, the Subscribers hereby
automatically exercise the registration rights granted in this Section 11.1.
The
Seller is hereby given the same rights and benefits as any other party
identified in such registration. In the event that any registration pursuant
to
this Section 11.1 shall be, in whole or in part, an underwritten public offering
of common stock of the Company, the number of shares of Registrable Securities
to be included in such an underwriting may be reduced by the managing
underwriter if and to the extent that the Company and the underwriter shall
reasonably be of the opinion that such inclusion would adversely affect the
marketing of the securities to be sold by the Company therein; provided,
however, that the Company shall notify the Seller in writing of any such
reduction. Notwithstanding the foregoing provisions, or Section 11.4 hereof,
the
Company may withdraw or delay or suffer a delay of any registration statement
referred to in this Section 11.1 without thereby incurring any liability to
the
Seller due to such withdrawal or delay.
13
11.2. Registration
Procedures.
If and
whenever the Company is required by the provisions of Section 11.1 to effect
the
registration of any Registrable Securities under the 1933 Act, the Company
will,
as expeditiously as possible:
(a) subject
to the timelines provided in this Agreement, prepare and file with the
Commission a registration statement required by Section 11, with respect to
such
securities and use its best efforts to cause such registration statement to
become and remain effective for the period of the distribution contemplated
thereby (determined as herein provided), promptly provide to the holders of
the
Registrable Securities copies of all filings and Commission letters of comment
and notify Subscribers (by telecopier and by e-mail addresses provided by
Subscribers) and Grushko & Xxxxxxx, P.C. (by telecopier and by email to
Xxxxxxxxx@xxx.xxx)
on or
before the first business day thereafter that the Company receives notice that
(i) the Commission has no comments or no further comments on the Registration
Statement, and (ii) the registration statement has been declared effective
(failure to timely provide notice as required by this Section 11.2(a) shall
be a
material breach of the Company’s obligation and an Event of Default as defined
in the Notes and a Non-Registration Event as defined in Section 11.4 of this
Agreement);
(b) prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may
be
necessary to keep such registration statement effective until such registration
statement has been effective for a period of two (2) years, and comply with
the
provisions of the 1933 Act with respect to the disposition of all of the
Registrable Securities covered by such registration statement in accordance
with
the Sellers’ intended method of disposition set forth in such registration
statement for such period;
(c) furnish
to the Sellers, at the Company’s expense, such number of copies of the
registration statement and the prospectus included therein (including each
preliminary prospectus) as such persons reasonably may request in order to
facilitate the public sale or their disposition of the securities covered by
such registration statement or make them electronically available;
(d) use
its
commercially reasonable best efforts to register or qualify the Registrable
Securities covered by such registration statement under the securities or “blue
sky” laws of New York and such jurisdictions as the Sellers shall request in
writing, provided, however, that the Company shall not for any such purpose
be
required to qualify generally to transact business as a foreign corporation
in
any jurisdiction where it is not so qualified or to consent to general service
of process in any such jurisdiction;
14
(e) if
applicable, list the Registrable Securities covered by such registration
statement with any securities exchange on which the Common Stock of the Company
is then listed;
(f) notify
the Subscribers within two hours of the Company’s becoming aware that a
prospectus relating thereto is required to be delivered under the 1933 Act,
of
the happening of any event of which the Company has knowledge as a result of
which the prospectus contained in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing or which
becomes subject to a Commission, state or other governmental order suspending
the effectiveness of the registration statement covering any of the Registrable
Securities;
(g) provided
same would not be in violation of the provision of Regulation FD under the
1934
Act, make available for inspection by the Sellers, and any attorney, accountant
or other agent retained by the Seller or underwriter, all publicly available,
non-confidential financial and other records, pertinent corporate documents
and
properties of the Company, and cause the Company's officers, directors and
employees to supply all publicly available, non-confidential information
reasonably requested by the seller, attorney, accountant or agent in connection
with such registration statement; and
(h) provide
to the Sellers copies of the Registration Statement and amendments thereto
five
business days prior to the filing thereof with the Commission.
11.3. Provision
of Documents.
In
connection with each registration described in this Section 11, each Seller
will
furnish to the Company in writing such information and representation letters
with respect to itself and the proposed distribution by it as reasonably shall
be necessary in order to assure compliance with federal and applicable state
securities laws.
11.4. Non-Registration
Events.
