Exhibit 10.26
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
February 22, 2006, among Xxxxxxx Industries, Inc., a Delaware corporation (the
"Company"), and the purchasers identified on the signature pages hereto (each, a
"Purchaser" and collectively, the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act (as defined below) and Rule
506 promulgated thereunder, the Company desires to issue and sell to the
Purchasers, and the Purchasers, severally and not jointly, desire to purchase
from the Company certain securities of the Company, as more fully described in
this Agreement.
WHEREAS, the Purchasers understand and acknowledge that up to an aggregate
of 3,750,000 shares of the Company's Common Stock (as defined below) are being
offered for sale, of which 2,500,000 shares are being offered by First Montauk
Securities Corporation as placement agent on behalf of the Company and the
remaining 1,250,000 shares ("1,250,000 Share Offering") are being offered
directly by the Company without the assistance or participation of First Montauk
Securities Corporation pursuant to 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.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms shall have
the meanings indicated in this Section 1.1:
"Action" means any action, suit, inquiry, notice of violation,
proceeding (including any partial proceeding such as a deposition) or
investigation pending or threatened in writing against or affecting the Company,
any Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency, regulatory authority
(federal, state, county, local or foreign), stock market, stock exchange or
trading facility.
"Affiliate" means any Person that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 144.
With respect to a Purchaser, any investment fund or managed account that is
managed on a discretionary basis by the same investment manager as such
Purchaser will be deemed to be an Affiliate of such Purchaser.
"Business Day" means 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 New York are authorized or required by law or other governmental
action to close.
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"Change of Control" means the consummation, in one or a series of
related transactions, of a "Rule 13e-3 transaction" as defined in Rule 13e-3
under the Exchange Act with respect to the Company.
"Closing" means the closing of the purchase and sale of the Shares
pursuant to Section 2.
"Closing Date" means the date of the Closing.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, $.001 par
value per share, and any securities into which such common stock may hereafter
be reclassified.
"Common Stock Equivalents" means any securities of the Company or
any Subsidiary which entitle the holder thereof to acquire Common Stock at any
time, including without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock or other securities that entitle the holder to receive, directly or
indirectly, Common Stock.
"Company Counsel" specifically for the transactions contemplated by
this Agreement means Ellenoff Xxxxxxxx & Schole LLP.
"Effective Date" means the date that the Registration Statement is
first declared effective by the Commission.
"Escrow Agent" means Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP.
"Escrow Agreement" means the Escrow Agreement, dated as of the date
of this Agreement, by and among the Escrow Agent, the Company and the
Purchasers, other than the Purchasers in the 1,250,000 Share Offering, in the
form of Exhibit A hereto.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Investment Amount" means, with respect to each Purchaser, the
investment amount set forth under such Purchaser's name on the signature pages
hereof next to the label "Investment Amount."
"Lien" means any lien, charge, encumbrance, security interest, right
of first refusal or other restrictions of any kind, but excluding any
restriction imposed under applicable securities laws.
"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.
"Per Share Purchase Price" equals $0.60.
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"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Qualified Institutional Buyer" means a "qualified institutional
buyer" as such term is defined in Rule 144A promulgated under the Securities
Act.
"Registration Statement" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale by the Purchasers of the Shares.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company and the
Purchasers, in the form of Exhibit B hereto.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities" means the Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means the shares of Common Stock issued or issuable to the
Purchasers, and the Purchasers in the 1,250,000 Share Offering, at the Closing
pursuant to this Agreement.
"Subsidiary" means any subsidiary of the Company that would be
required to be listed in an exhibit to the Company's Annual Report on Form
10-KSB covering the period in which the date of this Agreement falls.
"Trading Day" means a day on which the Common Stock is traded on a
Trading Market.
"Trading Market" means the following markets or exchanges on which
the Common Stock is listed or quoted for trading on the date in question: the
OTC Bulletin Board, the American Stock Exchange, the New York Stock Exchange,
the Nasdaq National Market or the Nasdaq SmallCap Market.
"Transaction Documents" means this Agreement, the Registration
Rights Agreement and any other documents or agreements executed in connection
with the transactions contemplated hereunder.
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ARTICLE II.
PURCHASE AND SALE
2.1 Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to each Purchaser,
and each Purchaser shall, severally and not jointly, purchase from the Company,
the Shares representing such Purchaser's Investment Amount. The Closing shall
take place at the offices of Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP, 0000 Xxxxxx xx
xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 on the date this Agreement is executed
and delivered by the parties or at such other location or time as the parties
may agree. The Closing of the 1,250,000 Share Offering shall take place at the
Company's principal executive offices.
2.2 Closing Deliveries. (a) At the Closing, the Company shall deliver or
cause to be delivered to each Purchaser the following:
(i) a certificate, registered in the name of such Purchaser
evidencing the number of Shares as set forth under such Purchaser's name
on the signature pages hereof next to the label "Shares";
(ii) the legal opinion of Company Counsel, in the form
attached hereto as Exhibit C, addressed to the Purchasers;
(iii) the Registration Rights Agreement duly executed by the
Company; and
(iv) the Escrow Agreement duly executed by the Company, except
with respect to the Purchasers in the 1,250,000 Share Offering.
(b) At the Closing, each Purchaser shall deliver or cause to be
delivered to the Company the following:
(i) such Purchaser's Investment Amount, in United States
dollars and in immediately available funds, by wire transfer to an account
designated in writing by the Company for such purpose;
(ii) the Registration Rights Agreement duly executed by such
Purchaser; and
(iii) the Escrow Agreement duly executed by the Purchaser,
except with respect to the Purchasers in the 1,250,000 Share Offering.
2.3 Closing Conditions.
(a) The obligations of the Company hereunder in connection with the
Closing are subject to the following conditions being met:
(i) the accuracy in all material respects when made and on the
Closing Date of the representations and warranties of each Purchaser
contained herein;
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(ii) all obligations, covenants and agreements of the
Purchasers required to be performed at or prior to the Closing Date
shall have been performed; and
(iii) the delivery by the Purchasers of the items set forth in
Section 2.2(b) of this Agreement.
