SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is dated as of
June 22, 2005, by and among Accupoll Holding Corp., a Nevada corporation (the
"COMPANY"), and the purchasers identified on the signature pages hereto (each,
including its successors and assigns, a "PURCHASER" and collectively the
"PURCHASERS").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act (as defined below),
and Rule 506 promulgated thereunder, the Company desires to issue and sell to
each Purchaser, and each Purchaser, severally and not jointly, desires to
purchase from the Company in the aggregate, up to $3 million of Preferred Stock
and Warrants on the Closing Date.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree
as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. In addition to the terms defined elsewhere in this
Agreement: (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Certificate of Designation (as defined
herein), and (b) the following terms have the meanings indicated in this Section
1.1:
"ACTION" shall have the meaning ascribed to such term in
Section 3.1(j).
"ACTUAL MINIMUM" means, as of any date, the maximum aggregate
number of shares of Common Stock then issued or potentially issuable in
the future pursuant to the Transaction Documents, including any
Underlying Shares issuable upon exercise or conversion in full of all
Warrants and shares of Preferred Stock, ignoring any conversion or
exercise limits set forth therein, and assuming that any previously
unconverted shares of Preferred Stock are held until the fifth
anniversary of the Closing Date and all dividends are paid in shares of
Common Stock until such third anniversary, subject to the limitation on
the number of shares of Common Stock issuable hereunder set forth in
Section 5(a)(iii) of the Certificate of Designation.
"AFFILIATE" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is
under common control with a Person, as such terms are used in and
construed under Rule 144 under the Securities Act. With respect to a
Purchaser, any investment fund or managed account that is managed on a
discretionary basis by the same investment manager as such Purchaser
will be deemed to be an Affiliate of such Purchaser.
"CERTIFICATE OF DESIGNATION" means the Certificate of
Designation to be filed prior to the Closing by the Company with the
Secretary of State of Delaware, in the form of EXHIBIT A attached
hereto.
"CLOSING" means the closing of the purchase and sale of the
Securities pursuant to Section 2.1.
"CLOSING DATE" means the Trading Day when all of the
Transaction Documents have been executed and delivered by the
applicable parties thereto, and all conditions precedent to (i) each
Purchaser's obligations to pay the Subscription Amount have been
satisfied or waived (ii) and the Company's obligations to deliver the
Securities have been satisfied or waived.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, par
value $0.001 per share, and any securities into which such common stock
shall hereinafter been reclassified into.
"COMMON STOCK EQUIVALENTS" means any securities of the Company
or the Subsidiaries which would entitle the holder thereof to acquire
at any time Common Stock, including without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is
at any time convertible into or exchangeable for, or otherwise entitles
the holder thereof to receive, Common Stock.
"COMPANY COUNSEL" means Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP.
"DISCLOSURE SCHEDULES" means the Disclosure Schedules of the
Company delivered concurrently herewith.
"DISCUSSION TIME" shall mean 9 P.M. (New York Time) on such
calendar day when the Purchaser was first contacted regarding an
investment in the Company.
"EFFECTIVE DATE" means the date that the Registration
Statement is first declared effective by the Commission.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXEMPT ISSUANCE" the issuance of (a) shares of Common Stock
or options to employees, officers or directors of the Company pursuant
to any stock or option plan duly adopted (b) securities upon the
exercise of or conversion of any securities issued hereunder,
convertible securities, options or warrants issued and outstanding on
the date of this Agreement, provided that such securities have not been
amended since the date of this Agreement to increase the number of such
securities.
"GAAP" shall have the meaning ascribed to such term in Section
3.1(h).
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"LIENS" means a lien, charge, security interest, encumbrance,
right of first refusal, preemptive right or other restriction.
"LOSSES" means any and all losses, claims, damages,
liabilities, settlement costs and expenses, including without
limitation costs of preparation and reasonable attorneys' fees.
"MAJORITY IN INTEREST" shall mean, at any time of
determination, the majority in interest (based on then-outstanding
Stated Value amounts of Preferred Stock at the time of such
determination) of the Purchasers.
"MARKET PRICE" shall mean the average of the 10 VWAPs
immediately prior to the date in question.
"MATERIAL ADVERSE EFFECT" shall have the meaning assigned to
such term in Section 3.1(b).
"MATERIAL PERMITS" shall have the meaning ascribed to such
term in Section 3.1(m).
"PERSON" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
"PREFERRED STOCK" means the up to 30,000 shares of the
Company's Series A Convertible Preferred Stock issued hereunder having
the rights, preferences and privileges set forth in the Certificate of
Designation.
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated the date hereof, among the Company and each Purchaser,
in the form of EXHIBIT B.
"REGISTRATION STATEMENT" means a registration statement
meeting the requirements set forth in the Registration Rights Agreement
and covering the resale by the Purchasers of the Underlying Shares.
"REQUIRED APPROVALS" shall have the meaning ascribed to such
term in Section 3.1(e).
"RULE 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule.
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"SEC REPORTS" shall have the meaning ascribed to such term in
Section 3.1(h).
"SECURITIES" means the Preferred Stock, the Warrants and the
Underlying Shares.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SET PRICE" shall have the meaning ascribed to such term in
the Certificate of Designations.
