CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
EXHIBIT
99.2
THIS
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
(this
“Agreement”),
dated
as of June 27, 2008, is entered into by and among x.Xxxxxxx Corporation, a
Delaware 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 and pursuant
to
Section 4(2) of the Securities Act of 1933 (the “Securities
Act”),
as
amended, the Company desires to issue and sell to the Purchasers and the
Purchasers, severally and not jointly, desire to purchase from the Company
(i)
shares of the Company’s 5% Series AA Convertible Preferred Stock, par value
$.001 per share (the “Preferred
Stock”),
which
are convertible into shares of the Company’s common stock, par value $.001 per
share (the “Common
Stock”),
and
(ii) certain other securities of the Company as more fully described in this
Agreement.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and 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 an aggregate of up to 100,000 shares of Preferred Stock
(“Shares”)
and
certain Common Stock purchase warrants as described below in this Section for
an
aggregate purchase price of up to $1,000,000. The purchase and sale of such
securities shall take place at one or more closings (collectively, the
“Closing”)
at the
offices of XxXxxxxxx, Xxxxxxx & Xxxxxxx LLP (“MD&B”),
00
Xxxxxxxxxx, Xxxxx 000, Xxxxx Xxxxx, Xxxxxxxxxx 00000, 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.”
(ii)
At the
Closing, the parties shall deliver or shall cause to be delivered the following:
(A) the Company shall deliver to each Purchaser (1) a stock certificate
registered in the name of such Purchaser, representing a number of Shares equal
to the quotient obtained by dividing the purchase price indicated below such
Purchaser’s name on the signature page to this Agreement by 10, and (2) a Common
Stock purchase warrant, in the form of Exhibit
A,
registered in the name of such Purchaser, pursuant to which such Purchaser
shall
have the right to acquire the number of Warrant Shares (as defined in the
Warrant) indicated below such Purchaser’s name on the signature page to this
Agreement (collectively, the “Warrants”)
and
(B) each Purchaser shall deliver (1) the purchase price 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 or, with the consent of the Company,
through conversion of outstanding indebtedness, and (2) an executed copy of
this
Agreement.
1.2 Terms
of Preferred Stock.
The
Preferred Stock shall have the rights preferences and privileges set forth
in
Exhibit
B,
and
shall be incorporated into a Certificate of Designation (the “Certificate
of Designation”)
to be
filed prior to the Closing by the Company with the Secretary of State of
Delaware.
1.3 Certain
Defined Terms.
For
purposes of this Agreement, “Original
Issue Date”
shall
have the meaning set forth in Exhibit
B,
“Trading
Day”
shall
mean any day on which the Common Stock is traded in the over the counter market,
as reported by the NASD’s OTC Bulletin Board or on a Subsequent Market (as
hereinafter defined) on which the Common Stock is then listed or quoted, as
the
case may be and “Business
Day”
shall
mean any day except Saturday, Sunday and any day which shall be a federal legal
holiday or a day on which banking institutions in the State of California are
authorized or required by law or other governmental action to close. A
“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
(a) Organization
and Qualification.
The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, 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 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 or
other entity in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not,
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 Certificate of Designation 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”).
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(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 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).
Except
as disclosed in Schedule
2.1(c),
the
Company owns all of the capital stock of each Subsidiary. No shares of Common
Stock are entitled to preemptive or similar rights, nor is any holder of the
securities of the Company or any Subsidiary entitled to preemptive or similar
rights arising out of any agreement or understanding with the Company or any
Subsidiary by virtue of any of the Transaction Documents. Except as a result
of
the purchase and sale of the Shares 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 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.
The issue and sale of the Shares, Warrants or Underlying Shares (as hereinafter
defined) will not obligate the Company to issue shares of Common Stock or other
securities to any Person other than the Purchaser and will not result in a
right
of any holder of Company’s securities to adjust the exercise or conversion or
reset price under such securities.
(d) Issuance
of the Shares and the Warrants.
The
Shares 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 will use its reasonable best efforts to obtain an increase in its
authorized shares of Common Stock, and will utilize its best efforts thereafter
to reserve for issuance to the holders of the Shares and the Warrants sufficient
shares to enable it to perform its conversion, exercise and other obligations
under this Agreement, the Certificate of Designation and the Warrants. The
shares of Common Stock issuable upon conversion of the Shares and upon exercise
of the Warrants are collectively referred to herein as the “Underlying
Shares.”
The
Shares, the Warrants and the Underlying Shares are collectively referred to
herein as, the “Securities.”
When
issued in accordance with the Certificate of Designation and the Warrants,
the
Underlying Shares will be duly authorized, validly issued, fully paid and
nonassessable, free and clear of all Liens.