The
Company and the Subscribers agree that the Sellers will suffer damages if the
Company does not comply with its obligations set forth in Section
11.1.
11.5. Expenses.
All
expenses incurred by the Company in complying with Section 11, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel and independent public accountants for the Company,
fees and expenses (including reasonable counsel fees) incurred in connection
with complying with state securities or “blue sky” laws, fees of the National
Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents
and registrars, costs of insurance and fee of one counsel for all Sellers are
called “Registration
Expenses.”
All
underwriting discounts and selling commissions applicable to the sale of
Registrable Securities, including any fees and disbursements of any additional
counsel to the Seller, are called "Selling
Expenses."
The
Company will pay all Registration Expenses in connection with the registration
statement under Section 11. Selling Expenses in connection with each
registration statement under Section 11 shall be borne by the Seller and may
be
apportioned among the Sellers in proportion to the number of shares sold by
the
Seller relative to the number of shares sold under such registration statement
or as all Sellers thereunder may agree.
11.6. Indemnification
and Contribution.
(a) In
the
event of a registration of any Registrable Securities under the 1933 Act
pursuant to Section 11, the Company will, to the extent permitted by law,
indemnify and hold harmless the Seller, each officer of the Seller, each
director of the Seller, each underwriter of such Registrable Securities
thereunder and each other person, if any, who controls such Seller or
underwriter within the meaning of the 1933 Act, against any losses, claims,
damages or liabilities, joint or several, to which the Seller, or such
underwriter or controlling person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Registrable Securities were registered under the 1933 Act
pursuant to Section 11, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances when made, and will subject to the provisions
of
Section 11.6(c) reimburse the Seller, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable
to
the Seller to the extent that any such damages arise out of or are based upon
an
untrue statement or omission made in any preliminary prospectus if (i) the
Seller failed to send or deliver a copy of the final prospectus delivered by
the
Company to the Seller with or prior to the delivery of written confirmation
of
the sale by the Seller to the person asserting the claim from which such damages
arise, (ii) the final prospectus would have corrected such untrue statement
or
alleged untrue statement or such omission or alleged omission, or (iii) to
the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by any such Seller,
or
any such controlling person in writing specifically for use in such registration
statement or prospectus.
15
(b) In
the
event of a registration of any of the Registrable Securities under the 1933
Act
pursuant to Section 11, each Seller severally but not jointly will, to the
extent permitted by law, indemnify and hold harmless the Company, and each
person, if any, who controls the Company within the meaning of the 1933 Act,
each officer of the Company who signs the registration statement, each director
of the Company, each underwriter and each person who controls any underwriter
within the meaning of the 1933 Act, against all losses, claims, damages or
liabilities, joint or several, to which the Company or such officer, director,
underwriter or controlling person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration statement
under which such Registrable Securities were registered under the 1933 Act
pursuant to Section 11, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Company and each such officer, director, underwriter
and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, however, that the Seller will be liable hereunder
in any such case if and only to the extent that any such loss, claim, damage
or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with information pertaining to such Seller, as such, furnished in
writing to the Company by such Seller specifically for use in such registration
statement or prospectus, and provided, further, however, that the liability
of
the Seller hereunder shall be limited to the net proceeds actually received
by
the Seller from the sale of Registrable Securities covered by such registration
statement.
(c) Promptly
after receipt by an indemnified party hereunder of notice of the commencement
of
any action, such indemnified party shall, if a claim in respect thereof is
to be
made against the indemnifying party hereunder, notify the indemnifying party
in
writing thereof, but the omission so to notify the indemnifying party shall
not
relieve it from any liability which it may have to such indemnified party other
than under this Section 11.6(c) and shall only relieve it from any liability
which it may have to such indemnified party under this Section 11.6(c), except
and only if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified
party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel reasonably
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake
the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 11.6(c) for any legal expenses subsequently incurred
by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected,
provided, however, that, if the defendants in any such action include both
the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to
it
which are different from or additional to those available to the indemnifying
party or if the interests of the indemnified party reasonably may be deemed
to
conflict with the interests of the indemnifying party, the indemnified parties,
as a group, shall have the right to select one separate counsel and to assume
such legal defenses and otherwise to participate in the defense of such action,
with the reasonable expenses and fees of such separate counsel and other
expenses related to such participation to be reimbursed by the indemnifying
party as incurred.
