Exhibit 3
ACCRUE SOFTWARE, INC.
SECURED CONVERTIBLE NOTE
PURCHASE AGREEMENT
FEBRUARY 4, 2003
ACCRUE SOFTWARE, INC.
SECURED CONVERTIBLE NOTE
PURCHASE AGREEMENT
This Secured Convertible Note Purchase Agreement (the "Agreement") is made
as of the 4th day of February, 2003 by and between Accrue Software, Inc., a
Delaware corporation (the "Company") and each of the purchasers listed on
Exhibit A attached to this Agreement (each a "Purchaser" and together the
"Purchasers").
RECITALS
The Company desires to issue and sell, and each Purchaser desires to
purchase, a secured convertible promissory note in substantially the form
attached to this Agreement as Exhibit B (the "Note") which shall be convertible
on the terms stated therein into equity securities of the Company. The Notes and
the equity securities issuable upon conversion thereof (and the securities
issuable upon conversion of such equity securities) are collectively referred to
herein as the "Securities."
AGREEMENT
In consideration of the mutual promises contained herein and other good
and valuable consideration, receipt of which is hereby acknowledged, the parties
to this Agreement agree as follows:
1. PURCHASE AND SALE OF NOTES.
(a) SALE AND ISSUANCE OF NOTES. Subject to the terms and conditions
of this Agreement, each Purchaser agrees to purchase at the Closing (as defined
below) and the Company agrees to sell and issue to each Purchaser a Note in the
principal amount set forth opposite such Purchaser's name on Exhibit A. The
purchase price of each Note shall be equal to 100% of the principal amount of
such Note. The Company's agreements with each of the Purchasers are separate
agreements, and the sales of the Notes to each of the Purchasers are separate
sales, subject to Section 6(c) hereof.
(b) CLOSING; DELIVERY.
(i) The purchase and sale of the Notes shall take place at the
offices of Venture Law Group, a Professional Corporation, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, at 10:00 a.m., on February 4th, 2003, or at such other
time and place as the Company and the Purchasers mutually agree upon, orally or
in writing (which time and place are designated as the "Initial Closing"). In
the event there is more than one closing, the term "Closing" shall apply to each
such closing, unless otherwise specified herein.
(ii) At each Closing, the Company shall deliver to each
Purchaser the Note to be purchased by such Purchaser against (1) payment of the
purchase price therefor by check payable to the Company or by wire transfer to a
bank designated by the Company, (2) delivery of counterpart signature pages to
this Agreement and the Note, and (3) delivery of a validly completed and
executed IRS Form W-8 BEN or IRS Form W-9, as applicable, establishing such
Purchaser's exemption from withholding tax, which forms are attached to this
Agreement as Exhibit C.
(iii) Until the earlier of (A) such time as the aggregate
amount of principal indebtedness evidenced by the Notes equals a total of
$810,000, or (B) the date 150 days from the date hereof, the Company may sell
additional Notes to such persons or entities as determined by the Company, or to
any Purchaser who desires to acquire additional Notes. All such sales shall be
made on the terms and conditions set forth in this Agreement. For purposes of
this Agreement, and all other agreements contemplated hereby, any additional
purchaser so acquiring Notes shall be deemed to be a "Purchaser" for purposes of
this Agreement, and any notes so acquired by such additional purchaser shall be
deemed to be "Notes" and "Securities" as applicable.
2. STOCK PURCHASE AGREEMENT. Each Purchaser understands and agrees that
the conversion of the Notes into equity securities of the Company in connection
with a proposed equity financing of the Company will require such Purchaser's
execution of certain agreements relating to the purchase and sale of such
securities as well as any rights relating to such equity securities.
3. SECURITY INTEREST. The indebtedness represented by the Notes shall be
secured by certain of the assets of the Company and its direct and indirect
United States subsidiaries (the "Collateral") in accordance with the provisions
of the Note.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to, and covenants with, the Purchasers, as follows:
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure so to qualify would have a material adverse
effect on its business, financial condition or properties (a "Material Adverse
Effect").
(b) AUTHORIZATION. The Agreement and the Notes, and the Common Stock
issuable upon conversion of the Notes, have been duly authorized by the Board of
Directors of the Company. The Agreement and the Notes, when executed and
delivered by the Company, shall constitute valid and legally binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and other laws of general
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application affecting enforcement of creditors' rights generally, as limited by
laws relating to the availability of specific performance, injunctive relief, or
other equitable remedies.