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(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
making and/or obtaining the Required Filings and 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 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 or a Subsidiary 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 filing of the Certificate of Designation with the Secretary of State
of
Delaware, (ii) the filings required pursuant to Section
3.9,
(iii)
the filing with the Securities and Exchange Commission (the “Commission”)
of a
Notice of Sale of Securities Pursuant to Regulation D (“Form
D”)
meeting the requirements Rule 506 of Regulation D and, (iv) the filing of Form
D
and related filings in compliance with applicable state “blue sky” securities
laws, and (v) in all other cases where the failure to obtain such consent,
waiver, authorization or order, or to give such notice or make such filing
could
not have or result in, individually or in the aggregate, a Material Adverse
Effect (collectively, the “Required
Filings and Approvals”).
4
(g) Litigation;
Proceedings.
Except
as described in the SEC Documents, 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, if there
were
an unfavorable decision, individually or in the aggregate, have or result in
a
Material Adverse Effect. Except as described in the SEC Documents, (i) 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; (ii) 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 (iii)
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.
(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.
(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.
Neither the Company nor, to its knowledge, any Person acting on its behalf
has
taken or is 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.
5
(j) SEC
Documents; Financial Statements.
The
Company has filed all reports required to be filed by it under the Securities
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 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 under the Exchange Act.
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. Since March 31, 2008, 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 otherwise 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 similar
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.
6
(m) Seniority.
No
outstanding class of equity securities of the Company is senior to the Shares
in
right of payment, whether upon liquidation or dissolution, or
otherwise.
(n) Listing
and Maintenance Requirements.
Except
as set forth in the SEC Documents, the Company has not, in the two years
preceding the date hereof received notice (written or oral) from the NASD’s OTC
Bulletin Board, any 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, market or trading facility. 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.
(o) Patents
and Trademarks.
The
Company and its Subsidiaries have, or 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, neither the Company nor any Subsidiary has
received a written notice that the Intellectual Property Rights used by the
Company or its Subsidiaries violates or infringes upon the rights of any Person.
Except as specified in Schedule
2.1(o),
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.
(p) Registration
Rights; Rights of Participation.
Except
as disclosed in the SEC Documents, 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 have 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.
(q) 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.
(r) Title.
The
Company and the Subsidiaries have good and marketable title to 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 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.
7
(s) 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.
(t) Shareholders
Rights Plan.
Neither
the consummation of the transactions contemplated hereby nor the issuance of
the
Underlying Shares will cause the Purchasers to be deemed an “Acquiring Person”
under any existing or hereafter adopted shareholders rights plan or similar
arrangement.
(u) 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.
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. This 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 Warrants,
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 or
under an exemption from such registration and in compliance with applicable
federal and state securities laws. Nothing contained herein shall be deemed
a
representation or warranty by such Purchaser to hold Securities for any period
of time. Such Purchaser is acquiring the Securities hereunder in the ordinary
course of its business. Such Purchaser does not have any agreement or
understanding, directly or indirectly, with any Person to distribute the
Securities.
8
(c) Purchaser
Status.
At the
time such Purchaser was offered the Securities, 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.
(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 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.
9
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) Restricted
Securities.
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. Any such transferee shall
agree
in writing to be bound by the terms of this Agreement and shall have the rights
of a Purchaser under this Agreement.
(b) Legend.
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.
10
3.2 Acknowledgments.
(a) By
Purchasers.
The
Purchasers acknowledge that (i) the issuance of the Underlying Shares upon
(A)
conversion of the Shares in accordance with the terms of the Certificate of
Designation, and (B) 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, (ii) the Securities
are deemed to be restricted securities and, as such, are subject to restrictions
upon transfer and legend conditions as specified in Section
3.1,
(iii)
registration rights of any kind (demand, piggyback or otherwise) have not been
provided hereunder and (iv) certain qualifying officers, directors and employees
of the Company may be acquiring Securities hereunder on same terms as other
Purchasers.
(b) By
Company.
The
Company acknowledges that its obligation to issue Underlying Shares upon (x)
conversion of the Shares in accordance with the terms of the Certificate of
Designation, and (y) exercise of the Warrants in accordance with their terms,
is
unconditional and absolute, subject to the limitations set forth herein, in
the
Certificate of Designation or pursuant to the Warrants, regardless of the effect
of any such dilution.
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 causing its attorneys to render
and deliver any legal opinion required in order to permit a Purchaser to receive
Underlying Shares free of all restrictive legends and to subsequently sell
Underlying Shares under Rule 144 upon receipt of a notice of an intention to
sell or other form of notice having a similar effect.
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.
The
Company will use its reasonable best efforts to obtain an increase in its
authorized Common Stock such that thereafter it will at all times reserve and
keep available out of its authorized Common Stock, solely for the purpose of
issue upon the conversion of Series AA Preferred Stock and exercise of the
Warrants as herein provided, such number of shares of Common Stock as shall
be
equal to the Underlying Shares.
11
3.6 Reservation
and Listing of Underlying Shares.
