SECURITIES PURCHASE AGREEMENT
Exhibit
10.1
THIS SECURITIES PURCHASE AGREEMENT
(this “Agreement”), dated as of March 7, 2008, is entered into by and among
Xxxxxx Xxxxxxx Enterprises,
Inc., a Delaware corporation (the “Company”), and the Buyer(s) set forth
on the signature pages affixed hereto (individually, a “Buyer” or collectively
“Buyers”).
WITNESSETH:
WHEREAS, the Company and the
Buyer(s) are executing and delivering this Agreement in reliance upon an
exemption from securities registration pursuant to Section 4(2) and/or
Rule 506 of Regulation D (“Regulation D”) and/or Regulation S (“Regulation
S”) as promulgated by the U.S. Securities and Exchange Commission (the “SEC”)
under the Securities Act of 1933, as amended (the “Securities
Act”);
WHEREAS, the parties desire
that, upon the terms and subject to the conditions contained herein, the Company
shall sell to the Buyers, as provided herein, and the Buyers shall purchase up
to One Million Dollars ($1,000,000), or such greater amount as the Company shall
determine in its sole discretion, (the “Purchase Price”) principal amount of
Convertible Promissory Notes (the “Convertible Notes”), which shall be
convertible into units (“Units”) of the Company at a conversion price of $2.50
per Unit. Each Unit shall consist of one share of the Company’s
common stock, par value $0.01 (the “Common Stock”) (as converted, the
“Conversion Shares”) and one common stock purchase warrant (“Warrants” or “Unit
Warrants”), exercisable at a price of $3.00 per share. The total Purchase Price
shall be allocated among the Buyer(s) in the respective amounts set forth on the
Buyer Counterpart Signature Page(s), affixed hereto (the “Subscription
Amount”);
WHEREAS, the Company also
intends to conduct a private placement offering (the “PPO”) of units consisting
of one share of the Company’s common stock and one warrant to purchase one-half
of a share of the Company’s common stock in an amount, together with the
aggregate Purchase Price of the Notes, of at least $3,000,000 (the “Minimum PPO
Amount”);
WHEREAS, the Convertible Notes
shall be automatically converted into Units simultaneously with the closing of
the PPO in an amount equal to or greater than the Minimum PPO Amount (the PPO
and the other transactions contemplated hereby and thereby are
sometimes hereinafter referred to as the “Transactions”); and
WHEREAS, the proceeds from the
sale of the Convertible Notes shall be held in escrow pending a Closing (as
hereinafter defined) or series of Closings, pursuant to the terms of an escrow
agreement, substantially in the form of the Escrow Agreement among the Company
and the Escrow Agent (as defined below) (the “Escrow Agreement”)
NOW, THEREFORE, in
consideration of the mutual covenants and other agreements contained in this
Agreement the Company and the Buyer(s) hereby agree as follows:
1. PURCHASE AND SALE OF
CONVERTIBLE NOTES.
(a) Purchase of Convertible
Notes. Subject to the satisfaction (or waiver) of the terms
and conditions of this Agreement, each Buyer agrees, severally and not jointly,
to purchase at a Closing (as defined herein below) and the Company agrees to
sell and issue to each Buyer, severally and not jointly, at a Closing,
Convertible Notes in amounts set forth on the signature pages affixed
hereto. No minimum amount of Convertible Notes need be subscribed to
for the Company to complete and close the offering of Convertible
Notes. Each Convertible Note can be closed upon
separately. Upon execution of this Agreement on the Buyer Counterpart
Signature Page, attached hereto as Annex A, and completion of the Confidential
Prospective Purchaser Questionnaire (the “Questionnaire”) by a Buyer, the Buyer
should wire transfer the Subscription Amount set forth on the signature pages
affixed hereto in same-day funds set forth immediately below, which Subscription
Amount shall be held in escrow pursuant to the terms of the Escrow Agreement and
disbursed in accordance therewith.
Wire Instructions
Bank: Citibank,
N.A.
000
Xxxxxxx Xxxxxx
Xxx Xxxx, XX
ABA#:
021000089
S.W.I.F.T. XXXXXX00
Account
Name: Gottbetter
& Partners, LLP Attorney Trust
Account#: 49061322
FBO: (Insert
Subscriber Name) FBO X. Xxxxxxx Ent.
(b) Closing
Dates. The closings of the purchase and sale of the
Convertible Notes (the “Closings”) shall take place at the offices of Gottbetter
& Partners, LLP, 000 Xxxxxxx Xxxxxx, 00xx Xxxxx,
Xxx Xxxx, XX 00000 or such other place as is mutually agreed to by the Company
and the Buyers on or before February 29, 2008 subject to notification of
satisfaction of the conditions to the Closings set forth herein (or such later
date as is mutually agreed to by the Company and the Buyers.
(c) Escrow Arrangements; Form of
Payment. Upon execution hereof by the Buyers and pending a
Closing, the Purchase Price shall be deposited in a non-interest bearing escrow
account with Gottbetter & Partners, LLP as escrow Agent (the “Escrow
Agent”), pursuant to the terms of the Escrow Agreement. Subject to
the satisfaction of the terms and conditions of this Agreement, on the
applicable Closing Date, (i) the Escrow Agent shall deliver to the Company in
accordance with the terms of the Escrow Agreement the Purchase Price for the
Convertible Notes to be issued and sold to the Buyer on such Closing Date, and
(ii) the Company shall deliver to the Buyer, the Convertible Note, duly executed
on behalf of the Company.
(d) Note
Conversions. As set forth in the Convertible Note, the Notes
are subject to optional and mandatory conversion features. The
initial conversion price which is subject to adjustment in the manner set forth
in the Convertible Note is $2.50 per Unit. As set forth in the
Warrant comprising part of the Units, the initial exercise price of the Unit
Warrants is
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$3.00 per
share, subject to adjustment as provided in the Unit
Warrants. Piggyback registration rights shall apply to the Conversion
Shares and the shares underlying the Unit Warrants. If
the Company shall determine to register for sale for cash any of its Common
Stock for its own account or for the account of others , other than (i) a
registration relating solely to employee benefit plans or securities issued or
issuable to employees, consultants (to the extent the securities owned or to be
owned by such consultants could be registered on Form S-8) or any of their
Family Members (including a registration on Form S-8) or (ii) a registration
relating solely to a Securities Act Rule 145 transaction or a registration on
Form S-4 in connection with a merger, acquisition, divestiture, reorganization
or similar event, the Company shall promptly give to the holders of Conversion
Shares, Unit Warrants and/or shares underlying Unit Warrants written notice
thereof (and in no event shall such notice be given less than 20 calendar days
prior to the filing of such registration statement), and shall include in a
piggyback registration, to the extent practicable, all of the Conversion Shares
and shares underlying the Unit Warrants specified in a written request delivered
by the holder thereof within 10 calendar days after receipt of such written
notice from the Company. However, the Company may, without the consent of the
holders, withdraw such registration statement prior to its becoming effective if
the Company or such other stockholders have elected to abandon the proposal to
register the securities proposed to be registered thereby. To the
extent there is not a registration in effect covering the resale of the shares
underlying the Unit Warrants, the Unit Warrants may be exercised on a cashless
basis.
2. BUYER’S REPRESENTATIONS AND
WARRANTIES.
Each
Buyer represents and warrants, severally and not jointly, as to such Buyer,
that:
(a) Investment
Purpose. The Buyer is acquiring the Convertible Notes, and,
upon conversion of Convertible Notes, the Buyer will acquire the Conversion
Shares, the Warrants and/or the shares of Common Stock issuable upon exercise of
the Warrants (the “Warrant Shares”), for its own account for investment only and
not with a view towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered or exempted under the
Securities Act; provided, however, that by making the representations herein,
such Buyer reserves the right to dispose of the Conversion Shares, the Warrants
and the Warrant Shares, at any time in accordance with or pursuant to an
effective registration statement covering such Conversion Shares, the Warrants
and the Warrant Shares or an available exemption under the Securities
Act. The Buyer agrees not to sell, hypothecate or otherwise transfer
the Buyer’s securities unless such securities are registered under the federal
and applicable state securities laws or unless, in the opinion of counsel
satisfactory to the Company, an exemption from such law is
available.