16
(d) In
order
to provide for just and equitable contribution in the event of joint liability
under the 1933 Act in any case in which either (i) a Seller, or any controlling
person of a Seller, makes a claim for indemnification pursuant to this Section
11.6 but it is judicially determined (by the entry of a final judgment or decree
by a court of competent jurisdiction and the expiration of time to appeal or
the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 11.6 provides
for indemnification in such case, or (ii) contribution under the 1933 Act may
be
required on the part of the Seller or controlling person of the Seller in
circumstances for which indemnification is not provided under this Section
11.6;
then, and in each such case, the Company and the Seller will contribute to
the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that the Seller is
responsible only for the portion represented by the percentage that the public
offering price of its securities offered by the registration statement bears
to
the public offering price of all securities offered by such registration
statement, provided, however, that, in any such case, (y) the Seller will not
be
required to contribute any amount in excess of the public offering price of
all
such securities sold by it pursuant to such registration statement; and (z)
no
person or entity guilty of fraudulent misrepresentation (within the meaning
of
Section 11(f) of the 0000 Xxx) will be entitled to contribution from any person
or entity who was not guilty of such fraudulent misrepresentation.
11.7. Delivery
of Unlegended Shares.
(a) Within
three (3) business days (such third business day being the “Unlegended
Shares Delivery Date”)
after
the business day on which the Company has received (i) a notice that Warrant
Shares have been sold pursuant to a registration statement or Rule 144 under
the
1933 Act, (ii) a representation that the prospectus delivery requirements,
or
the requirements of Rule 144, as applicable and if required, have been
satisfied, and (iii) the original share certificates representing the shares
of
Common Stock that have been sold, and (iv) in the case of sales under Rule
144,
customary representation letters of the Subscriber and/or Subscriber’s broker
regarding compliance with the requirements of Rule 144, the Company at its
expense, (y) shall deliver, and shall cause legal counsel selected by the
Company to deliver to its transfer agent (with copies to Subscriber) an
appropriate instruction and opinion of such counsel, directing the delivery
of
shares of Common Stock without any legends including the legend set forth in
Section 4 above, reissuable pursuant to any effective and current Registration
Statement described in Section 11 of this Agreement or pursuant to Rule 144
under the 1933 Act (the “Unlegended
Shares”);
and
(z) cause the transmission of the certificates representing the Unlegended
Shares together with a legended certificate representing the balance of the
submitted Warrant Shares certificate, if any, to the Subscriber at the address
specified in the notice of sale, via express courier, by electronic transfer
or
otherwise on or before the Unlegended Shares Delivery Date.
(b) In
lieu
of delivering physical certificates representing the Unlegended Shares, if
the
Company’s transfer agent is participating in the Depository Trust Company
(“DTC”)
Fast
Automated Securities Transfer program, upon request of a Subscriber, so long
as
the certificates therefor do not bear a legend and the Subscriber is not
obligated to return such certificate for the placement of a legend thereon,
the
Company must cause its transfer agent to electronically transmit the Unlegended
Shares by crediting the account of Subscriber’s prime Broker with DTC through
its Deposit Withdrawal Agent Commission system. Such delivery must be made
on or
before the Unlegended Shares Delivery Date.
17
(c) The
Company understands that a delay in the delivery of the Unlegended Shares
pursuant to Section 11 hereof after the Unlegended Shares Delivery Date could
result in economic loss to Subscriber. As compensation to Subscriber for such
loss, the Company agrees to pay late payment fees (as liquidated damages and
not
as a penalty) to the Subscriber for late delivery of Unlegended Shares in the
amount of $100 per business day after the Delivery Date for each $10,000 of
Purchase Price (as defined in the Warrants) of the Unlegended Shares subject
to
the delivery default. If during any 360 day period, the Company fails to deliver
Unlegended Shares as required by this Section 11.7 for an aggregate of thirty
(30) days, then each Subscriber or assignee holding Securities subject to such
default may, at its option, require the Company to redeem all or any portion
of
the Warrant Shares subject to such default at a price per share equal to 120%
of
the Purchase Price of such Warrant Shares (“Unlegended
Redemption Amount”).
