EXCHANGE AGREEMENT
Among
XXXXXXXX TECHNOLOGIES, INC.
MARKET LLC
And
XXXXX LLC
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December 9, 2002
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EXCHANGE AGREEMENT, dated as of December 9, 2002 (this "Agreement"),
among XXXXXXXX TECHNOLOGIES, INC., a Florida corporation (the "Company"), XXXXX
LLC, an entity organized and existing under the laws of The Cayman Islands and
MARKET LLC, an entity organized and existing under the laws of The Cayman
Islands ( "Investors").
RECITALS
In connection with the transaction related to the Exchange Agreement,
dated as of December 9, 2002, by and among the Company and Eurotech, Ltd., among
others, it is required that the Investors exchange, five million two hundred
twenty five ($5,225,000) in value of convertible promissory notes, inclusive of
accrued interest, of the Company (the "Notes") for shares of the Company's newly
issued Series C Convertible Preferred Stock, $.0001 par value per share
("Preferred Stock"), according to the terms and conditions set forth below.
AGREEMENT
IN CONSIDERATION of the mutual covenants and agreements set forth
herein and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
Section 1.1. Certain Definitions. As used in this Agreement, unless the
context requires a different meaning, the following terms have the meanings
indicated in this Section 1.1
"Affiliate" means, with respect to any Person, any Person
that, directly or indirectly, controls, is controlled by, or is under common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with") shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
"Agreement" shall have the meaning set forth in the preamble
hereto.
"Business Day" means any day except Saturday, Sunday and any
day which shall be a U.S. federal legal holiday or a day on which banking
institutions in the State of Delaware are authorized or required by law or other
government actions to close.
"Certificate of Designation" shall be set forth as Exhibit A
hereto.
"Closing" shall have the meaning set forth in Section 2.1.2.
"Closing Date" shall have the meaning set forth in Section
2.1.2.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, par value
$0.0001 per share.
"Company" shall have the meaning set forth in the preamble
hereto.
"Conversion Price" shall have the meaning set forth in the
Certificate of Designation.
"Conversion Date" shall have the meaning set forth in the
Certificate of Designation.
"Disclosure Materials" means, collectively, the SEC Documents
and the Schedules to this Agreement and all other information furnished by or on
behalf of the Company, relating to or concerning the Company, to the Investors
or its agents and counsel in connection with the transactions contemplated by
this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, including the rules promulgated thereunder.
"Initial Reserve" shall have the meaning set forth in Section
3.1.4.
"Intellectual Property Rights" shall have the meaning set
forth in Section 3.1.
"Investors" shall have the meaning set forth in the recitals
hereto.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, right of first refusal, charge, security interest or encumbrance of any
kind in or on such asset or the revenues or income thereon or therefrom.
"Material Adverse Effect" shall have the meaning set forth in
Section 3.1.1.
"Notes" shall have the meaning set forth in the recitals
hereto.
"Original Issue Date" shall mean the first issuance of any
Shares by the Company, regardless of the number of transfers of any particular
Share and regardless of the number of certificates which may be issued to
evidence any particular Share.
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"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind
"Preferred Stock" shall have the meaning set forth in the
recitals hereto.
"Required Approvals" shall have the meaning set forth in
Section 3.1.
"SEC Documents" means the Company's reports, schedules, forms
and proxy statements filed with the Commission under the Securities Act and the
Exchange Act.
"Securities" means, collectively, the Shares and the
Underlying Shares.
"Securities Act" means the Securities Act of 1933, as amended,
including the rules promulgated thereunder.
"Shares" means the shares of Preferred Stock to be issued
pursuant to this Agreement.
"Stated Value" means the face amount of $1,000 per Share.
"Subsidiaries" shall have the meaning set forth in Section
3.1.
"Trading Day" shall have the meaning set forth in the
Certificate of Designation.
"Transaction Documents" means collectively, this Agreement and
the Certificate of Designation.
"Underlying Shares" means the shares of Common Stock issuable
upon conversion of the Preferred Stock, and as payment of dividends thereon
(assuming such dividends are to be paid in Common Stock).
ARTICLE 2
Exchange of Securities
Section 2.1. Exchange of Securities; Closing.
2.1.1. Subject to the terms and conditions set forth in this Agreement,
the Company shall issue to Xxxxx LLC, 1,413 shares of Preferred
Stock, provided that Xxxxx LLC shall deliver to the Company
$1,413,000 in value of convertible promissory notes, inclusive of
accrued interest, then held by Xxxxx LLC to be exchanged
therefor. The Company shall issue to Market LLC, 3,812 shares of
Preferred Stock, provided that Market LLC shall deliver to the
Company $3,812,000 in value of convertible promissory notes,
inclusive of accrued interest, then held by Market LLC to be
exchanged therefor. The Shares issued pursuant to this Agreement
shall have the respective rights, preferences and privileges set
forth in Exhibit A (the "Certificate of Designation").
