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SECURED CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
Among
ACCORD ADVANCED TECHNOLOGIES, INC.
and
THE INVESTORS SIGNATORY HERETO
Dated as of June __, 2000
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SECURED CONVERTIBLE DEBENTURE PURCHASE AGREEMENT (this "AGREEMENT"), dated
as of June 22, 2000, among ACCORD ADVANCED TECHNOLOGIES, INC. a Nevada
corporation (the "COMPANY"), and the investors signatory hereto (each such
investor is a "PURCHASER" and all such investors are, collectively, the
"PURCHASERS").
WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Company desires to issue and sell to the Purchasers and the Purchasers,
severally and not jointly, desire to purchase from the Company an aggregate
principal amount of $1,000,000 of the Company's 12% Secured Convertible
Debentures, due June 30, 2001, which shall be in the form of EXHIBIT A (the
"DEBENTURES"), and which are convertible into shares of the Company's common
stock, $ .0001 par value per share (the "Common Stock"). All references to $
(dollars) shall be to US$ (United States Dollars).
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy are hereby acknowledged, the Company and the Purchasers agree as
follows:
ARTICLE I
PURCHASE AND SALE
1.1 THE CLOSING.
(a) THE CLOSING. (i) Subject to the terms and conditions set forth in
this Agreement, the Company shall issue and sell to the Purchasers and the
Purchasers shall, severally and not jointly, purchase from the Company the
Debentures for an aggregate purchase price of $1,000,000. The closing of the
purchase and sale of the Debentures (the "CLOSING") shall take place at the
offices of Robinson Silverman Pearce Aronsohn & Berman LLP ("ROBINSON
SILVERMAN"), 1290 Avenue of the Americas, New York, New York 10104, immediately
following the execution hereof or such later date as the parties shall agree.
The date of the Closing is hereinafter referred to as the "CLOSING DATE." The
purchase and sale of the Debentures shall occur in two separate tranches. The
first tranche ("FIRST TRANCHE") shall be completed on the Closing Date and the
Purchasers shall pay an aggregate purchase price of $500,000 on such date (the
"INITIAL PURCHASE PRICE"). The second tranche ("SECOND TRANCHE") shall be
completed within thirty days after the Effective Date (as defined in Section
3.1(b)) ("SECOND TRANCHE CLOSING DATE") and the Purchasers shall pay an
aggregate purchase price of $500,000 (the "SUBSEQUENT PURCHASE PRICE").
(ii) On the Closing Date, the parties shall deliver or shall cause
to be delivered the following: (A) the Company shall deliver to each Purchaser
(1) Debentures representing a portion of the Initial Purchase Price paid by such
Purchaser on the Closing Date, as indicated below such Purchaser's name on the
signature page to this Agreement, registered in the name of such Purchaser, (2)
a Common Stock purchase warrant, in the form of EXHIBIT D, registered in the
name of such Purchaser, pursuant to which such Purchaser shall have the right to
acquire 500,000 shares of Common Stock as indicated below such Purchaser's name
on the signature page to this Agreement (collectively, the "WARRANTS"), (3) the
legal opinion of Robson, Ferber, Frost, Chan & Essner, LLP outside counsel to
the Company, in the form of EXHIBIT C, (4) an executed Registration Rights
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Agreement, dated the date hereof, among the Company and the Purchasers, in the
form of EXHIBIT B (the "REGISTRATION RIGHTS AGREEMENT"), and the Transfer Agent
Instructions, in the form of EXHIBIT E, delivered to and acknowledged by the
Company's transfer agent (the "TRANSFER AGENT INSTRUCTIONS") and (5) an executed
Security Agreement, dated the date hereof, between the Company and the
Purchasers, in the Form of Exhibit F (the "SECURITY AGREEMENT"); and (B) each
Purchaser shall deliver (1) its portion of the Initial Purchase Price purchase
indicated below such Purchaser's name on the signature page to this Agreement in
United States dollars in immediately available funds by wire transfer to an
account designated in writing by the Company for such purpose, and (2) an
executed Registration Rights Agreement and Security Agreement.
(iii) Within thirty days following the Effective Date, (A) the
Company will, against delivery of the amounts set forth in clause (B) in this
paragraph, deliver to each Purchaser, Debentures representing the portion of the
Subsequent Payment Price indicated below such Purchaser's name on the signature
page of this Agreement (subject to equitable adjustment for stock splits,
recombinations and similar events), registered in the name of such Purchaser,
(B) each Purchaser will deliver to the Company, its portion of the Subsequent
Payment Price as indicated below such Purchaser's name on the signature page to
this Agreement in United States dollars in immediately available funds by wire
transfer to an account designated in writing by the Company for such purpose and
(C) the Company will deliver to each Purchaser, Warrants, registered in the name
of such Purchaser, pursuant to which such Purchaser shall have the right to
acquire the number of shares of Common Stock indicated below such Purchaser's
name on the signature page to this Agreement.