(c) NON-CONTRAVENTION. The execution and delivery of this Agreement,
the issuance and sale of the Notes (and the stock issuable upon conversion of
the Notes), to be sold by the Company under this Agreement, the fulfillment of
the terms of this Agreement and the consummation of the transactions
contemplated hereby will not (A) conflict with or constitute a violation of, or
default (with the passage of time or otherwise) under, (i) any material bond,
debenture, note or other evidence of indebtedness, or any material lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument to which the Company is a party or by which it or
its property is bound, (ii) the certificate of incorporation, by-laws or other
organizational documents of the Company, or (iii) any law, administrative
regulation, ordinance or order of any court or governmental agency, arbitration
panel or authority binding as of the Closing upon the Company or its property
which is reasonably likely to result in a Material Adverse Effect. No consent,
approval, authorization or other order of, or registration, qualification or
filing with, any regulatory body, administrative agency, or other governmental
body in the United States is required for the execution and delivery of this
Agreement and the valid issuance and sale of the Notes to be sold pursuant to
this Agreement, other than such as have been made or obtained, and except for
any securities filings required to be made under federal or state securities
laws or the requirements of the National Association of Securities Dealers, Inc.
and which may be required to be made after the Closing. For purposes of clauses
(i) and (iii) of this paragraph (c), "the Company" shall be deemed to include
all direct and indirect United States subsidiaries of the Company.
(d) CAPITALIZATION. The capitalization of the Company is described
in the Company's filings (the "SEC Documents") with the Securities and Exchange
Commission (the "SEC") as of the dates set forth therein. The Company has not
issued any capital stock since September 21, 2000, other than pursuant to
employee benefit plans disclosed in the Company's SEC Documents. Except as set
forth in or contemplated by the Company's SEC Documents, there are no
outstanding rights (including, without limitation, preemptive rights), warrants
or options to acquire, or instruments convertible into or exchangeable for, any
unissued shares of capital stock or other equity interest in the Company, or any
contract, commitment, agreement, understanding or arrangement of any kind to
which the Company is a party and relating to the issuance or sale of any capital
stock of the Company, any such convertible or exchangeable securities or any
such rights, warrants or options. No preemptive right, co-sale right,
registration right or limitation or restriction on granting the registration
rights set forth in Section 10 hereof, right of first refusal or other similar
right exists (or has not been waived) with respect to the issuance and sale of
the Notes.
(e) LEGAL PROCEEDINGS. There is no legal or governmental proceeding
pending, or, to the knowledge of the Company, threatened, to which the Company
or any subsidiary of the Company is a party or of which the business or property
of the Company or any subsidiary of the Company is subject that is not disclosed
in the Company's SEC Documents, which is reasonably likely to result in a
Material Adverse Effect.
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(f) NO VIOLATIONS. The Company is not in violation of its
certificate of incorporation, bylaws or other organizational document, or,
except as otherwise described in the SEC Documents, violation of any law,
administrative regulation, ordinance or order of any court or governmental
agency, arbitration panel or authority applicable to the Company, which
violation, individually or in the aggregate, has had, or would be reasonably
likely to have, a Material Adverse Effect, and the Company is not in default
(and there exists no condition which, with the passage of time or otherwise,
would constitute a material default) in the performance of any bond, debenture,
note or any other evidence of indebtedness in any indenture, mortgage, deed of
trust or any other agreement or instrument to which the Company is a party or by
which the Company is bound or by which the property of the Company is bound,
which has had, or would be reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect. For purposes of this paragraph (f), "the
Company" shall be deemed to include all direct and indirect subsidiaries of the
Company.
(g) REPORTING STATUS. The Company has filed all reports, schedules,
registration statements, forms and other documents required to be filed by the
Company with the SEC, including those that the Company may file with the SEC
after the date of this Agreement until the Closing ("SEC Filings") required to
be filed as of the date hereof. The SEC Filings (i) were or will be filed on a
timely basis, (ii) at the time filed, were or will be prepared in compliance in
all material respects with the applicable requirements of the Securities Act and
the Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such SEC Filings, and (iii) did not or will not at the
time they were or are filed contain any untrue statement of a material fact or
omit to state a material fact required to be stated in such SEC Filings or
necessary in order to make the statements in such SEC Filings, in the light of
the circumstances under which they were made, not misleading.
