1
EXHIBIT 4.01
SECURED CONVERTIBLE DEBENTURE PURCHASE AGREEMENT (this "Agreement"),
dated as of September 26, 2000, among XxXxxxx Energy Systems of America, Inc., a
Utah corporation (the "Company"), and the investors signatory hereto (each such
investor is a "Purchaser" and all such investors are, collectively, the
"Purchasers").
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers and the
Purchasers, severally and not jointly, desire to purchase from the Company, an
aggregate principal amount of $1,500,000 of the Company's 10% Secured
Convertible Debentures, due September 26, 2001, which shall be in the form of
Exhibit A (the "Debentures"), and which are convertible into shares of the
Company's common stock, $ .001 par value per share (the "Common Stock").
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers agree
as follows:
ARTICLE I
PURCHASE AND SALE
1.1 The Closing
(a) The Closing. (i) Subject to the terms and conditions set
forth in this Agreement, the Company shall issue and sell to the Purchasers and
the Purchasers shall, severally and not jointly, purchase from the Company the
Debentures for an aggregate purchase price of $1,500,000. The closing of the
purchase and sale of the Debentures (the "Closing") shall take place at the
offices of Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP ("Xxxxxxxx
Xxxxxxxxx"), 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, immediately
following the execution hereof or such later date as the parties shall agree.
The date of the Closing is hereinafter referred to as the "Closing Date."
(ii) At the Closing, the parties shall deliver or
shall cause to be delivered the following: (A) the Company shall deliver to each
Purchaser: (1) Debentures in the aggregate principal amount of 33.33% of the
purchase price indicated below such Purchaser's name on the signature page to
this Agreement, registered in the name of such Purchaser, (2) the legal opinion
of Xxxxx Liddell & Xxxx LLP, outside counsel to the Company, in the form of
Exhibit C, (3) an executed Registration Rights Agreement, dated the date hereof,
among the Company and the Purchasers, in the form of Exhibit B (the
"Registration Rights Agreement"), (4) Transfer Agent Instructions, in the form
of Exhibit E, delivered to and acknowledged by the Company's transfer agent (the
"Transfer Agent Instructions"), (5) an executed Security Agreement, dated the
date hereof, between the Company and the Purchasers, in the form of Exhibit F
(the "Security Agreement"), (6) an executed Intellectual Property Security
Agreement, dated the date hereof; between the Company and the Purchaser, in the
form of Exhibit G (the "IP Security Agreement"); and (7) the Escrow Agreement
(the "Escrow Agreement") of even date hereof, among the Company, the Purchasers
and Xxxx X. Xxxxxxxxx, Esq. (the "Escrow Agent"); and (B) each Purchaser will
deliver to the Escrow Agent for delivery in accordance with the Escrow
Agreement: (1) 33.33% of the purchase price indicated below such Purchaser's
name on the signature page to this Agreement in United States dollars in
immediately available funds by wire transfer as designated in the Escrow
Agreement for such purpose, and (2) an executed Registration Rights Agreement,
Security Agreement, IP Security Agreement and this Agreement.
(iii) Within thirty days following the Effective Date
(as defined herein) is declared effective by the Commission (as defined herein),
(A) the Company will, against delivery of the amounts set forth in clause (B) in
this paragraph, deliver to each Purchaser, Debentures in the aggregate principal
amount of 66.67% of the purchase price indicated below such Purchaser's name on
the signature page to this Agreement (subject to
Convertible Debenture Purchase Agreement
2
equitable adjustment for stock splits, recombinations and similar events),
registered in the name of such Purchaser, and (B) each Purchaser will deliver to
the Company, 66.67% of the purchase price indicated below such Purchaser's name
on the signature page to this Agreement in United States dollars in immediately
available funds by wire transfer to an account designated in writing by the
Company for such purpose.
Notwithstanding anything to the contrary contained in this
Agreement, the commitment of a Purchaser to acquire the securities described in
Section 1.1(a)(iii) above is subject to the satisfaction or waiver by the
Purchasers of each of the following conditions:
(a) The Closing. The Closing shall have occurred;
(b) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company contained in the this
Agreement shall be true and correct as of the date when made and as of the date,
after the Effective Date, when the additional financing is provided to the
Company pursuant to Section 1.1(a)(iii) above (the "Additional Financing Date"),
as though made on and as of the Additional Financing Date (other than
representations and warranties which relate to a specific date (which shall not
include representations and warranties relating to the "date hereof") which
representations and warranties shall be true as of such specific date);
(c) Performance by the Company. The Company shall have
performed, satisfied and complied with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Company between the Closing Date and the Additional Financing Date
and no Event (as defined in the Registration Rights Agreement ) shall have
occurred which has not been cured to the satisfaction of the Purchasers;
(d) Underlying Shares Registration Statement. The Underlying
Shares Registration Statement (as defined herein) shall have been declared
effective under the Securities Act (as defined herein) by the Commission and
shall have remained effective at all times, not subject to any actual or
threatened stop order or subject to any actual or threatened suspension at any
time prior to the Additional Financing Date.
