EXHIBIT 10.3
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
August 22, 2007
Worldwide Stock Transfer, LLC
000 Xxxxx Xxxx Xx
Xxxxxxx, Xxx Xxxxxx 00000
RE: XXXXXX ELECTRONICS, INC.
Ladies and Gentlemen:
Reference is made to that certain Securities Purchase Agreement (the
"Securities Purchase Agreement") of even date herewith by and between Xxxxxx
Electronics, Inc., a New York corporation (the "Company"), and the Buyer set
forth on Schedule I attached thereto the "Buyer"). Pursuant to the Securities
Purchase Agreement, the Company shall sell to the Buyer, and the Buyer shall
purchase from the Company, convertible debentures (collectively, the
"Debentures") in the aggregate principal amount of Six Million Dollars
($6,000,000), plus accrued interest, which are convertible into shares of the
Company's common stock, par value $0.01 per share (the "Common Stock"), at the
Buyer's discretion. The Company has also issued to the Buyer warrants to
purchase up to 1,262,274 shares of Common Stock, at the Buyer's discretion (the
"Warrant"). These instructions relate to the following stock or proposed stock
issuances or transfers:
1. Shares of Common Stock to be issued to the Buyers upon conversion of
the Debentures ("Conversion Shares") plus the shares of Common Stock
to be issued to the Buyers upon conversion of accrued interest and
liquidated damages into Common Stock (the "Interest Shares").
2. Up to 1,262,274 shares of Common Stock to be issued to the Buyers upon
exercise of the Warrant (the "Warrant Shares").
This letter shall serve as our irrevocable authorization and direction to
Registrar and Transfer Company (the "Transfer Agent") to do the following:
1. Conversion Shares and Warrant Shares.
a. Instructions Applicable to Transfer Agent. With respect to the
Conversion Shares, Warrant Shares and the Interest Shares, the
Transfer Agent shall issue the Conversion Shares, Warrant Shares
and the Interest Shares to the Buyer from time to time upon
delivery to the Transfer Agent of a properly completed and duly
executed Conversion Notice (the "Conversion Notice") in the form
attached as Exhibit A to the Debentures, or a properly completed
and duly executed Exercise Notice (the "Exercise Notice") in the
form attached as Exhibit A to the Warrant, delivered to the
Transfer Agent by Xxxxx Xxxxxxxx, Esq. (the "Escrow Agent") on
behalf of the Company. Upon receipt of a Conversion Notice or an
Exercise Notice, the Transfer Agent shall within three (3)
Trading Days thereafter (i) issue and surrender to a common
carrier for overnight delivery to the address as specified in the
Conversion Notice or the Exercise Notice, a certificate,
registered in the name of the Buyer or its designees, for the
number of shares of Common Stock to which the Buyer shall be
entitled as set forth in the Conversion Notice or Exercise Notice
or (ii) provided the Transfer Agent is participating in The
Depository Trust Company ("DTC") Fast Automated Securities
Transfer Program, upon the request of the Buyer, credit such
aggregate number of shares of Common Stock to which the Buyer
shall be entitled to the Buyer's or its designees' balance
account with DTC through its Deposit Withdrawal At Custodian
("DWAC") system provided the Buyer causes its bank or broker to
initiate the DWAC transaction. For purposes hereof "Trading Day"
shall mean any day on which the Nasdaq Market is open for
customary trading.
b. The Company hereby confirms to the Transfer Agent and the Buyer
that certificates representing the Conversion Shares and the
Warrant Shares shall not bear any legend restricting transfer and
should not be subject to any stop-transfer restrictions and shall
otherwise be freely transferable on the books and records of the
Company; provided that counsel to the Company delivers (i) the
Notice of Effectiveness set forth in Exhibit I attached hereto
and (ii) an opinion of counsel in the form set forth in Exhibit
II attached hereto, and that if the Conversion Shares, Warrant
Shares and the Interest Shares are not registered for sale under
the Securities Act of 1933, as amended, then the certificates for
the Conversion Shares, Warrant Shares and Interest Shares shall
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A FORM
REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES
LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT."
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c. In the event that counsel to the Company fails or refuses to
render an opinion as required to issue the Conversion Shares or
the Warrant Shares in accordance with the preceding paragraph
(either with or without restrictive legends, as applicable), then
the Company irrevocably and expressly authorizes counsel to the
Buyer to render such opinion. The Transfer Agent shall accept and
be entitled to rely on such opinion for the purposes of issuing
the Conversion Shares.
d. Instructions Applicable to Escrow Agent. Upon the Escrow Agent's
receipt of a properly completed Conversion Notice or Exercise
Notice and the Aggregate Exercise Price (as defined in the
Warrant), the Escrow Agent shall, within one (1) Trading Day
thereafter, send to the Transfer Agent the Conversion Notice or
Exercise Notice as the case may be, which shall constitute an
irrevocable instruction to the Transfer Agent to process such
Conversion Notice or Exercise Notice in accordance with the terms
of these instructions.