Notwithstanding anything to the contrary contained in this Agreement, the
commitment of a Purchaser to acquire the securities described in Section
1.1(a)(iii) above is subject to the satisfaction or waiver by the Purchasers of
each of the following conditions:
(a) CLOSING OF FIRST TRANCHE. The Closing of the purchase and sale of
the First Tranche shall have occurred;
(b) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company contained in the Purchase
Agreement shall be true and correct as of the date when made and as of the
Second Tranche Closing Date as though made on and as of the Second Tranche
Closing Date (other than representations and warranties which relate to a
specific date (which shall not include representations and warranties relating
to the "date hereof") which representations and warranties shall be true as of
such specific date);
(c) PERFORMANCE BY THE COMPANY. The Company shall have performed,
satisfied and complied with all covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by the
Company between the Closing Date and the Second Tranche Closing Date and no
Event (as defined in the Registration Rights Agreement ) shall have occurred
which has not been cured to the satisfaction of the Purchasers;
(d) UNDERLYING SHARES REGISTRATION STATEMENT. The Underlying Shares
Registration Statement shall have been declared effective under the Securities
Act by the Commission and shall have remained effective at all times, not
subject to any actual or threatened stop order or subject to any actual or
threatened suspension at any time prior to the Second Tranche Closing Date.
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(e) NO INJUNCTION. Since the Closing Date, no statute, rule,
regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated, amended, modified or endorsed by any court of
governmental authority of competent jurisdiction or governmental authority,
stock market or trading facility which prohibits the consummation of any of the
transactions contemplated by the Transaction Documents or makes impracticable
the transactions contemplated thereby;
(f) ADVERSE CHANGES. Since the Closing Date, no event or series of
events which reasonably would be expected to have or result in a Material
Adverse Effect shall have occurred;
(g) NO SUSPENSIONS OF TRADING IN COMMON STOCK. The trading in the
Common Stock shall not have been suspended by the Commission or on the OTC
(except for any suspension of trading of limited duration solely to permit
dissemination of material information regarding the Company) at any time since
the Closing Date;
(h) LISTING OF COMMON STOCK. The Common Stock shall have been at all
times since the Closing Date quoted on the OTC;
(i) PURCHASERS' BENEFICIAL OWNERSHIP. The Purchasers shall not
beneficially own in excess of 9.999% of the outstanding shares of Common Stock;
(j) PERFORMANCE OF CONVERSION/EXERCISE OBLIGATIONS. The Company shall
have timely complied with its conversion, exercise and delivery obligations
under the First Tranche.
1.2 CERTAIN DEFINED TERMS. For purposes of this Agreement, "CONVERSION
PRICE," "ORIGINAL ISSUE DATE" and "TRADING DAY" shall have the meanings set
forth in the Debentures; "BUSINESS DAY" shall mean any day except Saturday,
Sunday and any day which shall be a federal legal holiday in the United States
or a day on which banking institutions in the State of New York or Arizona are
authorized or required by law or other governmental action to close; "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.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The Company
hereby makes the following representations and warranties to the Purchasers:
(a) ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Nevada with the requisite corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. The
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Company has no subsidiaries other than as set forth in SCHEDULE 2.1(A)
(collectively the "SUBSIDIARIES"). Each of 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. Each
of the Company and the Subsidiaries is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which the nature
of the business conducted or property 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, individually or in the aggregate, (x) adversely
affect the legality, validity or enforceability of the Securities (as defined
below) or any of this Agreement, the Registration Rights Agreement, the Security
Agreement, the Transfer Agent Instructions or the Warrants (collectively, the
"TRANSACTION DOCUMENTS"), (y) have or result in a material adverse effect on the
results of operations, assets, prospects, or condition (financial or otherwise)
of the Company and the Subsidiaries, taken as a whole, or (z) adversely impair
the Company's ability to perform fully on a timely basis its obligations under
any of the Transaction Documents (any of (x), (y) or (z), a "MATERIAL ADVERSE
EFFECT").
(b) 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 thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company. Each of
the Transaction Documents and the Debentures has been duly executed by the
Company and, when delivered (or filed, as the case may be) 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. 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.
(c) CAPITALIZATION. The number of authorized, issued and outstanding
capital stock of the Company is set forth in SCHEDULE 2.1(C). No shares of
Common Stock are entitled to preemptive or similar rights, nor is any holder of
the Common Stock entitled to preemptive or similar rights arising out of any
agreement or understanding with the Company by virtue of any of the Transaction
Documents. Except as a result of the purchase and sale of the Debentures and the
Warrants and except as disclosed in SCHEDULE 2.1(C), there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exchangeable for, or giving any Person (as defined below)
any right to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
(d) ISSUANCE OF THE DEBENTURES AND THE WARRANTS. The Debentures and the
Warrants are duly authorized and, when issued and paid for in accordance with
the terms hereof, will be duly and validly issued, fully paid and nonassessable,
free and clear of all liens, encumbrances and rights of first refusal of any
kind (collectively, "LIENS"). The Company has on the date hereof and will, at
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all times while the Debentures and the Warrants are outstanding, maintain an
adequate reserve of duly authorized shares of Common Stock, reserved for
issuance to the holders of the Debentures and the Warrants, to enable it to
perform its conversion, exercise and other obligations under this Agreement, the
Debentures and the Warrants. Such number of reserved and available shares of
Common Stock is not less than the sum of (i) 200% of the number of shares of
Common Stock which would be issuable upon conversion in full of the Debentures,
assuming such conversion occurred on the Original Issue Date, the Debentures
remain outstanding for two years and all interest is paid in shares of Common
Stock and (ii) the number of shares of Common Stock issuable upon exercise of
the Warrants (such number of shares of Common Stock as contemplated in clauses
(i)-(ii), the "INITIAL MINIMUM"). All such authorized shares of Common Stock
shall be duly reserved for issuance to the holders of the Debentures and the
Warrants. The shares of Common Stock issuable upon conversion of the Debentures
and upon exercise of the Warrants are collectively referred to herein as the
"UNDERLYING SHARES." The Debentures, the Warrants and the Underlying Shares are
collectively referred to herein as, the "SECURITIES." When issued in accordance
with the Debentures and the Warrants, the Underlying Shares will be duly
authorized, validly issued, fully paid and nonassessable, free and clear of all
Liens.
