DEBENTURE PURCHASE AGREEMENT
This Debenture Purchase Agreement (the "Agreement") is made and
entered into as of this 5th day of August, 1999, by and between Alliance
Equities, a Florida corporation (the "Purchaser"), and Xxxxxxxxx
Communications, Inc., a Nevada corporation (the "Company").
RECITALS
A. In order to provide working capital and financing for the
Company's expansion, the Purchaser will purchase up to $1.2 million of the
Company's 10% Convertible Subordinated Debentures (the "Debentures"). The
Purchaser will make the funds available to the Company, and the Company will
draw funds and issue Debentures to the Purchaser as the Company needs the
funding.
B. The Company desires to issue and sell the Debentures to the
Purchaser and the Purchaser desires to purchase the Debentures from the
Company on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing, the mutual
promises and covenants contained herein, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereby agree as follows:
AGREEMENT
1. PURCHASE OF THE DEBENTURES.
1.1 FUNDING. Upon execution hereof, Purchaser shall
deposit ---------- Thousand Dollars ($--0,000) with the Company, which shall
be used by the Company as provided for herein.
1.2 PURCHASE OF THE DEBENTURES. Subject to the terms
and conditions of this Agreement, and subject to compliance with all
applicable federal and state securities laws, the Purchaser hereby purchases
from the Company and the Company hereby issues and sells to the Purchaser
Debentures, in substantially the form as set forth in Exhibit B attached
hereto, in the aggregate amount of up to One Million Two Hundred Thousand
Dollars ($1,200,000). Concurrent with the execution and delivery of this
Agreement, the Purchaser shall purchase and the Company shall issue and sell
a Debenture in the amount of ----------- Thousand Dollars ($---,000)].
Thereafter, whenever the Company accepts funds and issue additional
Debentures, the Company shall give the Purchaser at least five (5) business
days prior written notice, and shall issue and deliver to the Purchaser a
Debenture in the face amount of the amount to be drawn.
1.3 REGISTRATION RIGHTS AGREEMENT. Concurrent with the
execution and delivery of this Agreement, the parties will execute and
deliver the Registration Rights Agreement in substantially the form as set
forth in Exhibit C attached hereto
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The
Purchaser hereby represents and warrants to the Company as follows:
2.1 ORGANIZATION, STANDING, AND POWER. The Purchaser
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Florida, and has all requisite power and authority
to enter into this Agreement and to perform its obligations hereunder.
2.2 EXECUTION, DELIVERY, AND PERFORMANCE. The
execution, delivery, and performance of this Agreement by the Purchaser and
the consummation of the transactions contemplated herein have been approved
by all requisite action by the Purchaser. This Agreement has been duly and
validly executed and delivered on behalf of the Purchaser and constitutes a
valid and binding obligation of the Purchaser.
2.3 NO VIOLATION. The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated herein will not violate any provision of the organizational
documents of the Purchaser, violate any statute, law, or any judgment,
decree, order, regulation, or rule of any court or governmental authority, or
cause a breach of or default under, with or without any notice or the lapse
of time or both, any provision of any agreement or instrument to which the
Company is a party or by which any of its properties are affected.
2.4 NO BROKERS OR FINDERS. The Purchaser has not
employed any broker or finder or incurred any liability for any brokerage
fees, commissions, or finder's fees in connection with the purchase of the
Debentures.
2.5 SECURITIES LAWS REPRESENTATIONS.
(a) The Purchaser is an "Accredited
Investor," as such term is defined in Rule 501(a) of Regulation D,
promulgated under the Securities Act of 1933, as amended (the "Securities
Act").
(b) The Purchaser is acquiring the Debentures
solely for the Purchaser's own account and not as a nominee or agent for any
third party, for investment purposes only, and not with a view to or for sale
in connection with any distribution. The Purchaser does not have any
contract, undertaking, agreement, or arrangement with any person to sell or
transfer the Debentures or grant participations in the Debentures to such
person or to any third person.