"SHAREHOLDER APPROVAL" means such approval as may be required
by the applicable rules and regulations of the Trading Market (or any
successor entity) from the shareholders of the Company with respect to
the transactions contemplated by the Transaction Documents, including
the issuance of all of the Underlying Shares and shares of Common Stock
issuable upon exercise of the Warrants in excess of 19.9% of the
Company's issued and outstanding Common Stock on the Closing Date.
"SHORT SALES" shall include, without limitation, all "short
sales" as defined in Rule 3b-3 of the Exchange Act.
"STATED VALUE" means $100 per share of Preferred Stock.
"SUBSCRIPTION AMOUNT" shall mean, as to each Purchaser, the
amount to be paid for the Preferred Stock purchased hereunder as
specified below such Purchaser's name on the signature page of this
Agreement, in United States Dollars.
"SUBSIDIARY" means any subsidiary of the Company that is
required to be listed in SCHEDULE 3.1(A).
"TRADING DAY" means any day during which the Trading Market
shall be open for business.
"TRADING MARKET" means the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in
question: OTC Bulletin Board, the American Stock Exchange, the New York
Stock Exchange, the Nasdaq National Market or the Nasdaq SmallCap
Market.
"TRANSACTION DOCUMENTS" means this Agreement, the Certificate
of Designation, the Warrants, the Registration Rights Agreement and any
other documents or agreements executed in connection with the
transactions contemplated hereunder.
"UNDERLYING SHARES" means the shares of Common Stock issuable
upon conversion of the Preferred Stock, upon exercise of the Warrants
and issued and issuable in lieu of the cash payment of dividends on the
Preferred Stock.
"VWAP" means, for any date, the price determined by the first
of the following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Trading Market, the daily volume weighted average
price of the Common Stock for such date (or
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the nearest preceding date) on the Trading Market on which the Common
Stock is then listed or quoted as reported by Bloomberg Financial L.P.
(based on a Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m.
Eastern Time); (b) if the Common Stock is not then listed or quoted on
a Trading Market and if prices for the Common Stock are then quoted on
the OTC Bulletin Board, the volume weighted average price of the Common
Stock for such date (or the nearest preceding date) on the OTC Bulletin
Board; (c) if the Common Stock is not then listed or quoted on the OTC
Bulletin Board and if prices for the Common Stock are then reported in
the "Pink Sheets" published by the National Quotation Bureau
Incorporated (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of
the Common Stock so reported; or (c) in all other cases, the fair
market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Purchasers and reasonably
acceptable to the Company.
"WARRANTS" means the Common Stock Purchase Warrants, in the
form of EXHIBIT C, delivered to the Purchasers at the Closing in
accordance with Section 2.2 hereof, which warrants shall be exercisable
immediately upon issuance for a term of 3 years
"WARRANT SHARES" means the shares of Common Stock issuable
upon exercise of the Warrants.
ARTICLE II
PURCHASE AND SALE
2.1 CLOSING. On the Closing Date, each Purchaser shall purchase from
the Company, severally and not jointly with the other Purchasers, and the
Company shall issue and sell to each Purchaser, (a) shares of Preferred Stock
with an aggregate Stated Value equal to such Purchaser's Subscription Amount;
and (b) the Warrants as determined pursuant to Section 2.2(a). The aggregate
number of shares of Preferred Stock sold hereunder shall be up to 30,000.
Upon satisfaction of the conditions set forth in Section 2.2, the
Closing shall occur at the offices of Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP or
such other location as the parties shall mutually agree.
2.2 CONDITIONS TO CLOSING. The Closing is subject to the satisfaction
or waiver by the party to be benefited thereby of the following conditions:
(a) The Company shall have delivered or caused to be delivered
to each Purchaser the following:
(i) this Agreement duly executed by the Company;
(ii) a certificate evidencing a number of shares of
Preferred Stock
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equal to such Purchaser's Subscription Amount
divided by 100, registered in the name of such
Purchaser;
(iii) a Warrant registered in the name of such Purchaser
to purchase up to a number of shares of Common
Stock equal to such Purchaser's Subscription
Amount divided by 100 and then multiplied by
1,000, with an exercise price equal $0.10 per
share;
(iv) a Warrant registered in the name of such Purchaser
to purchase up to a number of shares of Common
Stock equal to such Purchaser's Subscription
Amount divided by 100 and then multiplied by
1,000, with an exercise price equal $0.125 per
share
(v) the Registration Rights Agreement duly executed by
the Company; and
(vi) the Escrow Agreement duly executed by the Company;
and
(vii) a legal opinion of Company Counsel, in the form of
EXHIBIT D attached hereto, addressed to each
Purchaser.
(b) At the Closing, each Purchaser shall have delivered or
caused to be delivered to the Company the following:
(i) this Agreement duly executed by such Purchaser;
(ii) the Escrow Agreement duly executed by such
Purchaser;
(iii) such Purchaser's Subscription Amount by wire
transfer to the account as specified in writing by
the Company; and
(iv) the Registration Rights Agreement duly executed by
such Purchaser.
(c) All representations and warranties of the other party
contained herein shall remain true and correct as of the Closing Date
and all covenants of the other party shall have been performed if due
prior to such date.
