SECURITIES PURCHASE AGREEMENT (as amended or supplemented from time
to time, this "Agreement") made as of ___________________, 2007, between XXXXX
INDUSTRIES INCORPORATED, a Delaware corporation, with its principal offices at
0000 X Xxxxxxx Xxxxxx, Xxx Xxxxx, Xxx Xxxx 00000 (the "Company") and the
undersigned (the "Subscriber").
W I T N E S S E T H :
WHEREAS, the Company desires to issue, in a private placement,
shares of Series B Convertible Preferred Stock, (the "Preferred Stock") (as
defined in the Memorandum), with a minimum aggregate purchase price of
$3,500,000 (the "Minimum Amount") of Preferred Stock and a maximum aggregate
purchase price of $7,000,000 (the "Maximum Amount") of Preferred Stock;
WHEREAS, Subscriber desires to acquire the number of shares of
Preferred Stock (the "Shares") having an aggregate purchase price set forth on
the signature page hereof (the "Purchase Price").
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants hereinafter set forth, the parties hereto do hereby agree as
follows:
1. SUBSCRIPTION FOR SECURITIES AND REPRESENTATIONS BY SUBSCRIBER.
1.1. Subject to the terms and conditions hereinafter set forth, the
Subscriber hereby subscribes for and agrees to purchase from the Company the
Shares of Preferred Stock for the Purchase Price and the Company agrees to sell
such Shares to the Subscriber for the Purchase Price, subject to the Company's
right to sell to the Subscriber such lesser number of Shares as it may, in its
sole discretion, deem necessary or desirable. As the Company will not issue
fractional Shares, each Subscriber will be issued that number of whole Shares
which the Purchase Price will purchase (to the extent accepted), rounded down to
the next whole Share. Any portion of the Purchase Price not applied to the
purchase of Shares will be returned to the Subscriber, without interest. The
Purchase Price is payable, at or prior to the closing of this Agreement, by wire
transfer, subject to collection, as set forth in the "INSTRUCTIONS TO
SUBSCRIBERS" contained in the Subscription Documents Booklet of which this
Agreement is a part.
1.2. The Subscriber recognizes that the purchase of the Shares
involves a high degree of risk in that (i) the Shares have not been registered
under the Securities Act of 1933, as amended ("1933 Act"), and the Company has
no obligation to register the Shares, except as set forth in Section 3 of this
Agreement; (ii) an investment in the Shares is highly speculative and only
investors who can afford the loss of their entire investment should consider
investing in the Company and the Shares; (iii) the Subscriber may not be able to
liquidate the Subscriber's investment; and (iv) the Subscriber could sustain the
loss of Subscriber's entire investment. Such risks are more fully set forth in
the Company's Confidential Private Placement Memorandum dated May 30, 2006,
including the Exhibits thereto (as amended or supplemented from time to time,
collectively, the "Memorandum").
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1.3. The private placement of the Shares by the Company (the
"Private Placement Offering") pursuant to the Memorandum shall continue for a
period commencing on the date of the Memorandum and ending on the date set forth
in the Memorandum.
1.4. Treasury Department Circular 230 Disclosure. To ensure
compliance with Treasury Department Circular 230, the Subscriber is hereby
notified that: (i) any discussion of U.S. Federal tax issues in this Agreement
or the Memorandum is not intended or written to be relied upon, and cannot be
relied upon, by the Subscriber for the purpose of avoiding penalties that may be
imposed on the Subscriber under the Internal Revenue Code of 1986, as amended
(the "Code"); (ii) such discussion is included herein by the Company in
connection with the promotion or marketing (within the meaning of Circular 230)
by the Company of the transactions or matters addressed herein or therein; and
(iii) the Subscriber should seek advice based on its particular circumstances
from an independent tax advisor.
1.5. The Subscriber represents as follows:
(a) The Subscriber represents that the Subscriber is an
Accredited Investor (as defined in Rule 501 of Regulation D promulgated under
the 0000 Xxx) as indicated by the Subscriber's responses to the Confidential
Investor Questionnaire, a copy of which is included in the Subscription
Documents Booklet, and that the Subscriber is able to bear the economic risk of
investment in the Shares. The Subscriber is not an officer, director or
"affiliate" (as defined in Rule 403 under the 0000 Xxx) of the Company.