(e) NO CONFLICTS. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other charter documents (each as amended
through the date hereof), or (ii) subject to obtaining the Required Approvals
(as defined below), conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any agreement, credit facility,
debt or other instrument (evidencing a Company or Subsidiary debt or otherwise)
or other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or asset of the
Company is bound or affected; except in the case of each of clauses (ii) and
(iii), as could not, individually or in the aggregate, have or result in a
Material Adverse Effect. The business of the Company is not being conducted in
violation of any law, ordinance or regulation of any governmental authority,
except for violations which, individually or in the aggregate, could not have or
result in a Material Adverse Effect.
(f) FILINGS, CONSENTS AND APPROVALS. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filings required pursuant to Section
3.10, (ii) the filing with the Securities and Exchange Commission (the
"Commission") of a registration statement meeting the requirements set forth in
the Registration Rights Agreement and covering the resale of the Underlying
Shares by the Purchasers (the "UNDERLYING SHARES REGISTRATION STATEMENT"), (iii)
applicable Blue Sky filings and (iv) in all other cases where the failure to
obtain such consent, waiver, authorization or order, or to give such notice or
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make such filing or registration could not have or result in, individually or in
the aggregate, a Material Adverse Effect (collectively, the "REQUIRED
APPROVALS").
(g) LITIGATION; PROCEEDINGS. 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 or any of its Subsidiaries
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, individually or in the
aggregate, have or result in a Material Adverse Effect. Notwithstanding the
foregoing to the contrary, the Purchasers have been apprised of and provided
copies of all complaints and answers filed through the date hereof in connection
with that certain action filed in the United States District Court, Southern
District of New York as Case No. 99 Civ. 10625 (LMM) entitled GEM MANAGEMENT,
LTD. AND SUCCESSWAY HOLDINGS LTD., PLAINTIFFS V. ACCORD ADVANCED TECHNOLOGIES,
INC.
(h) NO DEFAULT OR VIOLATION. Neither the Company nor any Subsidiary (i)
is in default under or in violation of (and no event has occurred which has not
been waived which, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that it is
in violation of, any indenture, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties is
bound, (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is in violation of any statute, rule or regulation
of any governmental authority, in each case of clauses (i), (ii) or (iii) above,
except as could not individually or in the aggregate, have or result in a
Material Adverse Effect. The security interests granted to the Purchasers
pursuant to the Security Agreement will convey and grant to the Purchasers a
first priority security interest in all of the Collateral (as such term is
defined in such agreements).
(i) PRIVATE OFFERING. Assuming the accuracy of the representations and
warranties of the Purchasers set forth in Sections 2.2(b)-(g), the offer,
issuance and sale of the Securities to the Purchasers as contemplated hereby are
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "SECURITIES ACT"). Neither the Company nor any Person acting on its
behalf has taken or is, to the knowledge of the Company, contemplating taking
any action which could subject the offering, issuance or sale of the Securities
to the registration requirements of the Securities Act including soliciting any
offer to buy or sell the Securities by means of any form of general solicitation
or advertising.
(j) SEC DOCUMENTS; FINANCIAL STATEMENTS. The Company has filed all
reports required to be filed by it under the Exchange Act of 1934, as amended
(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 being
collectively referred to herein as the "SEC Documents" and, together with the
Schedules to this Agreement, the "DISCLOSURE MATERIALS") on a timely basis or
has received a valid extension of such time of filing and has filed any such SEC
Documents prior to the expiration of any such extension. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the
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Commission promulgated thereunder, and none of the SEC Documents, 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. All material agreements to which the Company is a party or to which
the property or assets of the Company are subject have been filed as exhibits to
the SEC Documents as required. The financial statements of the Company included
in the SEC Documents 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 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
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.
Except as specifically disclosed in the SEC Documents, (a) there has been no
event, occurrence or development that has or that could result in a Material
Adverse Effect, (b) the Company has not incurred any liabilities (contingent or
otherwise) other than (x) liabilities incurred in the ordinary course of
business consistent with past practice and (y) 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, (c) the Company has not
altered its method of accounting or the identity of its auditors and (d) the
Company has not declared or made any payment or distribution of cash or other
property to its stockholders or officers or directors (other than in compliance
with existing Company stock option plans) with respect to its capital stock, or
purchased, redeemed (or made any agreements to purchase or redeem) any shares of
its capital stock.
(k) INVESTMENT COMPANY. The Company is not, and is not an Affiliate (as
defined in Rule 405 under the Securities Act) of, an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
(l) CERTAIN FEES. No fees or commissions will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement. The Company
shall indemnify and hold harmless the Purchasers, their employees, officers,
directors, agents, and partners, and their respective Affiliates, from and
against all claims, losses, damages, costs (including the costs of preparation
and attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as such fees and expenses are incurred.
(m) SOLICITATION MATERIALS. Neither the Company nor any Person acting
on the Company's behalf has solicited any offer to buy or sell the Securities by
means of any form of general solicitation or advertising.
(n) FORM ELIGIBILITY. The Company is eligible to register securities
for resale with the Commission under Form S-1 or Form SB-2 promulgated under the
Securities Act.