(h) COLLATERAL. The Company and each of its direct and indirect
United States subsidiaries has good title to the Collateral, free of any Liens
except Permitted Liens. This Agreement creates in favor of the Purchasers a
valid security interest in all of the Company's right, title and interest in and
to the Collateral, and upon the filing of appropriate UCC financing statements
with the Delaware Secretary of State, the Purchasers' security interest
hereunder and under the Notes will be duly perfected in all of the Collateral in
which a security interest may be perfected by such filing.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser hereby
represents and warrants to the Company that:
(a) AUTHORIZATION. Such Purchaser has full power and authority to
enter into this Agreement. This Agreement, when executed and delivered by the
Purchaser, will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and any other laws of general application affecting enforcement of
creditors' rights generally, and as limited by laws relating to the availability
of a specific performance, injunctive relief, or other equitable remedies.
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(b) PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with
the Purchaser in reliance upon the Purchaser's representation to the Company,
which by the Purchaser's execution of this Agreement, the Purchaser hereby
confirms, that the Securities to be acquired by the Purchaser will be acquired
for investment for the Purchaser's own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof, and that the
Purchaser has no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, the Purchaser
further represents that the Purchaser does not presently have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities. The Purchaser has not been formed for the specific purpose of
acquiring any of the Securities.
(c) KNOWLEDGE. The Purchaser is aware of the Company's business
affairs and financial condition and has acquired sufficient information about
the Company to reach an informed and knowledgeable decision to acquire the
Securities.
(d) RESTRICTED SECURITIES. The Purchaser understands that the
Securities have not been, and will not be, registered under the Securities Act
of 1933, as amended (the "Securities Act"), by reason of a specific exemption
from the registration provisions of the Securities Act which depends upon, among
other things, the bona fide nature of the investment intent and the accuracy of
the Purchaser's representations as expressed herein. The Purchaser understands
that the Securities are "restricted securities" under applicable U.S. federal
and state securities laws and that, pursuant to these laws, the Purchaser must
hold the Securities indefinitely unless they are registered with the Securities
and Exchange Commission and qualified by state authorities, or an exemption from
such registration and qualification requirements is available. The Purchaser
acknowledges that, except as expressly set forth herein, the Company has no
obligation to register or qualify the Securities for resale. The Purchaser
further acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Securities,
and on requirements relating to the Company which are outside of the Purchaser's
control, and which the Company is under no obligation and may not be able to
satisfy.
(e) NOT A LISTED SECURITY. The Purchaser understands that the
Company's stock is not listed on a national securities exchange, and that the
Company has made no assurances that the Company's stock will ever be traded on a
national securities exchange.
(f) LEGENDS. The Purchaser understands that the Securities, and any
securities issued in respect thereof or exchange therefor, may bear one or all
of the following legends:
(i) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. EXCEPT IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER THE
SECURITIES ACT OF
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1933 OR ANY OTHER AVAILABLE EXEMPTION FROM REGISTRATION, NO SUCH SALE OR
DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933."
(ii) THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE HELD
BY A PERSON WHO MAY BE DEEMED TO BE AN AFFILIATE OF THE ISSUER FOR PURPOSES OF
RULE 144 PROMULGATED UNDER THE ACT.
(iii) Any legend required by the Blue Sky laws of any state to
the extent such laws are applicable to the shares represented by the certificate
so legended.
(g) ACCREDITED INVESTOR. The Purchaser is an accredited investor as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
(h) FOREIGN INVESTORS. If a Purchaser is not a United States person
(as defined by Rule 902(k) under the Securities Act), such Purchaser hereby
represents that it has satisfied itself as to the full observance of the laws of
its jurisdiction in connection with any invitation to subscribe for the
Securities or any use of this Agreement, including (i) the legal requirements
within its jurisdiction for the purchase of the Securities, (ii) any foreign
exchange restrictions applicable to such purchase, (iii) any governmental or
other consents that may need to be obtained and (iv) the income tax and other
tax consequences, if any, that may be relevant to the purchase, holding,
redemption, sale or transfer of the Securities. Such Purchaser's subscription
and payment for, and his or her continued beneficial ownership of the
Securities, will not violate any applicable securities or other laws of
Purchaser's jurisdiction. Such Purchaser also hereby represents that such
Purchaser is not a "10-percent shareholder" as defined in Section 871(h) of the
Internal Revenue Code of 1986, as amended.
6. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING. The obligations
of each Purchaser to the Company under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 4 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of the Closing.
(b) QUALIFICATIONS. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be obtained and effective as of
the Closing.
(c) MINIMUM AMOUNT. A minimum of $500,000 aggregate principal amount
of the Notes shall be purchased by the Purchasers at the initial Closing under
this Agreement.
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7. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations of
the Company to each Purchaser under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each Purchaser contained in Section 5 shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the Closing.
(b) QUALIFICATIONS. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be obtained and effective as of
the Closing.
(c) DELIVERY OF FORM W-8 BEN OR FORM W-9. Each Purchaser shall have
completed and delivered to the Company a validly executed IRS Form W-8 BEN or
IRS Form W-9, as applicable, establishing such Purchaser's exemption from
withholding tax.
8. COVENANTS OF THE COMPANY.
(a) NEGATIVE COVENANTS. Until the earlier to occur of the conversion
or repayment in full of the Notes, the Company shall not do any of the following
without the prior written consent of Purchasers holding a majority of the
outstanding principal amount of the Notes, which consent will not be
unreasonably withheld or delayed:
(i) SECURED INDEBTEDNESS. Create, incur, assume, or be liable
for any secured Indebtedness which is senior in right of payment to the Notes
other than Permitted Indebtedness or Permitted Senior Indebtedness.
(ii) LIENS. Create, incur, or allow any Lien on any of its
property, except for Permitted Liens.
(iii) DIVIDENDS AND DISTRIBUTIONS. Pay any dividends or make
any distribution or payment other than dividends payable solely in the Company's
Common Stock or redeem, retire or purchase any capital stock except for
repurchases of stock from former employees, consultants, or directors of Company
under the terms of applicable repurchase agreements, provided that no Event of
Default (as defined in the Notes) has occurred, is continuing or would exist
after giving effect to the repurchases.
(b) AFFIRMATIVE COVENANTS.
(i) REGISTRATION OF INTELLECTUAL PROPERTY. The Company shall,
within a period of thirty (30) days following the initial Closing, file with the
U.S. Copyright Office (the "CO") registrations with respect to all material
copyrights of the Company, provided that the legal, registration and other
related costs and expenses associated with such registrations and filings do not
exceed $2,000 in the aggregate. With respect to any registrations so filed, the
Company shall also concurrently make such filings as are required such that the
Purchasers have
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a first priority security interest in such copyrights (subject to Permitted
Liens created to secure Senior Permitted Indebtedness). At the request of the
Purchasers holding a majority of the outstanding principal amount of the Notes,
the Company shall also take commercially reasonable actions to register any
additional copyrights developed or acquired hereafter with the CO.
(ii) PERFECTION OF SECURITY INTEREST. The Company shall file
any amendments to UCC-1 financing statements or filings with the CO and PTO, and
shall make new filings, as are required in order to perfect the Purchasers'
security interest in the Collateral (including Collateral developed or acquired
hereafter), including without limitation as required upon the reorganization of
the Company under the laws of a jurisdiction other than the State of Delaware.
(iii) PRESERVATION OF COLLATERAL. The Company shall keep all
of its inventory in good and marketable condition, free from material defects.
Returns and allowances between the Company and its account debtors will follow
the Company's customary practices in the ordinary course of business.
(iv) ADDITIONAL CLOSINGS. The Company shall use reasonable
efforts to sell the remaining amount of Notes authorized for sale hereunder
($810,000 less the principal amount of Notes sold in the Initial Closing) within
the time period provided by Section 1(b) hereof (provided, however, that the
Company shall not be required to sell Notes in any transaction that would not
comply with applicable law).