(b) The Subscriber acknowledges that the Subscriber has
significant prior investment experience, including investment in non-listed and
non-registered securities. The Subscriber recognizes the highly speculative
nature of this investment. The Subscriber acknowledges that the Subscriber has
carefully read the Memorandum, including but not limited to, the Company's
Annual Report on Form 10KSB for the year ended December 31, 2006, and the
Company's Forms 8-K, dated January 3, 2007, January 30, 2007, February 16, 2007
, March 7, 2007, March 15, 2007 and March 20, 2007 and fully understands the
contents thereof, and the Subscriber has not received any other offering
literature or prospectus and no representations or warranties have been made to
the Subscriber by the Company or its employees, affiliates or agents, other than
the representations set forth in the Memorandum.
(c) The Subscriber acknowledges that the Shares were not
offered to the Subscriber by any means of general solicitation or general
advertising. In that regard, the Subscriber is not subscribing for the Shares:
(i) as a result of, or subsequent to, becoming aware of any advertisement,
article, notice or other communication published in any newspaper, magazine or
similar medium, generally available electronic communication, broadcast over
television or radio or generally available to the public on the internet or
worldwide web; (ii) as a result of, or subsequent to, attendance at a seminar or
meeting called by any of the means set forth in (i) above; or (iii) as a result
of, or subsequent to, any solicitations by a person not previously known to the
Subscriber in connection with investment in securities generally.
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(d) The Subscriber hereby acknowledges that the Private
Placement Offering and the Memorandum have not been reviewed by the Securities
and Exchange Commission (the "SEC") or by a state securities regulator because
it is intended to be a nonpublic offering pursuant to Sections 4(2) and 4(6) of
the 1933 Act and Regulation D promulgated thereunder. The Subscriber represents
and warrants that the Shares are being purchased for the Subscriber's own
account, for investment purposes only and not for distribution or resale to
others. The Subscriber agrees that the Subscriber will not sell or otherwise
transfer the Shares unless they are registered under the 1933 Act or unless an
exemption from such registration is available.
(e) The Subscriber understands that the Shares have not been
registered under the 1933 Act by reason of a claimed exemption under the
provisions of the 1933 Act which depends, in part, upon the Subscriber's
investment intention. In this connection, the Subscriber understands that it is
the position of the SEC that the statutory basis for such exemption would not be
present if the Subscriber's representation merely meant that the Subscriber's
present intention was to hold the Shares for a short period, such as the capital
gains period of tax statutes, for a deferred sale, for a market rise, assuming
that a market develops, or for any other fixed period. The Subscriber realizes
that, in the view of the SEC, a purchase now with an intent to resell after a
pre-determined amount of time would represent a purchase with an intent
inconsistent with the Subscriber's representations and warranties to the
Company, and the SEC might regard such a sale or disposition as a deferred sale
to which such exemptions are not available.
(f) The Subscriber understands that Rule 144 (the "Rule")
promulgated by the SEC under the 1933 Act requires, among other conditions, a
one (1) year holding period prior to the resale (in limited amounts) of
securities acquired in a non-public offering without having to satisfy the
registration requirements under the 1933 Act. The Subscriber understands that
the Company makes no representation or warranty regarding its fulfillment in the
future of any reporting requirements under the Securities Exchange Act of 1934,
as amended, or its dissemination to the public of any current financial or other
information concerning the Company, as is required by the Rule as one of the
conditions of its availability. The Subscriber understands and hereby
acknowledges that the Company is the only entity that can register the Shares
under the 1933 Act and that the Company is under no obligation to register the
Shares under the 1933 Act, with the exception of certain registration rights set
forth in Section 3 of this Agreement. The Subscriber acknowledges that the
Company may, if it desires, permit the transfer of the Shares out of the
Subscriber's name only when the Subscriber's request for transfer is accompanied
by an opinion of counsel reasonably satisfactory to the Company that neither the
sale nor the proposed transfer results in a violation of the 1933 Act or any
applicable state "blue sky" laws and subject to the provisions of Section 1.4(g)
of this Agreement.
(g) The Subscriber consents to the placement of a legend on
any certificate or other document evidencing the Shares stating that the Shares
are "restricted securities" (as defined in the Rule) and may only be publicly
offered and sold pursuant to an effective registration statement filed with the
SEC or pursuant to an exemption from the registration requirements.