(e) No Injunction. Since the Closing Date, no statute, rule,
regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated, amended, modified or endorsed by any court of
governmental authority of competent jurisdiction or governmental authority,
stock market or trading facility which prohibits the consummation of any of the
transactions contemplated by the Transaction Documents or makes impracticable
the transactions contemplated thereby;
(f) Adverse Changes. Since the Closing Date, no event or
series of events which reasonably would be expected to have or result in a
Material Adverse Effect (as defined herein) shall have occurred;
(g) No Suspensions of Trading in Common Stock. The trading in
the Common Stock shall not have been suspended by the Commission or on the OTC
Bulletin Board ("OTC") (except for any suspension of trading of limited duration
solely to permit dissemination of material information regarding the Company) at
any time since the Closing Date;
-2-
Convertible Debenture Purchase Agreement
3
(h) Listing of Common Stock. The Common Stock shall have been
at all times since the Closing Date quoted on the OTC;
(i) Change of Control. No Change of Control in the Company
shall have occurred. "Change of Control" means the occurrence of any of (i) an
acquisition after the date hereof by an individual or legal entity or "group"
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of in
excess of 33% of the voting securities of the Company, (ii) a replacement of
more than one-half of the members of the Company's board of directors which is
not approved by those individuals who are members of the board of directors on
the date hereof in one or a series of related transactions, (iii) the merger of
the Company with or into another entity, consolidation or sale of all or
substantially all of the assets of the Company in one or a series of related
transactions or (iv) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii) or (iii).
(i) Performance of Conversion Obligations. The Company shall
have timely complied with its conversion and delivery obligations after the
Closing Date.
1.2 Certain Defined Terms. For purposes of this Agreement, "Conversion
Price," "Original Issue Date" and "Trading Day" shall have the meanings set
forth in the Debentures; "Business Day" shall mean any day except Saturday,
Sunday and any day which shall be a federal legal holiday in the United States
or a day on which banking institutions in the State of New York or Utah are
authorized or required by law or other governmental action to close; A "Person"
means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to the Purchasers:
(a) Organization and Qualification. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Utah with the requisite corporate power and authority to
own and use its properties and assets and to carry on its business as currently
conducted. The Company has no subsidiaries other than as set forth in Schedule
2.1(a) (collectively the "Subsidiaries"). Each of the Subsidiaries is an entity,
duly incorporated or otherwise organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Company and the Subsidiaries is duly qualified to do business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not, individually or in the aggregate, (x)
adversely affect the legality, validity or enforceability of the Securities (as
defined below) or any of this Agreement, the Registration Rights Agreement, the
Security Agreement or the IP Security Agreement, Escrow Agreement or the
Transfer Agent Instructions (collectively, the "Transaction Documents"), (y)
have or result in a material adverse effect on the results of operations,
assets, prospects, or condition (financial or otherwise) of the
-3-
Convertible Debenture Purchase Agreement
4
Company and the Subsidiaries, taken as a whole, or (z) adversely impair the
Company's ability to perform fully on a timely basis its obligations under any
of the Transaction Documents (any of (x), (y) or (z), a "Material Adverse
Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company. Each of
the Transaction Documents has been duly executed by the Company and, when
delivered in accordance with the terms hereof, will constitute the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms. Neither the Company nor any Subsidiary is in violation of any of
the provisions of its respective certificate or articles of incorporation,
by-laws or other organizational or charter documents.
(c) Capitalization. The number of authorized, issued and
outstanding capital stock of the Company is set forth in Schedule 2.1(c). No
shares of Common Stock are entitled to preemptive or similar rights, nor is any
holder of the securities of the Company entitled to preemptive or similar rights
arising out of any agreement or understanding with the Company by virtue of any
of the Transaction Documents. Except as a result of the purchase and sale of the
Debentures and except as disclosed in Schedule 2.1(c), there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exchangeable for, or giving any Person any right to
subscribe for or acquire, any shares of Common Stock, or contracts, commitments,
understandings, or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock. The issue and sale of
Shares or Underlying Shares (as hereinafter defined) will not obligate the
Company to issue shares of Common Stock or other securities to any person other
than the Purchaser and will not result in a right of any holder of Company
securities to adjust the exercise or conversion or reset price under such
securities.
(d) Issuance of the Debentures. The Debentures will be duly
and validly issued, free and clear of all liens, encumbrances and rights of
first refusal of any kind (collectively, "Liens"). On the date hereof and on
each Closing Date, the Company will have (and will, at all times while
Debentures are outstanding, maintain) an adequate reserve of duly authorized
shares of Common Stock, reserved for issuance to the holders of such Debentures,
to enable it to perform its conversion, exercise and other obligations under
this Agreement, the Debentures. Such number of reserved and available shares of
Common Stock is not less than the sum of 200% of the number of shares of Common
Stock which would be issuable upon conversion in full of the Debentures,
assuming such conversion occurred on the Original Issue Date of the Debentures,
the Debenture remain outstanding for one year and all interest is paid in shares
of Common Stock. All such authorized shares of Common Stock shall be duly
reserved for issuance to the holders of the Debentures. The shares of Common
Stock issuable upon conversion of the Debentures are collectively referred to
herein as the "Underlying Shares." The Debentures and the Underlying Shares are
collectively referred to herein as, the "Securities."