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(o) FORM S-3 ELIGIBILITY. The Company shall use its best efforts to
become eligible to use Form S-3 promulgated under the Securities Act to register
its securities for resale with the Commission no later than 12 months after the
Closing Date.
(p) EXCLUSIVITY. The Company shall not issue and sell the Debentures to
any Person other than the Purchasers without the specific prior written consent
of the Purchasers.
(q) SENIORITY. No indebtedness of the Company is senior to the
Debentures in right of payment, whether with respect to interest or upon
liquidation or dissolution, or otherwise, except for that certain Small Business
Administration loan made on March 19, 1999 by Union Bank of Arizona in the
original principal amount of $1,000,000 (the "SBA LOAN").
(r) LISTING AND MAINTENANCE REQUIREMENTS COMPLIANCE. Except as set
forth in the SEC Documents, the Company has not, in the six months preceding the
date hereof, received notice (written or oral) from the NASDAQ or any other
stock exchange, market or trading facility on which the Common Stock is or has
been listed (or on which it has been quoted) to the effect that the Company is
not in compliance with the listing or maintenance requirements of such exchange
or 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.
(s) PATENTS AND TRADEMARKS. The Company and its Subsidiaries have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and rights which
are necessary or material for use in connection with their respective
businesses, as described in the SEC Documents and which the failure to so have
would have a Material Adverse Effect (collectively, the "INTELLECTUAL PROPERTY
RIGHTS"). To the best 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.
(t) REGISTRATION RIGHTS; RIGHTS OF PARTICIPATION. Except as set forth
on SCHEDULE 6(B) to the Registration Rights Agreement, the Company has not
granted or agreed to grant to any Person any rights (including "piggy-back"
registration rights) to have any securities of the Company registered with the
Commission or any other governmental authority which has not been satisfied. No
Person, has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents.
(u) REGULATORY PERMITS. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses as described in the SEC Documents, except where the failure to
possess such permits could not, individually or in the aggregate, have or result
in a Material Adverse Effect ("MATERIAL PERMITS"), and neither the Company nor
any such Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
(v) TITLE. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them which is material to the
business of the Company and its Subsidiaries and good and marketable title in
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all personal property owned by them which is material to the business of the
Company and its Subsidiaries, in each case free and clear of all Liens, except
for Liens granted to the Purchasers pursuant to the Security Agreement and for
other Liens as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and its Subsidiaries. Any real property and facilities held under lease
by the Company and its Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and its Subsidiaries are in compliance
and do not interfere with the use made and proposed to be made of such property
and buildings by the Company and its Subsidiaries.
(w) ABSENCE OF CERTAIN PROCEEDINGS. Except as described in the SEC
Reports, (i) there is no Action pending or, to the knowledge of the Company,
threatened against the Company, in any such case wherein an unfavorable
decision, ruling or finding could have or result in a Material Adverse Effect;
(ii) neither the Company nor any Subsidiary, nor any director or officer
thereof, is or has been the subject of any Action involving (A) a claim of
violation of or liability under federal or state securities laws or (B) a claim
of breach of fiduciary duty; (iii) the Company does not have pending before the
Commission any request for confidential treatment of information and the Company
has no knowledge of any expected such request that would be made prior to the
Effectiveness Date (as defined in the Registration Rights Agreement); and (iv)
there has not been, and to the best of the Company's knowledge 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.
(x) LABOR RELATIONS. No material labor problem exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company.
(y) DISCLOSURE. The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Purchasers or its agents or
counsel with any information that constitutes or might constitute material
non-public information. The Company understands and confirms that the Purchasers
shall be relying on the foregoing representations 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 are
true and correct 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.
(z) AUTHORIZATION OF STOCK. The Company represents and warrants that
its Board of Directors has the authority and any necessary approval to increase
the number of authorized shares of the Company's Common Stock. The Company
covenants and agrees that it shall increase or cause to be increased the number
of authorized shares of the Company's Common Stock to a total of 100,000,000
shares within 10 days of the Closing Date.
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2.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser hereby
for itself and for no other Purchaser represents and warrants 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 the requisite 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 purchase by such Purchaser of the Securities
hereunder has been duly authorized by all necessary action on the part of such
Purchaser. Each of this Agreement, the Registration Rights Agreement, the
Security Agreement and the Intellectual Property Security Agreement 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.
(b) INVESTMENT INTENT. Such Purchaser is acquiring the Securities as
principal for its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Purchaser's right, subject to the provisions of this
Agreement and the Registration Rights Agreement, at all times to sell or
otherwise dispose of all or any part of such Securities pursuant to an effective
registration statement under the Securities Act and in compliance with
applicable federal and state securities laws or under an exemption from such
registration. Nothing contained herein shall be deemed a representation or
warranty by such Purchaser to hold Securities for any amount of time.
(c) PURCHASER STATUS. At the time such Purchaser was offered the
Debentures and its respective Warrants, it was, and at the date hereof it is,
and at each exercise date under its respective Warrants, it will be, an
"accredited investor" as defined in Rule 501(a) under the Securities Act. Such
Purchaser has not been formed solely for the purpose of acquiring the
Securities.
(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.
(e) ABILITY OF SUCH PURCHASER TO BEAR RISK OF 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.