(b) Residence of
Buyer. The Buyer resides in the jurisdiction set forth in the
Questionnaire.
(c) Non-US
Person. If a Buyer is not a person in the United States or a
U.S. Person (as defined in Rule 902(k) of Regulation S) or is not purchasing the
Convertible Notes on behalf of a person in the United States or a U.S.
Person:
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(i) neither
the Buyer nor any disclosed principal is a U.S. Person nor are they subscribing
for the Convertible Notes for the account of a U.S. Person or for resale in the
United States and the Buyer confirms that the Convertible Notes have not been
offered to the Buyer in the United States and that this Agreement has not been
signed in the United States;
(ii) the Buyer
acknowledges that the Convertible Notes have not been registered under the
Securities Act and may not be offered or sold in the United States or to a U.S.
Person unless the securities are registered under the U.S. Securities Act and
all applicable state securities laws or an exemption from such registration
requirements is available, and further agrees that hedging transactions
involving such securities may not be conducted unless in compliance with the
U.S. Securities Act;
(iii) the Buyer
and if applicable, the disclosed principal for whom the Buyer is acting,
understands that the Company is the seller of the Convertible Notes and
underlying securities and that, for purposes of Regulation S, a “distributor” is
any underwriter, dealer or other person who participates pursuant to a
contractual arrangement in the distribution of securities sold in reliance on
Regulation S and that an “affiliate” is any partner, officer, director or any
person directly or indirectly controlling, controlled by or under common control
with any person in question. Except as otherwise permitted by Regulation S, the
Buyer and if applicable, the disclosed principal for whom the Buyer is acting,
agrees that it will not, during a one year distribution compliance period, act
as a distributor, either directly or through any affiliate, or sell, transfer,
hypothecate or otherwise convey the Convertible Notes or underlying securities
other than to a non-U.S. Person;
(iv) the Buyer
and if applicable, the disclosed principal for whom the Buyer is acting,
acknowledges and understands that in the event the Convertible Notes are
offered, sold or otherwise transferred by the Buyer or if applicable, the
disclosed principal for whom the Buyer is acting, to a non-U.S Person prior to
the expiration of a one year distribution compliance period, the purchaser or
transferee must agree not to resell such securities except in accordance with
the provisions of Regulation S, pursuant to registration under the Securities
Act, or pursuant to an available exemption from registration; and must further
agree not to engage in hedging transactions with regard to such securities
unless in compliance with the Securities Act; and
(v) neither
the Buyer nor any disclosed principal will offer, sell or otherwise dispose of
the Convertible Notes or the underlying securities in the United States or to a
U.S. Person unless (A) the Company has consented to such offer, sale or
disposition and such offer, sale or disposition is made in accordance with an
exemption from the registration requirements under the Securities Act and the
securities laws of all applicable states of the United States or (B) the SEC has
declared effective a registration statement in respect of such
securities.
(d) Accredited Investor
Status. The Buyer meets the requirements of at least one of
the suitability standards for an “Accredited Investor”
as that term is defined in Rule 501(a)(3) of Regulation D, and as set forth in
the Prospective Purchaser Questionnaire.
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(e) Accredited Investor
Qualifications. The Buyer (i) if a natural person, represents
that the Buyer has reached the age of 21 and has full power and authority to
execute and deliver this Agreement and all other related agreements or
certificates and to carry out the provisions hereof and thereof; (ii) if a
corporation, partnership, or limited liability company or partnership, or
association, joint stock company, trust, unincorporated organization or other
entity, represents that such entity was not formed for the specific purpose of
acquiring the Convertible Notes, such entity is duly organized, validly existing
and in good standing under the laws of the state of its organization, the
consummation of the transactions contemplated hereby is authorized by, and will
not result in a violation of state law or its charter or other organizational
documents, such entity has full power and authority to execute and deliver this
Agreement and all other related agreements or certificates and to carry out the
provisions hereof and thereof and to purchase and hold the Convertible Notes,
the execution and delivery of this Agreement has been duly authorized by all
necessary action, this Agreement has been duly executed and delivered on behalf
of such entity and is a legal, valid and binding obligation of such entity; or
(iii) if executing this Agreement in a representative or fiduciary capacity,
represents that it has full power and authority to execute and deliver this
Agreement in such capacity and on behalf of the subscribing individual, xxxx,
partnership, trust, estate, corporation, or limited liability company or
partnership, or other entity for whom the Buyer is executing this Agreement, and
such individual, partnership, xxxx, trust, estate, corporation, or limited
liability company or partnership, or other entity has full right and power to
perform pursuant to this Agreement and make an investment in the Company, and
represents that this Agreement constitutes a legal, valid and binding obligation
of such entity. The execution and delivery of this Agreement will not
violate or be in conflict with any order, judgment, injunction, agreement or
controlling document to which the Buyer is a party or by which it is
bound.
(f) Solicitation. The
Buyer is unaware of, is in no way relying on, and did not become aware of the
offering of the Convertible Notes through or as a result of, any form of general
solicitation or general advertising including, without limitation, any article,
notice, advertisement or other communication published in any newspaper,
magazine or similar media or broadcast over television or radio, in connection
with the offering and sale of the Convertible Notes and is not subscribing for
the Convertible Notes and did not become aware of the offering of the
Convertible Notes through or as a result of any seminar or meeting to which the
Buyer was invited by, or any solicitation of a subscription by, a person not
previously known to the Buyer in connection with investments in securities
generally.
(g) Brokerage
Fees. The Buyer has taken no action that would give rise to
any claim by any person for brokerage commissions, finders’ fees or the like
relating to this Agreement or the transaction contemplated hereby.
(h) Buyer’s
Advisors. The Buyer and the Buyer’s attorney, accountant,
purchaser representative and/or tax advisor, if any (collectively, the
“Advisors”), as the case may be, has such knowledge and experience in financial,
tax, and business matters, and, in particular, investments in securities, so as
to enable it to utilize the information made available to it in connection with
the Convertible Notes to evaluate the merits and risks of an investment in the
Convertible Notes and the Company and to make an informed investment decision
with respect thereto.
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(i) Buyer
Liquidity. The Buyer has adequate means of providing for such
Buyer’s current financial needs and foreseeable contingencies and has no need
for liquidity of its investment in the Convertible Notes for an indefinite
period of time.
(j) High Risk
Investment. The Buyer is aware that an investment in the
Convertible Notes, and upon conversion, the Conversion Shares, the Warrants
and/or the Warrant Shares, involves a number of very significant
risks. The Buyer has been advised that a variety of factors including
certain risks affect the Company’s business and results from
operations. These risk factors include, without limitation: (i) that
the Company’s success will depend primarily upon its ability to exploit and
protect the intellectual property rights that Xxxxxx Xxxxxxx and Xxxxxx Xxxxxxx
Productions, Inc. have assigned to the Company’s majority-owned subsidiary
Xxxxxx Xxxxxxx Ventures LLC; (ii) that Xxxxxx Xxxxxxx has entered into numerous
licensing, endorsement and other agreements over the last decade, and there can
be no assurances that a third party will not assert a claim to some or all of
the intellectual property rights that the Company believes have been assigned to
Xxxxxx Xxxxxxx Ventures LLC; (iii) that the United States Patent and Trademark
Office (“U.S. PTO”) may cite preexisting trademark applications and
registrations by third parties against, and prior trademark owners may oppose,
future trademark applications by the Company or Xxxxxx Xxxxxxx Ventures LLC
incorporating the Xxxxxx Xxxxxxx name; and (iv) that event if the Company or
Xxxxxx Xxxxxxx Ventures LLC were able to obtain acceptance of its trademark
applications by the U.S. PTO, a significant number of similar marks registered
by, and licensed to, third parties could diminish the value and protectability
of the intellectual property held by the Company or Xxxxxx Xxxxxxx Ventures
LLC.