-4-
Convertible Debenture Purchase Agreement
5
When issued in accordance with the Debentures, the Underlying Shares will be
duly authorized, validly issued, fully paid and nonassessable, free and clear of
all Liens.
(e) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other charter documents (each as amended
through the date hereof), or (ii) subject to obtaining the Required Approvals
(as defined below), conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any agreement, credit facility,
debt or other instrument (evidencing a Company or Subsidiary debt or otherwise)
or other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), as could not, individually or in the aggregate, have or
result in a Material Adverse Effect. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
authority, except for violations which, individually or in the aggregate, could
not have or result in a Material Adverse Effect.
(f) Filings, Consents and Approvals. Neither the Company nor
any Subsidiary is required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court or
other federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filings required pursuant to Section
3.10, (ii) the filing with the Securities and Exchange Commission (the
"Commission") of a registration statement meeting the requirements set forth in
the Registration Rights Agreement and covering the resale of the Shares and the
Underlying Shares by the Purchasers (the "Underlying Shares Registration
Statement"), (iii) applicable Blue Sky filings, and (iv) in all other cases
where the failure to obtain such consent, waiver, authorization or order, or to
give such notice or make such filing or registration could not have or result
in, individually or in the aggregate, a Material Adverse Effect (collectively,
the "Required Approvals").
(g) Litigation; Proceedings. There is no action, suit,
inquiry, notice of violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an "Action") which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, if there were an
unfavorable decision, individually or in the aggregate, have or result in a
Material Adverse Effect. Neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any Action involving
(A) a claim of violation of or liability under federal or state securities laws
or (B) a claim of breach of fiduciary
-5-
Convertible Debenture Purchase Agreement
6
duty; (iv) the Company does not have pending before the Commission any request
for confidential treatment of information and the Company has no knowledge of
any expected such request that would be made prior to the Effectiveness Date (as
defined in the Registration Rights Agreement); and (v) there has not been, and
to the best of the Company's knowledge there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former
director or officer of the Company.
(h) No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of (and no event has occurred
which has not been waived which, with notice or lapse of time or both, would
result in a default by the Company or any Subsidiary under), nor has the Company
or any Subsidiary received notice of a claim that it is in default under or that
it is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound, (ii) is in violation of any order of any court, arbitrator
or governmental body, or (iii) is in violation of any statute, rule or
regulation of any governmental authority, in each case of clauses (i), (ii) or
(iii) above, except as could not individually or in the aggregate, have or
result in a Material Adverse Effect. The security interests granted to the
Purchasers pursuant to the Security Agreement and Intellectual Property Security
Agreement will convey and grant to the Purchasers a first priority security
interest in all of the Collateral (as such term is defined in such agreements).
(i) Private Offering. Assuming the accuracy of the
representations and warranties of the Purchasers set forth in Sections
2.2(b)-(g), the offer, issuance and sale of the Securities to the Purchasers as
contemplated hereby are exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"). Neither the Company
nor any Person acting on its behalf has taken or is, to the knowledge of the
Company, contemplating taking any action which could subject the offering,
issuance or sale of the Securities to the registration requirements of the
Securities Act including soliciting any offer to buy or sell the Securities by
means of any form of general solicitation or advertising.
(j) SEC Reports; Financial Statements. The Company has filed
all reports required to be filed by it under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), including pursuant to Section 13(a) or
15(d) thereof, for the two years preceding the date hereof (or such shorter
period as the Company was required by law to file such material) (the foregoing
materials being collectively referred to herein as the "SEC Reports" and,
together with the Schedules to this Agreement, the "Disclosure Materials") on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such extension. As of
their respective dates, the SEC Reports complied in all material respects with
the requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. All material agreements to which the Company is
a party or to which the property or assets of the Company are subject have been
filed as exhibits to the SEC Reports as required under the Exchange Act. The
financial statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect
-6-
Convertible Debenture Purchase Agreement
7
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved ("GAAP"), except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.
Since [ ], except as specifically disclosed in the SEC Reports, (a) there has
been no event, occurrence or development that has or that could result in a
Material Adverse Effect, (b) the Company has not incurred any liabilities
(contingent or otherwise) other than (x) liabilities incurred in the ordinary
course of business consistent with past practice and (y) liabilities not
required to be reflected in the Company's financial statements pursuant to GAAP
or required to be disclosed in filings made with the Commission, (c) the Company
has not altered its method of accounting or the identity of its auditors and (d)
the Company has not declared or made any payment or distribution of cash or
other property to its stockholders or officers or directors (other than in
compliance with existing Company stock option plans) with respect to its capital
stock, or purchased, redeemed (or made any agreements to purchase or redeem) any
shares of its capital stock.