(d) From the date hereof to the Closing Date, trading in the
Common Stock shall not have been suspended by the Commission (except
for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to the Closing),
and, at any time prior to the Closing Date, trading in securities
generally as reported by Bloomberg Financial Markets shall not have
been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such service, or
on any Trading Market, nor shall a banking moratorium have been
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declared either by the United States or New York State authorities nor
shall there have occurred any material outbreak or escalation of
hostilities or other national or international calamity of such
magnitude in its effect on, or any material adverse change in, any
financial market which, in each case, in the reasonable judgment of
each Purchaser, makes it impracticable or inadvisable to purchase the
shares of Preferred Stock at the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth
in the SEC Reports or under the corresponding section of the Disclosure
Schedules which Disclosure Schedules shall be deemed a part hereof , the Company
hereby makes the representations and warranties set forth below to each
Purchaser:
(a) SUBSIDIARIES. All of the direct and indirect subsidiaries
of the Company are set forth on SCHEDULE 3.1(A). The Company owns,
directly or indirectly, all of the capital stock or other equity
interests of each Subsidiary free and clear of any Liens, and all the
issued and outstanding shares of capital stock of each Subsidiary are
validly issued and are fully paid, non-assessable and free of
preemptive and similar rights to subscribe for or purchase securities.
If the Company has no subsidiaries, then references in the Transaction
Documents to the Subsidiaries will be disregarded.
(b) ORGANIZATION AND QUALIFICATION. Each of the Company and
the Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with
the requisite power and authority to own and use its properties and
assets and to carry on its business as currently conducted. Neither the
Company nor any Subsidiary is in violation or default of any of the
provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to conduct business and
is in good standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be,
could not have or reasonably be expected to result in (i) a material
adverse effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business, prospects or financial condition of the
Company and the Subsidiaries, taken as a whole, or (iii) a material
adverse effect on the Company's ability to perform in any material
respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a "MATERIAL ADVERSE EFFECT") and
no Proceeding has been instituted in any such jurisdiction revoking,
limiting or curtailing or seeking to revoke, limit or curtail such
power and authority or qualification.
(c) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations hereunder
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or thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby or thereby have been duly authorized by all
necessary action on the part of the Company and no further consent or
action is required by the Company other than Required Approvals. Each
of the Transaction Documents has been (or upon delivery will be) duly
executed by the Company and, when delivered in accordance with the
terms hereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights
and remedies generally and general principles of equity. Neither the
Company nor any Subsidiary is in violation of any of the provisions of
its respective certificate or articles of incorporation, by-laws or
other organizational or charter documents except where such violation
could not, individually or in the aggregate, constitute a Material
Adverse Effect.
(d) ISSUANCE OF THE SECURITIES. The Securities are duly
authorized and, when issued and paid for in accordance with the
applicable Transaction Documents, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens. The Company
has reserved from its duly authorized capital stock a number of shares
of Common Stock for issuance of the Underlying Shares at least equal to
the Actual Minimum on the date hereof.
(e) CAPITALIZATION. The capitalization of the Company is as
described in the Company's most recent periodic report filed with the
Commission. The Company has not issued any capital stock since such
filing other than pursuant to the exercise of employee stock options
under the Company's stock option plans, the issuance of shares of
Common Stock to employees pursuant to the Company's employee stock
purchase plan and pursuant to the conversion or exercise of outstanding
Common Stock Equivalents. No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is
required for the issuance and sale of the shares of Preferred Stock.
Except as disclosed in the SEC Reports, there are no stockholders
agreements, voting agreements or other similar agreements with respect
to the Company's capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company's
stockholders.
(f) SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed
all reports required to be filed by it under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for
the two years preceding the date hereof (or such shorter period as the
Company was required by law to file such material) (the foregoing
materials, including the exhibits thereto, being collectively referred
to herein as the "SEC REPORTS") on a timely basis or has received a
valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. As of their
respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act and
the rules and regulations of the Commission promulgated thereunder, and
none of the SEC Reports, when filed, contained any untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in
light
8
of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Reports comply
in all material respects with applicable accounting requirements and
the rules and regulations of the Commission with respect thereto as in
effect at the time of filing. Such financial statements have been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved
("GAAP"), except as may be otherwise specified in such financial
statements or the notes thereto and except that unaudited financial
statements may not contain all footnotes required by GAAP, and fairly
present in all material respects the financial position of the Company
and its consolidated subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.
(g) MATERIAL CHANGES. Since the date of the latest audited
financial statements included within the SEC Reports, except as
specifically disclosed in the SEC Reports, (i) there has been no event,
occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has
not incurred any liabilities (contingent or otherwise) other than (A)
trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities not required
to be reflected in the Company's financial statements pursuant to GAAP
or required to be disclosed in filings made with the Commission, (iii)
the Company has not altered its method of accounting, (iv) the Company
has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock and
(v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option
plans. The Company does not have pending before the Commission any
request for confidential treatment of information.
(h) LITIGATION. There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of
the Company, threatened against or affecting the Company, any
Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign) (collectively, an
"ACTION") which (i) adversely affects or challenges the legality,
validity or enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision, have
or reasonably be expected to result in a Material Adverse Effect.
Neither the Company nor any Subsidiary, nor any director or officer
thereof, is or has been the subject of any Action involving a claim of
violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty. There has not been, and to the
knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or
former director or officer of the Company. The Commission has not
issued any stop order or other order suspending the effectiveness of
any registration statement filed by the Company or any Subsidiary under
the Exchange Act or the Securities Act.
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(i) LABOR RELATIONS. No material labor dispute exists or, to
the knowledge of the Company, is imminent with respect to any of the
employees of the Company which could reasonably be expected to result
in a Material Adverse Effect.