(k) Reliance on
Exemptions. The Buyer understands that the Convertible Notes
are being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and such
Buyer’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire such securities.
(l) Information. The
Buyer and its Advisors have been furnished with all materials relating to the
business, finances and operations of the Company and information it deemed
material to making an informed investment decision regarding its purchase of the
Convertible Notes and the underlying Units, which have been requested by such
Buyer. The Buyer and its Advisors have been afforded the opportunity
to review the Company’s SEC Filings, as that term is defined below, and the
information contained therein. The Buyer and its Advisors have been
afforded the opportunity to ask questions of the Company and its
management. Neither such inquiries nor any other due diligence
investigations conducted by such Buyer or its Advisors shall modify, amend or
affect such Buyer’s right to rely on the Company’s representations and
warranties contained in Section 3 below. The Buyer has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Convertible
Notes.
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(m) No Other Representations or
Information. In evaluating the suitability of an investment in
the Convertible Notes, the Buyer has not relied upon any representation or
information (oral or written) other than as stated in the Convertible Notes and
this Agreement;
(n) No Governmental
Review. The Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Convertible Notes, the Warrants,
the Warrant Shares or the Conversion Shares, or the fairness or suitability of
the investment in the Convertible Notes, the Warrants, the Warrant Shares or the
Conversion Shares, nor have such authorities passed upon or endorsed the merits
of the offering of the Convertible Notes, the Warrants, the Warrant Shares or
the Conversion Shares.
(o) Transfer or
Resale. The Buyer understands that: (i) the Convertible Notes
have not been and are not being registered under the Securities Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred
unless (A) subsequently registered thereunder, or (B) such Buyer shall have
delivered to the Company an opinion of counsel, in a generally acceptable form,
to the effect that such securities to be sold, assigned or transferred may be
sold, assigned or transferred pursuant to an exemption from such registration
requirements; (ii) any sale of such securities made in reliance on Rule 144
under the Securities Act (or a successor rule thereto) (“Rule 144”) may
be made only in accordance with the terms of Rule 144 and further, if Rule 144
is not applicable, any resale of such securities under circumstances in which
the seller (or the person through whom the sale is made) may be deemed to
be an underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such securities under the Securities
Act or any state securities laws or to comply with the terms and conditions of
any exemption thereunder. The Company reserves the right to place
stop transfer instructions against the shares and certificates for the
Conversion Shares and the Warrant Shares to the extent specifically set forth
under this Agreement. There can be no assurance that there will be
any market for the Convertible Notes, Conversion Shares, Warrants or Warrant
Shares, nor can there be any assurance that the Convertible Notes, Conversion
Shares, Warrants or Warrant Shares, will be freely transferable at any time in
the foreseeable future.
(p) Legends. The
Buyer understands that the certificates or other instruments representing the
Convertible Notes, the Warrants, the Warrant Shares and/or the Conversion
Shares, shall bear a restrictive legend in substantially the following form (and
a stop transfer order may be placed against transfer of such stock
certificates):
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THESE SECURITIES MAY
BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B)
OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (C) IN COMPLIANCE WITH RULE 144 OR 144A
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THEREUNDER,
IF AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, (D)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR (E) IN A TRANSACTION THAT
DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE
SECURITIES LAWS, AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO THE
COMPANY AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION, IN EITHER CASE
REASONABLY SATISFACTORY TO THE COMPANY. HEDGING TRANSACTIONS INVOLVING THESE
SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES
ACT.
The
legend set forth above shall be removed and the Company within four (4) business
days shall issue a certificate without such legend to the holder of the
Convertible Notes, Warrants, Warrant Shares and Conversion Shares, upon which it
is stamped, if, unless otherwise required by state securities laws, (i) the
Buyer or its broker make the necessary representations and warranties to the
transfer agent for the Common Stock that it has complied with the prospectus
delivery requirements in connection with a sale transaction, provided the
Convertible Notes, Warrants, Warrant Shares or Conversion Shares are registered
under the Securities Act or (ii) in connection with a sale transaction, after
such holder provides the Company with an opinion of counsel satisfactory to the
Company, which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public
sale, assignment or transfer of the Convertible Notes, Warrants, Warrant Shares
or Conversion Shares may be made without registration under the Securities
Act.
(q) Authorization,
Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of such Buyer and is a valid and
binding agreement of such Buyer enforceable in accordance with its terms, except
as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.
(r) Receipt of
Documents. Each Buyer and its counsel have received and read
in their entirety: (i) this Agreement, the Convertible Note, and the
Unit Warrant and each representation, warranty and covenant set forth herein and
therein; and (ii) all due diligence and other information necessary to verify
the accuracy and completeness of such representations, warranties and covenants;
each Buyer has received answers to all questions such Buyer submitted to the
Company regarding an investment in the Company; and each Buyer has relied on the
information contained therein and has not been furnished any other documents,
literature, memorandum or prospectus.
(s) Trading
Activities. The Buyer’s trading activities with respect to the
Company’s Common Stock shall be in compliance with all applicable federal and
state securities laws, rules and regulations and the rules and regulations of
the principal market on which the
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Company’s
Common Stock is listed or traded. Neither the Buyer nor its
affiliates has an open short position in the Common Stock of the Company and,
except as set forth below, the Buyer shall not, and shall not cause any of its
affiliates under common control with the Buyer, to engage in any short sale as
defined in any applicable SEC or National Association of Securities Dealers
rules on any hedging transactions with respect to the Common Stock until the
earlier to occur of (i) the third anniversary of the Closing Date and (ii) the
Buyer(s) no longer own a principal balance of the Convertible
Notes. Without limiting the foregoing, the Buyer agrees not to engage
in any naked short transactions in excess of the amount of shares owned (or an
offsetting long position) by the Buyer.
(t) Regulation
FD. The Buyer acknowledges and agrees that certain of the
information received by it in connection with the transactions contemplated by
this Agreement is of a confidential nature and may be regarded as material
non-public information under Regulation FD promulgated by the SEC and that such
information has been furnished to the Buyer for the sole purpose of enabling the
Buyer to consider and evaluate an investment in the Convertible Notes. The Buyer
agrees that it will treat such information in a confidential manner, will not
use such information for any purpose other than evaluating an investment in the
Convertible Notes, will not, directly or indirectly, trade or permit the Buyer’s
agents, representatives or affiliates to trade in any securities of the Company
while in possession of such information and will not, directly or indirectly,
disclose or permit the Buyer’s agents, representatives or affiliates to disclose
any of such information without the Company’s prior written consent. The Buyer
shall make its agents, affiliates and representatives aware of the confidential
nature of the information contained herein and the terms of this section
including the Buyer’s agreement to not disclose such information, to not trade
in the Company’s securities while in the possession of such information and to
be responsible for any disclosure or other improper use of such information by
such agents, affiliates or representatives. Likewise, without the Company’s
prior written consent, the Buyer will not, directly or indirectly, make any
statements, public announcements or other release or provision of information in
any form to any trade publication, to the press or to any other person or entity
whose primary business is or includes the publication or dissemination of
information related to the transactions contemplated by this
Agreement.
(u) No Legal Advice from the
Company. The Buyer acknowledges that it had the opportunity to
review this Agreement and the transactions contemplated by this Agreement with
its own legal counsel and investment and tax advisors. The Buyer is
relying solely on such Advisors and not on any statements or representations of
the Company or any of its representatives or agents for legal, tax or investment
advice with respect to this investment, the transactions contemplated by this
Agreement or the securities laws of any jurisdiction.
(v) No Group
Participation. The Buyer and its affiliates is not a
member of any group, nor is any Buyer acting in concert with any other person,
including any other Buyer, with respect to its acquisition of the Convertible
Notes, Warrants, Warrant Shares or Conversion Shares.