(k) Investment Company. The Company is not, and is not an
Affiliate (as defined in Rule 405 under the Securities Act) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(l) Certain Fees. No fees or commissions will be payable by
the Company to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement. The Company
shall indemnify and hold harmless the Purchasers, their employees, officers,
directors, agents, and partners, and their respective Affiliates, from and
against all claims, losses, damages, costs (including the costs of preparation
and attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as such fees and expenses are incurred.
(m) Solicitation Materials. Neither the Company nor any Person
acting on the Company's behalf has solicited any offer to buy or sell the
Securities by means of any form of general solicitation or advertising.
(n) Form S-B2 Eligibility. The Company is eligible to register
for resale under Form S-B2 promulgated under the Securities Act.
(a) Exclusivity. The Company shall not issue and sell the
Debentures to any Person other than the Purchasers without the specific prior
written consent of the Purchasers.
-7-
Convertible Debenture Purchase Agreement
8
(o) Seniority. No indebtedness of the Company is senior to the
Debentures in right of payment, whether with respect to interest or upon
liquidation or dissolution, or otherwise.
(p) Listing and Maintenance Requirements Compliance. Except as
set forth in the SEC Reports, the Company has not, in the two years preceding
the date hereof, received notice (written or oral) from any other stock
exchange, market or trading facility on which the Common Stock is or has been
listed (or on which it has been quoted) to the effect that the Company is not in
compliance with the listing or maintenance requirements of such exchange, market
or trading facility. The Company is, and has no reason to believe that it will
not in the foreseeable future continue to be, in compliance with all such
listing and maintenance requirements.
(q) Patents and Trademarks. The Company and its Subsidiaries
have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses and
rights which are necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so have would have a Material Adverse Effect (collectively, the "Intellectual
Property Rights"). Neither the Company nor any Subsidiary has received a written
notice that the Intellectual Property Rights used by the Company or its
Subsidiaries violates or infringes upon the rights of any Person. To the best
knowledge of the Company, all such Intellectual Property Rights are enforceable
and there is no existing infringement by another Person of any of the
Intellectual Property Rights.
(a) Registration Rights; Rights of Participation. Except as
set forth on Schedule 6(b) to the Registration Rights Agreement, the Company has
not granted or agreed to grant to any Person any rights (including "piggy-back"
registration rights) to have any securities of the Company registered with the
Commission or any other governmental authority which has not been satisfied.
Except as set forth on Schedule 6(b) to the Registration Rights Agreement, no
Person, has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents.
(r) Regulatory Permits. The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, have or
result in a Material Adverse Effect ("Material Permits"), and neither the
Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any Material Permit.
(s) Title. The Company and the Subsidiaries do not have title
to any real property. Any real property and facilities held under lease by the
Company and its Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and its Subsidiaries are in compliance
and do not interfere with the use made and proposed to be made of such property
and buildings by the Company and its Subsidiaries.
-8-
Convertible Debenture Purchase Agreement
9
(v) Labor Relations. No material labor problem exists or, to
the knowledge of the Company, is imminent with respect to any of the employees
of the Company.
(w) Disclosure. The Company confirms that neither it nor any
other Person acting on its behalf has provided any of the Purchasers or its
agents or counsel with any information that constitutes or might constitute
material non-public information. The Company understands and confirms that the
Purchasers shall be relying on the foregoing representations in effecting
transactions in securities of the Company. All disclosure provided to the
Purchasers regarding the Company, its business and the transactions contemplated
hereby, including the Schedules to this Agreement, furnished by or on behalf of
the Company are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
2.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby for itself and for no other Purchaser represents and warrants to the
Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The purchase by such Purchaser of the Securities
hereunder has been duly authorized by all necessary action on the part of such
Purchaser. Each of this Agreement, the Registration Rights Agreement, the
Security Agreement and the Intellectual Property Security Agreement has been
duly executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with its
terms.
(b) Investment Intent. Such Purchaser is acquiring the
Securities as principal for its own account for investment purposes only and not
with a view to or for distributing or reselling such Securities or any part
thereof, without prejudice, however, to such Purchaser's right, subject to the
provisions of this Agreement and the Registration Rights Agreement, at all times
to sell or otherwise dispose of all or any part of such Securities pursuant to
an effective registration statement under the Securities Act or under an
exemption from such registration and in compliance with applicable federal and
state securities laws. Nothing contained herein shall be deemed a representation
or warranty by such Purchaser to hold Securities for any period of time. Such
Purchaser is acquiring the Securities hereunder in the ordinary course of its
business. Such Purchaser does not have any agreement or understanding, directly
or indirectly, with any person to distribute the Securities.
(c) Purchaser Status. At the time such Purchaser was offered
the Securities, it was, and at the date hereof it is an "accredited investor" as
defined in Rule 501(a) under the Securities Act.
(d) Experience of such Purchaser. Such Purchaser, either alone
or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.
-9-
Convertible Debenture Purchase Agreement
10
(e) Ability of such Purchaser to Bear Risk of Investment. Such
Purchaser is able to bear the economic risk of an investment in the Securities
and, at the present time, is able to afford a complete loss of such investment.