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2.1.2. The closing of the exchange of the Shares (the "Closing") shall
take place at 10:00 A.M., local time, on or prior to December 15,
2002, at the offices of Xxxxxxx & Prager, LLP, 00 Xxxxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, or at such other time or place as the
Investors and the Company may agree in writing. The date of the
Closing is hereinafter referred to as the "Closing Date."
2.1.3. At the Closing, (i) the Company shall deliver or cause to be
delivered to the Investors (A) certificates representing 1,413
Shares to Xxxxx LLC, and (B) certificates representing 3,812
Shares to Market LLC; (ii) the Investors shall deliver or cause
to be delivered to the Company an aggregate $5,225,000 of
outstanding Notes, inclusive of accrued interest, held by
Investors, properly endorsed for transfer; and (iii) each party
hereto shall deliver or cause to be delivered all other executed
instruments, agreements and certificates as are required to be
delivered by or on its behalf at the Closing. Subsequent to the
Closing, Market LLC shall continue to hold $500,000 in principal
amount of that certain Amended Secured Convertible Revolving
Credit Note, dated June 4, 2002, by and between the parties.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investors as follows:
3.1.1. Organization and Qualification. The Company is a corporation, duly
incorporated, validly existing and in good standing under the laws of
the State of Florida, 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 active
subsidiaries other than as set forth in the SEC Documents
(collectively, the "Subsidiaries"). Each of the Subsidiaries is a
corporation, duly incorporated, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, with the
requisite corporate power and authority to own and use its properties
and assets and to carry on its business as currently conducted, except
where the failure to have such power and authority would not,
individually or in the aggregate, (x) adversely affect the legality,
validity or enforceability of the Shares or any Transaction Document,
(y) have 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 Transaction Document (a "Material Adverse
Effect"). Each of the Company and the Subsidiaries is duly qualified
to do business and is in good standing as a foreign corporation in
each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the
case may be, would not, individually or in the aggregate, have or
result in a Material Adverse Effect.
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3.1.2 Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and to
otherwise carry out its obligations thereunder. The execution and
delivery of each Transaction Document 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. Each Transaction Document has been duly executed by the
Company and, when delivered in accordance with the terms hereof,
each Transaction Document shall constitute the legal, valid and
binding obligation of the Company enforceable against the Company
in accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of,
creditors' rights and remedies or by other equitable principles
of general application. Neither the Company nor any Subsidiary is
in violation of any provision of its respective certificate or
articles of incorporation, bylaws or other charter documents.
3.1.3. Capitalization. The authorized, issued and outstanding
capital stock of the Company is set forth in the SEC Documents. No
shares of Common Stock are entitled to preemptive or similar rights.
Except as specifically disclosed in the SEC Documents, there are no
outstanding options, warrants, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or, except as a
result of the purchase and sale of the Shares, 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. To the knowledge of the
Company, except as specifically disclosed in the SEC Documents, no
Person or group of Persons beneficially owns (as determined pursuant
to Rule 13d-3 promulgated under the Exchange Act) or has the right to
acquire by agreement with or by obligation binding upon the Company
beneficial ownership of in excess of the Common Stock.
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3.1.4. Issuance of Securities. The Shares are duly authorized
and, when issued in accordance with the terms hereof, shall be validly
issued, fully paid and nonassessable, free and clear of all Liens. The
Company shall have at all time, an adequate reserve of duly authorized
shares of Common Stock to enable it to perform its conversion,
exercise and other obligations under this Agreement, or the
Certificate of Designation, which reserve, shall be no less than
50,000,000 shares of Common Stock (such sum, the "Initial Reserve").
If at any time the sum of the number of shares of Common Stock
issuable (a) upon conversion in full of the then outstanding Shares,
and (b) as the payment of dividends for the next thirty-six (36)
months on the Shares (assuming all such dividends are to be paid in
Common Stock) exceed the Initial Reserve, then the Company shall use
its best efforts to duly reserve 200% of the number of shares of
Common Stock equal to such excess to fulfill such obligations. This
obligation shall similarly apply to successive excesses. When issued
in accordance with the Certificate of Designation, the Underlying
Shares will be duly authorized, validly issued, fully paid and
nonassessable, and free and clear of all Liens.
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3.1.5. 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 its certificate of
incorporation, bylaws or other charter documents (each as amended
through the date hereof), (ii) subject to obtaining the Required
Approvals referred to in Section 3.1 , 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 of, any agreement, indenture
or instrument (evidencing a Company debt or otherwise) to which the
Company is a party or by which any property or asset of the Company 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 is subject
(including federal and state securities laws and regulations), or by
which any property or asset of the Company is bound or affected;
except in the case of each of clauses (ii) and (iii), as would 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 and in the
aggregate, would not have or result in a Material Adverse Effect.