(w) Reliance. Any
information which the Buyer has heretofore furnished or is furnishing herewith
to the Company is complete and accurate and may be relied upon by the Company in
determining the availability of an exemption from registration under federal
and
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state
securities laws in connection with the offering of securities. The
Buyer further represents and warrants that it will notify and supply corrective
information to the Company immediately upon the occurrence of any change therein
occurring prior to the Company’s issuance of the Convertible Notes. Within five
(5) days after receipt of a request from the Company, the Buyer will provide
such information and deliver such documents as may reasonably be necessary to
comply with any and all laws and ordinances to which the Company is
subject.
(x) (For
ERISA plans only). The fiduciary of
the ERISA plan represents that such fiduciary has been informed of and
understands the Company’s investment objectives, policies and strategies, and
that the decision to invest “plan assets” (as such term is defined in ERISA) in
the Company is consistent with the provisions of ERISA that require
diversification of plan assets and impose other fiduciary
responsibilities. The Buyer fiduciary or Plan (a) is responsible for
the decision to invest in the Company; (b) is independent of the Company or any
of its affiliates; (c) is qualified to make such investment decision; and (d) in
making such decision, the Buyer fiduciary or Plan has not relied on any advice
or recommendation of the Company or any of its affiliates;
(y) The Buyer
should check the Office of Foreign Assets Control (“OFAC”) website at
<xxxx://xxx.xxxxx.xxx/xxxx> before making the following representations.
The Buyer represents that the amounts invested by it in the Company in the
Convertible Notes were not and are not directly or indirectly derived from
activities that contravene federal, state or international laws and regulations,
including anti-money laundering laws and regulations. Federal regulations and
Executive Orders administered by OFAC prohibit, among other things, the
engagement in transactions with, and the provision of services to, certain
foreign countries, territories, entities and individuals. The lists
of OFAC prohibited countries, territories, persons and entities can be found on
the OFAC website at <xxxx://xxx.xxxxx.xxx/xxxx>. In addition,
the programs administered by OFAC (the “OFAC Programs”) prohibit dealing with
individuals1 or entities in certain countries regardless of
whether such individuals or entities appear on the OFAC lists;
(z) To the
best of the Buyer’s knowledge, none of: (1) the Buyer; (2) any person
controlling or controlled by the Buyer; (3) if the Buyer is a privately-held
entity, any person having a beneficial interest in the Buyer; or (4) any person
for whom the Buyer is acting as agent or nominee in connection with this
investment is a country, territory, individual or entity named on an OFAC list,
or a person or entity prohibited under the OFAC Programs. Please be
advised that the Company may not accept any amounts from a prospective investor
if such prospective investor cannot make the representation set forth in the
preceding paragraph. The Buyer agrees to promptly notify the Company
should the Buyer become aware of any change in the information set forth in
these representations. The Buyer understands and acknowledges that,
by law, the Company may be obligated to “freeze the account” of the
--------------------------------------------------------
1 These individuals include
specially designated nationals, specially designated narcotics traffickers and
other parties subject to OFAC sanctions and embargo programs.
10
Buyer,
either by prohibiting additional subscriptions from the Buyer, declining any
redemption requests and/or segregating the assets in the account in compliance
with governmental regulations, and the Placement Agent may also be required to
report such action and to disclose the Buyer’s identity to OFAC. The
Buyer further acknowledges that the Company may, by written notice to the Buyer,
suspend the redemption rights, if any, of the Buyer if the Company reasonably
deems it necessary to do so to comply with anti-money laundering regulations
applicable to the Company or any of the Company’s other service
providers. These individuals include specially designated nationals,
specially designated narcotics traffickers and other parties subject to OFAC
sanctions and embargo programs;
(aa) To the
best of the Buyer’s knowledge, none of: (1) the Buyer; (2) any person
controlling or controlled by the Buyer; (3) if the Buyer is a privately-held
entity, any person having a beneficial interest in the Buyer; or (4) any person
for whom the Buyer is acting as agent or nominee in connection with this
investment is a senior foreign political figure2, or
any immediate family3 member or
close associate4 of a
senior foreign political figure, as such terms are defined in the footnotes
below; and
(bb) If the
Buyer is affiliated with a non-U.S. banking institution (a “Foreign Bank”), or
if the Buyer receives deposits from, makes payments on behalf of, or handles
other financial transactions related to a Foreign Bank, the Buyer represents and
warrants to the Company that: (1) the Foreign Bank has a fixed address, other
than solely an electronic address, in a country in which the Foreign Bank is
authorized to conduct banking activities; (2) the Foreign Bank maintains
operating records related to its banking activities; (3) the Foreign Bank is
subject to inspection by the banking authority that licensed the Foreign Bank to
conduct banking activities; and (4) the Foreign Bank does not provide banking
services to any other Foreign Bank that does not have a physical presence in any
country and that is not a regulated affiliate.
3. REPRESENTATIONS AND
WARRANTIES OF THE COMPANY.
Except as
otherwise set forth herein and/or in the Company’s SEC filings, the Company
represents and warrants to each of the Buyers that:
(a) Organization and
Qualification. The Company is a corporation duly organized and
validly existing in good standing under the laws of the State of Delaware, and
has the requisite corporate power to own its properties and to carry on its
business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a Material Adverse Effect, as defined
below. The Company has no subsidiaries, other than Xxxxxx Xxxxxxx
Management Inc. (100% owned) and Xxxxxx Xxxxxxx
--------------------------------------------------------------
2 A “senior foreign
political figure” is defined as a senior official in the executive, legislative,
administrative, military or judicial branches of a foreign government (whether
elected or not), a senior official of a major foreign political party, or a
senior executive of a foreign government-owned corporation. In addition, a
“senior foreign political figure” includes any corporation, business or other
entity that has been formed by, or for the benefit of, a senior foreign
political figure.
3 “Immediate family” of a
senior foreign political figure typically includes the figure’s parents,
siblings, spouse, children and in-laws.
4 A “close associate” of a senior foreign
political figure is a person who is widely and publicly known to maintain an
unusually close relationship with the senior foreign political figure, and
includes a person who is in a position to conduct substantial domestic and
international financial transactions on behalf of the senior foreign political
figure.
11
Ventures,
LLC (85% owned). Xxxxxx Xxxxxxx Ventures LLC’s subsidiaries include
Instride Ventures LLC (50.1% owned), Vita Ventures, LLC (50.1% owned) and G.
Nutritional LLC (100% owned).
(b) Authorization, Enforcement,
Compliance with Other Instruments. (i) The Company has
the requisite corporate power and authority to enter into and perform this
Agreement, the Escrow Agreement and all other documents necessary or desirable
to effect the transactions contemplated hereby (collectively the “Transaction
Documents”) and to issue the Convertible Notes, the Warrants, the Warrant Shares
and the Conversion Shares in accordance with the terms hereof and thereof, (ii)
the execution and delivery of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Convertible Notes, the
Warrants, the Warrant Shares and the Conversion Shares and the reservation for
issuance and the issuance of the Conversion Shares and the Warrant Shares
issuable upon conversion or exercise thereof, have been duly authorized by the
Company’s Board of Directors and no further consent or authorization is required
by the Company, its Board of Directors or its stockholders, (iii) the
Transaction Documents have been duly executed and delivered by the Company, (iv)
the Transaction Documents constitute the valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors’
rights and remedies.