(j) REGULATORY PERMITS. The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities
necessary to conduct their respective businesses as described in the
SEC Reports, except where the failure to possess such permits could
not, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect ("MATERIAL PERMITS"), and
neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material
Permit.
(k) TITLE TO ASSETS. The Company and the Subsidiaries have
good and marketable title in fee simple to all real property owned by
them that is material to the business of the Company and the
Subsidiaries and good and marketable title in all personal property
owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for
Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries and Liens for the payment
of federal, state or other taxes, the payment of which is neither
delinquent nor subject to penalties. Any real property and facilities
held under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases of which the Company and
the Subsidiaries are in compliance.
(l) PATENTS AND TRADEMARKS. The Company and the Subsidiaries
have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights that are necessary or
material for use in connection with their respective businesses as
described in the SEC Reports and which the failure to so have could
have a Material Adverse Effect (collectively, the "INTELLECTUAL
PROPERTY RIGHTS"). Neither the Company nor any Subsidiary has received
a written notice that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of any
Person. To the knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights of others.
(m) TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as set
forth in the SEC Reports, none of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees of
the Company is presently a party to any transaction with the Company or
any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental
of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or
any such employee has a substantial interest or is an officer,
director, trustee or
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partner, in each case in excess of $200,000 other than (i) for payment
of salary or consulting fees for services rendered, (ii) reimbursement
for expenses incurred on behalf of the Company and (iii) for other
employee benefits, including stock option agreements under any stock
option plan of the Company.
(n) PRIVATE PLACEMENT. Assuming the accuracy of the Purchasers
representations and warranties set forth in Section 3.2, no
registration under the Securities Act is required for the offer and
sale of the Securities by the Company to the Purchasers as contemplated
hereby. The issuance and sale of the Securities hereunder does not
contravene the rules and regulations of the Trading Market.
(o) INVESTMENT COMPANY. The Company is not, and is not an
Affiliate of, and immediately after receipt of payment for the shares
of Preferred Stock, will not be or be an Affiliate of, an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that it
will not become subject to the Investment Company Act.
(p) LISTING AND MAINTENANCE REQUIREMENTS. The Company's Common
Stock is registered pursuant to Section 12(g) of the Exchange Act, and
the Company has taken no action designed to, or which to its knowledge
is likely to have the effect of, terminating the registration of the
Common Stock under the Exchange Act nor has the Company received any
notification that the Commission is contemplating terminating such
registration. The Company has not, in the 12 months preceding the date
hereof, received notice from any Trading Market on which the Common
Stock is or has been listed or quoted to the effect that the Company is
not in compliance with the listing or maintenance requirements of such
Trading Market. The Company is, and has no reason to believe that it
will not in the foreseeable future continue to be, in compliance with
all such listing and maintenance requirements.
(q) DISCLOSURE. The Company confirms that, neither the Company
nor any other Person acting on its behalf has provided any of the
Purchasers or their agents or counsel with any information that
constitutes or might constitute material, non-public information. The
Company understands and confirms that the Purchasers will rely on the
foregoing representations and covenants in effecting transactions in
securities of the Company. All disclosure provided to the Purchasers
regarding the Company, its business and the transactions contemplated
hereby, including the Schedules to this Agreement, furnished by or on
behalf of the Company with respect to the representations and
warranties made herein are true and correct with respect to such
representations and warranties and do not contain any untrue statement
of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The Company
acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section
3.2 hereof.
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(r) 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 this offering of the Securities to be integrated with prior
offerings by the Company for purposes of the Securities Act or which
could violate any applicable shareholder approval provisions,
including, without limitation, under the rules and regulations of the
Trading Market.
(s) TAX STATUS. The Company and each of its Subsidiaries has
made or filed all federal, state and foreign income and all other tax
returns, reports and declarations required by any jurisdiction to which
it is subject (unless and only to the extent that the Company and each
of its Subsidiaries has set aside on its books provisions reasonably
adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith
and has set aside on its books provisions reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which
such returns, reports or declarations apply. There are no unpaid taxes
in any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any
such claim. The Company has not executed a waiver with respect to the
statute of limitations relating to the assessment or collection of any
foreign, federal, statue or local tax. None of the Company's tax
returns is presently being audited by any taxing authority.
(t) NO GENERAL SOLICITATION OR ADVERTISING IN REGARD TO THIS
TRANSACTION. Neither the Company nor, to the knowledge of the Company,
any of its directors or officers (i) has conducted or will conduct any
general solicitation (as that term is used in Rule 502(c) of Regulation
D) or general advertising with respect to the sale of the Preferred
Stock or the Warrants, or (ii) made any offers or sales of any security
or solicited any offers to buy any security under any circumstances
that would require registration of the Preferred Stock, the Underlying
Shares or the Warrants under the Securities Act or made any "directed
selling efforts" as defined in Rule 902 of Regulation S.
(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 corrupt 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.
(w) ACKNOWLEDGMENT REGARDING PURCHASERS' PURCHASE OF
SECURITIES. The
12
Company acknowledges and agrees that the Purchasers are acting solely
in the capacity of arm's length purchasers with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that no Purchaser is acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to
this Agreement and the transactions contemplated hereby and any
statement made by any Purchaser or any of their respective
representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation and
is merely incidental to the Purchasers' purchase of the Securities. The
Company further represents to each Purchaser that the Company's
decision to enter into this Agreement has been based solely on the
independent evaluation of the Company and its representatives.