(b) The respective obligations of the Purchasers hereunder in
connection with the Closing are subject to the following conditions being
met:
(i) the accuracy in all material respects when made and on the
Closing Date of the representations and warranties of the Company
contained herein;
(ii) all obligations, covenants and agreements of the Company
required to be performed at or prior to the Closing Date shall have
been performed;
(iii) the delivery by the Company of the items set forth in
Section 2.2(a) of this Agreement;
(iv) there shall have been no Material Adverse Effect (as
hereinafter defined) with respect to the Company since the date
hereof; and
(v) from the date hereof to the Closing Date, trading in the
Common Stock shall not have been suspended by the Commission (except
for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to the Closing),
and, at any time prior to the Closing Date, trading in securities
generally as reported by Bloomberg Financial Markets shall not have
been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such service,
or on any Trading Market, nor shall a banking moratorium have been
declared either by the United States or New York State authorities
nor shall there have occurred any material outbreak or escalation of
hostilities or other national or international calamity of such
magnitude in its effect on, or any material adverse change in, any
financial market which, in each case, in the reasonable judgment of
each Purchaser, makes it impracticable or inadvisable to purchase
the Shares at the Closing.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
The Company makes the representations and warranties to the Purchasers set
forth in this Article III, subject to information set forth in the Disclosure
Materials (as defined in Section 3.1(g)). The disclosure set forth in the
Disclosure Materials shall qualify each section in this Article III where such
information is applicable.
3.1 Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to each Purchaser:
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(a) Organization and Qualification. Each of the Company and each
Subsidiary 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 corporate
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 each Subsidiary is duly
qualified to conduct business and is in good standing as a foreign corporation
or other entity in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
could not, individually or in the aggregate, have or reasonably be expected to
result in (i) an adverse effect on the legality, validity or enforceability of
any Transaction Document, (ii) a material and adverse effect on the results of
operations, assets, business or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole, or (iii) an adverse impairment
to the Company's ability to perform on a timely basis its obligations under any
Transaction Document (any of (i), (ii) or (iii), a "Material Adverse Effect").
Neither the Company nor any Subsidiary is in violation or default of any of the
provisions of its respective certificate or articles of incorporation, by-laws
or other organizational or charter document. All direct and indirect
subsidiaries of the Company are set forth in the Disclosure Materials. Except as
set forth in the Disclosure Materials, the Company owns, directly or indirectly,
all of the capital stock or other equity interests of each Subsidiary free and
clear of any Liens, and all the issued and outstanding shares of capital stock
of each Subsidiary are validly issued and are fully paid, non-assessable and
free of preemptive and similar rights to subscribe for or purchase securities.
(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 corporate action
on the part of the Company and no further action is required by the Company in
connection therewith. Each Transaction Document has been (or upon delivery will
have been) duly executed by the Company and, when delivered in accordance with
the terms hereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles.
(c) 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 organizational or charter documents,
or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) 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) assuming the accuracy
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of Purchasers' representations and warranties and compliance by the Purchasers
of their respective covenants as set forth in this Agreement, 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), such
as could not, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect.
(d) Filings, Consents and Approvals. The Company is not 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 the filing with the Commission of one or more Registration Statements
in accordance with the requirements Registration Rights Agreement.
(e) Issuance of the Securities. The Securities have been duly
authorized and, when issued and paid for in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free
and clear of all Liens. The Company has reserved from its duly authorized
capital stock the maximum number of shares of Common Stock issuable pursuant to
this Agreement.
(f) Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock of the Company is set forth in Schedule
3.1(f). Except as set forth in Schedule 3.1(f), no securities of the Company are
entitled to preemptive or similar rights, and 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.
Except as a result of the purchase and sale of the Securities and except as
disclosed in the Disclosure Materials, there are no outstanding options,
warrants, scrip 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. Except as set forth in Schedule
3.1(f), the issue and sale of the Securities will not, immediately or with the
passage of time, obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Purchasers and their permitted
successors and assigns) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price under
such securities. All of the outstanding shares of capital stock of the Company
are validly issued, fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities. No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is required for the
issuance and sale of the Securities. There are no stockholders agreements,
voting agreements or other similar agreements with respect to the Company's
capital stock to which the Company is a party or, to the knowledge of the
Company, between or among any of the Company's stockholders.
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(g) SEC Reports; Financial Statements. Except as set forth in
Schedule 3.1(g), 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 (or
such shorter period as the Company was required by law to file such reports)
(the foregoing materials being collectively referred to herein as the "SEC
Reports" and, together with the Schedules to this Agreement, the "Disclosure
Materials"), and for the twelve months preceding the date hereof, such reports
have filed on a timely basis or the Company has received a valid extension of
such time of filing and has filed any such SEC Reports prior to the expiration
of any such extension. Except as may have been corrected or supplemented in a
subsequent SEC Report, as of their respective dates, the SEC Reports complied in
all material respects with the requirements of the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Except as may have been corrected or
supplemented in a subsequent SEC Report, the financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Except as may have been
corrected or supplemented in a subsequent SEC Report, such financial statements
have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis during the periods involved
("GAAP"), except as may be otherwise specified in such financial statements or
the notes thereto, or, in the case of unaudited financial statements, as
permitted by Item 310(b) of Regulation S-B promulgated under the Securities Act
and the Exchange Act, 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, year-end audit
adjustments and the lack of footnotes. The Company has not received any letters
of comment from the Staff of the SEC which have not been satisfactorily resolved
as of the date hereof.
(h) Material Changes. Since the date of the latest balance sheet
included within the SEC Reports, except as specifically disclosed in the
Disclosure Materials, (i) there has been no event, occurrence or development
that has had or that could reasonably be expected to result in a Material
Adverse Effect, (ii) the Company has not incurred any material liabilities
(contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or required to be disclosed in filings made with the
Commission, (iii) the Company has not materially altered its method of
accounting or the identity of its auditors, (iv) the Company has not declared or
made any dividend or distribution of cash or other property to its stockholders
or purchased, redeemed or made any agreements to purchase or redeem any shares
of its capital stock, and (v) the Company has not issued any equity securities
to any officer, director or Affiliate, except pursuant to existing Company
equity compensation plans. The Company does not have pending before the
Commission any request for confidential treatment of information.
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(i) Litigation. Except as set forth in the SEC Reports, there is no
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 reasonably be expected to result in a Material Adverse Effect. Neither
the Company nor any Subsidiary, nor any director or officer thereof, is or has
been the subject of any Action involving a claim of violation of or liability
under federal or state securities laws or a claim of breach of fiduciary duty.
There has not been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation by the Commission involving the Company or any
current or former director or officer of the Company. The Commission has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.
(j) Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company.
(k) Compliance. Except as set forth in Schedule 3.1(k), neither the
Company nor any Subsidiary (i) is in default under or in violation of (and no
event has occurred that has not been waived that, 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 (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws relating to taxes,
environmental protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as could not,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect.