If,
after the date hereof, the Company shall list the Common Stock on any of the
New
York Stock Exchange, American Stock Exchange, or any NASDAQ market (each, a
“Subsequent
Market”),
then
the Company shall include in such listing for the benefit of the Purchasers
for
issuance upon exercise of the Warrants and conversion of the Shares a number
of
shares of Common Stock equal to not less than the Underlying
Shares.
3.7 Conversion
and Exercise Obligations and Procedures.
The
Company shall honor conversion of the Shares and exercise of the Warrants and
shall deliver Underlying Shares in accordance with the respective terms,
conditions and time periods set forth in the Certificate of Designation and
Warrants. The Conversion Notice (as defined in the Certificate of Designation)
and Notice of Exercise under the Warrants set forth the totality of the
procedures with respect to the conversion of the Shares 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 Shares and exercise their Warrants as contemplated in the Certificate
of
Designation and the Warrants (as applicable).
3.8 Certain
Securities Laws Disclosures; Publicity.
The
Company shall: (i) file with the Commission a Report on Form 8-K disclosing
the
transactions contemplated hereby within four Business Days after the Closing
Date, and (ii) timely file with the Commission a Form D promulgated under the
Securities Act. 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, except if such disclosure is required by law or stock
market or trading facility regulation, in which such case the disclosing party
shall promptly 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 is required by law or
stock
market regulations, in which case the Company shall provide the Purchasers
with
prior notice of such disclosure.
3.9 Use
of
Proceeds.
The
Company estimates that it shall use (i) approximately $80,000 of the net
proceeds from the sale of the Securities hereunder for note payments on existing
debt, (ii) approximately $270,000 of the net proceeds from the sale of the
Securities hereunder for payment of existing accounts payable and (iii) the
remainder for working capital purposes.
12
3.10 Exclusivity.
The
Company shall not issue and sell the Shares to any Person other than to the
Purchasers.
3.11 Shareholder
Rights Plan.
No
claim will be made or enforced by the Company or any other Person that any
Purchaser is an “Acquiring
Person”
under
any shareholders rights plan or similar plan or arrangement in effect or
hereafter adopted by the Company, or that any Purchaser could be deemed to
trigger the provisions of any such plan or arrangement, by virtue of receiving
Securities or shares of Common Stock under the Transaction
Documents.
3.12 Trading
Restrictions.
At no
time immediately prior to the date hereof has such Purchaser engaged in or
effected, in any manner whatsoever, directly or indirectly, in any “Short Sale”
(as defined herein). Each Purchaser further agrees that as long as such
Purchaser holds Shares, such Purchaser will not enter into any Short Sales.
For
purposes hereof, a “Short
Sale”
by
a
Purchaser shall mean a marked “short sale” of Common Stock by such Purchaser
that is made at a time when there is no equivalent offsetting long position
in
the Common Stock held by such Purchaser. For purposes of determining whether
there is an equivalent offsetting long position in the Common Stock held by
a
Purchaser, Underlying Shares issuable upon exercises of Warrants and upon
delivered Conversion Notices under the Shares shall be deemed to be held long
by
such Purchaser.
ARTICLE
IV
MISCELLANEOUS
4.1 Fees
and Expenses.
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 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 5:30 p.m. (Pacific 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 5:30 p.m. (Pacific Time) on any date and earlier than 11:59 p.m.
(Pacific 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:
13
|
If
to the Company:
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x.Xxxxxxx
Corporation
|
|
00000
Xxxx Xxxxxxxx Xxxxx
|
|
|
Xxx
Xxxxx, Xxxxxxxxxx 00000
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|
|
Facsimile
No.: (000) 000-0000
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Attn:
President
|
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With
copy to:
|
XxXxxxxxx,
Xxxxxxx & Xxxxxxx LLP
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|
00
Xxxxxxxxxx, Xxxxx 000
|
|
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Xxxxx
Xxxxx, Xxxxxxxxxx 00000
|
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Facsimile
No.: (000) 000-0000
|
|
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Attn:
Xxxx X. Xxxxxxx, Esq.
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|
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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 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.
14
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.
All
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 California, 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
and County of San Diego, 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 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 Shares and of the Warrants for a period of one year.
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 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 and the Company
will
be entitled to specific performance of each other’s obligations under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agree to waive in
any
action for specific performance of any such obligation the defense that a remedy
at law would be adequate.
15
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.
IN
WITNESS WHEREOF, the parties hereto have caused this Convertible Preferred
Stock
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
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X.XXXXXXX
CORPORATION
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|
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By:
/s/ XXXXXX XXXXXX
|
|
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Name:
Xxxxxx Xxxxxx
|
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Title: Secretary
|
[Purchaser
Signature Pages Follow]
16
Purchaser
Signature Page
| Name of Purchaser: | ||
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By: | |
| Name: | ||
| Title: | ||
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Purchase
Price:
|
$ |
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Number
of
|
||
|
Series
AA Shares:
|
||
|
Number
of Warrants:
|
||
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Address
for Notice:
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||
|
Phone:
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||
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Email:
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17