(c) The Purchaser understands that the sale
of the Debentures, and the issuance of shares (the "Shares") of the Company's
common stock (the "Common Stock") on conversion of the Debentures, has not
been registered under the Securities Act, or registered or qualified under
the securities laws of any (collectively, the "Securities Laws"), in reliance
upon exemptions from such registration and qualification requirements, and
that such exemptions are dependent in part on the representations made
herein. The Purchaser understands that any subsequent resale of the
Debentures or the Shares must either be registered and/or qualified pursuant
to the Securities Laws or be pursuant to an exemption from registration and
qualification contained in the Securities Laws or the rules and regulations
thereunder.
(d) The Purchaser underst- 8 - ands that
since the sale of the Debentures has not been registered or qualified under
the Securities Laws, the Purchaser must bear the economic risk of an
investment in the Debentures for an indefinite period of time. The Purchaser
understands that the Company has no obligation to register or qualify the
Debentures for resale under the Securities Laws or to take any action
(including but not limited to the filing of reports or the publication of
information required by Rule 144 under the Securities Act) that would make
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available any exemption from such registration and/or qualification
requirements. The Purchaser further understands that while the Company has an
obligation to register the Shares for resale, there are certain restrictions
on such obligation and further restrictions and delays in the registration
process, such that timely registration of the Shares for resale may not be
available when the Purchaser desires.
(e) The Purchaser understands that the
purchase of the Debentures involves certain risks, and the Purchaser has
taken full cognizance of and understand all the risks related to the purchase
of the Debentures. The Purchaser has the knowledge, sophistication, and
experience in financial and business matters to be capable of fully
evaluating the merits and risks of the purchase of the Debentures, to be
capable of fully understanding the information provided by the Company, and
to be able to protect the Purchaser's interests in connection with the
purchase of the Debentures. The Purchaser is capable of bearing the economic
risk of a complete loss of the Purchaser's investment in the Debentures. The
Purchaser was not formed for the purpose of purchasing the Debentures.
(f) The Purchaser has undertaken an
independent investigation of the investment in the Debentures and of the
business potential of the Company as a prudent, sophisticated investor would
deem appropriate for an investment in the Debentures. The Purchaser believes
that the Purchaser has received all the information the Purchaser considers
necessary or appropriate for deciding whether to purchase the Debentures. The
Purchaser has had the opportunity to ask questions and receive answers from
the Company concerning its businesses and financial condition and the terms
and conditions of the purchase of the Debentures and to obtain additional
information (to the extent the Company possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to the Purchaser or to which the
Purchaser had access. The Purchaser has a pre-existing business or personal
relationship with the Company or its officers, directors, or controlling
persons, which is of such a nature and duration as has enabled the Purchaser,
as a reasonably prudent investor, to be aware of the character, business
acumen, and general business and financial circumstances of the Company or
such persons connected with the Company.
(g) The Purchaser understands that the
Company will issue stop transfer instructions to its transfer agent with
respect to the Debentures and the Shares, and that the certificates
evidencing the Debentures and the Shares will contain the following
restrictive transfer legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR REGISTERED OR
QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS IN
RELIANCE UPON EXEMPTIONS THEREFROM. NO OFFER, SALE,
TRANSFER, ASSIGNMENT, PLEDGE, HYPOTHECATION, OR OTHER
DISPOSITION OF OR ENCUMBRANCE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER AND IN COMPLIANCE WITH ALL
APPLICABLE STATE SECURITIES LAWS, OR UPON RECEIPT BY THE
ISSUER OF AN OPINION OF LEGAL COUNSEL FOR THE HOLDER
REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
SUCH OFFER, SALE, TRANSFER, ASSIGNMENT, PLEDGE,
HYPOTHECATION, OR OTHER DISPOSITION OR ENCUM-
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BRANCE IS EXEMPT FROM THE REGISTRATION PROVISIONS OF THE
SECURITIES ACT AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER AND THE REGISTRATION AND/OR QUALIFICATION
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS.