3.1.6. Consents and Approvals. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or
order of, or make any filing or registration with, any court or other
federal, state, local, foreign 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 Florida, (ii), the application for the listing of the
Underlying Shares on the OTC Bulletin Board (and on each other
national securities exchange, market or trading facility on which the
Common Stock is then listed), and (iv) other than, in all other cases,
where the failure to obtain such consent, waiver, authorization or
order, or to give or make such notice or filing, would not,
individually or in the aggregate, have or result in a Material Adverse
Effect (the "Required Approvals").
3.1.7. Litigation; Proceedings. Except as specifically disclosed
in the Disclosure Materials, there is no action, suit, notice of
violation, proceeding or investigation pending or, to the best
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, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign) which
(i) adversely affects or challenges the legality, validity or
enforceability of any Transaction Document or the Securities or (ii)
would, individually or in the aggregate, have or result in a Material
Adverse Effect.
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3.1.8. Private Offering. Assuming the accuracy of the
representations and warranties of the Investors, the offering,
issuance or sale of the Securities as contemplated hereunder are
exempt from the registration requirements of the Securities Act.
3.1.9. Certain Fees. No fees or commissions will be payable by
the Company to any broker, financial advisor, finder, investment
banker, placement agent, or bank with respect to the transactions
contemplated hereby. The Investors shall have no obligation with
respect to such fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this
Section 3.1.9 that may be due in connection with the transactions
contemplated hereby. The Company shall indemnify and hold harmless
Investors, their respective employees, officers, directors, agents,
and partners, and their respective Affiliates, from and against all
claims, losses, damages, costs (including attorney's fees) and
expenses suffered in respect of any such claimed or existing fees, as
and when incurred.
3.1.10. SEC Documents; Financial Statements; No Adverse Change.
The Company has filed all reports required to be filed by it under the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the three years preceding the date hereof (or such shorter period
as the Company was required by law to file such material) 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. 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. Such financial statements have
been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved,
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 as of and for the dates thereof and
the results of operations, retained earnings and cash flows for the
periods then ended, subject, in the case of unaudited statements, to
normal year-end audit adjustments. Since the date of the financial
statements included in the Company's Quarterly Report on Form 10-Q for
the period ended September 30, 2002, as amended to the date hereof,
(a) there has been no event, occurrence or development that has had or
that could have or result in a Material Adverse Effect, (b) there has
been no material change in the Company's accounting principles,
practices or methods and (c) the Company has conducted its business
only in the ordinary course of such business. The Company last filed
audited financial statements with the Commission in October 2002, and
has not received any comments from the Commission in respect thereof.
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3.1.11. Seniority. No equity securities of the Company outstanding as of the
date hereof, are senior to the Shares in right of payment, whether with
respect to dividends or upon liquidation, dissolution or otherwise.
3.1.12. Listing and Maintenance Requirements Compliance. Other
than as specifically disclosed in writing to the Investors, the
Company has not in the two years prior to the date hereof received
written notice from any stock exchange, market or trading facility on
which the Common Stock is or has been listed (or on which it is or 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 has provided to the Investors true and
complete copies of all such notices contemplated by this Section. To
the Company's knowledge, it presently meets, and will continue to meet
for the foreseeable future (assuming no changes in the applicable
listing requirements), the currently applicable listing requirements
of the NASD relative to its continued listing on the OTC Bulletin
Board.
3.1.13. Disclosure. All information relating to or concerning the
Company set forth in the Transaction Documents or the Disclosure
Materials (other than the SEC Documents) is true and correct in all
material respects and does not fail to state any material fact
necessary in order to make the statements herein or therein, in light
of the circumstances under which they were made, not misleading. The
Company confirms that it has not provided to the Investors or any of
their representatives, agents or counsel any information that
constitutes material non-public information. The Company is not in
possession of, nor has the Company or its agents disclosed to
Investors, any material non-public information that (a) if disclosed,
would reasonably be expected to have a materially adverse effect on
the price of the Common Stock or (b) according to applicable law, rule
or regulation, should have been disclosed publicly by the Company
prior to the date hereof but which has not been so disclosed. Each of
the Company, its officers, directors, employees and agents shall in no
event disclose non-public information to Investors, advisors to or
representatives of Investors, unless prior to disclosure of such
information, the Company identifies such information as being
non-public information and provides Investors, such advisors and
representatives with the opportunity in writing to accept or refuse to
accept such non-public information for review and the Investors in
writing agrees to accept such non-public information. The Company may,
as a condition to disclosing any non-public information hereunder,
require each of Investor's advisors and representatives to enter into
a confidentiality agreement in form and substance reasonably
satisfactory to the Company and Investors.