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(h) The Subscriber understands that the Company will review
this Agreement and the Confidential Investor Questionnaire; and it is further
agreed that the Company reserves the unrestricted right to reject or limit any
subscription for any reason or for no reason and to close the Private Placement
Offering at any time.
(i) The Subscriber hereby represents that the address of the
Subscriber furnished by the Subscriber at the end of this Agreement is the
Subscriber's principal residence, if the Subscriber is an individual, or its
principal business address, if the Subscriber is a corporation or other entity.
(j) The Subscriber has had a reasonable opportunity to ask
questions of and receive answers from the Company concerning the Company and the
Private Placement Offering, and all such questions, if any, have been answered
to the full satisfaction of the Subscriber; and the Company shall provide the
Subscriber with the opportunity to ask additional questions of and receive
answers (all of which information shall be limited to information in the public
realm) from the Company concerning the Company during the period which the
Subscriber owns the Shares.
(k) The Subscriber is not relying on the Placement Agent, the
Company or any information in the Memorandum with respect to any legal,
investment or tax considerations involved in the purchase, ownership and
disposition of the Shares. The Subscriber has relied solely upon the advice of,
or has consulted with, in regard to the legal, investment and tax considerations
involved in the purchase, ownership and disposition of the Shares, the
Subscriber's legal counsel, business and/or investment adviser, accountant and
tax advisor.
(l) The Subscriber has such knowledge and expertise in
financial and business matters that the Subscriber is capable of evaluating the
merits and risks involved in an investment in the Shares. All information that
the Subscriber has provided concerning the Subscriber and the Subscriber's
financial position (including, without limitation, information in this Agreement
or in the Confidential Investor Questionnaire included in the Subscription
Documents Booklet) is true, correct and complete.
(m) The Subscriber has full power and authority to execute and
deliver this Agreement and to perform its obligations hereunder; and this
Agreement is a legally binding obligation of the Subscriber in accordance with
its terms.
(n) Except as set forth in the Memorandum no representations
or warranties have been made to the Subscriber by the Company, the Placement
Agent (as defined in the Memorandum) or any of their respective agents,
employees or affiliates and in entering into this transaction, the Subscriber is
not relying on any information, other than that contained in the Memorandum or
the results of an independent investigation by the Subscriber.
(o) The Subscriber agrees that the Subscriber will not sell or
otherwise transfer the Shares unless they are registered under the 1933 Act and
applicable state "blue sky" laws or unless an exemption from such registration
is available. The Subscriber represents and warrants that (i) the Subscriber has
adequate means of providing for the Subscriber's current needs and possible
personal contingencies; (ii) the Subscriber has no need for liquidity in this
investment; (iii) the Subscriber is able to bear the substantial economic risk
of an investment in the Shares for an indefinite period; and (iv) at the present
time the Subscriber could afford a complete loss of such investment.
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(p) It is understood that all documents, records and books
pertaining to this investment have been made available for the inspection by the
Subscriber's attorney and/or accountant and the Subscriber, and that the books
and records of the Company will be available upon reasonable notice during
business hours at its principal place of business.
(q) The Subscriber acknowledges and agrees that any changes
made by the Subscriber to any of the documents delivered to the Subscriber in
connection with the Private Placement Offering shall not be effective unless the
Company consents in writing to such changes.
(r) The Subscriber understands that it and its
representative(s) could be subject to fines, penalties and other liabilities
under applicable securities laws if the Subscriber or its representative(s),
while in possession of any material, non-public information that may be
contained in the Memorandum, trade in the Common Stock or other securities of
the Company or communicate such information to any other person under
circumstances in which it is reasonably foreseeable that such person is likely
to trade in such Common Stock or other securities. The Subscriber agrees that it
and its representative(s) will refrain from trading in the Common Stock or other
securities of the Company until such time as they are no longer prohibited from
trading in such Common Stock or other securities under all applicable securities
laws (whether because the Company has publicly disclosed all material
information in the Memorandum, the Memorandum no longer containing material
non-public information or otherwise).