3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser hereby, for itself and for no other Purchaser,
represents and warrants as of the date hereof and as of the Closing Date to the
Company as follows:
(a) ORGANIZATION; AUTHORITY. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or
partnership power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to
carry out its obligations thereunder. The execution, delivery and
performance by such Purchaser of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate or
similar action on the part of such Purchaser. Each Transaction Document
to which it is a party has been duly executed by such Purchaser, and
when delivered by such Purchaser in accordance with the terms hereof,
will constitute the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms, except
(i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
(b) NO VIEW TO DISTRIBUTE. Such Purchaser understands that the
Securities are "restricted securities" and have not been registered
under the Securities Act or any applicable state securities law and is
acquiring the Securities as principal for its own account and not with
a view to or for distributing or reselling such Securities or any part
thereof, has no present intention of distributing any of such
Securities and has no arrangement or understanding with any other
persons regarding the distribution of such Securities (this
representation and warranty not limiting such Purchaser's right to sell
the Securities pursuant to the Registration Statement or otherwise in
compliance with applicable federal and state securities laws). Such
Purchaser is acquiring the Securities hereunder in the ordinary course
of its business. Such Purchaser does not have any agreement or
understanding, directly or indirectly, with any Person to distribute
any of the Securities.
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(c) PURCHASER STATUS. At the time such Purchaser was offered
the Securities, it was, and at the date hereof it is, and on each date
on which it exercises any Warrants, it will be either: (i) an
"accredited investor" as defined in Rule 501(a)(1), (a)(2), (a)(3),
(a)(7) or (a)(8) under the Securities Act or (ii) a "qualified
institutional buyer" as defined in Rule 144A(a) under the Securities
Act. Such Purchaser is not required to be registered as a broker-dealer
under Section 15 of the Exchange Act.
(d) EXPERIENCE OF SUCH PURCHASER. Such Purchaser, either alone
or together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so as
to be capable of evaluating the merits and risks of the prospective
investment in the Securities, and has so evaluated the merits and risks
of such investment. Such Purchaser is able to bear the economic risk of
an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.
(e) GENERAL SOLICITATION. Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general
advertisement.
(f) SHORT SALES. Each Purchaser covenants that neither it nor
any affiliates acting on its behalf or pursuant to any understanding
with it will execute any Short Sales during the period from the
Discussion Time until prior to the time that the transactions
contemplated by this Agreement are first publicly announced as
described in Section 4.7. Notwithstanding the foregoing, no Purchaser
makes any representation, warranty or covenant hereby that it will not
engage in Short Sales in the securities of the Company after the time
that the transactions contemplated by this Agreement are first publicly
announced as described in Section 4.7.
(g) RISK FACTORS. Each Purchaser represents and warrants that
it has read and understands the attached Risk Factors relating to the
Company
The Company acknowledges and agrees that each Purchaser does not make
or has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in this
Section 3.2.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 TRANSFER RESTRICTIONS.
(a) The Securities may only be disposed of in compliance with
state and federal securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement
or Rule 144, to the Company or to an Affiliate of a Purchaser or in
connection with a pledge as contemplated in Section 4.1(b), the Company
14
may require the transferor thereof to provide to the Company an opinion
of counsel selected by the transferor and reasonably acceptable to the
Company, the form and substance of which opinion and shall be
reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities
under the Securities Act. As a condition of transfer, any such
transferee shall agree in writing to be bound by the terms of this
Agreement and shall have the rights of a Purchaser under this Agreement
and the Registration Rights Agreement.
(b) Each Purchaser agrees to the imprinting, so long as is
required by this Section 4.1(b), of the following legend on any
certificate evidencing Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [EXERCISABLE] [CONVERTIBLE]] HAVE BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF
COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL
BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES AND THE
SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY
SUCH SECURITIES.
The Company acknowledges and agrees that a Purchaser may from
time to time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or all of
the Securities to a financial institution that is an "accredited
investor" as defined in Rule 501(a) under the Securities Act and who
agrees to be bound by the provisions of this Agreement and the
Registration Rights Agreement and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured Securities
to the pledgees or secured parties. Such a pledge or transfer would not
be subject to approval of the Company and no legal opinion of legal
counsel of the pledgee, secured party or pledgor shall be required in
connection therewith. Further, no notice shall be required of such
pledge. At the appropriate Purchaser's expense, the Company will
execute and deliver such reasonable documentation as a pledgee or
secured party of Securities may reasonably request in connection with a
pledge or transfer of the Securities, including, if the Securities are
subject to registration pursuant to the Registration Rights Agreement,
the preparation and filing of any required prospectus supplement under
Rule 424(b)(3) under the Securities Act or other applicable provision
of the Securities Act to appropriately amend the list of Selling
Stockholders thereunder.