(f) ACCESS TO INFORMATION. Such Purchaser acknowledges that it has
reviewed the Disclosure Materials and has been afforded (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
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can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the Disclosure
Materials. Neither such inquiries nor any other investigation conducted by or on
behalf of such Purchaser or its representatives or counsel shall modify, amend
or affect such Purchaser's right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
(g) GENERAL SOLICITATION. Such Purchaser is not purchasing the
Securities as a result of or subsequent to 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.
(h) RELIANCE. Such Purchaser understands and acknowledges that (i) the
Securities are being offered and sold to it without registration under the
Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Purchaser hereby consents to such
reliance.
The Company acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 TRANSFER RESTRICTIONS. (a) Securities may only be disposed of pursuant
to an effective registration statement under the Securities Act, to the Company
or pursuant to an available exemption from or in a transaction not subject to
the registration requirements of the Securities Act, and in compliance with any
applicable federal and state securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement or to the
Company, except as otherwise set forth herein, the Company may require the
transferor thereof to provide to the Company an opinion of counsel selected by
the transferor, the form and substance of which opinion 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.
Notwithstanding the foregoing, the Company, without requiring a legal opinion as
described in the immediately preceding sentence, hereby consents to and agrees
to register on the books of the Company and with any transfer agent for the
securities of the Company any transfer of Securities by a Purchaser to an
Affiliate of such Purchaser or to one or more funds or managed accounts under
common management with such Purchaser, and any transfer among any such
Affiliates or one or more funds or managed accounts, provided that the
transferee certifies to the Company that it is an "accredited investor" as
defined in Rule 501(a) under the Securities Act and that it is acquiring the
Securities solely for investment purposes (subject to the qualifications
hereof). Any such transferee shall agree in writing to be bound by the terms of
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this Agreement and shall have the rights of a Purchaser under this Agreement and
the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required by
this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] 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.
Underlying Shares shall not contain the legend set forth above nor any
other legend if the conversion of Debentures and exercise of the Warrants or
other issuances of Underlying Shares as contemplated hereby, by the Debentures
or the Warrants occurs at any time while an Underlying Shares Registration
Statement is effective under the Securities Act or, in the event there is not an
effective Underlying Shares Registration Statement, at such time, in the opinion
of counsel to the Company, 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 the legal opinion included in the Transfer Agent
Instructions to the Company's transfer agent on the day that the Underlying
Shares Registration Statement is declared effective by the Commission. The
Company agrees that, in the event any Underlying Shares are issued with a legend
in accordance with this Section 3.1(b), it will, within five Trading Days after
request therefor by a Purchaser, provide such Purchaser with a certificate or
certificates representing such Underlying Shares, free from such legend at such
time as such legend would not have been required under this Section 3.1(b) had
such issuance occurred on the date of such request. The Company may not make any
notation on its records or give instructions to any transfer agent of the
Company which enlarge the restrictions of transfer set forth in this Section.
3.2 ACKNOWLEDGMENT OF DILUTION. The Company acknowledges that the issuance
of the Underlying Shares upon (i) conversion of the Debentures in accordance
with the terms of the Debentures, and (ii) exercise of the Warrants in
accordance with their terms, will 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 obligation to issue
Underlying Shares upon (x) conversion of the Debentures in accordance with the
terms of the Debentures, and (y) exercise of the Warrants in accordance with
their terms, is unconditional and absolute, subject to the limitations set forth
herein in the Debentures or pursuant to the Warrants, regardless of the effect
of any such dilution.
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3.3 FURNISHING OF INFORMATION. As long as the Purchasers own 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 Section 13(a) or 15(d) of the
Exchange Act. As long as the Purchasers own Securities, if the Company is not
required to file reports pursuant to such sections, it will prepare and furnish
to the Purchasers and make publicly available in accordance with Rule 144(c)
promulgated under the Securities Act such information as is required for the
Purchasers to sell the Securities under Rule 144 promulgated under the
Securities Act. 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 Underlying Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act, including
the legal opinion referenced above in this Section. Upon the request of any such
Person, the Company shall deliver to such Person a written certification of a
duly authorized officer as to whether it has complied with such requirements.
3.4 INTEGRATION. The Company shall not, and shall use its best efforts to
ensure that, no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers.
3.5 INCREASE IN AUTHORIZED SHARES. If on any date the Company would be, if
a notice of conversion or exercise (as the case may be) were to be delivered on
such date, precluded from (a) issuing (a) 200% of the number of Underlying
Shares as would then be issuable upon a conversion in full of the Debentures,
and (b) the number of Underlying Shares issuable upon exercise in full of the
Warrants (the "CURRENT REQUIRED MINIMUM"), in either case, due to the
unavailability of a sufficient number of authorized but unissued or reserved
shares of Common Stock, then the Board of Directors of the Company shall
promptly (and in any case, within 30 Business Days from such date) prepare and
mail to the stockholders of the Company proxy materials requesting authorization
to amend the Company's certificate or articles of incorporation to increase the
number of shares of Common Stock which the Company is authorized to issue to at
least such number of shares as reasonably requested by the Purchasers in order
to provide for such number of authorized and unissued shares of Common Stock to
enable the Company to comply with its issuance, conversion exercise and
reservation of shares obligations as set forth in this Agreement, the Debentures
and the Warrants (the sum of (x) the number of shares of Common Stock then
outstanding plus all shares of Common Stock issuable upon exercise of all
outstanding options, warrants and convertible instruments, and (y) the Current
Required Minimum, shall be a reasonable number). In connection therewith, the
Board of Directors shall (a) adopt proper resolutions authorizing such increase,
(b) recommend to and otherwise use its best efforts to promptly and duly obtain
stockholder approval to carry out such resolutions (and hold a special meeting
of the stockholders no later than the earlier to occur of the 60th day after
delivery of the proxy materials relating to such meeting and the 90th day after
request by a holder of Securities to issue the number of Underlying Shares in
accordance with the terms hereof) and (c) within five Business Days of obtaining
such stockholder authorization, file an appropriate amendment to the Company's
certificate or articles of incorporation to evidence such increase.