(d) In
addition to any other rights available to a Subscriber, if the Company fails
to
deliver to a Subscriber Unlegended Shares as required pursuant to this
Agreement, within seven (7) business days after the Unlegended Shares Delivery
Date and the Subscriber or a broker on the Subscriber’s behalf, purchases (in an
open market transaction or otherwise) shares of common stock to deliver in
satisfaction of a sale by such Subscriber of the shares of Common Stock which
the Subscriber was entitled to receive from the Company (a "Buy-In"), then
the
Company shall pay in cash to the Subscriber (in addition to any remedies
available to or elected by the Subscriber) the amount by which (A) the
Subscriber's total purchase price (including brokerage commissions, if any)
for
the shares of common stock so purchased exceeds (B) the aggregate purchase
price
of the shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares together with interest thereon at a rate of 15% per annum,
accruing until such amount and any accrued interest thereon is paid in full
(which amount shall be paid as liquidated damages and not as a penalty). For
example, if a Subscriber purchases shares of Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase
price of shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares, the Company shall be required to pay the Subscriber $1,000,
plus interest. The Subscriber shall provide the Company written notice
indicating the amounts payable to the Subscriber in respect of the
Buy-In.
(e) In
the
event a Subscriber shall request delivery of Unlegended Shares as described
in
Section 11.7 and the Company is required to deliver such Unlegended Shares
pursuant to Section 11.7, the Company may not refuse to deliver Unlegended
Shares based on any claim that such Subscriber or any one associated or
affiliated with such Subscriber has been engaged in any violation of law, or
for
any other reason, unless, an injunction or temporary restraining order from
a
court, on notice, restraining and or enjoining delivery of such Unlegended
Shares or exercise of all or part of said Warrant shall have been sought and
obtained by the Company or at the Company’s request or with the Company’s
assistance, and the Company has posted a surety bond for the benefit of such
Subscriber in the amount of 120% of the amount of the aggregate purchase price
of the Common Stock and Warrant Shares which are subject to the injunction
or
temporary restraining order, which bond shall remain in effect until the
completion of arbitration/litigation of the dispute and the proceeds of which
shall be payable to such Subscriber to the extent Subscriber obtains judgment
in
Subscriber’s favor.
12. (a) Right
of First Refusal.
Subject
to rights of holders of Debentures issued by the Company on March 10, 2006,
for
so long as Notes or Warrants are outstanding, the Subscribers shall be given
not
less than ten business days prior written notice of any proposed sale by the
Company of its debt, Common Stock or other securities or equity linked debt
obligations, except in connection with (i) full or partial consideration in
connection with a strategic merger, acquisition, consolidation or purchase
of
substantially all of the securities
or assets of corporation or other entity which holders of such securities or
debt are not at any time granted registration rights, (ii)
the
Company’s issuance of securities in connection with strategic license agreements
and other partnering arrangements so long as such issuances are not for the
purpose of raising capital and which holders of such securities or debt are
not
at any time granted registration rights, (iii) the Company’s issuance of Common
Stock or the issuances or grants of options to purchase Common Stock pursuant
to
stock option plans and employee stock purchase plans described on Schedule
5(d)
hereto at prices equal to or higher than the closing price of the Common Stock
on the issue date of any of the foregoing, and (iv) as a result of the exercise
of Warrants or conversion of Notes which are granted or issued pursuant to
this
Agreement (collectively the foregoing are “Excepted
Issuances”).
The
Subscribers who exercise their rights pursuant to this
Section
12(a) shall have the right during the ten business days following receipt of
the
notice to purchase in the aggregate up to all of such offered Common Stock,
debt
or other securities in accordance with the terms and conditions set forth in
the
notice of sale in the same proportion to each other as their purchase of Notes
in the Offering. Payment in connection with the Subscriber’s exercise of its
rights hereunder may be made by surrender or forgiveness of a corresponding
amount owed to such exercising Subscriber under the Note or any other
Transaction Document. In the event such terms and conditions are modified during
the notice period, the Subscribers shall be given prompt notice of such
modification and shall have the right during the ten business days following
the
notice of modification to exercise such right.
18
(b) Favored
Nations Provision.