(c) Capitalization. The
authorized capital stock of the Company consists of 25,000,000 shares of Common
Stock and 2 shares of Series A Preferred Stock. As of the date
hereof, the Company has 3,358,444 shares of Common Stock issued and outstanding
and 2 shares of Series A Preferred Stock outstanding. All of such
outstanding shares have been duly authorized, validly issued and are fully paid
and nonassessable. Except as set forth in Schedule 3(c), (i) no
shares of Common Stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Company, (ii)
there are no outstanding options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company, or contracts,
commitments, understandings or arrangements by which the Company is or may
become bound to issue additional shares of capital stock of the Company or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company, (iii) there are no outstanding debt
securities (iv) there are no agreements or arrangements under which the Company
is obligated to register the sale of any of their securities under the
Securities Act, (v) there are no outstanding registration statements and there
are no outstanding comment letters from the SEC or any other regulatory agency,
(vi) there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Convertible Notes as
described in this Agreement, and (vii) no co-sale right, right of first refusal
or other similar right exists with respect to the Convertible Notes, Warrants,
Warrant Shares and Conversion Shares or the issuance and sale
thereof. The Convertible Notes, Warrants, Warrant Shares and
Conversion Shares when issued, will be free and clear of all pledges, liens,
encumbrances and other restrictions (other than those arising under federal or
state securities laws as a result of the issuance of the Convertible
Notes). The issue and sale of the Convertible
12
Notes,
Warrants, Warrant Shares and Conversion Shares will not result in a right of any
holder of Company securities to adjust the exercise, conversion, exchange or
reset price under such securities. The Company has made available to
the Buyer true and correct copies of the Company’s Articles of Incorporation, as
amended and as in effect on the date hereof (the “Articles of Incorporation”),
and the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and
the terms of all securities convertible into or exercisable for Common Stock and
the material rights of the holders thereof in respect thereto other than stock
options issued to employees and consultants.
(d) Issuance of
Securities. The Convertible Notes are duly authorized and,
upon issuance in accordance with the terms hereof, shall be duly issued, fully
paid and nonassessable, are free from all taxes, liens and charges with respect
to the issue thereof. The Conversion Shares and the Warrant Shares
have been duly authorized and reserved for issuance, based on the initial
conversion price. Upon conversion or exercise in accordance with the
Transaction Documents, the Conversion Shares and the Warrant Shares will be duly
issued, fully paid and nonassessable.
(e) No
Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby will not (i) result in a violation of the
Articles of Incorporation, any certificate of designations of any outstanding
series of preferred stock of the Company or the By-laws or (ii) violate or
conflict with, or result in a breach of any provision of, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company is a party, or result in a violation of any law,
rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and the rules and regulations of the OTC
Bulletin Board (the “OTCBB”) on which the Common Stock is quoted) applicable to
the Company or by which any property or asset of the Company is bound or
affected except for those which could not reasonably be expected to have a
material adverse effect on the assets, business, condition (financial or
otherwise), results of operations or future prospects of the Company (a
“Material Adverse Effect”). Except those which could not reasonably
be expected to have a Material Adverse Effect, the Company is not in violation
of any term of or in default under its Articles of Incorporation or
By-laws. Except those which could not reasonably be expected to have
a Material Adverse Effect, the Company is not in violation of any term of or in
default under any material contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company. The business of the Company is
not being conducted, and shall not be conducted in violation of any material
law, ordinance, or regulation of any governmental entity. Except as
specifically contemplated by this Agreement and as required under the Securities
Act and any applicable state securities laws, the Company is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under or contemplated by this
Agreement or the Escrow Agreement in accordance with the terms hereof or
thereof. All consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date
hereof. The Company is unaware of any facts or circumstance, which
might give rise to any of the foregoing.
13
(f) SEC Filings; Financial
Statements. Except as set forth in Schedule 3(f), during the
past two completed fiscal years and the period subsequent thereto, the Company
has timely filed (subject to 12b-25 filings with respect to certain periodic
filings) all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC pursuant to the reporting requirements of the
Exchange Act (as hereinafter defined) (all of the foregoing and all other
documents filed with the SEC prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein, being hereinafter referred to herein as the
“SEC Filings”). The SEC Filings are available to the Buyers via the
SEC’s XXXXX system. Except as reflected in subsequent SEC Filings, as
of their respective dates, the SEC Filings complied in all material respects
with the requirements of the Exchange Act and the rules and regulations of the
SEC promulgated thereunder, and none of the SEC Filings, at the time they were
filed with the SEC, 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 reflected in subsequent SEC Filings,
as of their respective dates, the financial statements of the Company included
in the Company’s SEC Filings with the SEC (the “Financial Statements”) complied
as to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect
thereto. Such financial statements have been prepared in accordance
with generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such Financial
Statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements), and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyer including,
without limitation, information referred to in this Agreement, contains any
untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(g) Absence of
Litigation. Except as set forth in Schedule 3(g), the Company
is not aware of any action, suit, proceeding, inquiry or investigation before or
by any court, public board, government agency, self-regulatory organization or
body pending against or affecting the Company or the Common Stock, wherein an
unfavorable decision, ruling or finding would (i) adversely affect the validity
or enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of the documents contemplated herein,
or (ii) have a Material Adverse Effect.
(h) Acknowledgment Regarding
Buyer’s Purchase of the Convertible Notes. The Company
acknowledges and agrees that each Buyer is acting solely in the capacity of an
arm’s length purchaser with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that each Buyer
is not 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 such Buyer or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to such Buyer’s purchase
of the Convertible Notes, the Warrants, the Warrant Shares or the Conversion
Shares. The Company further represents to the Buyers
that
14
the
Company’s decision to enter into this Agreement has been based solely on the
independent evaluation by the Company and its representatives.
(i) No General
Solicitation. Neither the Company, nor any of its affiliates,
nor any person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in
connection with the offer or sale of the Convertible Notes, the Warrants, the
Warrant Shares or the Conversion Shares.
(j) No Integrated
Offering. 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 require registration of the Convertible Notes,
the Warrants, the Warrant Shares or the Conversion Shares under the Securities
Act or cause this offering of the Convertible Notes, the Warrants, the Warrant
Shares or the Conversion Shares to be integrated with prior offerings by the
Company for purposes of the Securities Act.
(k) Employee
Relations. The Company is not involved in any labor dispute
nor, to the knowledge of the Company, is any such dispute
threatened. None of the Company’s employees is a member of a union,
and the Company believes that its relations with its employees are
good.
(l) Intellectual Property
Rights. Except as set forth in Schedule 3(l), the Company has
no proprietary intellectual property. The Company has not received
any notice of infringement of, or conflict with, the asserted rights of others
with respect to any intellectual property that it utilizes.
(m) Environmental
Laws.
(i) The
Company has complied with all applicable Environmental Laws (as defined below),
except for violations of Environmental Laws that, individually or in the
aggregate, have not had and would not reasonably be expected to have a Material
Adverse Effect. There is no pending or, to the knowledge of the
Company, threatened civil or criminal litigation, written notice of violation,
formal administrative proceeding, or investigation, inquiry or information
request, relating to any Environmental Law involving the Company, except for
litigation, notices of violations, formal administrative proceedings or
investigations, inquiries or information requests that, individually or in the
aggregate, have not had and would not reasonably be expected to have a Material
Adverse Effect. For purposes of this Agreement, “Environmental Law”
means any federal, state or local law, statute, rule or regulation or the common
law relating to the environment or occupational health and safety, including
without limitation any statute, regulation, administrative decision or order
pertaining to (i) treatment, storage, disposal, generation and transportation of
industrial, toxic or hazardous materials or substances or solid or hazardous
waste; (ii) air, water and noise pollution; (iii) groundwater and soil
contamination; (iv) the release or threatened release into the environment of
industrial, toxic or hazardous materials or substances, or solid or hazardous
waste, including without limitation emissions, discharges, injections, spills,
escapes or dumping of pollutants, contaminants or chemicals; (v) the protection
of wild life, marine life and wetlands, including without limitation all
endangered and threatened species; (vi) storage tanks, vessels, containers,
abandoned or
15
discarded
barrels, and other closed receptacles; (vii) health and safety of employees and
other persons; and (viii) manufacturing, processing, using, distributing,
treating, storing, disposing, transporting or handling of materials regulated
under any law as pollutants, contaminants, toxic or hazardous materials or
substances or oil or petroleum products or solid or hazardous
waste. As used above, the terms “release” and “environment” shall
have the meaning set forth in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (“CERCLA”).