(c) CERTAIN DEFINITIONS. As used in this Agreement, the following
capitalized terms have the following meanings:
(i) "Indebtedness" shall mean indebtedness owed by the Company
to banks, commercial finance lenders, insurance companies, leasing or equipment
financing institutions, lending institutions or any other parties, which is for
money borrowed or the deferred purchase price or leasing of equipment, whether
or not secured.
(ii) "Lien" shall mean, with respect to any asset or property
of the Company, any security interest, mortgage, pledge, lien, claim, charge or
other encumbrance in, of, or on such property or the income therefrom,
including, without limitation, the interest of a vendor or lessor under a
conditional sale agreement, capital lease or other title retention agreement, or
any agreement to provide any of the foregoing, and the filing of any financing
statement or similar instrument under the Uniform Commercial Code or comparable
law of any jurisdiction.
(iii) "Permitted Indebtedness" shall mean: (i) Indebtedness to
trade creditors incurred in the ordinary course of business; (ii) Indebtedness
secured by Permitted Liens; (v) Indebtedness of Company to any of its
subsidiaries; (iii) Indebtedness which is first applied to fully pay all amounts
due under the Notes; and (iv) extensions, refinancings, modifications,
amendments and restatements of any items of Permitted Indebtedness set forth
above, provided that the principal amount thereof is not increased or the terms
thereof are not modified to impose more burdensome terms upon Company, as the
case may be.
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(iv) "Permitted Senior Indebtedness" shall mean Indebtedness
secured by the Permitted Liens described in subsections (iv), (v), (x) and (xii)
of the definition of Permitted Liens.
(v) "Permitted Liens" means (i) Liens for taxes not yet
delinquent or Liens for taxes being contested in good faith and by appropriate
proceedings for which adequate reserves have been established; (ii) Liens in
respect of property or assets imposed by law which were incurred in the ordinary
course of business, such as carriers', warehousemen's, materialmen's and
mechanics' Liens and other similar Liens arising in the ordinary course of
business which are not delinquent or remain payable without penalty or which are
being contested in good faith and by appropriate proceedings; (iii) Liens
incurred or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security, statutory obligations, contract bids, government contracts,
performance and return of money bonds and other similar obligations, incurred in
the ordinary course of business, whether pursuant to statutory requirements,
common law or consensual arrangements; (iv) Liens securing obligations under a
capital lease if such Liens do not extend to property other than the property
leased under such capital lease; (v) Liens upon any equipment or other property
acquired or held by Company or any of its subsidiaries to secure the purchase
price of such equipment or other property or Indebtedness incurred solely for
the purpose of financing the acquisition of such equipment or other property, so
long as such Lien extends only to the equipment or other property financed, and
any accessions, replacements, substitutions and proceeds (including insurance
proceeds) thereof or thereto; (vi) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payments of customs duties in
connection with the importation of goods; (vii) Liens which constitute rights of
setoff of a customary nature or banker's liens, whether arising by law or by
contract; (viii) Leases or subleases and licenses or sublicenses granted in the
ordinary course of Company's business; (ix) Liens securing Indebtedness which is
first applied to fully pay all amounts due under the Notes; (x) Liens securing
indebtedness of a Person (other than an existing subsidiary of the Company)
existing at the time such Person becomes a subsidiary of the Company or is
merged with or into the Company or a subsidiary of the Company or Liens securing
Indebtedness incurred in connection with an acquisition, merger or
consolidation; provided, that such Liens were in existence prior to the date of
such acquisition, merger or consolidation, were not incurred in anticipation
thereof, and do not extend to any other assets; (xi) Liens which are expressly
subordinate to the Notes; and (xii) Liens upon property or assets purchased or
otherwise acquired for consideration after the date hereof that do not extend to
any other property or assets except those purchased or otherwise acquired;
provided that, with respect to clauses (x)(but only if the primary purpose of
such acquisition, merger or consolidation is capital raising) and (xii) above,
the Company's consolidated net tangible assets are equal to or greater than 250%
of the Company's aggregate secured indebtedness (including the Notes and the
proposed secured indebtedness to be secured by such Liens).
(vi) "Person" means any corporation, individual, limited
liability company, joint stock company, joint venture, partnership,
unincorporated association,
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governmental regulatory entity, country, state or political subdivision thereof,
trust, municipality or other entity.