(l) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits would not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect ("Material
Permits"), and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material Permit.
(m) Title to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to their respective businesses and good and marketable title in all
personal property owned by them that is material to their respective businesses,
in each case free and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and the
Subsidiaries and Liens for the payment of federal, state or other taxes, the
payment of which is not delinquent. Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and the Subsidiaries are
in material compliance.
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(n) Patents and Trademarks. The Company and the Subsidiaries have,
or have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so have could, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect (collectively, the "Intellectual Property
Rights"). Neither the Company nor any Subsidiary has received a written notice
that the Intellectual Property Rights used by the Company or any Subsidiary
violates or infringes upon the rights of any Person. Except as set forth in the
SEC Reports, to the knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another Person
of any of the Intellectual Property Rights.
(o) Transactions With Affiliates and Employees. Except as set forth
in the SEC Reports, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than as
holders of stock options and/or warrants, and for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.
(p) Internal Control Over Financial Reporting. The Company and the
Subsidiaries maintain a system of internal control over financial reporting
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that material
information relating to the Company, including its Subsidiaries, is made known
to the certifying officers by others within those entities, particularly during
the period in which the Company's most recently filed periodic report under the
Exchange Act, as the case may be, is being prepared. The Company's certifying
officers have evaluated the effectiveness of the Company's controls and
procedures as of September 30, 2005 (such date, the "Evaluation Date"). The
Company presented in its most recently filed periodic report under the Exchange
Act the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no significant
changes in the Company's internal controls (as such term is defined in Item
307(b) of Regulation S-K under the Exchange Act) or, to the knowledge of the
Company, any other factors that could significantly affect the Company's
internal controls.
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(q) Certain Fees. Except as described in Schedule 3.1(q), no
brokerage or finder's fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Purchasers shall have no obligation with
respect to any fees or with respect to any claims (other than such fees or
commissions owed by a Purchaser pursuant to written agreements executed by such
Purchaser which fees or commissions shall be the sole responsibility of such
Purchaser) 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.
(r) Certain Registration Matters. Assuming the accuracy of the
Purchasers' representations and warranties set forth in Section 3.2(b)-(g), no
registration under the Securities Act is required for the offer and sale of the
Shares by the Company to the Purchasers under the Transaction Documents. The
Company is eligible to register the resale of the Shares for resale by the
Purchasers under Form SB-2 promulgated under the Securities Act. Except as
described in Schedule 3.1(r), 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 that have not been satisfied.
(s) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged. The Company has no reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business without a significant increase in cost.
(t) Listing and Maintenance Requirements. The Company is, and has no
reason to believe that it will not, upon the issuance of the Shares hereunder
and in the foreseeable future, continue to be, in compliance with the listing
and maintenance requirements for continued listing of the Common Stock on the
Over the Counter Bulletin Board. The issuance of the Securities hereunder does
not contravene the rules and regulations of the Over the Counter Bulletin Board.
The Company has not, in the 12 months preceding the date hereof, received notice
from any Trading Market on which the Common Stock is or has been listed or
quoted to the effect that the Company is not in compliance with the listing or
maintenance requirements of such Trading Market.
(u) Investment Company. The Company is not, and is not an Affiliate
of, an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
(v) Application of Takeover Protections. The Company and its Board
of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company's Certificate of Incorporation (or
similar charter documents) or the laws of its state of incorporation that is or
could become applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation as a result of the Company's
issuance of the Securities and the Purchasers' ownership of the Securities.
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(w) Disclosure. The Company confirms that, neither it nor any other
Person acting on its behalf has provided any of the Purchasers or their agents
or counsel with any information that the Company believes constitutes or might
constitute material, non-public information, except insofar as the existence and
terms of the proposed transactions hereunder may constitute such information.
The Company understands and confirms that the Purchasers will rely on the
foregoing representations and covenants in effecting transactions in securities
of the Company. All disclosure provided to the Purchasers regarding the Company,
its business and the transactions contemplated hereby, including the Disclosure
Materials to this Agreement, furnished by or on behalf of the Company with
respect to the representations and warranties made herein are true and correct
with respect to such representations and warranties and do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading. The Company acknowledges and agrees
that no Purchaser makes or has made any representations or warranties with
respect to the transactions contemplated hereby other than those specifically
set forth in Section 3.2 hereof.
(x) Xxxxxxxx-Xxxxx Act. The Company is in compliance with applicable
requirements of the Xxxxxxxx-Xxxxx Act of 2002 and applicable rules and
regulations promulgated by the Commission thereunder in effect as of the date of
this Agreement, except where such noncompliance could not be reasonably expected
to have, individually or in the aggregate, a Material Adverse Effect.
(y) No Integrated Offering. Assuming the accuracy of the Purchasers'
representations and warranties set forth in Section 3.2, neither the Company,
nor any of its affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would cause this
offering of the Securities to be integrated with prior offerings by the Company
for purposes of the Securities Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
any Trading Market on which any of the securities of the Company are listed or
designated.
(z) Solvency. Based on the financial condition of the Company as of
the Closing Date after giving effect to the receipt by the Company of the
proceeds from the sale of the Securities hereunder, (i) the Company's fair
saleable value of its assets exceeds the amount that will be required to be paid
on or in respect of the Company's existing debts and other liabilities
(including known contingent liabilities) as they mature; (ii) the Company's
assets do not constitute unreasonably small capital to carry on its business for
the current fiscal year as now conducted and as proposed to be conducted
including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof; and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid. The Company does not intend to incur
debts, other than in the ordinary course of its business, beyond its ability to
pay such debts as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of its debt). The Company has no knowledge
of any facts or circumstances which lead it to believe that it will file for
reorganization or liquidation under the bankruptcy or reorganization laws of any
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jurisdiction within one year from the Closing Date. The SEC Reports set forth as
of the dates thereof all outstanding secured and unsecured Indebtedness of the
Company or any Subsidiary, or for which the Company or any Subsidiary has
commitments (except where such Indebtedness would not have a Material Adverse
Effect). For the purposes of this Agreement, "Indebtedness" shall mean (a) any
liabilities for borrowed money or amounts owed in excess of $50,000 (other than
trade accounts payable incurred in the ordinary course of business), (b) all
guaranties, endorsements and other contingent obligations in respect of
Indebtedness of others, whether or not the same are or should be reflected in
the Company's balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value of
any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any Subsidiary is
in default with respect to any Indebtedness.