Other
than in connection with the Excepted Issuances, if at any time Warrants are
outstanding, the Company shall offer, issue or agree to issue any common stock
or securities convertible into or exercisable for shares of common stock (or
modify any of the foregoing which may be outstanding) to any person or entity
at
a price per share or conversion or exercise price per share which shall be
less
than the Warrant exercise price without the consent of each Subscriber, then
the
Company shall issue, for each such occasion, additional shares of Common Stock
to each Subscriber so that the average per share purchase price of the shares
of
Common Stock issued to the Subscriber (of only the Warrant Shares still owned
by
the Subscriber) is equal to such other lower price per share and the Warrant
exercise price shall automatically be reduced to such other lower price. The
delivery to the Subscriber of the additional shares of Common Stock shall be
not
later than the closing date of the transaction giving rise to the requirement
to
issue additional shares of Common Stock. The Subscriber is granted the
registration rights described in Section 11 hereof in relation to such
additional shares of Common Stock. For purposes of the issuance and adjustment
described in this paragraph, the issuance of any security of the Company
carrying the right to convert such security into shares of Common Stock or
of
any warrant, right or option to purchase Common Stock shall result in the
issuance of the additional shares of Common Stock upon the sooner of the
agreement to or actual issuance of such convertible security, warrant, right
or
option and again at any time upon any subsequent issuances of shares of Common
Stock upon exercise of such conversion or purchase rights if such issuance
is at
a price lower than the Warrant exercise price in effect upon such issuance.
The
rights of the Subscriber set forth in this Section 12 are in addition to any
other rights the Subscriber has pursuant to this Agreement, the Note, any
Transaction Document, and any other agreement referred to or entered into in
connection herewith. The Subscriber is also given the right to elect to
substitute any term or terms of any other offering in connection with which
the
Subscriber has rights as described in Section 12(a), for any term or terms
of
the Offering in connection with Securities owned by Subscriber as of the date
the notice described in Section 12(a) is required to be given to
Subscriber.
(c) Maximum
Exercise of Rights.
In the
event the exercise of the rights described in Sections 12(a) or 12(b)
would
or
could result in the issuance of an amount of common stock of the Company that
would exceed the maximum amount that may be issued to a Subscriber calculated
in
the manner described in Section 10 of the Warrant, then the issuance of such
additional shares of common stock of the Company to such Subscriber will be
deferred in whole or in part until such time as such Subscriber is able to
beneficially own such common stock without exceeding the applicable maximum
amount set forth calculated in the manner described in Section 10 of the
Warrant. The determination of when such Common Stock may be issued shall be
made
by each Subscriber as to only such Subscriber.
13. Miscellaneous.
(a) Notices.
All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted
to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery
by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, 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 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: (i) if to the Company, to: Aprecia,
Inc., 0000 Xxxx Xxxxx Xxxx, Xxxxxxxx, XX 00000, Attn: Xxxxxxx Xxxxxxxxx,
President and CEO, telecopier: (000) 000-0000, with a copy by telecopier only
to: Xxxxxx X. Xxxxxx, Esq., 000 Xxxxxxxxx Xxxx, Xxxxxxxxx, XX 00000-0000,
telecopier: (000) 000-0000, (ii) if to the Subscriber, to: the one or more
addresses and telecopier numbers indicated on the signature pages hereto, with
an additional copy by telecopier only to: Grushko & Xxxxxxx, P.C., 000 Xxxxx
Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, telecopier: (000) 000-0000, and
(iii) if to the Broker, to: Palladium Capital Advisors LLC, 00 Xxxx
00xx
Xxxxxx,
Xxx Xxxx, XX 00000, Attn: Xxxxxxx Xxxxxxxxx, telecopier: (000)
000-0000.
19
(b) Entire
Agreement; Assignment.
This
Agreement and other documents delivered in connection herewith represent the
entire agreement between the parties hereto with respect to the subject matter
hereof and may be amended only by a writing executed by both parties. Neither
the Company nor the Subscribers have relied on any representations not contained
or referred to in this Agreement and the documents delivered herewith. No right
or obligation of the Company shall be assigned without prior notice to and
the
written consent of the Subscribers.
(c) Counterparts/Execution.
This
Agreement may be executed in any number of counterparts and by the different
signatories hereto on separate counterparts, each of which, when so executed,
shall be deemed an original, but all such counterparts shall constitute but
one
and the same instrument. This Agreement may be executed by facsimile signature
and delivered by facsimile transmission.
(d) Law
Governing this Agreement.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York without regard to principles of conflicts of laws. Any action
brought by either party against the other concerning the transactions
contemplated by this Agreement shall be brought only in the state courts of
New
York or in the federal courts located in the state and county of New York.