9. COVENANT OF THE HOLDERS.
(a) FURTHER ASSURANCES. At any time and from time to time, upon the
written request of the Company and at the Company's expense, the Holders will
promptly and duly authenticate and deliver such instruments and documents and
take such further action as the Company may reasonably request for the purpose
of enabling the Company to incur Permitted Indebtedness and Senior Permitted
Indebtedness and otherwise preserving such rights under this Agreement
including, without limitation, filing any financing statements or amendments
thereto under the UCC as in effect with respect to Permitted Liens.
10. REGISTRATION RIGHTS.
10.1 DEFINITIONS. As used in this Section 10:
(a) The terms "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act of 1933, as amended (the
"Securities Act"), and the subsequent declaration or ordering of the
effectiveness of such registration statement;
(b) The term "Registrable Securities" means: (i) the shares of
the Company's Common Stock issued or issuable upon conversion of the Notes
(including Common Stock issued or issuable upon conversion of Preferred Stock
which is issued upon conversion of the Notes); and (ii) any other shares of
Common Stock of the Purchaser issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
the Securities, excluding in all cases, however, any Registrable Securities sold
by a person in a transaction in which such person's rights under this Agreement
and the Note are not assigned; provided, however, that Common Stock or other
securities shall only be treated as Registrable Securities if and so long as
they have not been (A) sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction, or (B) sold in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act under Section 4(1) thereof so that all transfer restrictions,
and restrictive legends with respect thereto, if any, are removed upon the
consummation of such sale;
(c) The number of shares of "Registrable Securities then
outstanding" shall mean the number of shares of Common Stock outstanding which
are, and the number of shares of Common Stock issuable pursuant to the then
exercisable or convertible securities which are, Registrable Securities;
(d) The term "Holder" means any holder of outstanding
Registrable Securities who, subject to the limitations set forth in Section 10.7
below, acquired such Registrable Securities in a transaction or series of
transactions not involving any registered public offering; and
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(e) The term "Form S-3" means such form under the Securities
Act as in effect on the date hereof or any registration form under the
Securities Act subsequently adopted by the Securities and Exchange Commission
("SEC") which permits inclusion or incorporation of substantial information by
reference to other documents filed by the Purchaser with the SEC.
10.2 COMPANY REGISTRATION. If (but without any obligation to do so)
the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock under the Securities Act in connection with the public offering of such
securities solely for cash (other than a registration relating solely to the
sale of securities to participants in a Company stock plan or a transaction
covered by Rule 145 under the Securities Act, a registration in which the only
stock being registered is Common Stock issuable upon conversion of debt
securities which are also being registered), the Company shall, at such time,
promptly give each Holder written notice of such registration. Upon the written
request of each Holder given within 20 days after mailing of such notice by the
Company in accordance with Section 11(e), the Company shall, subject to the
provisions of Section 10.6, cause to be registered under the Securities Act all
of the Registrable Securities that each such Holder has requested to be
registered.
10.3 FORM S-3 REGISTRATION. In case the Company shall receive from
any Holder or Holders of not less than fifty percent (50%) of the Registrable
Securities then outstanding a written request or requests that the Company
effect a registration on Form S-3 and any related qualification or compliance
with respect to all or a part of the Registrable Securities owned by such Holder
or Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders;
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within 15 days after receipt of such written notice from the Company; provided,
however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 10.3: (1) if
Form S-3 is not available for such offering by the Holders; (2) if the Company
shall furnish to the Holders a certificate signed by the President of the
Company stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such Form S-3 Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than 90 days after receipt of the request of
the Holder or Holders under this Section 10.3; provided, however, that the
Company shall not utilize this right more than once in any twelve month period;
(3) if the Company has, within the 12 month period preceding the date of such
request, already effected two registrations on Form S-3 for the Holders; or (4)
in any particular jurisdiction in which the
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Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance; and
(c) Subject to the foregoing, the Company shall file a
registration statement on Form S-3 covering the Registrable Securities and other
securities so requested to be registered promptly after receipt of the request
or requests of the Holders.