(h) The Purchaser understands that neither
the Securities and Exchange Commission (the "SEC") nor the securities
administrator of any state has issued any finding or determination relating
to the fairness of an investment in the Debentures and that neither the SEC
nor the securities administrator of any state has or will recommend or
endorse any such investment.
(i) The investment in the Debentures does not
exceed ten percent (10%) of the Purchaser's net worth.
2.6 INVESTMENT REPRESENTATIONS.
(a) The Purchaser understands that the
Debentures are speculative and that an investment in the Company involves a
high degree of risk.
(b) The Purchaser understands that the
Company has experienced operating losses in the last two years, and that the
Company may experience operating losses in the future. There are no
assurances that the Company will achieve profitability and report net income.
(c) The Purchaser understands that the has
only a limited operating history upon which the Purchaser may evaluate its
performance. The Company's prospects must be considered in light of the
risks, difficulties, expenses, and delays encountered in a company with
limited operating history. The Purchaser understands that there are no
assurances that the Company will be successful or achieve profitability.
(d) The Purchaser understands that the
Company is in the growth stage of its development, and its operations are
subject to all of the risks inherent in a growing business enterprise,
including the likelihood of operating losses. The likelihood of the success
of the Company must be considered in light of the problems, expenses,
difficulties, complications, and delays frequently encountered in connection
with the growth of an existing business, the implementation of the Company's
business plan, and the competitive environment in which the Company operates.
(e) The Purchaser understands that the
financial projections included in the materials presented to the Purchaser
represent the manager's estimates as to the future financial performance of
the Company based upon certain assumptions and courses of action that the
Company plans to undertake. Among the material assumptions are that the
Company will receive the funding at the times and in the amounts indicated,
achieve the projected sales revenues, and control costs as indicated.
However, there will usually be differences between the financial projections
and the actual results experienced because events and circumstances
frequently do not occur as expected, and those differences may be material.
In addition, the further the projections are for the future, the greater the
likelihood that actual results will differ materially from the projections.
There are no assurances that the Company will perform as set forth in the
financial projections, or that the assumptions on which the projections are
based will occur or will occur at the times indicated.
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(f) The Purchaser understands that there is
no trading market for the Debentures and that the Company does not anticipate
that a trading market will develop, or if developed, will continue. If no
market develops, it may be difficult or impossible for the Purchaser to
resell the Debentures should the Purchaser desire to do so. There are no
assurances that the Purchaser will be able to resell the Debentures, or if
the Purchaser is able to resell, that the Purchaser will be able to resell
the Debentures at the purchase price.
(g) The Purchaser understands that there is
only a thin trading market for the Common Stock and that there are no
assurances that a trading market will develop with sufficient volume to
enable the Purchaser to easily sell the Shares, or if developed, will
continue. If no market with sufficient trading volume develops, it may be
difficult or impossible for the Purchaser to resell the Shares should the
Purchaser desire to do so. There are no assurances that the Purchaser will be
able to resell the Shares, or if the Purchaser is able to resell, that the
Purchaser will be able to resell the Shares at the purchase price.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the Purchaser as follows:
3.1 ORGANIZATION, STANDING, AND POWER. The Company is
a corporation duly organized, validly existing, and in good standing under
the laws of the State of Nevada, and has all requisite power and authority to
enter into this Agreement and to perform its obligations hereunder.
3.2 EXECUTION, DELIVERY, AND PERFORMANCE. The
execution, delivery, and performance of this Agreement by the Company and the
consummation of the transactions contemplated herein have been approved by
all requisite action by the Company. This Agreement has been duly and validly
executed and delivered on behalf of the Company and constitutes a valid and
binding obligation of the Company.