2. All Shares.
a. The Transfer Agent shall reserve for issuance to the Buyer a
minimum of 1,071,429 Conversion Shares and 1,262,274 Warrant
Shares. All such shares shall remain in reserve with the
Transfer Agent until the Buyer provides the Transfer Agent
instructions that the shares or any part of them shall be
taken out of reserve and shall no longer be subject to the
terms of these instructions.
b. The Company hereby irrevocably appoints the Escrow Agent as
a duly authorized agent of the Company for the purposes of
authorizing the Transfer Agent to process issuances and
transfers specifically contemplated herein.
c. The Transfer Agent shall rely exclusively on the Conversion
Notice, the Escrow Notice, or the Exercise Notice and shall
have no liability for relying on such instructions. Any
Conversion Notice, Escrow Notice, or Exercise Notice
delivered hereunder shall constitute an irrevocable
instruction to the Transfer Agent to process such notice or
notices in accordance with the terms thereof. Such notice or
notices may be transmitted to the Transfer Agent by
facsimile or any commercially reasonable method.
d. The Company hereby confirms to the Transfer Agent and the
Buyer that no instructions other than as contemplated herein
will be given to Transfer Agent by the Company with respect
to the matters referenced herein. The Company hereby
authorizes the Transfer Agent, and the Transfer Agent shall
be obligated, to disregard any contrary instructions
received by or on behalf of the Company.
Certain Notice Regarding the Escrow Agent. The Company and the Transfer
Agent hereby acknowledge that the Escrow Agent is general counsel to the Buyer,
a partner of the general partner of the Buyer and counsel to the Buyer in
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connection with the transactions contemplated and referred herein. The Company
and the Transfer Agent agree that in the event of any dispute arising in
connection with this Agreement or otherwise in connection with any transaction
or agreement contemplated and referred herein, the Escrow Agent shall be
permitted to continue to represent the Buyer and neither the Company nor the
Transfer Agent will seek to disqualify such counsel.
The Company hereby agrees that it shall not replace the Transfer Agent as
the Company's transfer agent without the prior written consent of the Buyer.
Any attempt by Transfer Agent to resign as the Company's transfer agent
hereunder shall not be effective until such time as the Company provides to the
Transfer Agent written notice that a suitable replacement has agreed to serve as
transfer agent and to be bound by the terms and conditions of these Irrevocable
Transfer Agent Instructions.
The Company and the Transfer Agent hereby acknowledge and confirm that
complying with the terms of this Agreement does not and shall not prohibit the
Transfer Agent from satisfying any and all fiduciary responsibilities and duties
it may owe to the Company.
The Company and the Transfer Agent acknowledge that the Buyer is relying on
the representations and covenants made by the Company and the Transfer Agent
herein, which are a material inducement to the Buyer purchasing Debentures under
the Securities Purchase Agreement. The Company and the Transfer Agent further
acknowledge that without such representations and covenants of the Company and
the Transfer Agent made herein, the Buyer would not purchase the Debentures.
Each party hereto specifically acknowledges and agrees that in the event of
a breach or threatened breach by a party hereto of any provision hereof, the
Buyer will be irreparably damaged and that damages at law would be an inadequate
remedy if these Irrevocable Transfer Agent Instructions were not specifically
enforced. Therefore, in the event of a breach or threatened breach by a party
hereto, including, without limitation, the attempted termination of the agency
relationship created by this instrument, the Buyer shall be entitled, in
addition to all other rights or remedies, to an injunction restraining such
breach, without being required to show any actual damage or to post any bond or
other security, and/or to a decree for specific performance of the provisions of
these Irrevocable Transfer Agent Instructions.
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IN WITNESS WHEREOF, the parties have caused this letter agreement regarding
Irrevocable Transfer Agent Instructions to be duly executed and delivered as of
the date first written above.
COMPANY:
XXXXXX ELECTRONICS, INC.
By: /s/ Xxxxxxx Xxxxx
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Name: Xxxxxxx Xxxxx
Title: Chief Executive Officer
/s/ Xxxxx Xxxxxxxx
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Xxxxx Xxxxxxxx, Esq.
WORLDWIDE STOCK TRANSFER, LLC
By: /s/ Authorized Signatory
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Name: Authorized Signatory
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Title: Authorized Signatory
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SCHEDULE I
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SCHEDULE OF BUYERS
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Address/Facsimile
Name Signature Number of Buyers
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YA Global Investments, L.P. By: Yorkville Advisors, LLC 000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxx: Xxxxxxxx Xxxxxxx Xxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
By: /s/ Xxxx Xxxxxx
Name: Xxxx Xxxxxx
Xxx: Portfolio Manager
SCHEDULE I-1
EXHIBIT I
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TO IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
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FORM OF NOTICE OF EFFECTIVENESS
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OF REGISTRATION STATEMENT
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_________, 200_
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Attention:
RE: XXXXXX ELECTRONICS, INC.