(aa) Tax Status. Except for matters that would not, individually or
in the aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary has filed all necessary federal, state
and foreign income and franchise tax returns and has paid or accrued all taxes
shown as due thereon, and the Company has no knowledge of a tax deficiency which
has been asserted or threatened against the Company or any Subsidiary.
(bb) No General Solicitation. Neither the Company nor to the
knowledge of the Company any person acting on behalf of the Company has offered
or sold any of the Securities by any form of general solicitation or general
advertising. The Company has offered the Securities for sale only to the
Purchasers and certain other "accredited investors" within the meaning of Rule
501 under the Securities Act.
(cc) Foreign Corrupt Practices. Neither the Company, nor to the
knowledge of the Company, any agent or other person acting on behalf of the
Company, has (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company (or made by any person
acting on its behalf of which the Company is aware) which is in violation of
law, or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
(dd) Accountants. The Company's accountants are set forth in the SEC
Reports. To the knowledge of the Company, such accountants, who the Company
expects will express their opinion with respect to the financial statements to
be included in the Company's Annual Report on Form 10-KSB for the year ending
December 31, 2005, are a registered public accounting firm as required by the
Securities Act.
(ee) Acknowledgment Regarding Purchasers' Purchase of Securities.
The Company acknowledges and agrees that each of the Purchasers is acting solely
in the capacity of an arm's length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby. The Company further
acknowledges that no Purchaser is acting as a financial advisor or fiduciary of
the Company (or in any similar capacity) with respect to this Agreement and the
transactions contemplated hereby and any advice given by any Purchaser or any of
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their respective representatives or agents in connection with this Agreement and
the transactions contemplated hereby is merely incidental to the Purchasers'
purchase of the Securities. The Company further represents to each Purchaser
that the Company's decision to enter into this Agreement has been based solely
on the independent evaluation of the transactions contemplated hereby by the
Company and its representatives.
(ff) Acknowledgement Regarding Purchasers' Trading Activity.
Anything in this Agreement or elsewhere herein to the contrary notwithstanding
(except for Section 3.2(j) hereof), it is understood and agreed by the Company
(i) that none of the Purchasers have been asked to agree, nor has any Purchaser
agreed, to desist from purchasing or selling, long and/or short, securities of
the Company, or derivative securities based on securities issued by the Company
or to hold the Securities for any specified term; (ii) that past or future open
market or other transactions by any Purchaser, including short sales, and
specifically including, without limitation, short sales or derivative
transactions, before or after the closing of this or future private placement
transactions, may negatively impact the market price of the Company's
publicly-traded securities; (iii) that any Purchaser, and counter parties in
derivative transactions to which any such Purchaser is a party, directly or
indirectly, presently may have a short position in the Common Stock, and (iv)
that each Purchaser shall not be deemed to have any affiliation with or control
over any arm's length counter-party in any derivative transaction. The Company
further understands and acknowledges that (a) one or more Purchasers may engage
in hedging activities at various times during the period that the Securities are
outstanding, and (b) such hedging activities (if any) could reduce the value of
the existing stockholders' equity interests in the Company at and after the time
that the hedging activities are being conducted. The Company acknowledges that
such aforementioned hedging activities do not constitute a breach of any of the
Transaction Documents.
(gg) Manipulation of Price. The Company has not, and to its
knowledge no one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
any of the Securities, (ii) sold, bid for, purchased, or, paid any compensation
for soliciting purchases of, any of the Securities (other than for the placement
agent's placement of the Securities), or (iii) paid or agreed to pay to any
person any compensation for soliciting another to purchase any other securities
of the Company.
3.2 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, partnership or
limited liability company power and authority to enter into and to consummate
the transactions contemplated by the applicable Transaction Documents and
otherwise to carry out its obligations thereunder. The execution, delivery and
performance by such Purchaser of the Transaction Documents to which it is a
party and the consummation by such Purchaser of the transactions contemplated by
this Agreement have been duly authorized by all necessary corporate or, if such
Purchaser is not a corporation, such partnership, limited liability company or
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other applicable like action, on the part of such Purchaser. Each of this
Agreement and the Registration Rights Agreement has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with terms hereof,
will constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles.
(b) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, an "accredited investor" as
defined in Rule 501(a) under the Securities Act. Such Purchaser is not a
registered broker-dealer under Section 15 of the Exchange Act. If such Purchaser
has checked the box marked "Yes" on the signature page hereto, such Purchaser is
a Qualified Institutional Buyer.
(c) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.
(d) 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 Subsidiaries
and their respective 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 that
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.
(e) Knowledge and Experience of Such Purchaser. Such Purchaser,
either alone or together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment. Such
Purchaser is able to bear the economic risk of an investment in the Securities
and is able to afford a complete loss of such investment.
(f) Restrictions on Securities. Such Purchaser understands that the
Securities have not been registered under the Securities Act and may not be
offered, resold, pledged or otherwise transferred except (a) pursuant to an
exemption from registration under the Securities Act or pursuant to an effective
registration statement in compliance with Section 5 under the Securities Act and
(b) in accordance with all applicable securities laws of the states of the
United States and other jurisdictions.
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(g) 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 at all times to sell or otherwise
dispose of all or any part of such Securities in compliance with applicable
federal and state securities laws. Nothing contained herein shall be deemed a
representation or warranty by such Purchaser to hold the 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 any of the
Securities.
(h) Investment Decision. Such Purchaser is not relying on the
Company, any other potential Purchaser, or on any legal or other opinion in the
materials reviewed by the Purchaser with respect to the financial or tax
considerations of the Purchaser relating to its investment in the Securities.
Such Purchaser has relied solely on the representations and warranties,
covenants and agreements of the Company in this Agreement (including the
Schedules and Exhibits hereto) and on its examination and independent
investigation in making its decision to acquire the Securities. Such Purchaser
has not relied on the business or legal advice of First Montauk Securities
Corporation or any of its agents, counsel or Affiliates in making its investment
decision hereunder, and confirms that none of such Persons has made any
representations or warranties to such Purchaser in connection with the
transactions contemplated by the Transaction Documents.