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Section 3.2. Representations and Warranties of the Investors. Each Investor
hereby represents and warrants to the Company as follows:
3.2.1. Organization; Authority. Such Investor is an entity
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite power and
authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and to carry out its
obligations thereunder. This Agreement has been duly executed by such
Investor and, when delivered by such Investor in accordance with the
terms hereof, shall constitute the valid and legally binding
obligation of such Investor, enforceable against it in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights generally and to general
principles of equity.
3.2.2. Investment Intent. Such Investor is acquiring the
Securities to be acquired hereunder 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 or interest therein, without
prejudice, however, to such Investor's right, subject to the
provisions of this Agreement, at all times to sell or otherwise
dispose of all or any part of such Securities pursuant to an effective
registration statement under the Securities Act and in compliance with
applicable state securities laws or under an exemption from such
registration.
3.2.3. Investor Status. At the time such Investor was offered the Securities
to be acquired hereunder by such Investor, it was, and at the date
hereof, it is, and at the Closing Date, it will be, an "accredited
investor" as defined in Rule 501(a) under the Securities Act.
3.2.4. Experience of Investor. Such Investor, 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.
3.2.5. Ability of Investor to Bear Risk of Investment. Such Investor
acknowledges that an investment in the Securities is speculative
and involves a high degree of risk. Such Investor is able to bear
the economic risk of an investment in the Securities to be
acquired hereunder by such Investor, and, at the present time, is
able to afford a complete loss of such investment.
3.2.6. Reliance. Such Investor understands and acknowledges that (i) the
Securities to be acquired by it hereunder 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 Investor hereby consents to such reliance.
3.2.7. No General Solicitation. At no time was Investor presented
with or solicited by or through any leaflet, public promotional
meeting, television advertisement or any other form of general
solicitation or advertising.
3.2.8. No Encumbrances. The Securities to be surrendered are free
and clear of any encumbrances of every nature whatsoever. Investor is
the sole owner of the securities to be surrendered, and such shares
are duly authorized, validly issued, fully paid and non-assessable.
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3.2.9. No Other Representations .Except as specifically set forth
herein, Investor makes no representations or warranties with
respect to the Company of the securities being exchanged.
ARTICLE 4
OTHER AGREEMENTS OF THE PARTIES
Section 4.1. Transfer Restrictions.
4.1.1. The Securities may only be disposed of 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 thereof. In connection with any transfer
of any Securities other than pursuant to an effective registration
statement or to the Company, 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 under the Securities Act.
Notwithstanding the foregoing, the Company hereby consents to (i) any
transfer of Securities by the Investors to an Affiliate of the
Investors, or any transfers among any such Affiliates, and (ii) any
transfer by the Investors to any investment entity under common
management with the Investors, provided in each case of clauses (i)
and (ii) the transferee certifies to the Company that it is an
"accredited investor" as defined in Rule 501(a) under the Securities
Act. Any such transferee shall have the rights of the Investors under
this Agreement.
4.1.2. The Investors agree to the imprinting, so long as is
required by this Section, of the following legend (or such
substantially similar legend as is acceptable to the Investors and
their counsel, the parties agreeing that any unacceptable legended
Securities shall be replaced promptly by and at the Company's cost) on
the Securities:
[FOR SHARES] NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH
THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE, IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
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[ONLY FOR UNDERLYING SHARES TO THE EXTENT THE RESALE THEREOF IS NOT
COVERED BY AN EFFECTIVE REGISTRATION STATEMENT AT THE TIME OF
CONVERSION, ISSUANCE OR EXERCISE] THE SHARES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE, IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
Underlying Shares shall not contain the legend set forth above or any
other restrictive legend if all of the following conditions are satisfied: (i)
there is an effective Registration Statement at such time, (ii) the Investor has
delivered a certificate to the Company to the effect that the Investor will
comply with all applicable prospectus delivery requirements under the Securities
Act in any sale or transfer of the Underlying Shares by the Investor, and (iii)
the Investor has delivered to the Company an opinion of counsel (acceptable to
the Company) that such legend is not required under applicable requirements of
the Securities Act (including judicial interpretations and pronouncements issued
by the staff of the Commission). The Company agrees that it will provide the
Investor, upon request, with a certificate or certificates representing
Underlying Shares, free from such legend at such time as such legend is no
longer required hereunder. The Company may not make any notation on its records
or give instructions to any transfer agent of the Company which enlarge the
restrictions of transfer set forth in this Section.