(f) Access to Information. Such Purchaser acknowledges that it
has reviewed the Disclosure Materials and has been afforded (i) the opportunity
to ask such questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the Disclosure
Materials. Neither such inquiries nor any other investigation conducted by or on
behalf of such Purchaser or its representatives or counsel shall modify, amend
or affect such Purchaser's right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
(a) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of or subsequent to any advertisement, article, notice or
other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.
(g) Reliance. Such Purchaser understands and acknowledges that
(i) the Securities are being offered and sold to it without registration under
the Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Purchaser hereby consents to such
reliance.
The Company acknowledges and agrees that no Purchaser makes or
has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
(1)1.1 Transfer Restrictions. (a) Securities may only be disposed of
pursuant to an effective registration statement under the Securities Act, to the
Company or pursuant to an available exemption from or in a transaction not
subject to the registration requirements of the Securities Act, and in
compliance with any applicable federal and state securities laws. In connection
with any transfer of Securities other than pursuant to an effective registration
statement or to the Company, except as otherwise set forth herein, the Company
may require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor, the
-10-
Convertible Debenture Purchase Agreement
11
form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration of such
transferred Securities under the Securities Act. Any such transferee shall agree
in writing to be bound by the terms of this Agreement and shall have the rights
of a Purchaser under this Agreement and the Registration Rights Agreement.
(a) The Purchasers agree to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS.
Neither the Shares nor the Underlying Shares shall contain the
legend set forth above nor any other legend if the conversion of Debentures
occurs at any time while an Underlying Shares Registration Statement is
effective under the Securities Act or the holder is relying on Rule 144
promulgated under the Securities Act ("Rule 144") in connection with the resale
of such Underlying Shares, or in the event there is not an effective Underlying
Shares Registration Statement, and Rule 144 is not then available for resale of
the Underlying Shares, at such time as such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission). The
Company shall cause its counsel to issue the legal opinion included in the
Transfer Agent Instructions to the Company's transfer agent on the date that an
Underlying Shares Registration Statement is declared effective by the Commission
(such date, the "Effective Date"). The Company agrees that following the
Effective Date, it will, no later than three (3) Trading Days following the
delivery by a Purchaser to the Company of a certificate or certificates
representing Shares or Underlying Shares issued with a restrictive legend,
deliver to such Purchaser certificates representing such Shares which shall be
free from all restrictive and other legends. The Company may not make any
notation on its records or give instructions to any transfer agent of the
Company which enlarge the restrictions of transfer set forth in this Section.
3.2 Acknowledgment of Dilution. The Company acknowledges that the
issuance of Underlying Shares upon conversion of the Debentures will result in
dilution of the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions. The Company further acknowledges
that its obligation to issue Underlying Shares upon conversion of the Debenture
is unconditional and absolute, subject to the limitations set forth in the
Debentures, regardless of the effect of any such dilution.
3.3 Furnishing of Information. As long as the Purchasers own
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act. As long as the Purchasers own Securities, if
the Company is not required to file reports pursuant to such sections, it will
prepare and furnish to the Purchasers and make publicly available in accordance
with Rule 144(c) promulgated under the Securities Act such information as is
required for the Purchasers to sell the Securities under Rule 144 promulgated
under the Securities Act. The Company further
-11-
Convertible Debenture Purchase Agreement
12
covenants that it will take such further action as any holder of Securities may
reasonably request, all to the extent required from time to time to enable such
Person to sell Underlying Shares without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144 promulgated under
the Securities Act, including causing its attorneys to render and deliver any
legal opinion required in order to permit a Purchaser to receive Underlying
Shares free of all restrictive legends and to subsequently sell Underlying
Shares under Rule 144 upon receipt of a notice of an intention to sell or other
form of notice having a similar effect. Upon the request of any such Person, the
Company shall deliver to such Person a written certification of a duly
authorized officer as to whether it has complied with such requirements.
3.4 Integration. The Company shall not, and shall use its best efforts
to ensure that, no Affiliate of the Company shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers.
3.5 Increase in Authorized Shares. If on any date the Company would be,
if a notice of conversion or exercise (as the case may be) were to be delivered
on such date, precluded from issuing (a) 200% of the number of Underlying Shares
as would then be issuable upon a conversion in full of the Debentures (the
"Current Required Minimum"), in either case, due to the unavailability of a
sufficient number of authorized but unissued or reserved shares of Common Stock,
then the Board of Directors of the Company shall promptly (and in any case,
within 30 Business Days from such date) prepare and mail to the stockholders of
the Company proxy materials requesting authorization to amend the Company's
certificate or articles of incorporation to increase the number of shares of
Common Stock which the Company is authorized to issue to at least such number of
shares as reasonably requested by the Purchasers in order to provide for such
number of authorized and unissued shares of Common Stock to enable the Company
to comply with its issuance, conversion exercise and reservation of shares
obligations as set forth in this Agreement, the Debentures (the sum of (x) the
number of shares of Common Stock then outstanding plus all shares of Common
Stock issuable upon exercise of all outstanding options, warrants and
convertible instruments, and (y) the Current Required Minimum, shall be a
reasonable number). In connection therewith, the Board of Directors shall (a)
adopt proper resolutions authorizing such increase, (b) recommend to and
otherwise use its best efforts to promptly and duly obtain stockholder approval
to carry out such resolutions (and hold a special meeting of the stockholders no
later than the earlier to occur of the 60th day after delivery of the proxy
materials relating to such meeting and the 90th day after request by a holder of
Securities to issue the number of Underlying Shares in accordance with the terms
hereof) and (c) within five Business Days of obtaining such stockholder
authorization, file an appropriate amendment to the Company's certificate or
articles of incorporation to evidence such increase.