(i) No Other Representations. No oral or written representations
have been made to such Purchaser by the Company, or any of its officers,
directors, employees, agents, affiliates or subsidiaries of the Company, in
connection with its acquisition of Securities which were in any way inconsistent
with the representations contained herein. Such Purchaser acknowledges that no
representations or warranties of any type or description have been made to it by
any Person with regard to the Company, any of its Subsidiaries, any of their
respective businesses, properties or prospects or the investment contemplated
herein, other than the representations and warranties set forth in Article III
hereof. Purchaser has not been furnished with any oral representation or oral
information in connection with the offering of the Shares that is not contained
in this Agreement or the SEC Reports
(j) No Prior Short Selling. At no time during the 30 days prior to
the Closing Date has such Purchaser engaged in or effected, in any manner
whatsoever, directly or indirectly, any sale of Common Stock which such
Purchaser is not deemed to own under the provisions of Rule 200(b) of Regulation
SHO promulgated under the Exchange Act.
(k) Compliance with Laws. Such Purchaser is in compliance with all
securities laws applicable to it in connection with the transactions
contemplated by the Transaction Documents, including all securities laws, rules
and regulations in respect of the stabilization or manipulation of the price of
the Common Stock.
(l) Private Placement. Such Purchaser understands and acknowledges
that (i) the Securities are offered and sold 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 that the Company and its counsel will rely upon, the
accuracy and truthfulness of the foregoing representations and each Purchaser
hereby consents to such reliance.
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(m) Registration Statement Questionnaire. Such Purchaser has
completed or caused to be completed the Selling Securityholder Notice and
Questionnaire attached to the Registration Rights Agreement as Annex B, for use
in preparation of the Registration Statement, and the answers thereto are true
and correct as of the date hereof and will be true and correct as of the
effective date of the Registration Statement, or as applicable, any amendment
thereto, and such Purchaser will notify the Company immediately of any material
change in any such information provided in the Selling Securityholder Notice and
Questionnaire until such time as the Registration Statement has been declared
effective.
(n) Commissions. Such Purchaser has not incurred any obligation for
any finder's or broker's or agent's fees or commissions in connection with the
transactions contemplated hereby. Such Purchaser acknowledges that First Montauk
Securities will be paid a cash commission and non-accountable expense allowance
totaling eleven percent (11.0%) of the aggregate dollar amount of the Shares
sold to Purchasers, other than the shares sold in the 1,250,000 Share Offering,
pursuant to this Agreement. Additionally, the Company will issue First Montauk
Securities at the Closing a warrant to purchase up to ten percent (10.0%) of the
number of shares of Common Stock sold to Purchasers pursuant to this Agreement,
other than the shares sold in the 1,250,000 Share Offering, exercisable at $0.63
per share for a period of five (5) years from the date of this Agreement.
(o) Residence. If the Purchaser is an individual, such Purchaser
resides in the state identified in the address of such Purchaser set forth on
the signature page hereto; if such Purchaser is a partnership, corporation,
limited liability company or other entity, then the office or offices of such
Purchase in which its investment decision was made is located at the address or
addresses of such Purchaser set forth on the signature page hereto.
(p) Purchaser acknowledges that Purchaser is aware of the following
Telephone Interpretation in the SEC Manual of Publicly Available Telephone
Interpretations (July 1997):
A.65. Section 5
An issuer filed a Form S-3 registration statement for a secondary
offering of common stock which is not yet effective. One of the selling
shareholders wanted to do a short sale of common stock "against the box"
and cover the short sale with registered shares after the effective date.
The issuer was advised that the short sale could not be made before the
registration statement becomes effective, because the shares underlying
the short sale are deemed to be sold at the time such sale is made. There
would, therefore, be a violation of Section 5 if the shares were
effectively sold prior to the effective date.
(q) Purchaser acknowledges that it will execute and deliver to the
Company the Selling Securityholder Notice and Questionnaire attached as Annex B
to the Registration Rights Agreement in connection with the filing of the
Registration Statement, prior to the filing thereof.
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The Company acknowledges and agrees that each Purchaser does not
make or has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in this
Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 (a) Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of the Securities other
than pursuant to an effective registration statement, to the Company, to an
Affiliate of a Purchaser or in connection with a pledge as contemplated in
Section 4.1(b), the Company may require the transferor thereof to provide to the
Company an opinion of counsel selected by the transferor and reasonably
acceptable to the Company, the form and substance of which opinion 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.
(b) Certificates evidencing the Securities will contain the
following legend, so long as is required by this Section 4.1(b):
THESE SECURITIES 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 OR BLUE
SKY LAWS. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF
THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT.
The Company acknowledges and agrees that a Purchaser may from time to time
pledge Securities pursuant to a bona fide margin account and, if required under
the terms of such account, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such pledge or transfer would not
be subject to approval or consent of the Company and no legal opinion of legal
counsel to the pledgee, secured party or pledgor shall be required in connection
with the pledge, but the legend shall remain on the pledged Securities and such
legal opinion may be required in connection with a subsequent transfer following
default by the Purchaser transferee of the pledge. Further, no notice shall be
required of such pledge. At the appropriate Purchaser's expense, the Company
will execute and deliver such reasonable documentation as a pledgee or secured
party of Securities may reasonably request in connection with a pledge or
transfer of the Securities including the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) of the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list of
Selling Stockholders thereunder.
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(c) Certificates evidencing the Shares shall not contain any legend
(including the legend set forth in Section 4.1(b)): (i) while a
registration statement (including the Registration Statement) covering the
resale of such Shares is effective under the Securities Act, or (ii)
following any sale of such Shares pursuant to Rule 144, or (iii) if such
Shares are eligible for sale under Rule 144(k), or (iv) if such legend is
not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the Staff
of the Commission). The Company shall cause its counsel to issue the legal
opinion to the Company's transfer agent promptly after the Effective Date
if requested by the Company's transfer agent to effect the removal of the
legend hereunder. Following the Effective Date or at such earlier time as
a legend is no longer required for the Shares under this Section 4.1(c),
the Company will, no later than three (3) Trading Days following the
delivery by a Purchaser to the Company's transfer agent of a certificate
representing Shares containing a restrictive legend, deliver or cause to
be delivered to such Purchaser a certificate representing such Shares that
is free from all restrictive and other legends. The Company may not make
any notation on its records or give instructions to any transfer agent of
the Company that enlarge the restrictions on transfer set forth in this
Section. Certificates for Securities subject to legend removal hereunder
shall be transmitted by the transfer agent of the Company to the
Purchasers by crediting the account of the Purchaser's prime broker with
the Depository Trust Company System.