Section 4.2. Acknowledgment of Dilution. The Company acknowledges that the
issuance of Underlying Shares upon (i) conversion of the Shares and as payment
of dividends thereon may result in dilution of the outstanding shares of Common
Stock, which dilution may be substantial under certain market conditions. The
Company further acknowledges that its obligation to issue Underlying Shares in
accordance with the Certificate of Designation is unconditional and absolute
regardless of the effect of any such dilution.
Section 4.3. Furnishing of Information. As long as the Investors 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. If at any time prior to the date on which
the Investors may resell all of their Underlying Shares without volume
restrictions pursuant to Rule 144(k) promulgated under the Securities Act (as
determined by counsel to the Company pursuant to a written opinion letter to
such effect, addressed and acceptable to the Company's transfer agent for the
benefit of and enforceable by the Investor) the Company is not required to file
reports pursuant to such sections, it will prepare and furnish to the Investor
and make publicly available in accordance with Rule 144(c) promulgated under the
Securities Act annual and quarterly financial statements, together with a
discussion and analysis of such financial statements in form and substance
substantially similar to those that would otherwise be required to be included
in reports required by Section 13(a) or 15(d) of the Exchange Act in the time
period that such filings would have been required to have been made under the
Exchange 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 Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act, including the legal
opinion referenced above in this Section 4.3. Upon the request of any such
Person, the Company shall deliver to such Person a written certification of a
duly authorized officer as to whether it has complied with such requirements.
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Section 4.4. Integration. The Company shall not and shall use its best
efforts to ensure that no Affiliate 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 issuance, offer or sale of the Securities to the Investors.
Section 4.5. Certain Trades. The Company specifically acknowledges that,
except to the extent specifically provided herein or in any of the other
Transaction Documents (but limited in each instance to the extent so specified),
the Investors retains the right (but is not otherwise obligated) to buy, sell,
engage in hedging transactions or otherwise trade in the securities of the
Company, including, but not necessarily limited to, the Common Stock, at any
time before, contemporaneous with or after the execution of this Agreement or
from time to time and in any manner whatsoever permitted by applicable federal
and state securities laws.
Section 4.6. Consent Right.
4.6.1. The Company covenants and agrees that, during the period
from the date of this Agreement through and including the date which
is eighteen (18) months from the date of this Agreement, if the
Company offers to enter into any transaction that involves the
issuance of Common Stock, whether such transaction be for the purpose
of raising additional capital or for the reduction of any Company
liability, among other things (a ""New Transaction""), the Company
shall notify the Investors in writing of all of the terms of such
offer (a ""New Transaction Offer"") and shall obtain the consent of
Investors prior to consummation of the New Transaction.
Notwithstanding the preceding sentence, the Company shall not need the
consent of the Investors to consummate a New Transaction for Common
Stock issued at the Market Price that is conducted in the ordinary
course of business, but limited to an amount, in aggregate, of
$250,000.
4.6.2. In the event the New Transaction is consummated with such other
third party on terms providing for (x) either a sale price equal
to or computed based on, or a determination of a conversion price
based on, a lower percentage of the then current market price
(howsoever defined or computed) than as provided in the
Certificate of Designation for determining the Conversion Price,
the terms of any unissued, and any issued and unconverted
Preferred Stock, shall be modified to reduce the relevant
Conversion Price to be equal to that provided in the New
Transaction as so consummated unless waived by the Investors.
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Section 4.7. Listing of Underlying Shares. The Company shall (a) not later than
the time prescribed by the rules and regulations of the NASD , prepare and file
with the OTC Bulletin Board (as well as any other national securities exchange,
market or trading facility on which the Common Stock is then listed), if
necessary for listing, an additional shares listing application covering at
least such number of shares of Common Stock of the Underlying Shares as would be
issuable upon a conversion in full of (and as payment of dividends in respect
of) the Preferred Stock, assuming such conversion occurred on the date of such
application, (b) take all steps necessary to cause such Underlying Shares to be
approved for listing on the OTC Bulletin Board (as well as on any other national
securities exchange, market or trading facility on which the Common Stock is
then listed) as soon as possible thereafter, and (c) provide to the Investors
evidence of such listing, and the Company shall maintain the listing of its
Common Stock on such exchange or market. In addition, if at any time thereafter
the number of shares of Common Stock issuable on conversion of all then
outstanding Preferred Stock, including accrued and unpaid dividends thereon, is
greater than the number of shares of Common Stock theretofore listed with the
OTC Bulletin Board (and any such other national securities exchange, market or
trading facility), the Company shall, if necessary for listing, promptly take
such action (including the actions described in the preceding sentence) to file
an additional shares listing application with the NASD (and any such other
national securities exchange, market or trading facility) covering at least a
number of shares equal to the sum of two hundred percent (200%) of (A) the
number of Underlying Shares as would then be issuable upon a conversion in full
of the Preferred Stock, and (B) the number of Underlying Shares as would be
issuable as payment of dividends on the Preferred Stock.