3.6 Reservation and Listing of Underlying Shares. (a) The Company shall
(i) in the time and manner required by any national securities exchange, market,
trading or quotation facility on which the Common Stock is then traded, prepare
and file with such national securities exchange, market, trading or quotation
facility on which the Common Stock is then traded an additional shares listing
application covering a number of shares of Common Stock which is not
-12-
Convertible Debenture Purchase Agreement
13
less than the Initial Minimum, (ii) take all steps necessary to cause such
shares of Common Stock to be approved for listing on any such national
securities exchange, market or trading or quotation facility on which the Common
Stock is then listed as soon as possible thereafter, and (iii) provide to the
Purchasers evidence of such listing, and the Company shall maintain the listing
of its Common Stock thereon. If the number of Underlying Shares issuable upon
conversion in full of the then outstanding Debentures exceeds 85% of the number
of Underlying Shares previously listed on account thereof with any such required
exchanges, then the Company shall take the necessary actions to immediately list
a number of Underlying Shares as equals no less than the then Current Required
Minimum.
(b) The Company shall maintain a reserve of shares of Common
Stock for issuance upon conversion of the Debentures in full in accordance with
this Agreement, in such amount as may be required to fulfill its obligations in
full under the Transaction Documents, which reserve shall equal no less than the
then Current Required Minimum.
3.7 Conversion Procedures. The Transfer Agent Instructions and
Conversion Notice (as defined in the Debentures) set forth the totality of the
procedures with respect to the conversion of the Debentures, including the form
of legal opinion, if necessary, that shall be rendered to the Company's transfer
agent and such other information and instructions as may be reasonably necessary
to enable the Purchasers to convert their Debentures.
(1)1.1 Conversion and Exercise Obligations of the Company. The Company
shall honor conversions of the Debentures and shall deliver Underlying Shares in
accordance with the respective terms, conditions and time periods set forth in
the Debentures.
3.8 Subsequent Financing; Limitation on Registrations. (a) Subject to
Section 3.9(d) and (e), from the date hereof through the 90th Trading Day
following the Effective Date, the Company will not offer, sell, grant any option
to purchase, or otherwise dispose of (or announce any offer, sale, grant or any
option to purchase or other disposition) any of its or its Affiliates' equity or
equity equivalent securities (including the issuance of any debt or other
instrument at any time over the life thereof convertible into or exchangeable
for Common Stock.
(a) Subject to Section 3.9(d) and (e), the Company shall not,
directly or indirectly, offer, sell, grant any option to purchase, or otherwise
dispose of (or announce any offer, sale, grant or any option to purchase or
other disposition) any of its equity or equity-equivalent securities or
securities of any of its Affiliates that are exchangeable or convertible
(directly or indirectly) for shares of Common Stock, including the issuance of
any debt or other instrument at any time over the life thereof convertible into
or exchangeable for Common Stock (collectively, a "Subsequent Placement") from
the date hereof until the expiration of the 180th Trading Day after the
Effective Date, unless (A) the Company delivers to each of the Purchasers a
written notice (the "Subsequent Placement Notice") of its intention to effect
such Subsequent Placement, which Subsequent Placement Notice shall describe in
reasonable detail the proposed terms of such Subsequent Placement, the amount of
proceeds intended to be raised thereunder, the Person with whom such Subsequent
Placement shall be effected, and attached to which shall be a term sheet or
similar document relating thereto and (B) such Purchaser shall not have notified
the Company by 6:30 p.m. (New York City time) on the tenth Trading Day after its
-13-
Convertible Debenture Purchase Agreement
14
receipt of the Subsequent Placement Notice of its willingness to provide (or to
cause its sole designee to provide), subject to completion of mutually
acceptable documentation, financing to the Company on the same terms set forth
in the Subsequent Placement Notice. If the Purchasers shall fail to notify the
Company of their intention to enter into such negotiations within such time
period, the Company may effect the Subsequent Placement substantially upon the
terms and to the Persons (or Affiliates of such Persons) set forth in the
Subsequent Placement Notice; provided, that the Company shall provide the
Purchasers with a second Subsequent Placement Notice, and the Purchasers shall
again have the right of first refusal set forth above in this paragraph (a), if
the Subsequent Placement subject to the initial Subsequent Placement Notice
shall not have been consummated for any reason on the terms set forth in such
Subsequent Placement Notice within 45 Trading Days after the date of the initial
Subsequent Placement Notice with the Person (or an Affiliate of such Person)
identified in the Subsequent Placement Notice. If the Purchasers shall indicate
a willingness to provide financing in excess of the amount set forth in the
Subsequent Placement Notice, then each Purchaser shall be entitled to provide
financing pursuant to such Subsequent Placement Notice up to an amount equal to
such Purchaser's pro-rata portion of the aggregate number of Shares purchased by
such Purchaser under this Agreement, but the Company shall not be required to
accept financing from the Purchasers in an amount in excess of the amount set
forth in the Subsequent Placement Notice.