(ii) To the
knowledge of the Company there is no material environmental liability with
respect to any solid or hazardous waste transporter or treatment, storage or
disposal facility that has been used by the Company.
(iii) The
Company (i) has received all permits, licenses or other approvals required of
them under applicable Environmental Laws to conduct its business and (ii) is in
compliance with all terms and conditions of any such permit, license or
approval.
(n) Title to
Assets. Except as set forth in Schedule 3(n), the Company has
good and marketable title in fee simple to all real property owned by it that is
material to its business and good and marketable title in all personal property
owned by it that is material to its business, 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. Any real property and facilities held under lease
by the Company is held by it under valid, subsisting and enforceable leases of
which the Company is in compliance, except as could not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect.
(o) Internal Accounting
Controls. The Company is in
material compliance with the provisions of the Xxxxxxxx-Xxxxx Act of 2002
currently applicable to the Company. The Company maintains a
system of internal accounting controls 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, and (iii)
the recorded amounts for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(p) No Material Adverse
Breaches, etc. Except as set forth in the SEC Filings, the
Company is not subject to any charter, corporate or other legal restriction, or
any judgment, decree, order, rule or regulation which in the judgment of the
Company’s officers has or is expected in the future to have a Material Adverse
Effect. Except as set forth in the SEC Filings, the Company is not in
breach of any contract or agreement which breach, in the judgment of the
Company’s officers, has or is expected to have a Material Adverse
Effect.
(q) Tax
Status. The Company has made and filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject and (unless and only to the extent that the
Company has set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported taxes) has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to
16
be due on
such returns, reports and declarations, except those being contested in good
faith and has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in
any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any such
claim.
(r) Certain
Transactions. Except as set forth in the SEC Filings, and
except for arm’s length transactions pursuant to which the Company makes
payments in the ordinary course of business upon terms no less favorable than
the Company could obtain from third parties, none of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company (other than 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 corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(s) Rights of First
Refusal. Except as set forth in Schedule 3(c), the Company is
not obligated to offer the securities offered hereunder on a right of first
refusal basis or otherwise to any third parties including, but not limited to,
current or former stockholders of the Company, underwriters, brokers, agents or
other third parties.
(t) Reliance. The
Company acknowledges that the Buyers are relying on the representations and
warranties made by the Company hereunder and that such representations and
warranties are a material inducement to the Buyer purchasing the Convertible
Notes. The Company further acknowledges that without such
representations and warranties of the Company made hereunder, the Buyers would
not enter into this Agreement.
(u) Brokers’
Fees. The Company does not have any liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
4. COVENANTS.
(a) Best
Efforts. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in Sections 5
and 6 of this Agreement.
(b) Form
D. The Company agrees to file a Form D with respect to the
offer and sale of the Convertible Notes to the extent as required under
Regulation D. The Company shall, on or before each Closing, take such
action as the Company shall reasonably determine is necessary to be taken in
advance, to qualify the Convertible Notes, Warrants, Warrant Shares and
Conversion Shares or obtain an exemption for the Convertible Notes, Warrants,
Warrant Shares and Conversion Shares for sale to the Buyers at the Closing
pursuant to this Agreement under applicable securities or “Blue Sky” laws of the
states of the United States, and shall provide evidence of any such action so
taken to the Buyers on or prior to the Closing Date. The Company
shall also take such actions as are necessary on a post-closing basis to effect
required qualifications or exemptions under applicable securities or “Blue Sky”
laws.
17
(c) Reporting
Status. Until the earlier of (i) the date as of which the
Buyer(s) may sell all of the Warrants, the Warrant Shares and the Conversion
Shares without restriction pursuant to Rule 144(k) promulgated under the
Securities Act (or successor thereto), or (ii) the date on which (A) the
Buyer(s) shall have sold all the Warrants, the Warrant Shares and the Conversion
Shares and (B) none of the Convertible Notes are outstanding, the Company shall
file in a timely manner all reports required to be filed with the SEC pursuant
to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the
regulations of the SEC thereunder, and the Company shall not terminate its
status as an issuer required to file reports under the Exchange Act even if the
Exchange Act or the rules and regulations thereunder would otherwise permit such
termination.
(d) Use of
Proceeds. The Company shall use the net proceeds from the sale
of the Convertible Notes to as working capital.
(e) Reservation of
Shares. The Company shall take all action reasonably necessary
to at all times have authorized, and reserved for the purpose of issuance, that
number of shares of Common Stock equal to equal to the sum of (i) the number of
shares of Common Stock into which the Convertible Notes are convertible from
time to time, plus (ii) the number of shares of Common Stock for which the
Warrants are exercisable from time to time.
(f) Listings or
Quotation. The Company shall use its best efforts to maintain
the listing or quotation of its Common Stock upon the OTC Bulletin
Board.
(g) Corporate
Existence. So long as any of the Convertible Notes remain
outstanding, the Company shall not directly or indirectly consummate any merger,
reorganization, restructuring, reverse stock split consolidation, sale of all or
substantially all of the Company’s assets or any similar transaction or related
transactions (each such transaction, an “Organizational Change”), other than the
PPO, unless, subject to Section 8(p) hereof, prior to the consummation of an
Organizational Change, the Company obtains the written consent of the Buyers
that have outstanding Notes. In any such case, the Company will make
appropriate provision with respect to such holders’ rights and interests to
insure that the provisions of this Section 4(g) will thereafter be applicable to
the Convertible Notes.
(h) Resales Absent Effective
Registration Statement. Each of the Buyers understands and
acknowledges that (i) this Agreement and the agreements contemplated hereby may
require the Company to issue and deliver Conversion Shares or Warrant Shares to
the Buyers with legends restricting their transferability under the Securities
Act, and (ii) it is aware that resales of such Conversion Shares or Warrant
Shares may not be made unless, at the time of resale, there is an effective
registration statement under the Securities Act covering such Buyer’s resale(s)
or an applicable exemption from registration.
(i) Private
Placement. As soon as practicable after Closing, the Company
intends to engage in a private offering (the “PPO”) of Company units in an
amount, when combined with the aggregate Purchase Price for the Notes, of at
least $3,000,000 (the “Minimum PPO Amount”). The units shall consist
of one share of the Company’s common stock (the
18
“Investor
Shares”) and one common stock purchase warrant (the “Investor Warrant”) to
purchase one-half of a share of common stock. Each two Investor
Warrants shall entitle the holder thereof to purchase one share of the Company’s
common stock during a period of five years from issuance at a price to be
determined. Piggyback registration rights shall apply to the Investor
Shares and the shares underlying the Investor Warrants. If the
Company shall determine to register for sale for cash any of its Common Stock
for its own account or for the account of others , other than (i) a registration
relating solely to employee benefit plans or securities issued or issuable to
employees, consultants (to the extent the securities owned or to be owned by
such consultants could be registered on Form S-8) or any of their Family Members
(including a registration on Form S-8) or (ii) a registration relating solely to
a Securities Act Rule 145 transaction or a registration on Form S-4 in
connection with a merger, acquisition, divestiture, reorganization or similar
event, the Company shall promptly give to the holders of Investor Shares,
Investor Warrants and/or shares underlying Investor Warrants written notice
thereof (and in no event shall such notice be given less than 20 calendar days
prior to the filing of such registration statement), and shall include in a
piggyback registration, to the extent practicable, all of the Investor Shares
and shares underlying Investor Warrants specified in a written request delivered
by the holder thereof within 10 calendar days after receipt of such written
notice from the Company. However, the Company may, without the consent of the
holders, withdraw such registration statement prior to its becoming effective if
the Company or such other stockholders have elected to abandon the proposal to
register the securities proposed to be registered thereby. Each
Investor Warrant will contain standard anti-dilution protection and will provide
for “cashless exercise” to the extent there is not a registration statement in
effect covering the resale of the shares underlying the Investor
Warrants.
5. CONDITIONS TO THE COMPANY’S
OBLIGATION TO SELL.