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3.6 RESERVATION AND LISTING OF UNDERLYING SHARES. (a) The Company shall (i)
in the time and manner required by any national securities exchange or market or
trading or quotation facility on which the Common Stock is then traded, prepare
and file with such national securities exchange or market or quotation facility
on which the Common Stock is then listed for trading an additional shares
listing application covering a number of shares of Common Stock which is not
less than the Initial Minimum, (ii) take all steps necessary to cause such
shares of Common Stock to be approved for listing on any such national
securities exchange or market or trading or quotation facility on which the
Common Stock is then listed as soon as possible thereafter, and (iii) provide to
the Purchasers evidence of such listing, and the Company shall maintain the
listing of its Common Stock thereon. If the number of Underlying Shares issuable
upon conversion in full of the then outstanding Debentures and upon exercise of
the then unexercised portion of the Warrants exceeds 85% of the number of
Underlying Shares previously listed on account thereof with any such required
exchanges), then the Company shall take the necessary actions to immediately
list a number of Underlying Shares as equals no less than the then Current
Required Minimum.
(b) The Company shall maintain a reserve of shares of Common Stock for
issuance upon conversion of the Debentures in full and upon exercise in full of
the Warrants in accordance with this Agreement, the Debentures and the Warrants,
respectively, in such amount as may be required to fulfill its obligations in
full under the Transaction Documents, which reserve shall equal no less than the
then Current Required Minimum.
3.7 CONVERSION AND EXERCISE PROCEDURES. The Transfer Agent Instructions,
Conversion Notice (as defined in the Debentures) and Notice of Exercise under
the Warrants set forth the totality of the procedures with respect to the
conversion of the Debentures and exercise of the Warrants, including the form of
legal opinion, if necessary, that shall be rendered to the Company's transfer
agent and such other information and instructions as may be reasonably necessary
to enable the Purchasers to convert their Debentures and exercise their Warrants
as contemplated in the Debentures and the Warrants (as applicable).
3.8 CONVERSION AND EXERCISE OBLIGATIONS OF THE COMPANY. The Company shall
honor conversions of the Debentures and exercises of the Warrants and shall
deliver Underlying Shares in accordance with the respective terms, conditions
and time periods set forth in the Debentures and the Warrants.
3.9 SUBSEQUENT FINANCING; RIGHT OF FIRST REFUSAL; LIMITATION ON
REGISTRATIONS.
(a) Without the prior written consent of the Purchasers, prior to the 180th
day following the Effective Date (such date will be extended by the number of
days after the Effectiveness Date (as defined in the Registration Rights
Agreement) that an Underlying Shares Registration Statement has not been
declared effective by the Commission and by the number of days after the
Effective Date during which a Purchaser is not permitted or unable to utilize
the prospectus or otherwise to resell Underlying Shares under the Underlying
Shares Registration Statement) (the "RESTRICTED PERIOD"), the Company will not
offer, sell, grant any option to purchase, or otherwise dispose of (or announce
any offer, sale, grant or any option to purchase or other disposition) any of
its securities (including the issuance of any debt or other instrument at any
time over the life thereof convertible into or exchangeable for Common Stock) or
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any of its Affiliate's securities that may be exchangeable or convertible into
Common Stock, or otherwise enter into any other transaction intended to be
exempt or not subject to registration under the Securities Act (collectively, a
"SUBSEQUENT PLACEMENT"), unless none of the securities issued or granted (or
securities issuable upon conversion or exercise thereof) may be resold or
registered for issuance or resale under the Securities Act until the termination
of the Restricted Period. The restriction contained in the foregoing sentence
shall not apply to (i) issuances of Common Stock pursuant to a Strategic
Transaction (as defined below), (ii) issuances of shares of Common Stock as
payment of the purchase price for an acquisition of assets or stock of an
unaffiliated Person, and (iii) the granting of options or warrants to employees,
officers and directors of the Company, and the issuance of Common Stock upon
exercise of such options or warrants granted under any stock option plan
heretofore or hereinafter duly adopted by the Company ("OPTION PLAN ISSUANCES").
A "STRATEGIC TRANSACTION" shall mean a transaction or relationship in which the
Company issues shares of Common Stock to a Person which is, itself or through
its subsidiaries, an operating company in a business related to the business of
the Company and in which the Company receives material benefits in addition to
the investment of funds, but shall not include a transaction in which the
Company is issuing securities primarily for the purpose of raising capital or to
an entity whose primary business is investing in securities.