15
(c) Certificates evidencing Underlying Shares shall not
contain any legend (including the legend set forth in Section 4.1(b)):
(i) while a registration statement (including the Registration
Statement) covering the resale of such Underlying Shares is effective
under the Securities Act, or (ii) following any sale of such Underlying
Shares pursuant to Rule 144, or (iii) if such Securities are eligible
for sale under Rule 144(k), or (iv) if such legend is not required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the
Commission). The Company shall cause its counsel to issue a legal
opinion to the Company's transfer agent promptly after the Effective
Date if required by the Company's transfer agent to effect the removal
of the legend hereunder. If all or any shares of Preferred Stock or any
portion of a Warrant is converted or exercised (as applicable) at a
time when there is an effective registration statement to cover the
resale of the Underlying Shares, or if such Underlying Shares may be
sold under Rule 144(k) or if such legend is not otherwise required
under applicable requirements of the Securities Act (including judicial
interpretations thereof) then such Underlying Shares shall be issued
free of all legends. The Company agrees that following the Effective
Date or at such time as such legend is no longer required under this
Section 4.1(c), it will, no later than three Trading Days following the
delivery by a Purchaser to the Company or the Company's transfer agent
of a certificate representing Securities issued with a restrictive
legend (such date, the "LEGEND REMOVAL DATE"), deliver or cause to be
delivered to such Purchaser a certificate representing such Underlying
Shares that is free from all restrictive and other legends. The Company
may not make any notation on its records or give instructions to any
transfer agent of the Company that enlarge the restrictions on transfer
set forth in this Section. Certificates for Securities subject to
legend removal hereunder shall be transmitted by the transfer agent of
the Company to the Purchasers by crediting the account of the
Purchaser's prime broker with the Depository Trust Company System.
(d) In addition to such Purchaser's other available remedies,
the Company shall pay to a Purchaser, in cash, as partial liquidated
damages and not as a penalty, for each $100,000 of Underlying Shares
(based on the VWAP on the date such Securities are submitted to the
Company's transfer agent) delivered for removal of the restrictive
legend and subject to this Section 4.1(c), $10 per Trading Day
(increasing to $20 per Trading Day five (5) Trading Days after such
damages have begun to accrue) for each Trading Day after the Legend
Removal Date until such certificate is delivered. Nothing herein shall
limit such Purchaser's right to pursue actual damages for the Company's
failure to deliver certificates representing any Securities as required
by the Transaction Documents, and such Purchaser shall have the right
to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive
relief.
(e) Each Purchaser, severally and not jointly with the other
Purchasers, agrees that the removal of the restrictive legend from
certificates representing Securities as set forth in this Section 4.1
is predicated upon the Company's reliance that the Purchaser will sell
any Securities pursuant to either the registration requirements of the
16
Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom.
4.2 FURNISHING OF INFORMATION. As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. Upon the request of any Purchaser, the Company shall deliver to
such Purchaser a written certification of a duly authorized officer as to
whether it has complied with the preceding sentence. As long as any Purchaser
owns Securities, if the Company is not required to file reports pursuant to such
laws, it will prepare and furnish to each Purchaser and make publicly available
in accordance with Rule 144(c) such information as is required for each
Purchaser to sell the Securities under Rule 144. The Company further covenants
that it will take such further action as any holder of Securities may reasonably
request, all to the extent required from time to time to enable such Person to
sell such Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144.
4.3 INTEGRATION. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.
4.4 SECURITIES LAWS DISCLOSURE; PUBLICITY. The Company shall, by 8:30
a.m. Eastern time on the Trading Day following the date hereof, issue a press
release or file a Current Report on Form 8-K, in each case reasonably acceptable
to each Purchaser disclosing the material terms of the transactions contemplated
hereby. The Company and each Purchaser shall consult with each other in issuing
any press releases with respect to the transactions contemplated hereby, and
neither the Company nor any Purchaser shall issue any such press release or
otherwise make any such public statement without the prior consent of the
Company, with respect to any press release of any Purchaser, or without the
prior consent of each Purchaser, with respect to any press release of the
Company, which consent shall not unreasonably be withheld, except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without
the prior written consent of such Purchaser, except (i) as required by federal
securities law in connection with the registration statement contemplated by the
Registration Rights Agreement and (ii) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company shall provide
the Purchasers with prior notice of such disclosure permitted under subclause
(i) or (ii).
17
4.5 NON-PUBLIC INFORMATION. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Purchaser
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that each Purchaser shall
be relying on the foregoing representations in effecting transactions in
securities of the Company.
4.6 USE OF PROCEEDS. See SCHEDULE 4.7.
4.7 RESERVATION AND LISTING OF SECURITIES.
(a) The Company shall maintain a reserve from its duly
authorized shares of Common Stock for issuance pursuant to the
Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents.
(b) If, on any date, the number of authorized but unissued
(and otherwise unreserved) shares of Common Stock is less than 130% of
(i) the Actual Minimum on such date, minus (ii) the number of shares of
Common Stock previously issued pursuant to the Transaction Documents,
then the Board of Directors of the Company shall use commercially
reasonable efforts to amend the Company's certificate or articles of
incorporation to increase the number of authorized but unissued shares
of Common Stock to at least the Actual Minimum at such time (minus the
number of shares of Common Stock previously issued pursuant to the
Transaction Documents), as soon as possible and in any event not later
than the 75th day after such date; provided that the Company will not
be required at any time to authorize a number of shares of Common Stock
greater than the maximum remaining number of shares of Common Stock
that could possibly be issued after such time pursuant to the
Transaction Documents.
(c) The Company shall: (i) in the time and manner required by
the Trading Market, prepare and file with such Trading Market an
additional shares listing application covering a number of shares of
Common Stock at least equal to the Actual Minimum on the date of such
application, (ii) take all steps necessary to cause such shares of
Common Stock to be approved for listing on the Trading Market as soon
as possible thereafter, (iii) provide to each Purchaser evidence of
such listing, and (iv) use reasonable efforts to maintain the listing
of such Common Stock on such Trading Market or another Trading Market.