(d) In addition to such Purchaser's other available remedies, the
Company shall pay to a Purchaser, in cash, as partial liquidated damages
and not as a penalty, for each $1,000 of Shares (based on the closing
price of the Common Stock on the date such Securities are submitted to the
Company's transfer agent) delivered for removal of the restrictive legend
and subject to Section 4.1(c), $10 per Trading Day (increasing to $20 per
Trading Day five (5) Trading Days after such damages have begun to accrue)
for each Trading Day after the Legend Removal Date until such certificate
is delivered without a legend. Nothing herein shall limit such Purchaser's
right to pursue actual damages for the Company's failure to deliver
certificates representing any Securities as required by the Transaction
Documents, and such Purchaser shall have the right to pursue all remedies
available to it at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief.
4.2 Furnishing of Information. As long as any Purchaser owns the
Securities, the Company covenants to use its best efforts to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act which are required to be filed in order to satisfy
the current public information requirements of Rule 144(c)(1). As long as any
Purchaser owns Securities, if the Company is no longer subject to the periodic
reporting requirements of the Exchange Act and Rule 144(k) is not available to
any Purchaser with respect to any Securities held, the Company will prepare and
furnish to the Purchasers and make publicly available in accordance with Rule
144(c)(2) such information as is required for the Purchasers to sell the Shares
under Rule 144.
-19-
4.3 Securities Laws Disclosure; Publicity. The Company shall, by 8:30 a.m.
Eastern time on the Trading Day following the date hereof, issue a press
release, disclosing the material terms of the transactions contemplated hereby
and shall promptly thereafter, but in any event prior to 5:30 pm on the same day
file a Current Report on Form 8-K disclosing the material terms of the
transaction and shall attach the Transaction Documents thereto. In addition, the
Company will make such other filings and notices in the manner and time required
by the Commission and the Trading Market on which the Common Stock is listed.
The Company and First Montauk Securities Corporation, on behalf of the
Purchasers, shall consult with each other in issuing any press releases with
respect to the transactions contemplated hereby, and neither party shall issue
any such press release without the prior consent of the other, which consent
shall not be unreasonably withheld or delayed, except if such disclosure is
required by law or Trading Market regulations, in which case the disclosing
party shall provide the other party with prior notice of such press release. The
Company shall not publicly disclose the name of any Purchaser, or include the
name of any Purchaser in any filing with the Commission or any regulatory agency
or Trading Market, without the prior written consent of such Purchaser, except
to the extent such disclosure (but not any disclosure as to the controlling
Persons thereof) is required by law or Trading Market regulations, in which case
the Company shall provide the Purchasers with prior notice of such disclosure.
4.4 Indemnification.
(a) Reimbursement. If any Purchaser becomes involved in any capacity in
any Proceeding by or against any Person who is a stockholder of the Company
(except as a result of sales, pledges, margin sales and similar transactions by
such Purchaser to or with any current stockholder), solely as a result of such
Purchaser's acquisition of the Securities under this Agreement, the Company will
reimburse such Purchaser for its reasonable legal and other expenses (including
the cost of any investigation preparation and travel in connection therewith)
incurred in connection therewith, as such expenses are incurred. The
reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliates of the Purchasers who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may
be, of the Purchasers and any such Affiliate, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company solely as a result of acquiring the Securities under
this Agreement, except to the extent that such claims are based on a breach of
any representations and warranties or covenants made by the Purchasers in
Transaction Documents.
(b) Indemnification of Purchasers. Subject to the provisions of this
Section 4.4, the Company will indemnify and hold the Purchasers and their
directors, officers, stockholders, members, partners, employees and agents
(each, a "Purchaser Party") harmless from any and all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable attorneys'
fees and costs of investigation that any such Purchaser Party may suffer or
incur as a result of or relating to (a) any material breach of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents or (b) any action instituted
against a Purchaser, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such Purchaser, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of such Purchaser's representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any
violations by the Purchaser of state or federal securities laws or any conduct
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by such Purchaser which constitutes fraud, gross negligence, willful misconduct
or malfeasance). If any action shall be brought against any Purchaser Party in
respect of which indemnity may be sought pursuant to this Agreement, such
Purchaser Party shall promptly notify the Company in writing, and the Company
shall have the right to assume the defense thereof with counsel of its own
choosing. Any Purchaser Party shall have the right to employ separate counsel in
any such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Purchaser Party except
to the extent that (i) the employment thereof has been specifically authorized
by the Company in writing, (ii) the Company has failed after a reasonable period
of time to assume such defense and to employ counsel or (iii) in such action
there is, in the reasonable opinion of such separate counsel, a material
conflict on any material issue between the position of the Company and the
position of such Purchaser Party. The Company will not be liable to any
Purchaser Party under this Agreement (i) for any settlement by a Purchaser Party
effected without the Company's prior written consent, which shall not be
unreasonably withheld or delayed; or (ii) to the extent, but only to the extent
that a loss, claim, damage or liability is attributable to any Purchaser Party's
breach of any of the representations, warranties, covenants or agreements made
by the Purchasers in this Agreement or in the other Transaction Documents.
(c) Indemnification of Company. In addition to the indemnity provided in
the Registration Rights Agreement, the Purchasers will, severally and not
jointly, indemnify and hold the Company and its directors, officers,
shareholders, partners, employees and agents (each, a "Company Party") harmless
from any and all Losses that any such Company Party may suffer or incur as a
result of or relating to any material misrepresentation, breach or inaccuracy of
any representation, warranty, covenant or agreement made by the Purchasers in
any Transaction Document; provided, that such indemnity (other than as to any
indemnity called for under the Registration Rights Agreement) does not exceed,
with respect to each Purchaser, the portion of the Investment Amount of such
Purchaser hereunder, together with the Company's reasonable attorneys' fees and
costs of investigation subject to indemnification above. Except as set forth
above, the mechanics and procedures with respect to the rights and obligations
under this Section 4.4(c) will be the same as those set forth in the
Registration Rights Agreement.
4.5 Use of Proceeds. The Company shall use the net proceeds from the sale
of the Securities hereunder for working capital purposes, and not for the
satisfaction of debt (other than trade payables in the ordinary course,
consistent with past practices), to redeem any Company equity or
equity-equivalent securities or to settle any outstanding Action with such
proceeds.
4.6 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market such that it would require stockholder
approval of the sale of the Securities to the Purchasers unless stockholder
approval is obtained before the closing of such subsequent transaction.
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4.7 Stockholder Rights Plan. No claim will be made or enforced by the
Company or, to the knowledge of the Company, any other Person that any Purchaser
is an "Acquiring Person" under any stockholder 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 under the Transaction Documents. The Company
shall conduct its business in a manner so that it will not become subject to the
Investment Company Act.
4.8 Non-Public Information. The Company covenants and agrees that neither
it nor any other Person acting on its behalf will provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.