(b) Except for (x) Underlying Shares, (y) other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to be
registered, and securities of the Company permitted pursuant to Section 6(c) of
the Registration Rights Agreement to be registered, in the Underlying Shares
Registration Statement in accordance with the Registration Rights Agreement, and
(z) Common Stock permitted to be issued pursuant to Section 3.9 (e), the Company
shall not, for a period of not less than 90 Trading Days after the Effective
Date, without the prior written consent of the Purchasers (i) issue or sell any
of its or any of its Affiliates' equity or equity-equivalent securities pursuant
to Regulation S promulgated under the Securities Act, or (ii) register any
securities of the Company. Any days after the Effective Date that a Purchaser is
unable to sell Underlying Shares under the Underlying Shares Registration
Statement shall be added to such 90 Trading Day period.
(d) With respect to Section 3.9(a) and (b), the 90 and 180
Trading Day periods shall be extended for the number of Trading Days during such
period (A) in which trading in the Common Stock is suspended by any securities
exchange or market or quotation system on which the Common Stock is then listed,
or (B) during which the Underlying Shares Registration Statement is not
effective, or (C) during which the prospectus included in the Underlying Shares
Registration Statement may not be used by the holders thereof for the resale of
Underlying Shares.
(e) The restrictions contained in Section 3.9(a) and (b)
above, shall not apply to (i) the granting of options or warrants to employees,
officers and directors of the Company, and the issuance of Common Stock upon
exercise of such options or warrants granted under any stock option plan
heretofore or hereinafter duly adopted by the Company and (ii) issuances of
Common Stock pursuant to a Strategic Transaction (as defined herein). A
"Strategic Transaction" shall mean a transaction or relationship in which the
Company issues shares of Common Stock to a Person which is, itself or through
its subsidiaries, an operating company in a business related to the business of
the Company and in which the Company receives material benefits in addition to
the investment of funds, but shall not include a transaction in which the
Company is issuing securities primarily for the purpose of raising capital or to
an entity whose primary business is investing in securities.
-14-
Convertible Debenture Purchase Agreement
15
(1)1.2 Certain Securities Laws Disclosures; Publicity. The Company
shall: (i) on the Closing Date, issue a press release reasonably acceptable to
the Purchasers disclosing the transactions contemplated hereby, (ii) file with
the Commission a Report on Form 8-K disclosing the transactions contemplated
hereby within twelve Business Days after the Closing Date, and (iii) timely file
with the Commission a Form D promulgated under the Securities Act. The Company
shall, no less than two Business Days prior to the filing of any disclosure
required by clauses (ii) and (iii) above, provide a copy thereof to the
Purchasers for their review. The Company and the Purchasers shall consult with
each other in issuing any other press releases or otherwise making public
statements or filings and other communications with the Commission or any
regulatory agency or stock market or trading facility with respect to the
transactions contemplated hereby and neither party shall issue any such press
release or otherwise make any such public statement, filings or other
communications without the prior written consent of the other, except that if
such disclosure is required by law or stock market regulation, in which such
case the disclosing party shall promptly provide the other party with prior
notice of such public statement, filing or other communication. Notwithstanding
the foregoing, the Company shall not publicly disclose the names of the
Purchasers, or include the names of the Purchasers in any filing with the
Commission, or any regulatory agency, trading facility or stock market without
the prior written consent of the Purchasers, except to the extent such
disclosure (but not any disclosure as to the controlling Persons thereof) is
required by law or stock market regulations, in which case the Company shall
provide the Purchasers with prior notice of such disclosure.
(1)1.3 Transfer of Intellectual Property Rights. Except in connection
with the sale of all or substantially all of the assets of the Company or
licensing arrangements in the ordinary course of the Company's business, the
Company shall not transfer, sell or otherwise dispose of any Intellectual
Property Rights, or allow any of the Intellectual Property Rights to become
subject to any Liens, or fail to renew such Intellectual Property Rights (if
renewable and it would otherwise lapse if not renewed), without the prior
written consent of the Purchasers.
3.9 Use of Proceeds. The Company shall use the net proceeds from the
sale of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than payment of trade
payables in the ordinary course of the Company's business and prior practices),
to redeem any Company equity or equity-equivalent securities or to settle any
outstanding litigation.