The
parties to this Agreement hereby irrevocably waive any objection to jurisdiction
and venue of any action instituted hereunder and shall not assert any defense
based on lack of jurisdiction or venue or based upon forum
non conveniens.
The
parties executing this Agreement and other agreements referred to herein or
delivered in connection herewith on behalf of the Company agree to submit to
the
in personam jurisdiction of such courts and hereby irrevocably waive trial
by
jury.
The
prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid
or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any
agreement.
(e) Specific
Enforcement, Service of Process.
The
Company and Subscriber acknowledge and agree that irreparable damage would
occur
in the event that any of the provisions of this Agreement were not performed
in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to seek an injunction
or
injunctions to prevent or cure breaches of the provisions of this Agreement
and
to enforce specifically the terms and provisions hereof, this being in addition
to any other remedy to which any of them may be entitled by law or equity.
Service of Process may be made upon the Company and signators hereto on behalf
of the Company in the same manner as notices may be given. Nothing in this
Section shall affect or limit any right to serve process in any manner permitted
by law.
20
(f) Independent
Nature of Subscribers.
The
Company acknowledges that the obligations of each Subscriber under the
Transaction Documents are several and not joint with the obligations of any
other Subscriber, and no Subscriber shall be responsible in any way for the
performance of the obligations of any other Subscriber under the Transaction
Documents. The
Company acknowledges that each Subscriber has represented that the decision
of
each Subscriber to purchase Securities has been made by such Subscriber
independently of any other Subscriber and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial
or
otherwise) or prospects of the Company which may have been made or given by
any
other Subscriber or by any agent or employee of any other Subscriber, and no
Subscriber or any of its agents or employees shall have any liability to any
Subscriber (or any other person) relating to or arising from any such
information, materials, statements or opinions. The
Company acknowledges that nothing contained in any Transaction Document, and
no
action taken by any Subscriber pursuant hereto or thereto (including, but not
limited to, the (i) inclusion of a Subscriber in the Registration Statement
and
(ii) review by, and consent to, such Registration Statement by a Subscriber)
shall be deemed to constitute the Subscribers as a partnership, an association,
a joint venture or any other kind of entity, or create a presumption that the
Subscribers are in any way acting in concert or as a group with respect to
such
obligations or the transactions contemplated by the Transaction Documents.
The Company acknowledges that each Subscriber shall be entitled to independently
protect and enforce its rights, including without limitation, the rights arising
out of the Transaction Documents, and it shall not be necessary for
any other Subscriber to be joined as an additional party in any proceeding
for
such purpose. The Company acknowledges that it has elected to provide all
Subscribers with the same terms and Transaction Documents for the convenience
of
the Company and not because Company was required or requested to do so by the
Subscribers. The Company acknowledges that such procedure with respect to
the Transaction Documents in no way creates a presumption that the Subscribers
are in any way acting in concert or as a group with respect to the Transaction
Documents or the transactions contemplated thereby.
(g) Damages.
In the
event the Subscriber is entitled to receive any liquidated damages pursuant
to
the Transactions, the Subscriber may elect to receive the greater of actual
damages or such liquidated damages.
(h) Consent.
As used
in the Agreement, “consent of the Subscribers” or similar language means the
consent of holders of not less than 80% of the outstanding Note principal owned
by Subscribers on the date consent is requested.
(i) Equal
Treatment.
No
consideration shall be offered or paid to any person to amend or consent to
a
waiver or modification of any provision of the Transaction Documents unless
the
same consideration is also offered and paid to all the Subscribers and their
permitted successors and assigns.
(j) Maximum
Payments.
Nothing
contained herein or in any document referred to herein or delivered in
connection herewith shall be deemed to establish or require the payment of
a
rate of interest or other charges in excess of the maximum permitted by
applicable law. In the event that the rate of interest or dividends required
to
be paid or other charges hereunder exceed the maximum permitted by such law,
any
payments in excess of such maximum shall be credited against amounts owed by
the
Company to the Subscriber and thus refunded to the Company.
21
(k) Calendar
Days.
All
references to “days” in the Transaction Documents shall mean calendar days
unless otherwise stated. The terms “business days” and “trading days” shall mean
days that the New York Stock Exchange is open for trading for three or more
hours. Time periods shall be determined as if the relevant action, calculation
or time period were occurring in New York City.