The
obligation of the Company hereunder to issue and sell the Convertible Notes to a
Buyer at a Closing is subject to the satisfaction, at or before the applicable
Closing Date, of each of the following conditions, provided that these
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion:
(a) The Buyer
shall have executed this Agreement and completed and executed the Questionnaire
and any other Transaction Documents to which it is a party and delivered them to
the Escrow Agent.
(b) The Buyer
shall have delivered to the Escrow Agent the Purchase Price for Convertible
Notes in the respective amounts as set forth on the signature pages affixed
hereto by wire transfer of immediately available U.S. funds pursuant to the wire
instructions provided by the Company.
(c) The
representations and warranties of the Buyer contained in this Agreement shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and the Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Buyer at or prior to the Closing Date.
19
6. CONDITIONS TO THE BUYER’S
OBLIGATION TO PURCHASE.
(a) The
obligation of the Buyer(s) hereunder to purchase Convertible Notes at a Closing
is subject to the satisfaction, at or before each Closing Date, of each of the
following conditions:
(i) The
Company shall have executed the Transaction Documents and delivered the same to
the Escrow Agent (on behalf of the Buyers).
(ii) The
representations and warranties of the Company contained in this Agreement shall
be true and correct in all material respects (except to the extent that any of
such representations and warranties is already qualified as to materiality in
Section 3 above, in which case, such representations and warranties shall be
true and correct without further qualification) as of the date when made and as
of each Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to each Closing Date. The
Company shall have obtained and delivered to the Escrow Agent (on behalf of the
Buyers) any and all consents, permits, approvals, registrations and waivers
necessary or appropriate for consummation of the purchase and sale of the
Convertible Notes and the consummation of the other transactions contemplated by
the Transaction Documents, all of which shall be in full force and
effect. The Escrow Agent (on behalf of the Buyers) shall have
received a certificate, executed by the President of the Company, dated as of
the initial Closing Date, to the foregoing effect and as to such other matters
as may be reasonably requested by the Buyers. The foregoing
certificate shall only be required to be delivered on the initial Closing Date
unless any information in the certificate has changed at the time of a
subsequent Closing.
(iii) The
Company shall have executed and delivered to the Escrow Agent (on behalf of the
Buyer(s)) the Convertible Notes in the respective amounts set forth on the
signature pages affixed hereto.
(iv) The
Company shall have reserved out of its authorized and unissued Common Stock,
solely for the purpose of effecting the conversion of the Convertible Notes and
the exercise of the Warrants, sufficient shares of Common Stock to effect the
conversion of all of the Convertible Notes’ and the exercise of all
Warrants.
(v) The
Company shall have delivered to the Escrow Agent (on behalf of the Buyers) a
certificate, executed on behalf of the Company by its Secretary, dated as of the
Closing Date, certifying the resolutions adopted by the Board of Directors of
the Company approving the transactions contemplated by this Agreement and the
other Transaction Documents and the issuance of the Convertible Notes,
certifying the current versions of the Articles of Incorporation and By-laws of
the Company and certifying as to the signatures and authority of persons signing
the Transaction Documents and related documents on behalf of the
Company. The foregoing certificate shall only be required to be
delivered on the initial Closing Date unless any information contained in the
certificate has changed at the time of a subsequent Closing.
20
(vi) The
Buyers shall have received an opinion from the Company’s counsel, dated as of
the Closing Date, in form and substance reasonably acceptable to the Buyers. The
foregoing opinion shall only be required to be delivered on the initial Closing
Date unless any information contained therein has changed at the time of a
subsequent Closing.
7. INDEMNIFICATION OF
BUYERS. In consideration of the Buyer’s execution and delivery of this
Agreement and acquiring the Convertible Notes, the Warrants, the Warrant Shares
and the Conversion Shares hereunder, and in addition to all of the Company’s
other obligations under this Agreement, the Company shall defend, protect,
indemnify and hold harmless the Buyer(s) and each other holder of the
Convertible Notes, the Warrants, the Warrant Shares and the Conversion Shares,
and all of their officers, directors, employees and agents (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the “Buyer Indemnitees”) from and
against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Buyer Indemnitee is a party to the action for
which indemnification hereunder is sought), and including reasonable attorneys’
fees and disbursements (the “Indemnified Liabilities”), incurred by the Buyer
Indemnitees or any of them as a result of, or arising out of, or relating to (a)
any material misrepresentation or material breach of any representation or
warranty made by the Company in the Transaction Documents, (b) any material
breach of any covenant, agreement or obligation of the Company contained in the
Transaction Documents, or (c) any cause of action, suit or claim brought or made
against such Buyer Indemnitee and arising out of or resulting from the
execution, delivery, performance or enforcement of this Agreement or any other
Transaction Document executed pursuant hereto by any of the Buyer
Indemnitees. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.
8. GOVERNING LAW:
MISCELLANEOUS.
(a) Governing
Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York without regard to the
principles of conflict of laws. The parties further agree that any
action between them shall be heard exclusively in federal or state court sitting
in the New York County, New York, and expressly consent to the jurisdiction and
venue of the Supreme Court of New York, sitting in New York County and the
United States District Court for the Southern District of New York for the
adjudication of any civil action asserted pursuant to this
paragraph.
(b) Counterparts. This
Agreement may be executed in two or more identical counterparts, all of which
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. In the event any signature page is delivered by facsimile
transmission, the party using such means of delivery shall cause four (4)
additional original executed signature pages to be physically delivered to the
other party within five (5) days of the execution and delivery
hereof.
(c) Headings. The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
21
(d) Severability. If
any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(e) Entire Agreement,
Amendments. This Agreement supersedes all other prior oral or
written agreements between the Buyer(s), the Company, their affiliates and
persons acting on their behalf with respect to the matters discussed herein, and
this Agreement and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.
(f) Notices. Any
notices, consents, waivers, or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been delivered (i) upon receipt, when delivered personally; (ii) upon
confirmation of receipt, when sent by facsimile; (iii) upon receipt when sent by
U.S. certified mail, return receipt requested, or (iv) one (1) day after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
|
If
to the Company, to:
|
Xxxxxx
Xxxxxxx Enterprises, Inc.
|
|
000
X. Xxxxxx-Xxxxx Xxxx., 0xx
Xxxxx
|
|
|
Xxxxxx-Xxxxx,
XX 00000
|
|
|
Attention: Xxxxxxx
Xxxxxxxxx, General Counsel
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (000)
000-0000
|
|
|
With
a copy to:
|
Gottbetter
& Partners, LLP
|
|
000
Xxxxxxx Xxxxxx, 00xx
Xxxxx
|
|
|
Xxx
Xxxx, Xxx Xxxx 00000
|
|
|
Attention: Xxxxx
Xxxxxxxx
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (000)
000-0000
|
If to the
Buyer(s), to its address and facsimile number set forth on the signature pages
affixed hereto. Each party shall provide five (5) days’ prior written
notice to the other party of any change in address or facsimile
number.
(g) Successors and
Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and
assigns. Neither the Company nor any Buyer shall assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the other party hereto.
22
(h) No Third Party
Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
person.
(i) Survival. Unless
this Agreement is terminated under Section 8(l), the representations and
warranties of the Company and the Buyer(s) contained in Sections 2 and 3, the
agreements and covenants set forth in Sections 4, 5 and 8, and the
indemnification provisions set forth in Section 7, shall survive the Closing for
a period of two (2) years following the date on which the Convertible Notes are
converted in full. The Buyer(s) shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
(j) Publicity. The
Company shall have the right to approve, before issuance, any press release or
any other public statement with respect to the transactions contemplated hereby
to be made by any party and the Company shall be entitled to issue any press
release or other public disclosure with respect to such transactions including
those required under applicable securities or other laws or
regulations.
(k) Further
Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) Termination. In
the event that a Closing shall not have occurred with respect to a Buyer on or
before February 29, 2008 this Agreement shall be terminated with respect to such
Buyer without liability of any party to any other party.
(m) No Strict
Construction. 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.