4.9 Reservation of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement.
4.10 Listing of Common Stock. The Company hereby agrees to use best
efforts to maintain the listing of the Common Stock on a Trading Market, and as
soon as reasonably practicable following the Closing (but not later than the
earlier of the Effective Date and the first anniversary of the Closing Date) to
list all of the Shares on such Trading Market, if applicable. The Company
further agrees, if the Company applies to have the Common Stock traded on any
other Trading Market, it will include in such application all of the Shares, and
will take such other action as is necessary to cause all of the Shares to be
listed on such other Trading Market as promptly as possible. The Company will
take all action reasonably necessary to continue the listing and trading of its
Common Stock on a Trading Market and will comply in all material respects with
the Company's reporting, filing and other obligations under the bylaws or rules
of the Trading Market.
4.11 Equal Treatment of Purchasers. No consideration shall be offered or
paid to any person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration (on
a pro-rata basis) is also offered to all of the parties to the Transaction
Documents, provided such party holds all or any portion of the Shares purchased
pursuant to this Agreement. For clarification purposes, this provision
constitutes a separate right granted to each Purchaser by the Company and
negotiated separately by each Purchaser, and is intended to treat the Purchasers
as a class and shall not in any way be construed as the Purchasers acting in
concert or as a group with respect to the purchase, disposition or voting of
Securities or otherwise.
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4.12 Participation in Future Financing. From the date hereof until 12
months after the Closing Date, upon any financing by the Company or any of its
subsidiaries of Common Stock or Common Stock Equivalents (a "Subsequent
Financing"), each Purchaser shall have the right to participate in up to 100% of
such Subsequent Financing. At least 10 Trading Days prior to the closing of the
Subsequent Financing, the Company shall deliver to each Purchaser a written
notice of its intention to effect a Subsequent Financing ("Pre-Notice"), which
Pre-Notice shall ask such Purchaser if it wants to review the details of such
financing (such additional notice, a "Subsequent Financing Notice"). Upon the
request of a Purchaser (which shall be made within 2 Trading Days of delivery of
a Pre-Notice), and only upon a request by such Purchaser, for a Subsequent
Financing Notice, the Company shall promptly, but no later than 1 Trading Day
after such request, deliver a Subsequent Financing Notice to such Purchaser. The
Subsequent Financing Notice shall describe in reasonable detail the proposed
terms of such Subsequent Financing, the amount of proceeds intended to be raised
thereunder, the Person with whom such Subsequent Financing is proposed to be
effected (subject to confidentiality), and attached to which shall be a term
sheet or similar document relating thereto. If by 6:30 p.m. (New York City time)
on the 10th Trading Day after all of the Purchasers have received the
Pre-Notice, notifications of the Purchasers of their willingness to participate
in the Subsequent Financing is, in the aggregate, less than the total amount of
the Subsequent Financing, then the Company may effect the remaining portion of
such Subsequent Financing on the terms and to the Persons set forth in the
Subsequent Financing Notice. If the Company receives no notice from a Purchaser
as of such 10th Trading Day, such Purchaser shall be deemed to have notified the
Company that it does not elect to participate. The Company must provide the
Purchasers with a second Subsequent Financing Notice, and the Purchasers will
again have the right of participation set forth above in this Section 6.2, if
the Subsequent Financing subject to the initial Subsequent Financing Notice is
not consummated for any reason substantially on terms no more favorable to the
Purchasers than those set forth in such Subsequent Financing Notice within 60
Trading Days after the date of the initial Subsequent Financing Notice. In the
event the Company receives responses to Subsequent Financing Notices from
Purchasers seeking to purchase more than the aggregate amount of the Subsequent
Financing, each such Purchaser shall have the right to purchase their Pro Rata
Portion (as defined below) of the Subsequent Financing. "Pro Rata Portion" is
the ratio of (x) the Subscription Amount of a participating Purchaser and (y)
the sum of the aggregate Subscription Amount of all participating Purchasers.
4.13 Short Sales and Confidentiality After The Date Hereof. Such Purchaser
has not directly or indirectly, nor has any Person acting on behalf of or
pursuant to any understanding with such Purchaser, engaged in any transactions
in the securities of the Company (including, without limitations, any Short
Sales involving the Company's securities) since the time that such Purchaser was
first contacted by the Company, First Montauk Securities Corporation or any
other Person regarding an investment in the Company. Such Purchaser covenants
that neither it nor any Person acting on its behalf or pursuant to any
understanding with it will engage in any transactions in the securities of the
Company (including Short Sales) prior to the time that the transactions
contemplated by this Agreement are publicly disclosed by the Company. Such
Purchaser has maintained, and covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed by the Company such
Purchaser will maintain, the confidentiality of all disclosures made to it in
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connection with this transaction (including the existence and terms of this
transaction). Notwithstanding the foregoing, no Purchaser makes any
representation, warranty or covenant hereby that it will not engage in Short
Sales in the securities of the Company after the time that the transactions
contemplated by this Agreement are first publicly announced as described in
Section 4.4 to the extent permitted by applicable rules. Notwithstanding the
foregoing, in the case of a Purchaser that is a multi-managed investment vehicle
whereby separate portfolio managers manage separate portions of such Purchaser's
assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of such
Purchaser's assets, the covenant set forth above shall only apply with respect
to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this Agreement.
ARTICLE V.
MISCELLANEOUS
5.1 Fees and Expenses. At the Closing, the Company shall pay to Sichenzia
Xxxx Xxxxxxxx Xxxxxxx an aggregate of $10,000 for its legal fees and expenses
incurred in connection with its due diligence and the preparation and
negotiation of the Transaction Documents. Except as expressly set forth in the
Transaction Documents to the contrary, 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 transfer agent fees, stamp taxes and other taxes and duties levied
in connection with the issuance of the Securities.
5.2 Entire Agreement. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
5.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 6:30 p.m. (New
York City time) on any Trading Day, (c) the Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or (d)
upon actual receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as follows:
If to the Company: Xxxxxxx Industries, Inc.
00000 XX 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, CFO
Facsimile No.: (000) 000-0000
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With a copy to: Ellenoff Xxxxxxxx & Schole LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
If to a Purchaser: To the address set forth under such Purchaser's
name on the signature pages hereof;
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
5.4 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and each Purchaser or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.
5.5 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. This Agreement
shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement or any of the Transaction
Documents.
5.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Securities; provided, that, such transfer is
in accordance with this Agreement and the transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to the "Purchasers."