In addition, the Company shall hold a special meeting of shareholders
(which may also be at the annual meeting of shareholders) at the
earliest practical date, for the purpose of obtaining Shareholder
Approval, with the recommendation of the Company's Board of Directors
that such proposal be approved, and the Company shall solicit proxies
from its shareholders in connection therewith in the same manner as all
other management proposals in such proxy statement and all
management-appointed proxyholders shall vote their proxies in favor of
such proposal.
4.11 CONVERSION AND EXERCISE PROCEDURES. The form of Election to
Purchase included in the Warrants and the forms of Conversion Notice included in
the Certificate of Designation set forth the totality of the procedures required
in order to exercise the Warrants or convert the
18
Preferred Stock. No additional legal opinion or other information or
instructions shall be necessary to enable each Purchaser to exercise
their Warrants or convert their Preferred Stock. The Company shall
honor exercises of the Warrants and conversions of the Preferred Stock
and shall deliver Underlying Shares in accordance with the terms,
conditions and time periods set forth in the Transaction Documents. The
Company acknowledges that the issuance of the Securities may result in
dilution of the outstanding shares of Common Stock, which dilution may
be substantial under certain market conditions. The Company further
acknowledges that its obligations under the Transaction Documents,
including its obligation to issue the Underlying Shares pursuant to the
Transaction Documents, are unconditional and absolute and not subject
to any right of set off, counterclaim, delay or reduction, regardless
of the effect of any such dilution or any claim the Company may have
against any Purchaser and regardless of the dilutive effect that such
issuance may have on the ownership of the other stockholders of the
Company.
4.12 FUTURE RIGHT TO PARTICIPATE. For a period of time commencing on
the Effective Date and ending 180 calendar days thereafter, each Purchaser shall
have the right to subscribe for an amount of Preferred Stock equaled to its
Subscription Amount on the same terms and conditions contained herein.
4.13 PARTICIPATION IN FUTURE FINANCING.
From the date hereof until the date that is the 90 days after
the Effective Date, upon any financing by the Company or any of its
Subsidiaries of Common Stock or Common Stock Equivalents (a "SUBSEQUENT
FINANCING"), such Purchaser shall have the right to participate in the
Subsequent Financing in an amount equal to up to 100% of the Subsequent
Financing, subject to rights of refusal previously granted (the
"PARTICIPATION MAXIMUM").
At least 5 Trading Days prior to the closing of the Subsequent
Financing, the Company shall deliver to each Purchaser a written notice
of its intention to effect a Subsequent Financing ("PRE-NOTICE"), which
Pre-Notice shall ask such Purchaser if it wants to review the details
of such financing (such additional notice, a "SUBSEQUENT FINANCING
NOTICE"). Upon the request of a Purchaser, and only upon a request by
such Purchaser, for a Subsequent Financing Notice, the Company shall
promptly, but no later than 1 Trading Day after such request, deliver a
Subsequent Financing Notice to such Purchaser. The Subsequent Financing
Notice shall describe in reasonable detail the proposed terms of such
Subsequent Financing, the amount of proceeds intended to be raised
thereunder, the Person with whom such Subsequent Financing is proposed
to be effected, and attached to which shall be a term sheet or similar
document relating thereto.
Any Purchaser desiring to participate in such Subsequent
Financing must provide written notice to the Company by not later than
5:30 p.m. (New York City time) on the 5th Trading Day after all of the
Purchasers have received the Pre-Notice that the Purchaser is willing
to participate in the Subsequent Financing, the amount of the
Purchaser's participation, and that the Purchaser has such funds ready,
willing and available for investment on the terms set forth in the
Subsequent Financing Notice. If the
19
Company receives no notice from a Purchaser as of such 5th Trading Day,
such Purchaser shall be deemed to have notified the Company that it
does not elect to participate.
If by 5:30 p.m. (New York City time) on the 5th Trading Day
after all of the Purchasers have received the Pre-Notice, notifications
by the Purchasers of their willingness to participate in the Subsequent
Financing (or to cause their designees to participate) is, in the
aggregate, less than the total amount of the Subsequent Financing, then
the Company may effect the remaining portion of such Subsequent
Financing on the terms and to the Persons set forth in the Subsequent
Financing Notice.
If by 5:30 p.m. (New York City time) on the 5th Trading Day
after all of the Purchasers have received the Pre-Notice, the Company
receives responses to a Subsequent Financing Notice from Purchasers
seeking to purchase more than the aggregate amount of the Participation
Maximum, each such Purchaser shall have the right to purchase the
greater of (a) their Pro Rata Portion (as defined below) of the
Participation Maximum and (b) the difference between the Participation
Maximum and the aggregate amount of participation by all other
Purchasers. "PRO RATA PORTION" is the ratio of (x) the Subscription
Amount of Securities purchased on the Closing Date by a Purchaser
participating under this Section 4.13 and (y) the sum of the aggregate
Subscription Amounts of Securities purchased on the Closing Date by all
Purchasers participating under this Section 4.13.
The Company must provide the Purchasers with a second
Subsequent Financing Notice, and the Purchasers will again have the
right of participation set forth above in this Section 4.13, if the
Subsequent Financing subject to the initial Subsequent Financing Notice
is not consummated for any reason on the terms set forth in such
Subsequent Financing Notice within 60 Trading Days after the date of
the initial Subsequent Financing Notice.
