Exhibit 4.5
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 cove-nants 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
Five Hundred and Twenty Thousand Dollars ($520,000) 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
Five Hundred and Twenty Thousand Dollars ($520,000). 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 deli-very 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 con-templated 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 judg-ment, 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 connec-tion 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 Pur-chaser'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 understands 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 under-stands 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 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
busi-nesses 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,
ASSIGN-MENT, 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-BRANCE IS EXEMPT FROM THE REGISTRATION PROVISIONS OF THE
SECURITIES ACT AND THE RULES AND REGULATIONS PROMU-LGATED THEREUNDER
AND THE REGISTRATION AND/OR QUALIFI-CATION 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.
(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 con-templated 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 judg-ment, 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. As of the date hereof, the Company has issued and outstanding
nineteen million eighty thousand six hundred twelve (19,080,612) shares of
Common stock and one million (1,000,000) shares of preferred stock. 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:
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.
4.4 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.
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
0000 Xxxxxx Xxxx
Xxxxx Xxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
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 admini-strators, 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 deli-vered 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 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 super-sedes 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: /S/ Xxxxxxx Xxxxxxx By: /S/ Xxxx Xxxxxxxxx
--------------------------- ----------------------------
Xxxxxxx Xxxxxxx Xxxx Xxxxxxxxx
President President