10.4 OBLIGATIONS OF THE COMPANY. Whenever required under this
Section 10 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its commercially reasonable
efforts to cause such registration statement to become effective, and, upon the
request of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to 90 days;
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement;
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them;
(d) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
10.5 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 10 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
10.6 EXPENSES OF REGISTRATION.
(a) COMPANY REGISTRATION. All expenses other than underwriting
discounts and commissions incurred in connection with registrations, filings or
qualifications of Registrable Securities pursuant to Section 10.2 for each
Holder (which right may be assigned as provided in Section 10.10), including
(without limitation) all registration, filing, and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company shall be
borne by the Company. The Company shall not be required to pay the fees or
expenses of separate counsel to the selling Holders.
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(b) REGISTRATION ON FORM S-3. All expenses incurred in
connection with a registration requested pursuant to Section 10.3, including
(without limitation) all registration, filing, qualification, printer and
accounting fees shall be borne by the Company. The Company shall not be required
to pay any underwriters' or brokers' fees, discounts or commissions relating to
the Registrable Securities, or the fees or expenses of separate counsel to the
selling Holders.
10.7 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 10.2 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling stockholders according to
the total amount of securities entitled to be included therein owned by each
selling stockholder or in such other proportions as shall mutually be agreed to
by such selling stockholders) but in no event shall the amount of securities of
the selling Holders included in the offering be reduced below 20% of the total
amount of securities included in such offering. For purposes of the preceding
parenthetical concerning apportionment, for any selling stockholder which is a
holder of Registrable Securities and which is a partnership or corporation, the
partners, retired partners and stockholders of such holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single "selling
stockholder," and any pro-rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder," as defined in this sentence.
10.8 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 10:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder and each person, if any, who controls such Holder
within the meaning of the Securities Act or the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), against any losses, claims, damages, or
liabilities (joint or several) to which any of the foregoing persons may become
subject, under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or
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(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law; and the
Company will pay, as incurred, any legal or other expenses reasonably incurred
by any person intended to be indemnified pursuant to this subsection 10.8(a), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this subsection 10.8(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability, or action if such settlement is effected
without the consent of the Company, which consent shall not be unreasonably
withheld, nor shall the Company be liable in any such case for any such loss,
claim, damage, liability, or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by such Holder or controlling person;
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act or the Exchange
Act, any other Holder selling securities in such registration statement and any
controlling person of any such other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Securities Act, the Exchange Act or other federal
or state law, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will pay, as incurred, any legal or other expenses reasonably incurred by
any person intended to be indemnified pursuant to this subsection 10.8(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this subsection 10.8(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided that in no event shall any indemnity under this subsection
10.8(b) exceed the gross proceeds from the offering received by such Holder;
(c) Promptly after receipt by an indemnified party under this
Section 10.8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 10.8, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under
-14-
this Section 10.8, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 10.8;
(d) If the indemnification provided in this Section 10.8 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission; and
(e) The obligations of the Company and Holders under this
Section 10.8 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 10, and otherwise.
10.9 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Securities Act ("Rule 144") and any other rule or regulation of the SEC that may
at any time permit a Holder to sell securities of the Company to the public
without registration, the Company agrees to use its best efforts to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration.
10.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 10 may only
be assigned by a Holder to a transferee or assignee of all of such Holder's
interest in Holder's Note, and shall be subject to the restrictions on transfers
contained in such Note. Such assignment shall be effective only if
-15-
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the Securities Act.
10.11 TERMINATION OF REGISTRATION RIGHTS. The rights granted under
this Section 10 shall terminate upon the earlier of (a) five (5) years following
the date of this Agreement, or (b) with respect to any Holder, at such time as
such Holder may sell all of such Holder's Registrable Securities in any one
three month period pursuant to Rule 144 or such successor rule as may be
adopted.
11. MISCELLANEOUS.
(a) SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
(b) GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
(c) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(d) TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(e) NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
48 hours after being deposited in the U.S. mail as certified or registered mail
with postage prepaid, if such notice is addressed to the party to be notified at
such party's address or facsimile number as set forth below or as subsequently
modified by written notice.
(f) FINDER'S FEE. Each party represents that it neither is nor will
be obligated for any finder's fee or commission in connection with this
transaction. Each Purchaser agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which each Purchaser or any of its officers, employees,
or representatives is responsible. The Company agrees to indemnify and hold
harmless each Purchaser from any liability for any commission or compensation in
the nature of a finder's fee
-16-
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.