Section 4.8. Notice of Breaches. Each of the Company and the Investors shall
give prompt written notice to the other of any breach by it of any
representation, warranty or other agreement contained in any Transaction
Document, as well as any events or occurrences arising after the date hereof,
which would reasonably be likely to cause any representation or warranty or
other agreement of such party, as the case may be, contained in the Transaction
Documents to be incorrect or breached as of such Closing Date. However, no
disclosure by either party pursuant to this Section 4.8 shall be deemed to cure
any breach of any representation, warranty or other agreement contained in any
Transaction Document. Notwithstanding the generality of the foregoing, the
Company shall promptly notify the Investors of any notice or claim (written or
oral) that it receives from any lender of the Company to the effect that the
consummation of the transactions contemplated by the Transaction Documents
violates or would violate any written agreement or understanding between such
lender and the Company, and the Company shall promptly furnish by facsimile to
the Investors a copy of any written statement in support of, allegedly in
support of, or relating to such claim or notice.
Section 4.9. Conversion Restrictions. The Investors shall not be able to convert
the Preferred Stock into Common Stock of the Company prior to six (6) months
following the Closing Date without the written consent of the Company (the
"Holding Period"). Upon the expiration of the Holding Period, each Investor
shall be able to convert up to 10% of the initial Stated Value of the Shares
originally issued to such Investor pursuant to this Agreement, plus accrued
interest, at the beginning of each calendar month unless otherwise redeemed by
the Company with available capital prior to such conversion.
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Section 4.10. Conversion Procedures. If the Company changes its transfer agent
at any time prior to the conversion of all of the Shares held by the Investors,
the Company shall deliver any transfer agent instructions to such replacement
transfer agent and cause such transfer agent to comply therewith.
Section 4.11. Conversion and Exercise Obligations of the Company. The Company
shall honor conversions of the Shares and shall deliver Underlying Shares upon
such conversions and exercises in accordance with the respective terms and
conditions and time periods set forth in the Certificate of Designation.
Section 4.12. Transfer of Intellectual Property Rights. Except for (i) exclusive
licenses granted to Affiliates, (ii) in the ordinary course of the Company's
business consistent with past practice, (iii) in connection with the sale of all
or substantially all of the assets of the Company, or (iv) upon payment of fair
consideration pursuant to a third party appraisal, neither the Company nor any
Affiliate shall transfer, sell or otherwise dispose of, any Intellectual
Property Rights, or allow the Intellectual Property Rights to become subject to
any Liens, or fail to renew such Intellectual Property Rights (if renewable and
would otherwise expire).
Section 4.13. Release. Effective upon the mutual execution hereof, the Company,
for itself and on behalf of all Affiliates, representatives, and all
predecessors in interest, successors and assigns (collectively, the "Releasing
Parties"), hereby releases and forever discharges each of the Investors, and
Investors' direct and indirect partners, officers, directors, employees,
Affiliates, representatives, agents, advisors, trustees, beneficiaries,
predecessors in interest, successors in interest and nominees of and from any
and all claims, demands, actions and causes of action, whether known or unknown,
fixed or contingent, arising prior to the date of execution of this Agreement,
that the Company may have had, may now have or may hereafter acquire with
respect to any matters whatsoever under, relating to or arising from any prior
Securities Purchase Agreement, Registration Statement, and the agreements
entered into by the Company and Investors in connection therewith (sometimes
collectively referred to as the "Prior Agreements"). The Company also fully
waives any offsets it may have with respect to the amounts owed under the Prior
Agreements. Additionally, the Company represents, warrants and covenants that it
has not, and at the time this release becomes effective will not have, sold,
assigned, transferred, or otherwise conveyed to any other person or entity all
or any portion of its rights, claims, demands, actions, or causes of action
herein released.