[THIS
SPACE INTENTIONALLY LEFT BLANK]
22
SIGNATURE
PAGE TO SUBSCRIPTION AGREEMENT (A)
Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us.
| APRECIA,
INC.
a
Delaware corporation
By:_________________________________
Name:
Idisodre Xxxxxxxxx
Title:
President and CEO
Dated:
May ___, 2007
|
|
SUBSCRIBER
|
PURCHASE
PRICE
|
AND
NOTE
PRINCIPAL
|
CLASS
A
WARRANTS
|
|
ALPHA
CAPITAL ANSTALT
Pradafant
7
9490
Furstentums
Vaduz,
Lichtenstein
Fax:
000-00-00000000
___________________________________________
(Signature)
By:
|
$85,000.00
|
$93,500.00
|
250,000
|
23
SIGNATURE
PAGE TO SUBSCRIPTION AGREEMENT (B)
Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us.
| APRECIA,
INC.
a
Delaware corporation
By:_________________________________
Name:
Idisodre Xxxxxxxxx
Title:
President and CEO
Dated:
May ___, 2007
|
|
SUBSCRIBER
|
PURCHASE
PRICE
|
AND
NOTE
PRINCIPAL
|
CLASS
A
WARRANTS
|
|
HARBORVIEW
MASTER FUND L.P.
2nd
Floor, Harbor House
Waterfront
Drive, Road Town
Tortola,
British Virgin Islands
Fax:
(000) 000-0000
___________________________________________
(Signature)
By:
|
$85,000.00
|
$93,500.00
|
250,000
|
24
LIST
OF EXHIBITS AND SCHEDULES
|
Exhibit
A
|
Form
of Note
|
|
|
Exhibit
B
|
Form
of Class A Warrant
|
|
|
Exhibit
C
|
Escrow
Agreement
|
|
|
Exhibit
D
|
Security
Agreement Dated March 10, 2006
|
|
|
Exhibit
E
|
Collateral
Agent Agreement Dated March 10, 2006
|
|
|
Exhibit
F
|
Form
of Legal Opinion
|
|
|
Exhibit
G
|
Form
of Lockup Agreement
|
|
|
Schedule
5(d)
|
Additional
Issuances / Capitalization
|
|
|
Schedule
5(o)
|
Undisclosed
Liabilities
|
|
|
Schedule
5(y)
|
Transfer
Agent
|
|
|
Schedule
7
|
Broker
Compensation
|
|
|
Schedule
9(e)
|
Use
of Proceeds
|
|
|
Schedule
9(o)
|
Additional
Permitted Lien
|
|
|
Schedule
11.1
|
Other
Registrable Securities
|
25
EXHIBIT
G
LOCKUP
AGREEMENT
This
AGREEMENT (the "Agreement") is made as of the ____ day of May, 2007, by Xxxxxxx
Xxxxxxxxx ("Holder"), in connection with his ownership of shares of Aprecia,
Inc., a Delaware corporation (the "Company").
NOW,
THEREFORE, for good and valuable consideration, the sufficiency and receipt
of
which consideration are hereby acknowledged, Holder agrees as
follows:
1. Background.
a.
Holder
is
the beneficial owner of the amount of shares of the Common Stock, $.0001 par
value, of the Company (“Common Stock”) designated on the signature page
hereto.
x. Xxxxxx
acknowledges that the Company has entered into or will enter into at or about
the date hereof agreements with subscribers to the Company’s secured Notes
(“Notes”) and Warrants (the “Subscribers”). Holder understands that, as a
condition to proceeding with the Offering, the Subscribers have required, and
the Company has agreed to obtain on behalf of the Subscribers an agreement
from
the Holder to refrain from selling any securities of the Company from the date
of the Subscription Agreement until one year after the Closing Date (as defined
in the Subscription Agreement) (the "Restriction Period"), except as described
below.