(s) In the event that the Subscriber is acting as agent,
representative or nominee for another party (each, a "Beneficial Owner"), the
Subscriber understands and acknowledges that the representations, warranties and
agreements made herein are made by the Subscriber: (i) with respect to the
Subscriber; and (ii) with respect to each Beneficial Owner of the Shares
subscribed for hereby. The Subscriber represents and warrants that he, she or it
has all requisite power and authority from said Beneficial Owner(s) to execute
and perform the obligations under this Agreement and has anti-money laundering
policies and procedures in place reasonably designed to verify the identity of
each Beneficial Owner and the sources of each Beneficial Owner's funds. Such
policies and procedures are properly enforced and are consistent with anti-money
laundering/OFAC laws (as defined below) such that the Company may rely on this
representation. The Subscriber agrees, except to the extent specifically
prohibited by applicable law, to indemnify the Company, the Placement Agent and
their respective officers and agents for any and all costs, fees and expenses
(including reasonable legal fees and disbursements) in connection with any
damages resulting from the Subscriber's or any Beneficial Owner's
misrepresentation or misstatement contained herein, or the assertion of the
Subscriber's lack of proper authorization from each Beneficial Owner of the
Shares subscribed for hereby to enter into this Agreement or perform the
obligations thereof.
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(t) Prospective Subscribers should check the Treasury
Department's Office of Foreign Assets Control ("OFAC") website at
xxxx://xxx.xxxxx.xxx/xxxx before making the following representations.
The Subscriber represents that the Purchase Price was not directly
or indirectly derived from activities that may contravene U.S. Federal, state
and international laws and regulations, including anti-money laundering laws.
OFAC prohibits, among other things, the engagement in transactions
with, and the provisions 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.
The Subscriber hereby represents and warrants, to the best of its
knowledge, that none of:
(i) the Subscriber;
(ii) any person controlling, controlled by or under common control
with, the Subscriber;
(iii) if the Subscriber is a privately held entity, any person
having a beneficial interest in the Subscriber; or
(iv) any person for whom the Subscriber is acting as agent or
nominee in connection with this investment
(A) is a country, territory, individual or entity named on an
OFAC list, or is an individual or entity that resides or has a place of business
in a country or territory named on such lists;
(B) is a senior foreign political figure(1), or any immediate
family member(2) or close associate(3) of a senior foreign political figure
within the meaning of the Department of Treasury's Guidance on Enhanced Scrutiny
for Transactions That May Involve the Proceeds of Foreign Official Corruption(4)
and as referenced in the USA PATRIOT Act of 2001, as amended (the "Patriot
Act");(5) or
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(1) A "senior foreign political figure" is defined as a current or former senior
official in the executive, legislative, administrative, military or judicial
branches of a non-U.S. government (whether elected or not), a senior official of
a major non-U.S. political party, or a senior executive of a non-U.S.
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.
(2) "Immediate family" of a senior foreign political figure typically includes
the figure's parents, siblings, spouse, children and in-laws.
(3) 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.
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(C) is a "foreign shell bank"(6) and does not transact
business with a "foreign shell bank".
The Subscriber agrees to promptly notify the Company should the
Subscriber become aware of any change in the information set forth in these
representations.
The Subscriber understands that the Company may not accept any
portion of the Purchase Price if the Subscriber cannot make the representation
set forth above or if the information provided to the Company is incomplete or
is deemed suspicious.
If the Subscriber is an investment entity, then the Subscriber
hereby represents and warrants to the Company that the Subscriber is aware of
the requirements of the Patriot Act, the regulations administered by OFAC and
other applicable U.S. Federal, state or non-U.S. anti-money laundering laws and
regulations (as amended, collectively, the "anti-money laundering/OFAC laws").
The Subscriber further warrants and represents that it has anti-money laundering
policies and procedures in place reasonably designed to verify the identity of
its beneficial owners and/or underlying investors (as applicable) and their
sources of funds. Such policies and procedures are properly enforced and are
consistent with the anti-money laundering/OFAC laws. The Subscriber hereby
warrants to the Company that, to the best of its knowledge, the Subscriber's
beneficial owners and/or underlying investors (as applicable) are not
individuals, entities or countries that may subject the Company to criminal or
civil violations of any anti-money laundering/OFAC laws. The Subscriber hereby
acknowledges and agrees that the Company, or any other party on behalf of the
Company, may be required and shall be entitled to reveal any information
regarding the Company and the Subscriber's investment in the Company, including
details of the Subscriber's identity, to their regulators and/or any other
government agency within their jurisdiction, as they shall, in their sole and
absolute discretion, consider appropriate.
