EXHIBIT 4.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is dated as of August
31, 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.
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"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 the nearest preceding date) on the Trading
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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 equal to such Purchaser's Subscription
Amount divided by 100, registered in the name of such
Purchaser;
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(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 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
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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 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
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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 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
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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.
(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.
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(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 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.
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(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.
(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
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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
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
12
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.
(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"
13
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 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
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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.
(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
15
(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
Securities Act, including any applicable prospectus delivery requirements,
or an exemption therefrom.
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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).
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
17
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 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,
18
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 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
19
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.
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
20
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 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,
21
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 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
22
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
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
23
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
---------------------
Name: Xxxxxxx X. Xxxxx 00000 Xxx Xxxx Xxx., Xxxxx 000
Title: Chief Executive Officer Xxxxxx, XX 00000
(000) 000-0000
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: XXXXX XXXXXXXX
Signature of Authorized Signatory of Purchaser: /s/ X. Xxxxxxxx
Lugano: August 31, 2005
Name of Authorized Signatory: ______________________________________________
Title of Authorized Signatory: ______________________________________________
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: USD 20,000
Shares of Preferred Stock: -200-
Warrant Shares: -200-
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
26
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: XXXXX XXXXXXXX
Signature of Authorized Signatory of Purchaser: /s/ X. Xxxxxxxx
Lugano: August 31, 2005
Name of Authorized Signatory: ______________________________________________
Title of Authorized Signatory: ______________________________________________
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: USD 10,000
Shares of Preferred Stock: -100-
26
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