(n) Remedies. In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, the Buyer and the Company will be entitled
to specific performance under this Agreement. The parties agree that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of obligations described in the foregoing sentence and
hereby agree to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
(o) ANTI
MONEY LAUNDERING REQUIREMENTS
|
The
USA PATRIOT Act
|
What
is money laundering?
|
How
big is the problem and why is it important?
|
|
The
USA PATRIOT Act is designed to detect, deter,
and
punish terrorists in the United States and
abroad.
The
Act imposes new anti-money laundering
requirements
on
brokerage firms and financial institutions.
Since
April
24, 2002 all brokerage firms have been required
to
have new, comprehensive anti-money laundering
programs.
To
help you understand theses efforts, we want to
provide
you with some information about money
laundering
and our steps to implement the USA
PATRIOT
Act.
|
Money
laundering is the process of disguising illegally
obtained
money so that the funds appear to come from
legitimate
sources or activities. Money laundering occurs
in
connection with a wide variety of crimes, including
illegal
arms sales, drug trafficking, robbery, fraud,
racketeering,
and
terrorism.
|
The
use of the U.S. financial system by criminals to facilitate terrorism or
other crimes could well taint our financial markets. According
to the U.S. State Department, one recent estimate puts the amount of
worldwide money laundering
activity
at $1 trillion a year.
|
23
|
What
are we required to do to eliminate money laundering?
|
|
|
Under
new rules required by the USA PATRIOT Act, our anti-money laundering
program
must designate a special compliance officer, set up employee training,
conduct
independent audits, and establish policies and procedures to detect and
report
suspicious transaction and ensure compliance with the new
laws.
|
As
part of our required program, we may ask you to provide various
identification documents
or
other information. Until you provide the information or
documents we need, we may not
be
able to effect any transactions for
you.
|
(p) Waiver. Any
provision of this Agreement, the Convertible Notes, Units or the Warrants,
(except as to maturity, interest rate and conversion rate) may be waived or
amended with the consent of the holders of a majority in principal amount of the
Convertible Notes then outstanding.
[REMAINDER
PAGE INTENTIONALLY LEFT BLANK]
24
IN WITNESS WHEREOF, the Buyers and the Company
have caused this Securities Purchase Agreement to be duly executed as of the
date first written above.
|
COMPANY:
|
|
|
Xxxxxx
Xxxxxxx Enterprises, Inc.
|
|
|
By:_________________________________
|
|
|
Name:
|
|
|
Title:
|
|
|
BUYERS:
The
Buyers executing the Signature Page in the form attached hereto as
Annex A and delivering the same to the
Company or its agents shall be
deemed
to have executed this Agreement and agreed to the terms
hereof.
|
25
Annex
A
Buyer
Counterpart Signature Page
The
undersigned, desiring to: (i) enter into the Securities Purchase Agreement dated
as of __________5, 2008 (the “Agreement”), between the
undersigned, Xxxxxx Xxxxxxx Enterprises, Inc., a Delaware corporation (the
“Company”), and the other parties thereto, in or substantially in the form
furnished to the undersigned and (ii) purchase the Convertible Notes of the
Company as set forth below, hereby agrees to purchase such Convertible Notes
from the Company and further agrees to join the Agreement as a party thereto,
with all the rights and privileges appertaining thereto, and to be bound in all
respects by the terms and conditions thereof. The undersigned
specifically acknowledges having read the representations section in the
Agreement entitled “Buyer’s Representations and Warranties,” and hereby
represent that the statements contained therein are complete and accurate with
respect to the undersigned as a Buyer.
The Buyer
hereby elects to purchase $____________ Convertible Notes (to be completed by
the Buyer) under the Securities Purchase Agreement.
Name of
Buyer:
If
an entity:
Print
Name of Entity:
By:
Name:
Title:
If
an individual:
Print
Name:
Signature:
All
Buyers:
Address:
Telephone
No.:
Facsimile
No.:
Email
Address:
---------------------------------------------------------------------
5 Will
reflect the Closing Date. Not to be completed by
Buyer.
SCHEDULE
I
SCHEDULE OF
BUYERS
|
Name
|
Amount
of Subscription
|
SCHEDULE
3(c)
Rights
Regarding Stock
(i) The
Investor Rights Agreement from August 2005 (between GFME and Xxxxxx Xxxxxxx
Ventures, LLC on the one hand and Xxxxxx Xxxxxxx and Xxxxxx Xxxxxxx Productions,
Inc. collectively “Xxxxxxx”, on the other hand) gives Xxxxxxx a right of first
refusal to participate pro rata in new securities issued by the
Company. The Investor Rights Agreement is Exhibit 10.4 to the Current
Report on Form 8-K filed by the Company with the SEC on August 18,
2005.
(ii) Stock
Purchase Rights.
As of December 31, 2007, there are
outstanding options to purchase 733,392 shares of the common stock of the
Company, and conversion rights regarding 1,799,753 shares of the common stock of
the Company. Said options were issued under the Company's Amended
Stock Option Plan. Said conversion rights were granted pursuant to
the Investor Rights Agreement. Said Plan is Exhibit 4.3 to the Form
S-8 Registration Statement filed by the Company with the SEC on February 2,
2000. The Investor Rights Agreement is Exhibit 10.4 to the Current
Report on Form 8-K filed by the Company with the SEC on August 18,
2005.
Pursuant
to the Investor Rights Agreement described above, Xx. Xxxxxxx and Xxxxxx Xxxxxxx
Productions, Inc. may exchange their membership interests in Xxxxxx Xxxxxxx
Ventures LLC for shares of common stock of the Company.
(iii) Outstanding
Debt Securities.
None.
(iv) Registration
Rights.
Pursuant to the Registration Rights
Agreement described below, Xx. Xxxxxxx and Xxxxxx Xxxxxxx Productions, Inc. have
registration rights regarding the shares of common stock into which their
membership interests in Xxxxxx Xxxxxxx Ventures LLC are
exchangeable. The Registration Rights Agreement is Exhibit 10.3 to
the Current Report on Form 8-K filed by the Company with the SEC on August 18,
2005.
(v) Outstanding
Registration Statements and Comment Letters.
None.
SCHEDULE
3(f)
SEC
Filings
The
Quarterly Reports on Form 10-QSB that were filed by the Company on May 23, 2006,
July 9, 2007, July 27, 2007 and August 20, 2007 were not timely
filed. The Annual Report on Form 10-KSB that was filed by the Company
on July 27, 2007 was not timely filed.
On
January 10, 2007, the Company filed an Amendment to the Form 8-K originally
filed with the SEC on December 21, 2006 to include certain information requested
by the commission.
On
December 20, 2006, the Company filed the Current Reports on Form 8-K with the
SEC reporting the November 24, 2006 receipt of a OTCBB Delinquency Notification
and the Company’s request to appeal the determination.
SCHEDULE
3(g)
Litigation
None,
except suit by Circle Group Holdings, Inc. (now Z-Trim Holdings, Inc.) against
the Company, which is described in the filings made by the Company with the SEC
on the following dates:
Current Reports on Form
8-K
June 5,
2006
May 4,
2006
March 17,
2006
February
28, 2006
November
29, 2005
Quarterly Reports on Form
10-QSB (Item 1 of Part II)
November
14, 2007
August
20, 2007
July 27,
2007
July 9,
2007
August
14, 2006 [also see Note 1 to Item 1 (financial statements)]
Annual Report on Form 10-KSB
(Item 3)
July 27,
2007.
SCHEDULE
3(l)
Intellectual
Property
See the
Assignment Agreement and the Services Agreement which are Exhibits 10.1 and
10.2, respectively, to the Current Report on Form 8-K filed by the Company with
the SEC on August 18, 2005. Certain rights discussed therein may
revert or be assigned to Xx. Xxxxxx Xxxxxxx and/or Xxxxxx Xxxxxxx Productions,
Inc. from time to time.
SCHEDULE
3(n)
Title to
Assets
Not
Applicable