2. TERMS OF SUBSCRIPTION.
The Private Placement Offering of the Shares is being made on a
"best efforts" basis as more particularly set forth in the Memorandum.
3. REGISTRATION RIGHTS.
3.1. Within 90 days after the Final Closing Date (regardless of
whether the Maximum Amount of Preferred Stock shall have been sold), the Company
shall, at its sole cost and expense, file a registration statement (as amended
or supplemented from time to time, the "Registration Statement") on the
appropriate form under the 1933 Act with the SEC covering all of the shares of
Common Stock issuable upon conversion of the Preferred Stock, including any such
shares issueable upon conversion on dividends paid in the form of Preferred
Stock ("Conversion Shares") and shares of Common Stock issuable upon exercise of
the Placement Agent's Warrants (the "Warrant Shares" and, together with the
Conversion Shares, the "Registrable Securities"). The Company will use best
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(4) For a more extensive discussion of the preceding terms and definitions, see
xxxx://xxx.xxxxxxxxxxxxxx.xxx/xxxxxxxxx/xxxxxxxxx/0000/xx0000x0.xxx.
(5) The Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56
(2001).
(6) A "foreign shell bank" is a foreign bank that does not have a physical
presence in any country.
7
efforts to have the Registration Statement declared effective, and to keep the
Registration Statement effective, until the earlier of (x) three years after the
Final Closing Date, (y) the date when all the Registrable Securities have been
sold or (z) the date on which the Registrable Securities may be sold without any
restriction pursuant to the Rule 144. If the Registration Statement is not filed
within 90 days after the Final Closing Date, the Company will pay to each
Investor an amount in cash, as partial liquidated damages and not as a penalty,
equal to three percent (3%) of the Purchase Price for each thirty (30) day
period, or any part thereof, beyond such 90 day period, until the Registration
Statement is filed. In addition, if the Registration Statement is not declared
effective within 180 days after the filing date, the Company will pay to each
Investor an amount in cash, as partial liquidated damages and not as a penalty,
equal to two percent (2%) of the Purchase Price for each thirty (30) day period,
or any part thereof, beyond such 180 day period, until the Registration
Statement is declared effective. The maximum cash payments to each Investor
pursuant to these provisions are twenty-four percent (24%) of such Investor's
Purchase Price, as the case may be. No such amounts shall be payable in relation
to the Warrant Shares.
3.2. In the event the Company effects any registration under the
1933 Act of any Registrable Securities pursuant to Section 3.1 or 3.7 of this
Agreement, the Company shall indemnify, to the extent permitted by law, and hold
harmless each Investor whose Shares are included in such registration statement
(each, a "Seller"), any underwriter, any officer, director, employee or agent of
any Seller or underwriter, and each other person, if any, who controls any
Seller or underwriter within the meaning of Section 15 of the 1933 Act, against
any losses, claims, damages, liabilities, judgment, fines, penalties, costs and
expenses, joint or several, or actions in respect thereof (collectively, the
"Claims"), to which each such indemnified party becomes subject, under the 1933
Act or otherwise, insofar as such Claims arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the registration statement or prospectus or any amendment or supplement thereto
or any document filed under a state securities or blue sky law (as amended or
supplemented from time to time, collectively, the "Registration Documents") or
insofar as such Claims arise out of or are based upon the omission or alleged
omission to state in any Registration Document a material fact required to be
stated therein or necessary to make the statements made therein not misleading,
and will reimburse any such indemnified party for any legal or other expenses or
disbursements reasonably incurred by such indemnified party in investigating or
defending any such Claim; provided that the Company shall not be liable in any
such case to a particular indemnified party to the extent such Claim is based
upon an untrue statement or alleged untrue statement of a material fact or
omission or alleged omission of a material fact made in any Registration
Document in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such indemnified party specifically for use in
the preparation of such Registration Document.