2. Share
Restriction.
a. Holder
hereby agrees that during the Restriction Period, the Holder will not sell
or
otherwise dispose of any shares of Common Stock or any options, warrants or
other rights to purchase shares of Common Stock or any other security of the
Company which Holder owns or has a right to acquire as of the date hereof,
other
than in connection with an offer made to all shareholders of the Company in
connection with merger, consolidation or similar transaction involving the
Company. Holder further agrees that the Company is authorized to and the Company
agrees to place "stop orders" on its books to prevent any transfer of shares
of
Common Stock or other securities of the Company held by Holder in violation
of
this Agreement. The Company agrees not to allow to occur any transaction
inconsistent with this Agreement.
b. Any
subsequent issuance to and/or acquisition by Holder of Common Stock or options
or instruments convertible into Common Stock will be subject to the provisions
of this Agreement.
c. Notwithstanding
the foregoing restrictions on transfer, the Holder may, at any time and from
time to time during the Restriction Period, transfer the Common Stock (i) as
bona fide gifts or transfers by will or intestacy, (ii) to any trust for the
direct or indirect benefit of the undersigned or the immediate family of the
Holder, provided that any such transfer shall not involve a disposition for
value, (iii) to a partnership which is the general partner of a partnership
of
which the Holder is a general partner, provided, that, in the case of any gift
or transfer described in clauses (i), (ii) or (iii), each donee or transferee
agrees in writing to be bound by the terms and conditions contained herein
in
the same manner as such terms and conditions apply to the undersigned. For
purposes hereof, "immediate family" means any relationship by blood, marriage
or
adoption, not more remote than first cousin.
3. Miscellaneous.
a. At
any
time, and from time to time, after the signing of this Agreement Holder will
execute such additional instruments and take such action as may be reasonably
requested by the Subscribers to carry out the intent and purposes of this
Agreement.
26
b. This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York without regard to principles of conflicts of laws. Any action
brought by either party against the other concerning the transactions
contemplated by this Agreement shall be brought only in the state courts of
New
York or in the federal courts located in the state and county of New York.
The
parties to this Agreement hereby irrevocably waive any objection to jurisdiction
and venue of any action instituted hereunder and shall not assert any defense
based on lack of jurisdiction or venue or based upon forum
non conveniens.
The
parties executing this Agreement and other agreements referred to herein or
delivered in connection herewith agree to submit to the in personam jurisdiction
of such courts and hereby irrevocably waive trial by jury.
The
prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid
or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any
agreement.
c. The
restrictions on transfer described in this Agreement are in addition to and
cumulative with any other restrictions on transfer otherwise agreed to by the
Holder or to which the Holder is subject to by applicable law.
d. This
Agreement shall be binding upon Holder, its legal representatives, successors
and assigns.
e. This
Agreement may be signed and delivered by facsimile and such facsimile signed
and
delivered shall be enforceable.
f. The
Company agrees not to take any action or allow any act to be taken which would
be inconsistent with this Agreement.
g. Notices
and service of process in connection herewith may be made and given to the
Company and Holder in the same manner as set forth in the Subscription
Agreement.
IN
WITNESS WHEREOF, and intending to be legally bound hereby, Holder has executed
this Agreement as of the day and year first above written.
| HOLDER:
________________________________
(Signature
of Holder)
________________________________
(Print
Name of Holder)
________________________________
Number
of Shares of Common Stock
Beneficially
Owned
COMPANY:
APRECIA,
INC.
By:______________________________
|
27
SCHEDULE
7
|
BROKER:
|
PALLADIUM
CAPITAL ADVISORS LLC
|
|
00
Xxxx 00xx
Xxxxxx
Xxx
Xxxx, XX 00000
Attn:
Xxxxxxx Xxxxxxxxx
Fax:
(000) 000-0000
|
Cash
Fee.
The
Company agrees that it will pay the Broker, on the Closing Date a fee of eight
percent (8%) of the Principal Amount (“Broker’s Cash Fee”). The Company
represents that there are no other parties entitled to receive fees,
commissions, or similar payments in connection with the Offering except the
Broker. The Broker’s Cash Fee will be paid by delivery of a Note in the
principal amount of the Broker’s Cash Fee (“Broker’s Note”).
Broker’s
Warrants.
On the
Closing Date, the Company will issue to the Broker, 83,111 Class A Warrants
to
the Broker (“Broker’s Warrants”). The Broker’s Warrants will be similar to and
carrying the same rights as the Class A Warrants issuable to the
Subscribers.
All
the
representations, covenants, warranties, undertakings, remedies, liquidated
damages, indemnification, and other rights including but not limited to
reservation requirements and registration rights made or granted to or for
the
benefit of the Subscribers are hereby also made and granted to and for the
benefit of the Broker in respect of the Broker’s Warrants and the Warrant Shares
issuable upon exercise of the Broker’s Note and Broker’s Warrants.
28