(b) Without the prior written consent of the Purchasers, prior to the 181th
day following the Effective Date, the Company shall not, directly or indirectly
enter into a Subsequent Placement, unless: (A) the Company delivers to each of
the Purchasers a written notice (the "SUBSEQUENT PLACEMENT NOTICE") of its
intention to effect such Subsequent Placement, which Subsequent Placement Notice
shall describe in reasonable detail the proposed terms of such Subsequent
Placement, the amount of proceeds intended to be raised thereunder, the Person
with whom such Subsequent Placement shall be effected, and attached to which
shall be a term sheet or similar document relating thereto and (B) such
Purchaser shall not have notified the Company by 6:30 p.m. (New York City time)
on the tenth Trading Day after its receipt of the Subsequent Placement Notice of
its willingness to provide (or to cause its sole designee to provide), subject
to completion of mutually acceptable documentation, financing to the Company on
the same terms set forth in the Subsequent Placement Notice. If the Purchasers
shall fail to notify the Company of their intention to enter into such
negotiations within such time period, the Company may effect the Subsequent
Placement substantially upon the terms and to the Persons (or Affiliates of such
Persons) set forth in the Subsequent Placement Notice, PROVIDED, that the
Company shall provide the Purchasers with a second Subsequent Placement Notice,
and the Purchasers shall again have the right of first refusal set forth above
in this paragraph (b), if the Subsequent Placement subject to the initial
Subsequent Placement Notice shall not have been consummated for any reason on
the terms set forth in such Subsequent Placement Notice within thirty Trading
Days after the date of the initial Subsequent Placement Notice with the Person
(or an Affiliate of such Person) identified in the Subsequent Placement Notice.
If the Purchasers shall indicate a willingness to provide financing in excess of
the amount set forth in the Subsequent Placement Notice, then each Purchaser
shall be entitled to provide financing pursuant to such Subsequent Placement
Notice up to an amount equal to such Purchaser's pro-rata portion of the
aggregate number of Shares purchased by such Purchaser under this Agreement, but
the Company shall not be required to accept financing from the Purchasers in an
amount in excess of the amount set forth in the Subsequent Placement Notice. The
restrictions of this subsection shall not apply to: (i) a Subsequent Placement
in which the securities (and securities issuable upon conversion or exercise
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thereof) shall be restricted from resale and conversion and will not be
registered for issuance or resale for at least 365 days following the issuance
date thereof, (ii) issuances of shares of Common Stock pursuant to a Strategic
Transaction, (iii) issuances of shares of Common Stock as payment of the
purchase price for an acquisition of assets or stock of an unaffiliated Person
and (iv) Option Plan Issuances.
(c) Except for (x) Underlying Shares, (y) other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to be
registered, and securities of the Company permitted pursuant to Schedule 6(b) of
the Registration's Rights Agreement to be registered, in the Underlying Shares
Registration Statement in accordance with the Registration Rights Agreement, and
(z) Common Stock permitted to be issued pursuant to paragraph (a)(i)- (iii) of
Section 3.9(a), the Company shall not, for a period of not less than 90 Trading
Days after the date that the Underlying Shares Registration Statement is
declared effective by the Commission, without the prior written consent of the
Purchasers (i) issue or sell any of its or any of its Affiliates' equity or
equity-equivalent securities pursuant to Regulation S promulgated under the
Securities Act, or (ii) register any securities of the Company. Any days that a
Purchaser is unable to sell Underlying Shares under the Underlying Shares
Registration Statement shall be added to such 90 Trading Day period.
3.10 CERTAIN SECURITIES LAWS DISCLOSURES; PUBLICITY. The Company shall: (i)
on the Closing Date issue a press release acceptable to the Purchasers
disclosing the transactions contemplated hereby, (ii) file with the Commission a
Report on Form 8-K disclosing the transactions contemplated hereby within ten
Business Days after the Closing Date, and (iii) timely file with the Commission
a Form D promulgated under the Securities Act as required under Regulation D
promulgated under the Securities Act and provide a copy thereof to the
Purchasers promptly after the filing thereof. The Company shall, no less than
two Business Days prior to the filing of any disclosure required by clauses (ii)
and (iii) above, provide a copy thereof to the Purchasers. No such filing or
disclosure may be made that mentions the Purchasers by name without the prior
consent of the Purchasers. The Company and the Purchasers shall consult with
each other in issuing any press releases or otherwise making public statements
or filings and other communications with the Commission or any regulatory agency
or stock market or trading facility with respect to the transactions
contemplated hereby and neither party shall issue any such press release or
otherwise make any such public statement, filings or other communications
without the prior written consent of the other, which consent shall not be
unreasonably withheld or delayed, except that no prior consent shall be required
if such disclosure is required by law, in which such case the disclosing party
shall provide the other party with prior notice of such public statement, filing
or other communication. Notwithstanding the foregoing, the Company shall not
publicly disclose the names of the Purchasers, or include the names of the
Purchasers in any filing with the Commission, or any regulatory agency, trading
facility or stock market without the prior written consent of the Purchasers,
except to the extent such disclosure (but not any disclosure as to the
controlling Persons thereof) is required by law, in which case the Company shall
provide the Purchasers with prior notice of such disclosure.
3.11 TRANSFER OF INTELLECTUAL PROPERTY RIGHTS. Except in connection with
the sale of all or substantially all of the assets of the Company or licensing
arrangements in the ordinary course of the Company's business, the Company shall
not transfer, sell or otherwise dispose of any Intellectual Property Rights, or
allow any of the Intellectual Property Rights to become subject to any Liens, or
fail to renew such Intellectual Property Rights (if
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renewable and it would otherwise lapse if not renewed), without the prior
written consent of the Purchasers.
3.12 USE OF PROCEEDS. The Company shall use the net proceeds from the sale
of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than payment of trade
payables in the ordinary course of the Company's business and prior practices),
to redeem any Company equity or equity-equivalent securities or to settle any
outstanding litigation.