5.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.5.
5.8 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 New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all Proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, employees or agents) shall be commenced exclusively in the state and
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federal courts sitting in the City of New York, Borough of Manhattan (the "New
York Courts"). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of the any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such New York Court, or that such Proceeding has been
commenced in an improper or inconvenient forum. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such 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. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If either party shall
commence a Proceeding to enforce any provisions of a Transaction Document, then
the prevailing party in such Proceeding shall be reimbursed by the other party
for its attorney's fees and other costs and expenses actually incurred with the
investigation, preparation and prosecution of such Proceeding.
5.9 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing.
5.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile or electronic transmission, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such facsimile or
electronic signature page were an original thereof.
5.11 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.12 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities. If a replacement
certificate or instrument evidencing any Securities is requested due to a
mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a
replacement.
-26-
5.13 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 under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.14 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
5.15 Termination. This Agreement may be terminated by any Purchaser, as to
such Purchaser's obligations hereunder only and without any effect whatsoever on
the obligations between the Company and the other Purchasers, by written notice
to the other parties, if the Closing has not been consummated on or before
February 20, 2006; provided, however, that no such termination will affect the
right of any party to xxx for any breach by the other party (or parties).
5.16 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. The decision of each Purchaser to
purchase Securities pursuant to this Agreement has been made by such Purchaser
independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, or condition (financial
or otherwise) of the Company or any Subsidiary which may have been made or given
by any other Purchaser or by any agent or employee of any other Purchaser, and
no Purchaser or any of its agents or employees shall have any liability to any
other Purchaser relating to or arising from any such information, materials,
statements or opinions. Nothing contained herein or in any Transaction Document,
and no action taken by any Purchaser pursuant thereto, shall be deemed to
constitute the Purchasers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Purchasers are in any
way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Document. The Company hereby
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confirms that it understands and agrees that the Purchasers are not acting as a
"group" as that term is used in Section 13(d) of the Exchange Act. Each
Purchaser acknowledges that no other Purchaser has acted as agent for such
Purchaser in connection with making its investment hereunder and that no other
Purchaser will be acting as agent of such Purchaser in connection with
monitoring its investment hereunder. Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose. Each Purchaser represents
that it has been represented by its own separate legal counsel in its review and
negotiations of this Agreement and the Transaction Documents
5.17 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
XXXXXXX INDUSTRIES, INC.
/s/ Xxxxxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: CFO
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
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IN WITNESS WHEREOF, the parties have executed this Securities Purchase
Agreement as of the date first written above.
[_______________________________]
By:
-------------------------------
Name:
Title:
[PURCHASER SIGNATURE PAGES TO XXXXXXX INDUSTRIES, INC.
SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
Name of Purchaser: _____________________________________________________________
Signature of Authorized Signatory of Purchaser: ________________________________
Name of Authorized Signatory: __________________________________________________
Title of Authorized Signatory: _________________________________________________
Email Address of Purchaser:_____________________________________________________
Address for Notice of Purchaser:
Address for Delivery of Securities for Purchaser (if not same as above):
Subscription Amount:
Shares:
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
Investment Amount: $[ ]
Shares:
----------------------------------------
Qualified Institutional Buyer: [ ] Yes
[ ] No
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Exhibit A
Escrow Agreement
-31-
Exhibit B
Registration Rights Agreement
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Exhibit C
Form of Company Counsel Legal Opinion
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DISCLOSURE SCHEDULE
This Disclosure Schedule has been prepared in connection with the
Securities Purchase Agreement dated February 22, 2006 (the "Agreement") between
Xxxxxxx Industries, Inc., a Delaware corporation (the "Company") and the
purchasers identified on the signature page to the Agreement (each a "Purchaser"
and, collectively, the "Purchasers"). Capitalized terms not otherwise defined in
this Disclosure Schedule shall have the same meaning as in the Agreement.
The disclosure of any matter in this Disclosure Schedule should not be
construed as indicating that such matter is necessarily required to be disclosed
in order for any representation or warranty in the Agreement to be true and
correct in all material respects. Any description of any document included in
this Disclosure Schedule is qualified in all respects by reference to such
document.
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Schedule 3.1(a)
Subsidiaries
Xxxxxxx Machine Works, Inc., a Texas corporation 100% owned by Xxxxxxx
Industries, Inc.
Hemiwedge Valve Corporation, Inc., a Texas corporation 100% owned by Xxxxxxx
Industries, Inc.
100% of the capital stock of Xxxxxxx Machine Works has been pledged to
Stillwater National Bank.
100% of the capital stock of Hemiwedge Valve Corporation will be pledged to
Stillwater National Bank.
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Schedule 3.1(f)
Capitalization
Common Stock - 50,000,000 shares authorized, 12,116,156 shares outstanding as of
December 31, 2005 (which includes 416,667 shares representing an investment by
A. Xxxx Xxxxx)
Preferred Stock - 10,000,000 shares authorized, no shares outstanding.
Stock Options Outstanding (as of December 31, 2005) - 53,857 Warrants
Outstanding (as of December 31, 2005) - 201,712
(See Options/Warrants schedule attached )
Convertible Debenture in principal amount of $2,500,000, convertible into shares
of common stock at $1.00 per share.
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Schedule 3.1(k)
Compliance
None.
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Schedule 3.1(q)
Certain Fees
BROKER: FIRST MONTAUK SECURITIES CORP.
Parkway 109 Office Center
000 Xxxxxx Xxxxxxx Xxxx
Xxx Xxxx, XX 00000
Cash Fee. The Company has agreed that it will pay the Broker, on the
Closing Date a fee of eleven percent (11%) of the Purchase Price ("Broker's Cash
Fee"), excluding the shares sold in the 1,250,000 Share Offering. The Company
represents that there are no other parties entitled to receive fees,
commissions, or similar payments in connection with the sale of the Shares
except the Broker.
Broker's Warrants. On the Closing Date, the Company will issue to
the Broker, ten (10) warrants for each one hundred (100) Shares issued to the
Purchaser ("Broker's Warrants") at an exercise price of $0.63 per share,
excluding the shares sold in the 1,250,000 Offering.
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Schedule 3.1(r)
Registration Matters
Piggyback Registration Rights:
A. Xxxx Xxxxx - 416,667 shares
Stillwater National Bank and Trust Company - 2,368,000 common shares
Stillwater National Bank and Trust Company - shares issuable upon conversion of
convertible note in the principal amount of $2,500,000, convertible at $1.00 per
share
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