Section 4.14. Indemnification. If (i) an Investor becomes involved in any
capacity in any action, proceeding or investigation brought by any stockholder
of the Company or third-party, in connection with or as a result of the
consummation of the transactions contemplated by this Agreement, or if any
Investor is impleaded in any such action, proceeding or investigation by any
Person, or (ii) an Investor becomes involved in any capacity in any action,
proceeding or investigation brought by the Securities and Exchange Commission,
any self-regulatory organization or other body having jurisdiction, against or
involving the Company or in connection with or as a result of the consummation
of the transactions contemplated by this Agreement, or if an Investor is
impleaded in any such action, proceeding or investigation by any Person, then in
any such case, the Company hereby agrees to indemnify, defend and hold harmless
such Investor from and against and in respect of all losses, claims,
liabilities, damages or expenses (collectively "Losses") resulting from, imposed
upon or incurred by the Investor, directly or indirectly, and reimburse such
Investor for its reasonable legal and other expenses (including the cost of any
investigation and preparation) incurred in connection therewith, as such
expenses are incurred; provided, however, that this sentence shall not apply to
the extent that such Losses are caused by, result from or arise out of any
breach of this Agreement by the Investor or any intentionally wrongful or
grossly negligent conduct by the Investor. The indemnification and reimbursement
obligations of the Company under this Section shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same terms
and conditions to any Affiliates of the Investor who are actually named in such
action, proceeding or investigation, and partners, directors, agents, employees
and controlling persons (if any), as the case may be, of the Investor and any
such Affiliate, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Company, the
Investor, any such Affiliate and any such Person. The Company also agrees that
neither of the Investors nor any such Affiliate, partner, director, agent,
employee or controlling person of the Investors shall have any liability to the
Company or any Person asserting claims on behalf of or in right of the Company
in connection with or as a result of the consummation of this Agreement, except
as provided in or contemplated by this Agreement.
15
Section 4.15. Change in Control. Without the prior written consent of the
Investors, which consent shall not be unreasonably withheld, the Company shall
not enter into any agreement or understanding which may, directly or indirectly,
cause or effect the sale of or substantially all of its assets or a change in
"control" as defined in Rule 405 under the Securities Act.
ARTICLE 5
CONDITIONS; TERMINATION
Section 5.1. Conditions Precedent.
5.1.1. Conditions Precedent to the Obligation of the Company to Issue
the Shares. The obligation of the Company to issue the Shares
hereunder to the Investors is subject to the satisfaction or
waiver by the Company, at or before the Closing, of each of the
following conditions:
5.1.1.1. Accuracy of the Investors' Representations and Warranties. The
representations and warranties of the Investors shall be true and
correct in all material respects as of the date when made and as
of the Closing Date, as though made on and as of such date;
5.1.1.2. Performance by the Investors. The Investors shall have
performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by it at or
prior to the Closing; and
5.1.1.3. No Prohibitions. The exchange, purchase of and payment for the
Shares to be issued to the Investors (and upon
conversion thereof, the Underlying Shares) hereunder shall not be
prohibited or enjoined (temporarily or permanently) by any
applicable law or governmental regulation.
16
5.1.2. Conditions Precedent to the Obligation of the Investors to
Exchange the Notes. The obligation of the Investors to surrender
its Notes in return for the Shares to be acquired by them
hereunder is subject to the satisfaction or waiver by the
Investors, at or before the Closing, of each of the following
conditions:
5.1.2.1. Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company set
forth herein shall be true and correct in all material respects
as of the date when made and as of the Closing Date as though
made on and as of such date;
5.1.2.2. Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or
complied with by the Company at or prior to the Closing;
5.1.2.3. No Prohibitions. The exchange, purchase of and payment for the
Shares to be issued to the Investors (and upon conversion thereof,
the Underlying Shares) hereunder shall not be prohibited or
enjoined (temporarily or permanently) by any applicable law or
governmental regulation;
5.1.2.4. Adverse Changes. No event or series of events
which, individually or in the aggregate, would have or result in
a Material Adverse Effect shall have occurred between the date
hereof and the Closing;
5.1.2.5. No Suspensions of Trading in Common Stock. Trading in the Common
Stock shall not have been suspended from trading on the NASD OTC
Bulletin Board at any time between the date hereof and the Closing;
5.1.2.6. Listing of Common Stock. The Common Stock shall have at all times
between the date hereof and the Closing Date been listed for
trading on the OTC Bulletin Board;
5.1.2.7. Required Approvals. All Required Approvals shall have been
obtained;
5.1.2.8. Certificate of Designation. The Certificate of Designation shall
have been duly filed with the Secretary of State of Florida, and
the Company shall have delivered a copy thereof to the Investors
certified as filed by the office of the Secretary of State of
Florida; and
5.1.2.9. Exchange. The Company shall have entered into that certain Exchange
Agreement by and among the Company and Eurotech, Ltd., among others.
Section 5.2. Termination.
5.2.1. Termination by Mutual Consent. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to Closing by
the mutual consent of the Company and the Investors.
17
5.2.2. Termination by the Company or the Investors. This Agreement and
the transactions contemplated hereby may be terminated prior to
Closing by either the Company or the Investors, by giving written
notice of such termination to the other party, if:
5.2.2.1. there shall be in effect any statute, rule, law or
regulation that prohibits the consummation of the Closing
or the transactions contemplated by the Transaction
Documents or if the consummation of the Transaction
Documents would violate any non-appealable final judgment,
order, decree, ruling or injunction of any court of or
governmental authority having competent jurisdiction; or
5.2.2.2. there shall have been an amendment to Regulation D
promulgated under the Securities Act or an interpretive
release promulgated or issued thereunder, which, in the
reasonable judgment of the terminating party, is likely to
have or result in a Material Adverse Effect.