3.3 NO VIOLATION. The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated herein will not violate any provision of the organizational
documents of the Company, violate any statute, law, or any judgment, decree,
order, regulation, or rule of any court or governmental authority, or cause a
breach of or default under, with or without any notice or the lapse of time
or both, any provision of any agreement or instrument to which the Company is
a party or by which any of its properties are affected.
3.4 CAPITALIZATION. The Company is authorized to issue
up to one hundred million (100,000,000) shares of Common Stock, par value
$.001 per share, and five million (5,000,000) shares of preferred stock, par
value $.01 per share. Other than the outstanding shares of preferred stock,
the Company has no outstanding options, warrants, or rights to purchase
shares of Common Stock or securities convertible into shares of Common Stock.
4. CONDITIONS TO THE ISSUANCE OF THE DEBENTURES. Other than
the issuance of the Debenture concurrent with the execution and delivery of
this Agreement, each draw upon funds and issuance of a Debenture therefor
shall be subject to the following conditions, unless waived in writing by the
party that is the beneficiary of such condition:
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4.1 REPRESENTATIONS AND WARRANTIES TRUE. All of the
representations and warranties of the Company contained in Section 3 of this
Agreement shall be true and correct as of the date of the draw, and the
Company shall deliver to the Purchaser a certificate executed by the
Company's President attesting thereto; provided that any change in the
Company's capitalization as set forth in Section 3.4 of this Agreement shall
be set forth in such certificate. All of the representations and warranties
of the Purchaser contained in Section 2 of this Agreement shall be true and
correct as of the date of the draw, and all such representations and
warranties shall be deemed to be correct and the Company shall have the right
to rely upon them unless the Purchaser shall have notified the Company in
writing prior to the draw.
4.2 NOTICE. The Company shall have given the Purchaser
written notice at least five (5) business days prior to drawing on the funds.
4.3 DELIVERY TO THE PURCHASER. The Company shall have
delivered to the Purchaser (i) a duly executed Debenture in an amount equal
to the draw, and (ii) a solvency certificate executed by the Company's Chief
Financial Officer.
4. NO DEFAULT. The Company shall not be in default
under the Debentures.
5. INDEMNIFICATION.
5.1 INDEMNIFICATION. Each party (the "Indemnifying
Party") shall indemnify, save, defend, and hold the other party (the
"Indemnified Party") harmless from and against any and all claims, demands,
expenses, lawsuits, liabilities, and losses, including but not limited to
penalties, interest, court costs, and attorneys' fees, arising out of or in
connection with any breach of a representation or warranty of the
Indemnifying Party contained in this Agreement.
5.2 NOTICE OF CLAIM. Promptly after the receipt by the
Indemnified Party of any notice of a claim or the commencement of any action,
suit, or proceeding, the Indemnified Party shall give the Indemnifying Party
written notice of such claim or the commencement of such action, suit, or
proceeding. The written notice shall include the nature, amount, and cause of
any claim for indemnification in reasonable detail.
5.3 DEFENSE. Upon receipt of a written notice of a
claim from the Indemnified Party, the Indemnifying Party shall provide a
defense of the claim to the Indemnified Party, including legal counsel
selected by the Company and reasonably acceptable to the Purchaser. The
Indemnified Party may employ separate legal counsel, but such separate legal
counsel shall be at the Indemnified Party's own cost and expense, unless the
Indemnifying Party fails or refuses to provide a defense. The Indemnifying
Party shall have the exclusive authority to settle any claim, so long as such
compromise or settlement does not adversely affect the Indemnified Party. The
Indemnifying Party shall have no liability for any settlement made without
its prior written consent. The Indemnified Party shall use its best efforts
to assist the Indemnifying Party is the defense of the claim and shall make
available all information and assistance that the Indemnifying Party may
reasonably request in connection with such defense.
6. GENERAL PROVISIONS.
6.1 AMENDMENT. All amendments or modifications of this
Agreement shall be in writing and shall be signed by each of the parties
hereto.