3.13 REIMBURSEMENT. If any Purchaser, other than by reason of its gross
negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by or against any Person, including
stockholders of the Company, in connection with or as a result of the
consummation of the transactions contemplated by Transaction Documents, the
Company will reimburse such Purchaser for its reasonable legal and other
expenses (including the cost of any investigation and preparation) incurred in
connection therewith, as such expenses are incurred. In addition, other than
with respect to any matter in which a Purchaser is a named party, the Company
will pay such Purchaser the charges, as reasonably determined by such Purchaser,
for the time of any officers or employees of such Purchaser devoted to appearing
and preparing to appear as witnesses, assisting in preparation for hearings,
trials or pretrial matters, or otherwise with respect to inquiries, hearings,
trials, and other proceedings relating to the subject matter of this Agreement.
The reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliates of the Purchasers who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may
be, of the Purchasers and any such Affiliate, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company in connection with or as a result of the consummation of
the Transaction Documents except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the gross negligence
or willful misconduct of the applicable Purchaser or entity in connection with
the transactions contemplated by this Agreement.
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ARTICLE IV
MISCELLANEOUS
4.1 FEES AND EXPENSES. At the Closing, the Company shall reimburse the
Purchasers for their legal fees and expenses incurred in connection with the
preparation and negotiation of the Transaction Documents by authorizing a
payment out of escrow in the amount of $15,000 for the preparation and
negotiation of the Transaction Documents. The amount contemplated by the
immediately preceding sentence shall be retained by the Purchasers and shall not
be delivered to the Company at the Closing. Other than the amount contemplated
in the immediately preceding sentence, and except as otherwise set forth in the
Registration Rights Agreement, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all stamp and
other taxes and duties levied in connection with the issuance of the Securities.
4.2 ENTIRE AGREEMENT; AMENDMENTS. The Transaction Documents, together with
the Exhibits and Schedules thereto and the Transfer Agent Instructions 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.
4.3 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 (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 6:30 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Agreement later than 6:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the Business Day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The address for such notices and
communications shall be as follows:
If to the Company: 5002 South Ash Avenue
Tempe, AZ 85282
Facsimile No.: (480) 820-2319
Attn: Chief Financial Officer
If to a Purchaser: To the address set forth under such Purchaser's
name on the signature pages hereto.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
4.4 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 of the Purchasers or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
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with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
4.5 HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
4.6 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 the Purchasers. Except as set forth in
Section 3.1(a), the Purchasers may not assign this Agreement or any of the
rights or obligations hereunder without the consent of the Company. This
provision shall not limit any Purchaser's right to transfer securities or
transfer or assign rights under the Registration Rights Agreement.
4.7 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.
4.8 GOVERNING LAW. The corporate laws of the State of Nevada shall govern
all issues concerning the relative rights of the Company and its stockholders.
All other questions concerning the construction, validity, enforcement and
interpretation of this Agreement 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 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 the 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. 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.
4.9 SURVIVAL. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery and conversion or
exercise (as the case may be) of the Debentures and the Warrants.
4.10 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
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<PAGE>
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
4.11 SEVERABILITY. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
4.12 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers will be entitled to specific performance of the obligations of the
Company under the Transaction Documents. The Company and each of the Purchasers
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of its 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.
4.13 INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser under any Transaction Document is 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 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.
4.14 REPRESENTATION BY COUNSEL. Each party hereto represents that it has
been represented by counsel of its own selection in connection with the
transaction contemplated hereby. Each purchaser is relying solely on its own due
diligence conducted in connection with the contemplated transaction and the
representations and warranties of the Company.
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SIGNATURE PAGES FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Convertible
Debenture Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
ACCORD ADVANCED TECHNOLOGIES, INC.
By /s/ Travis Wilson
-----------------------------------------
Name: Travis Wilson
Title: Chief Executive Officer
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
<PAGE>
AJW PARTNERS, LLC
By: SMS Group, LLC
By: /s/ Corey S. Ribotsky
--------------------------------
Name: Corey S. Ribotsky
Title:
Debentures Purchase Price
due on the Closing Date: $50,000.00
Debentures Purchase Price
due after the Effective Date: $50,000.00
Number of Shares underlying
Warrant due on the Closing Date 50,000
Number of Shares underlying
Warrant due after the Effective Date 50,000
Address for Notice:
AJW Partners, LLC
155 First Street
Suite B
Mineola, New York 11501
Facsimile No.: (516) 739-7115
Attn: Corey S. Ribotsky
With copies to: Robinson Silverman Pearce Aronsohn &
Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630
Attn: Eric L. Cohen, Esq.
<PAGE>
NEW MILLENIUM CAPITAL PARTNERS II, LLC
By: First Street Manager II, LLC
By: /s/ GLENN A. ARBEITMAN
--------------------------------------------
Name: Glenn A. Arbeitman
Title:
Debentures Purchase Price
due on the Closing Date: $450,000.00
Debentures Purchase Price
due after the Effective Date: $450,000.00
Number of Shares underlying
Warrant due on the Closing Date 450,000
Number of Shares underlying
Warrant due after the Effective Date 450,000
Address for Notice:
New Millenium Capital Partners II, LLC
155 First Street
Suite B
Mineola, New York 11501
Facsimile No.: (516) 739-7115
Attn: Glenn A. Arbeitman
With copies to: Robinson Silverman Pearce Aronsohn &
Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630
Attn: Eric L. Cohen, Esq.