5.2.3. Termination by the Investors. This Agreement and the transactions
contemplated hereby may be terminated prior to Closing by the
Investors, by giving written notice of such termination to the
Company, if:
5.2.3.1. the Company has breached in any material respects any
representation, warranty, covenant or agreement contained
in any Transaction Document and such breach is not cured
within one (1) Business Day following receipt by the
Company of notice of such breach;
5.2.3.2. there has occurred an event or series of events which,
individually or in the aggregate, is likely to have or result in a
Material Adverse Effect which is not disclosed in the Disclosure
Materials;
5.2.3.3. trading in the Common Stock has been suspended on the NASD OTC
Bulletin Board; or
5.2.3.4. the Closing has not occurred by December 15, 2002 (other than through
the fault of the Investors).
ARTICLE 6
MISCELLANEOUS
Section 6.1. Fees and Expenses. The Company shall pay all stamp and other taxes
and duties levied in connection with the issuance of the Shares pursuant hereto.
The Investors shall be responsible for its own tax liability that may arise as a
result of the investment hereunder or the transactions contemplated by this
Agreement.
Section 6.2. Entire Agreement; Amendments, Exhibits and Schedules. This
Agreement, together with the Exhibits and Schedules hereto, and the Certificate
of Designations contain the entire understanding of the parties with respect to
the subject matter hereof and thereof, and supersede all prior agreements and
understandings with regard to the issuance of the Series C Preferred Stock. The
Exhibits and Schedules to this Agreement are hereby incorporated herein and made
a part hereof for all purposes as if fully set forth herein.
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Section 6.3. 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 5:00 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 5:00 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the Business Day scheduled for delivery, if sent by nationally recognized
overnight or other courier service, or (iv) upon actual receipt by the party to
whom such notice is required to be given. The address for such notices and
communications shall be as follows:
If to the Company: Xxxxxxxx Technologies, Inc.
Xxxxxxxx Technologies, Inc.
#000
00 Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx, President
Fax: 000-000-0000
If to Investors: XX Xxx 000, Xxxxxx Xxxx Xxxxxxxx Xxxxxx
Building Xxxxxxx Road Grand Cayman,
Cayman Islands British West, Indies
Cayman Islands
Fax: 000-000-0000
With copies to: (which shall not constitute notice)
Xxxxxxx & Xxxxxx, LLP
00 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn. Xxxxxx X. Xxxxxxx, Esq.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
Section 6.4. 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 both the Company and the Investors, 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.
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Section 6.5. 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.
Section 6.6. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns, including
any Persons to whom the Investors transfer Shares.
Section 6.7. No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and assigns and,
other than with respect to assignees under the immediately preceding Section, is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person.
Section 6.8. Governing Law. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the exclusive
jurisdiction of the federal courts whose districts encompass the County of New
York or the state courts of the State of New York sitting in the County of New
York in connection with any dispute arising under this Agreement, any of the
other Transaction Documents or the Prior Agreements and hereby waives, to the
maximum extent permitted by law, any objection, including any objection based on
forum non conveniens, to the bringing of any such proceeding in such
jurisdictions.
Section 6.9. Jury Trial Waiver. The Company and Investors hereby waive a trial
by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other in respect of any matter arising out of or in
connection with the Transaction Documents.
Section 6.10. Survival. The representations, warranties, agreements and
covenants contained in this Agreement shall survive the Closing and the
conversion of the Shares.
Section 6.11. 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.
Section 6.12. Publicity. The Company and the Investors shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and no party shall issue any
such press release or otherwise make any such public statement without the prior
written consent of the other party, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which such case the disclosing party shall
provide the other party with prior notice of such public statement.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of the Investors without the prior written consent of the Investors, except to
the extent required by law, in which case the Company shall provide the
Investors with written notice of such public disclosure prior thereto, or
promptly thereafter.
20
Section 6.13. 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 affected 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.
Section 6.14. Remedies. Each of the parties to this Agreement acknowledges and
agrees that the other party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the parties hereto agrees
that the other party shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce specifically
this Agreement and the terms and provisions of this Agreement in any action
instituted in any court of the United States of America or any state thereof
having jurisdiction over the parties to this Agreement and the matter, in
addition to any other remedy to which they may be entitled, at law or in equity.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this
Exchange Agreement to be duly executed as of the date first indicated above.
XXXXXXXX TECHNOLOGIES, INC.
Dated: ___________________
By: ______________________________
Name:
Title:
XXXXX LLC
Dated: ____________________ By: ______________________________
Name:
Title:
MARKET LLC
Dated: ____________________ By: ______________________________
Name:
Title:
22