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6.2 WAIVER. Any waiver of any right, power, or
privilege hereunder must be in writing and signed by the party being charged
with the waiver. No delay on the part of any party hereto in exercising any
right, power, or privilege hereunder shall operate as a waiver of any other
right, power, or privilege hereunder, nor shall any single or partial
exercise of any right, power, or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power, or
privilege.
6.3 NOTICES. All notices or other communications
required or permitted to be given pursuant to this Agreement shall be in
writing and shall be delivered personally or sent by overnight courier, by
telecopier with confirmation by first class mail, or by certified mail,
return receipt requested. Notices delivered personally or sent by overnight
courier or telecopier with confirmation by first class mail shall be
effective on the date first received, while notices sent by certified mail,
return receipt requested, shall be deemed to have been received and to be
effective three (3) business days after deposit into the mails. Notices shall
be given to the parties at the following respective addresses, or to such
other addresses as any party shall designate in writing:
If to the Company: Xx. Xxxx Xxxxxxxxx
President
Xxxxxxxxx Communications, Inc.
0000 Xxxxxx Xxxxxxxxx
Xxxxx X-0
Xxxxx Xxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
With a copy to: Xxxxxx X. Xxxxxx, Xx., Esq.
Xxxxxx Coffee Nojima, LLP
00000 Xxxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
If to the Purchaser:
President
Alliance Equities
Telephone:
Telecopier:
6.4 SUCCESSORS AND ASSIGNS. This Agreement and each of
its provisions shall be binding upon and shall inure to the benefit of the
parties hereto and their respective administrators, successors, and assigns.
Notwithstanding the immediately preceding sentence, neither party may assign
any of its rights or obligations hereunder without the prior written consent
of the other party, which consent the other party may withhold in its sole
and absolute discretion.
6.5 LAW GOVERNING. This Agreement has been negotiated,
executed, and delivered and shall be performed in the State of California
and shall be governed by and construed and enforced in accordance with the
laws of the State of California, without regard for its conflict
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of laws rules. The parties hereby irrevocably submit to the exclusive
jurisdiction of the courts of the State of California and any United States
District Court situated in the State of California for the purposes of
construing and enforcing this Agreement.
6.6 ATTORNEYS' FEES. Should a lawsuit be commenced to
interpret or enforce the terms of this Agreement, the prevailing party shall
be entitled to recover costs and attorneys' fees in addition to any other
recovery to which such party may be entitled.
6.7 COUNTERPARTS. This Agreement may be executed in
two or more counterparts, including by facsimile transmission, all of which
together shall constitute a single instrument.
6.8 SEVERABILITY OF PROVISIONS. In the event any one
or more of the provisions of this Agreement shall for any reason be held to
be invalid, illegal, or unenforceable in any respect, such invalidity,
illegality, or unenforceability shall not affect any other provision hereof,
and this Agreement shall be construed as if such invalid, illegal, or
unenforceable provision had never been contained herein.
6.9 INTEGRATION. This Agreement constitutes the entire
understanding and agreement between the parties with respect to the
transactions contemplated herein and supersedes all previous communications,
representations, or understandings, either oral or written, between the
parties relating to the subject matter hereof, all of which are merged herein.
6.10 EXPENSES. Except as otherwise set forth herein,
each party shall bear all of its own expenses incurred in negotiating and
performing this Agreement.
6.11 CONSTRUCTION. The headings in the sections and
paragraphs of this Agreement are for convenience only and shall not
constitute a part hereof. Whenever the context so requires, the masculine
shall include the feminine and the neuter, the singular shall include the
plural, and conversely. The terms and all parts of this Agreement shall in
all cases be interpreted simply and according to their plain meaning and
neither for nor against any party hereto.
IN WITNESS WHEREOF, the parties have duly executed and delivered
this Agreement as of the date first written above.
Alliance Equities Xxxxxxxxx Communications, Inc.
By: ______________________________ By: ______________________________
Xxxxxxx Xxxxxxx Xxxx Xxxxxxxxx
President President
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