Notwithstanding the foregoing, this Section 4.13 shall not apply in
respect of an Exempt Issuance.
ARTICLE V
MISCELLANEOUS
5.1 FEES AND EXPENSES. Except as otherwise set forth in this Agreement,
each party shall pay the fees and expenses of its advisers, counsel, accountants
and other experts, if any, and all other expenses incurred by such party
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement. The Company shall pay all stamp and other taxes and duties
levied in connection with the sale of the Securities.
5.2 ENTIRE AGREEMENT. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
20
5.3 NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified on the signature page prior to 5:30 p.m. (New York City time) on a
Trading Day and an electronic confirmation of delivery is received by the
sender, (b) the next Trading Day after the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 5:30 p.m. (New
York City time) on any Trading Day, (c) three Trading Days following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or (d)
upon actual receipt by the party to whom such notice is required to be given.
The addresses for such notices and communications are those set forth on the
signature pages hereof, or such other address as may be designated in writing
hereafter, in the same manner, by such Person.
5.4 AMENDMENTS; WAIVERS. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each Purchaser or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.
5.5 CONSTRUCTION. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
5.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser. Any Purchaser may assign
any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Securities, provided such transferee agrees
in writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the "Purchasers".
5.7 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in this Agreement.
5.8 GOVERNING LAW. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the
21
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York. Each party hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in the City
of New York, borough of Manhattan for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is
improper or inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law. The parties
hereby waive all rights to a trial by jury. If either party shall commence an
action or proceeding to enforce any provisions of the Transaction Documents,
then the prevailing party in such action or proceeding shall be reimbursed by
the other party for its attorneys' fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.
5.9 SURVIVAL. The representations and warranties contained herein shall
survive the Closing and the delivery, exercise and/or conversion of the
Securities, as applicable.
5.10 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
5.11 SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.12 RESCISSION AND WITHDRAWAL RIGHT. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights; PROVIDED,
HOWEVER, in the case of a
22
rescission of a conversion of the Preferred Stock or exercise of the Warrant,
the Purchaser shall be required to return any shares of Common Stock subject to
such conversion or exercise notice.
5.13 REPLACEMENT OF SECURITIES. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
5.14 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of each
Purchaser and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.15 PAYMENT SET ASIDE. To the extent that the Company makes a payment
or payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
5.16 INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. The Company has
elected to provide all Purchasers with the same terms and Transaction Documents
23
for the convenience of the Company and not because it was required or requested
to do so by the Purchasers.
5.17 LIQUIDATED DAMAGES. The Company's obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.
5.18 CONSTRUCTION. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.
[SIGNATURE PAGE FOLLOWS]
24
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
ACCUPOLL HOLDING CORP. ADDRESS FOR NOTICE:
--------------------- -------------------
By: /S/ XXXXXXX X. XXXXX 00000 Xxx Xxxx Xxx., Xxxxx 000
----------------------------- Xxxxxx, XX 00000
Name: Xxxxxxx X. Xxxxx (000) 000-0000
Title: Chief Executive Officer
With a copy to (which shall not constitute notice):
Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP
1065 Avenue of the Americas
T 212-930-9700
F 212-930-9725
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
25
[PURCHASER SIGNATURE PAGES TO ACUP SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Purchaser: LEMANIK S.A.
--------------------------------------------------------------
SIGNATURE OF AUTHORIZED SIGNATORY OF PURCHASER: ENIELCO, CELLINI XXXXX XXXXXXXX
--------------------------------
Name of Authorized Signatory: /S/ ENIELCO, CELLINI /S/ XXXXX XXXXXXXX
---------------------------------------------------
Title of Authorized Signatory: GENERAL MANAGER MANAGER
--------------------------------------------------
Email Address of Authorized Signatory:
------------------------------------------
Address for Notice of Investing Entity:
Address for Delivery of Securities for Investing Entity (if not same as above):
Subscription Amount: $125,000 $
Shares of Preferred Stock: 1250#
Warrant Shares: 1,250,000 warrants (strike $0.10) + 1,250,000 warrants (strike
$0.125)
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
26
[PURCHASER SIGNATURE PAGES TO ACUP SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Purchaser: LEMANIK SICAV ACTIVE GROWTH
--------------------------------------------------------------
SIGNATURE OF AUTHORIZED
SIGNATORY OF PURCHASER: /S/ XXXXXX XXXXXXXXX /S/ XXXXX XXXXXXXXX
--------------------------------------------------------
Name of Authorized Signatory: XXXXXX XXXXXXXXX XXXXX XXXXXXXXX
--------------------------------------------------
Title of Authorized Signatory: CHAIRMAN MEMBER OF THE BOARD
-------------------------------------------------
Email Address of Authorized Signatory:
------------------------------------------
Address for Notice of Investing Entity:
Address for Delivery of Securities for Investing Entity (if not same as above):
Subscription Amount: $50,000 $
Shares of Preferred Stock: 500 #
Warrant Shares: 500,000 warrants of common shares (strike $0.10) + 500,000
warrants of common shares (strike $0.125)
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
27
DISCLOSURE SCHEDULES
ACUP USE OF PROCEEDS
ASSUMING A $1 MILLION BRIDGE
-----------------------------
o 150K Musco settlement
o 550K Operations for 2 months
o 100K Certification for Surecount and California
o 100K Legal and accounting
o 100K Offering costs
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