(g) AMENDMENTS AND WAIVERS. Any term of this Agreement may only be
amended or waived with the written consent of the Company and the holders of at
least a majority of the outstanding principal amount of the Notes (provided that
amendment of Section 10 hereof shall instead require the written consent of the
holders of at least of majority of the Registrable Securities then outstanding).
Any amendment or waiver effected in accordance with this Section 11(g) shall be
binding upon each Purchaser and each transferee of the Securities, each future
holder of all such Securities, and the Company.
(h) SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith, in order to maintain the economic position enjoyed
by each party as close as possible to that under the provision rendered
unenforceable. In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then (i) such provision shall be
excluded from this Agreement, (ii) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (iii) the balance of the
Agreement shall be enforceable in accordance with its terms.
(i) ENTIRE AGREEMENT. This Agreement, and the documents referred to
herein constitute the entire agreement between the parties hereto pertaining to
the subject matter hereof, and any and all other written or oral agreements
existing between the parties hereto are expressly canceled.
(j) EXCULPATION AMONG PURCHASERS. Each Purchaser acknowledges that
it is not relying upon any person, firm or corporation, other than the Company
and its officers and directors, in making its investment or decision to invest
in the Company. Each Purchaser agrees that no Purchaser nor the respective
controlling persons, officers, directors, partners, agents, or employees of any
Purchaser shall be liable for any action heretofore or hereafter taken or
omitted to be taken by any of them in connection with the Securities.
(k) ADVICE OF LEGAL COUNSEL. Each party acknowledges and represents
that, in executing this Agreement, it has had the opportunity to seek advice as
to its legal rights from legal counsel and that the person signing on its behalf
has read and understood all of the terms and provisions of this Agreement. This
Agreement shall not be construed against any party by reason of the drafting or
preparation thereof.
(l) FEES AND EXPENSES. The Company shall pay promptly after the
Closing the fees and expenses of Fenwick & West, the counsel for the Purchasers,
incurred in connection with performing due diligence with respect to this
Agreement, the documents referred to herein and the transactions contemplated
hereby and thereby, provided such fees and expenses do not exceed, in the
aggregate, $15,000.
(m) CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH ARE
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
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COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT.
[Signature Pages Follow]
-18-
The parties have executed this Secured Convertible Note Purchase Agreement
as of the date first written above.
COMPANY:
ACCRUE SOFTWARE, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President and CEO
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Address: ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
PURCHASERS:
RS ORPHAN FUND, LP
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Investment Advisory
General Partner
Address: ▇▇▇ ▇▇▇▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile Number:
-19-
PURCHASERS:
RS ORPHAN OFFSHORE FUND, LP
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Investment Advisory
General Partner
Address: ▇▇▇ ▇▇▇▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile Number:
STERLING PAYOT CAPITAL, LP
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: General Partner
Address: ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile Number:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Address: ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile Number:
-20-
PURCHASERS:
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile Number: ▇▇▇-▇▇▇-▇▇▇▇
SIGNATURE PAGE TO SECURED CONVERTIBLE NOTE PURCHASE AGREEMENT
Exhibit A - Schedule of Purchasers
Exhibit B - Form of Promissory Note
Exhibit C - Purchaser Withholding Exemptions
EXHIBIT A
SCHEDULE OF PURCHASERS
FIRST CLOSING
TYPE OF ORIGINAL PRINCIPAL
PURCHASER NAME AND ADDRESS CONSIDERATION AMOUNT OF NOTE
-------------------------- ------------- --------------
RS Orphan Fund, LP Cash $ 79,000
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
RS Orphan Offshore Fund, LP Cash $ 21,000
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Sterling Payot Capital, LP Forgiveness of $335,573.57(1)
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Forgiveness of $ 60,349.72(2)
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Cash $ 5,000.00
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
------------------
(1) Includes principal and accrued interest through the Closing of promissory
note in the aggregate principal amount of $320,100 surrendered at the time of
the Closing and the payment of $15,000 in cash.
(2) Includes principal and accrued interest through the Closing of promissory
notes in the aggregate principal amount of $60,000 surrendered as payment at the
time of the Closing.
EXHIBIT B
FORM OF SECURED CONVERTIBLE PROMISSORY NOTE
EXHIBIT C
PURCHASER WITHHOLDING EXEMPTIONS