3.3. In connection with any registration statement in which a Seller
is participating, such Seller, severally and not jointly, shall indemnify, to
the extent permitted by law, and hold harmless the Company, each of its
directors, each of its officers who have signed such registration statement,
each other person, if any, who controls the Company within the meaning of
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Section 15 of the 1933 Act, each other Seller and each underwriter, any officer,
director, employee or agent of any such other Seller or underwriter and each
other person, if any, who controls such other Seller or underwriter within the
meaning of Section 15 of the 1933 Act against any Claims to which each such
indemnified party may become subject under the 1933 Act or otherwise, insofar as
such Claims (or actions in respect thereof) are based upon any untrue statement
or alleged untrue statement of any material fact contained in any Registration
Document, or insofar as any Claims are based upon the omission or alleged
omission to state in any Registration Document a material fact required to be
stated therein or necessary to make the statements made therein not misleading,
and will reimburse any such indemnified party for any legal or other expenses or
disbursements reasonably incurred by such indemnified party in investigating or
defending any such claim; provided, however, that such indemnification or
reimbursement shall be payable only if, and to the extent that, any such Claim
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any Registration Document in reliance
upon and in conformity with written information furnished to the Company by such
Seller specifically for use in the preparation thereof.
3.4. Any person entitled to indemnification under Section 3.2 or 3.3
of this Agreement shall notify promptly the indemnifying party in writing of the
commencement of any Claim if a claim for indemnification in respect thereof is
to be made against an indemnifying party under this Section 3.4, but the
omission of such notice shall not relieve the indemnifying party from any
liability which it may have to any indemnified party otherwise than under
Section 3.2 or 3.3 of this Agreement, except to the extent that such failure
shall materially adversely affect any indemnifying party or its rights
hereunder. In case any action is brought against the indemnified party and it
shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in, and, to the extent that
it chooses, to assume the defense thereof with counsel reasonably satisfactory
to the indemnified party; and, after notice from the indemnifying party to the
indemnified party that it so chooses, the indemnifying party shall not be liable
for any legal or other expenses or disbursements subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that (i) if the indemnifying party
fails to take reasonable steps necessary to defend diligently the Claim within
twenty (20) days after receiving notice from the indemnified party that the
indemnified party believes it has failed to do so; (ii) if the indemnified party
who is a defendant in any action or proceeding which is also brought against the
indemnifying party reasonably shall have concluded that there are legal defenses
available to the indemnified party which are not available to the indemnifying
party; or (iii) if representation of both parties by the same counsel is
otherwise inappropriate under applicable standards of professional conduct, the
indemnified party shall have the right to assume or continue its own defense as
set forth above (but with no more than one firm of counsel for all indemnified
parties in each jurisdiction, except to the extent any indemnified party or
parties reasonably shall have concluded that there are legal defenses available
to such party or parties which are not available to the other indemnified
parties or to the extent representation of all indemnified parties by the same
counsel is otherwise inappropriate under applicable standards of professional
conduct) and the indemnifying party shall be liable for any reasonable expenses
therefor; provided, that no indemnifying party shall be subject to any liability
for any settlement of a Claim made without its consent (which may not be
unreasonably withheld, delayed or conditioned). If the indemnifying party
assumes the defense of any Claim hereunder, such indemnifying party shall not
enter into any settlement without the consent of the indemnified party if such
settlement attributes liability to the indemnified party.
9
3.5. If for any reason the indemnity provided in Section 3.2 or 3.3
of this Agreement is unavailable, or is insufficient to hold harmless, an
indemnified party, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of any Claim in such
proportion as is appropriate to reflect the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other from
the transactions contemplated by this Agreement. If, however, the allocation
provided in the immediately preceding sentence is not permitted by applicable
law, or if the indemnified party failed to give the notice required by Section
3.4 of this Agreement, then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the indemnifying party and the indemnified party, as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable in respect of any Claim shall be deemed to include any legal or other
expenses or disbursements reasonably incurred by such indemnified party in
connection with investigating or defending any such Claim. Notwithstanding the
foregoing, no underwriter or controlling person thereof, if any, shall be
required to contribute, in respect of such underwriter's participation as an
underwriter in the Private Placement Offering, any amount in excess of the
amount by which the total price at which the Registrable Securities underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 0000 Xxx) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The obligation
of any underwriters to contribute pursuant to this Section 3.5 shall be several
in proportion to their respective underwriting commitments and not joint.