Ladies and Gentlemen:
We are counsel to Xxxxxx Electronics, Inc., (the "Company"), and have
represented the Company in connection with that certain Securities Purchase
Agreement, dated as of ________________ ____, 200_ (the "Securities Purchase
Agreement"), entered into by and among the Company and the Buyer set forth on
Schedule I attached thereto (collectively the "Buyer") pursuant to which the
Company has agreed to sell to the Buyers up to $6,000,000 of secured convertible
debentures, which shall be convertible into shares (the "Conversion Shares") of
the Company's common stock, par value $0.01 per share (the "Common Stock"), in
accordance with the terms of the Securities Purchase Agreement. Pursuant to the
Securities Purchase Agreement, the Company also has entered into a Registration
Rights Agreement, dated as of ______________ ___, 200_, with the Buyer (the
"Investor Registration Rights Agreement") pursuant to which the Company agreed,
among other things, to register the Conversion Shares under the Securities Act
of 1933, as amended (the "1933 Act"). In connection with the Company's
obligations under the Securities Purchase Agreement and the Registration Rights
Agreement, on _______, 200_, the Company filed a Registration Statement (File
No. ___-_________) (the "Registration Statement") with the Securities and
Exchange Commission (the "SEC") relating to the sale of the Conversion Shares.
In connection with the foregoing, we advise the Transfer Agent that a
member of the SEC's staff has advised us by telephone that the SEC has entered
an order declaring the Registration Statement effective under the 1933 Act at
____ P.M. on __________, 200_ and we have no knowledge, after telephonic inquiry
of a member of the SEC's staff, that any stop order suspending its effectiveness
has been issued or that any proceedings for that purpose are pending before, or
threatened by, the SEC and the Conversion Shares are available for sale under
the 1933 Act pursuant to the Registration Statement.
EXHIBIT I-1
The Buyers has confirmed it shall comply with all securities laws and
regulations applicable to it including applicable prospectus delivery
requirements upon sale of the Conversion Shares.
Very truly yours,
By:
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EXHIBIT I-2
EXHIBIT II
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TO IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
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FORM OF OPINION
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________________ 200_
VIA FACSIMILE AND REGULAR MAIL
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Attention:
RE: XXXXXX ELECTRONICS, INC.
Ladies and Gentlemen:
We have acted as special counsel to Xxxxxx Electronics, Inc. (the
"Company"), in connection with the registration of ___________shares (the
"Shares") of its common stock with the Securities and Exchange Commission (the
"SEC"). We have not acted as your counsel. This opinion is given at the request
and with the consent of the Company.
In rendering this opinion we have relied on the accuracy of the Company's
Registration Statement on Form SB-2, as amended (the "Registration Statement"),
filed by the Company with the SEC on _________ ___, 200_. The Company filed the
Registration Statement on behalf of certain selling stockholders (the "Selling
Stockholders"). This opinion relates solely to the Selling Shareholders listed
on Exhibit "A" hereto and number of Shares set forth opposite such Selling
Stockholders' names. The SEC declared the Registration Statement effective on
__________ ___, 200_.
We understand that the Selling Stockholders acquired the Shares in a
private offering exempt from registration under the Securities Act of 1933, as
amended. Information regarding the Shares to be sold by the Selling Stockholders
is contained under the heading "Selling Stockholders" in the Registration
Statement, which information is incorporated herein by reference. This opinion
does not relate to the issuance of the Shares to the Selling Stockholders. The
opinions set forth herein relate solely to the sale or transfer by the Selling
Stockholders pursuant to the Registration Statement under the Federal laws of
the United States of America. We do not express any opinion concerning any law
of any state or other jurisdiction.
In rendering this opinion we have relied upon the accuracy of the foregoing
statements.
EXHIBIT II-1
Based on the foregoing, it is our opinion that the public resale of the
Shares has been registered with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, and that ________ may remove the restrictive
legends contained on the Shares. This opinion relates solely to the number of
Shares set forth opposite the Selling Stockholders listed on Exhibit "A" hereto.
This opinion is furnished to Transfer Agent specifically in connection with
the sale or transfer of the Shares, and solely for your information and benefit.
This letter may not be relied upon by Transfer Agent in any other connection,
and it may not be relied upon by any other person or entity for any purpose
without our prior written consent. This opinion may not be assigned, quoted or
used without our prior written consent. The opinions set forth herein are
rendered as of the date hereof and we will not supplement this opinion with
respect to changes in the law or factual matters subsequent to the date hereof.
Very truly yours,
EXHIBIT II-2
EXHIBIT A
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(LIST OF SELLING STOCKHOLDERS)
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Name: No. of Shares:
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EXHIBIT A