3.6. The provisions of Section 3.2 through 3.5 of this Agreement
shall be in addition to any other rights to indemnification or contribution
which any indemnified party may have pursuant to law or contract and shall
remain operative and in full force and effect regardless of any investigation
made or omitted by or on behalf of any indemnified party and shall survive the
transfer of the Registrable Securities by any such party.
3.7. If and whenever the Company is required by the provisions of
this Section 3 to use its best efforts to register any Registrable Securities
under the 1933 Act, the Company shall, as expeditiously as possible under the
circumstances:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective as soon as possible after filing
and remain effective.
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(b) Subject to Section 3.1 of this Agreement, prepare and file
with the SEC such amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement current and effective and to comply with the provisions
of the 1933 Act, and any regulations promulgated thereunder, with respect to the
sale or disposition of all Registrable Securities covered by the registration
statement required to effect the distribution of the securities, but in no event
shall the Company be required to do so for a period of more than three (3) years
following the effective date of the registration statement.
(c) Furnish to the Sellers participating in the offering,
applicable copies (in reasonable quantities) of summary, preliminary, final,
amended or supplemented prospectuses, in conformity with the requirements of the
1933 Act and any regulations promulgated thereunder, and other documents as
reasonably may be required in order to facilitate the disposition of the
securities, but only while the Company is required under the provisions hereof
to keep the registration statement current.
(d) Use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions of the United States as the
Sellers participating in the offering shall reasonably request, and do any and
all other acts and things which may be reasonably necessary to enable each
participating Seller to consummate the disposition of the Registrable Securities
in such jurisdictions.
(e) Notify each Seller selling Registrable Securities, at any
time when a prospectus relating to any such Registrable Securities covered by
such registration statement is required to be delivered under the 1933 Act, of
the Company's becoming aware that the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing, and promptly prepare and furnish to each such Seller selling
Registrable Securities a reasonable number of copies of a prospectus
supplemented or amended so that, as thereafter delivered to the purchasers of
such Registrable Securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing.
(f) As soon as practicable after the effective date of the
registration statement, and in any event within eighteen (18) months thereafter,
make generally available to the Sellers participating in the offering an
earnings statement (which need not be audited) covering a period of at least
twelve (12) consecutive months beginning after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the 1933 Act, including, at the Company's option, Rule 158
thereunder. To the extent that the Company files such information with the SEC
in satisfaction of the foregoing, the Company need not deliver the above
referenced earnings statement to the Seller.
(g) Upon request, deliver promptly to counsel of each Seller
participating in the offering copies of all correspondence between the SEC and
the Company, its counsel or auditors and all memoranda relating to discussions
with the SEC or its staff with respect to the registration statement and permit
each such Seller to do such investigation at such Seller's sole cost and
expense, upon reasonable advance notice, with respect to information contained
in or omitted from the registration statement as it deems reasonably necessary.
Each Seller agrees that it will use its best efforts not to interfere
unreasonably with the Company's business when conducting any such investigation
and each Seller shall keep any such information received pursuant to this
Section 3 confidential.
11
(h) Provide a transfer agent and registrar located in the
United States for all such Shares covered by such registration statement not
later than the effective date of such registration statement.
(i) List the Shares covered by such registration statement on
such exchanges and/or on the NASDAQ as the Common Stock is then currently listed
upon.
(j) Pay all Registration Expenses (as defined below) incurred
in connection with a registration of Registrable Securities, whether or not such
registration statement shall become effective; provided that each Seller shall
pay all underwriting discounts, commissions and transfer taxes, and their own
counsel and accounting fees, if any, relating to the sale or disposition of such
Seller's Registrable Securities pursuant to such registration statement. As used
herein, "Registration Expenses" means any and all reasonable and customary
expenses incident to performance of or compliance with the registration rights
set forth herein, including, without limitation, (i) all SEC and stock exchange
or National Association of Securities Dealers, Inc. registration and filing
fees, (ii) all fees and expenses of complying with state securities or blue sky
laws (including reasonable fees and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the Registrable
Securities but no other expenses of or disbursements by the underwriters or
their counsel), (iii) all printing, messenger and delivery expenses, and (iv)
the reasonable fees and disbursements of counsel for the Company and the
Company's independent public accountants.
3.8. The Company acknowledges that there is no adequate remedy at
law for failure by it to comply with the provisions of this Section 3 and that
such failure would not be adequately compensable in damages, and therefore
agrees that its obligations and agreements contained in this Section 3 may be
specifically enforced. In the event that the Company shall fail to file such
registration statement when required pursuant to Section 3.1 of this Agreement
or to keep any registration statement effective as provided in this Section 3 or
otherwise fails to comply with its obligations and agreements in this Section 3,
then, in addition to any other rights or remedies the Registered Holders may
have at law or in equity, including, without limitation, the right of
rescission, the Company shall indemnify and hold harmless the Registered Holders
from and against any and all manner or loss which they may incur as a result of
such failure. In addition, the Company shall also reimburse the Registered
Holders for any and all reasonable legal fees, expenses and disbursements
incurred by them in enforcing their rights pursuant to this Section 3,
regardless of whether any litigation was commenced; provided, however, that the
Company shall not be liable for the fees and expenses of more than one law firm,
which firm shall be designated by the Placement Agent.
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4. MISCELLANEOUS.
4.1. All notices, consents and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given (a)
when delivered by hand, (b) one (1) business day after the business day of
transmission if sent by telecopier (with receipt confirmed), provided that a
copy is mailed by certified mail, return receipt requested, or (c) one (1)
business day after the business day of deposit with the carrier, if sent for
next business day delivery by Express Mail, Federal Express or other recognized
express delivery service (receipt requested), in each case addressed to the
Company at the address indicated on the first page of this Agreement marked
"Attention: Xxxxx Xxxxxx and to the Subscriber at the Subscriber's address
indicated on the last page of this Agreement (or to such other addresses and/or
telecopier numbers as a party may designate as to itself by notice to the other
parties).
4.2. This Agreement shall not be changed, modified or amended except
by a writing signed by the parties, and this Agreement may not be discharged
except by performance in accordance with its terms or by a writing signed by the
parties.
4.3. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and to their respective heirs, legal representatives,
successors and assigns. This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter hereof and merges and
supersedes all prior discussions, agreements and understandings of any and every
nature among them.
4.4. Notwithstanding the place where this Agreement may be executed
by any of the parties hereto, the parties expressly agree that all the terms and
provisions hereof shall be construed in accordance with and governed by the laws
of the State of New York without regard to New York conflict of law rules. The
parties hereby agree that any dispute which may arise between them arising out
of or in connection with this Agreement shall be adjudicated before a court
located in New York and they hereby submit to the exclusive jurisdiction of the
courts of the State of New York and of the Federal courts in New York with
respect to any action or legal proceeding commenced by any party, and
irrevocably waive any objection they now or hereafter may have respecting the
venue of any such action or proceeding brought in such a court or respecting the
fact that such court is an inconvenient forum, relating to or arising out of
this Agreement or any acts or omissions relating to the sale of the Shares
hereunder, and consent to the service of process in any such action or legal
proceeding by means of registered or certified mail, return receipt requested,
in case of the address set forth below or such other address as a party shall
furnish in writing to the other parties.
4.5. This Agreement may be executed in counterparts. Upon the
execution and delivery of this Agreement by the Subscriber, this Agreement shall
become a binding obligation of the Subscriber with respect to the purchase of
the Shares as herein provided; subject, however, to the right hereby reserved to
the Company to enter into the same agreements with other subscribers and to add
and/or to delete other persons as subscribers.
4.6. The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect.
13
4.7. It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not operate, or be construed, as a waiver of
any subsequent breach by that same party.
4.8. The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.
*** THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK ***
14
ALL INVESTORS MUST COMPLETE THIS PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement on
_____________________, 2006.
_________ Shares of Series B Preferred Stock x $10.00 per Share =$______________
(minimum subscription = $10,000)
_________________________________________________
Exact Name in Which Title is to be Held
_________________________________________________
(Authorized Signature)
_________________________________________________
Print Name of Signatory and Capacity in which
Signed if an Entity
_________________________________________________
Signature (if Joint Tenants or Tenants in Common)
_________________________________________________
Print Name of above Signatory
SUBSCRIPTION ACCEPTED:
XXXXX INDUSTRIES INCORPORATED
By: ___________________________
Name:
Title:
Date:___________________________
________________________________
Aggregate Purchase Price Accepted
15