3.10 Reimbursement. If any Purchaser becomes involved in any capacity
in any action, proceeding or investigation brought by or against any Person,
including stockholders of the Company, solely as a result of acquiring the
Securities under this Agreement, the Company will reimburse such Purchaser for
its reasonable legal and other expenses (including the cost of any
investigation, preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred. The reimbursement
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same terms
and conditions to any Affiliates of the Purchasers who are actually named in
such action, proceeding or investigation, and partners, directors, agents,
employees and controlling persons (if any), as the case may be, of the
Purchasers and any such Affiliate, and
-15-
Convertible Debenture Purchase Agreement
16
shall be binding upon and inure to the benefit of any successors, assigns, heirs
and personal representatives of the Company, the Purchasers and any such
Affiliate and any such Person. The Company also agrees that neither the
Purchasers nor any such Affiliates, partners, directors, agents, employees or
controlling persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company solely as a result of
acquiring the Securities under this Agreement. The Company's reimbursement
obligation under this Section shall not apply if any action, proceeding or
investigation arises out of or relates to any Purchaser's gross negligence or
willful misconduct.
ARTICLE I
MISCELLANEOUS
(1)1.1 Fees and Expenses. At the Closing, the Company shall reimburse
the Purchasers for their legal fees and expenses incurred in connection with the
preparation and negotiation of the Transaction Documents by paying to Xxxxxxxx
Xxxxxxxxx $30,000 (less $5,000 which has been received) for the preparation and
negotiation of the Transaction Documents. The amount contemplated by the
immediately preceding sentence shall be retained by the Purchasers and shall not
be delivered to the Company at the Closing. Other than the amount contemplated
herein, and except as otherwise set forth in the Registration Rights Agreement,
each party shall pay the fees and expenses of its advisers, counsel, accountants
and other experts, if any, and all other expenses incurred by such party
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement. The Company shall pay all stamp and other taxes and duties
levied in connection with the issuance of the Securities
1.3 Entire Agreement; Amendments. The Transaction Documents, together with the
Exhibits and Schedules thereto and Transfer Agent Instructions, contain the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with
respect to such matters, which the parties acknowledge have been merged into
such documents, exhibits and schedules.
1.4 Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified in this Section prior to 6:30 p.m. (New York City time) on a
Business Day, (ii) the Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified in this Agreement later than 6:30 p.m. (New York City time) on
any date and earlier than 11:59 p.m. (New York City time) on such date, (iii)
the Business Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The address for such notices and
communications shall be as follows:
-16-
Convertible Debenture Purchase Agreement
17
If to the Company: XxXxxxx Energy Systems of America, Inc.
00000 Xxx 000, XXX 000-X
Xxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Chief Financial Officer
With copies to: Xxxxx Xxxxxxx & Xxxx LLP
000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
If to a Purchaser: To the address set forth under such
Purchaser's name on the signature pages
hereto.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
1.5 Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by both the
Company and each of the Purchasers or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
1.6 Headings. The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect any of the
provisions hereof.
1.7 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Except as set forth in
Section 3.1(a), the Purchasers may not assign this Agreement or any of the
rights or obligations hereunder without the consent of the Company. This
provision shall not limit any Purchaser's right to transfer securities or
transfer or assign rights under the Registration Rights Agreement.
4.7 No Third-Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective successors and
permitted assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.
1.8 Governing Law. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of
-17-
Convertible Debenture Purchase Agreement
18
the Transaction Documents), and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law.
1.9 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery and conversion of
the Debentures.
1.10 Execution. This Agreement may be executed in two or more counterparts, all
of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
1.11 Severability. In case any one or more of the provisions of this Agreement
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
1.12 Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the Purchasers
will be entitled to specific performance of the obligations of the Company under
the Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of its
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
1.13 Independent Nature of Purchasers' Obligations and Rights. The obligations
of each Purchaser under any Transaction Document is several and not joint with
the obligations of any other Purchaser and no Purchaser shall be responsible in
any way for the performance of the obligations of any other Purchaser under any
Transaction Document. Nothing contained herein or in any Transaction Document,
and no action taken by any Purchaser pursuant thereto, shall be deemed to
constitute the Purchasers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Purchasers are in any
way acting in concert with respect to such obligations or the transactions
contemplated by the Transaction Document. Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement or out of the other Transaction Documents,
-18-
Convertible Debenture Purchase Agreement
19
and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOWS]
-19-
Convertible Debenture Purchase Agreement
20
IN WITNESS WHEREOF, the parties hereto have caused this
Secured Convertible Debenture Purchase Agreement to be duly executed by their
respective authorized signatories as of the date first indicated above.
XXXXXXX ENERGY SYSTEMS OF AMERICA, INC.
By:
------------------------------------
Name:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
Convertible Debenture
21
AJW PARTNERS, LLC
By: SMS Group, LLC
By:
-------------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title:
Purchase Price: $250,000
Address for Notice:
AJW Partners, LLC
000 Xxxxx Xxxxxx
Xxxxx X
Xxxxxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx X. Xxxxxxxx
With copies to: Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000 or (000) 000-0000
Attn: Xxxx X. Xxxxx, Esq.
Convertible Debenture
22
NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By: First Street Manager II, LLC
By:
--------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title:
Purchase Price: $250,000
Address for Notice:
New Millennium Capital Partners II, LLC
000 Xxxxx Xxxxxx
Xxxxx X
Xxxxxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx X. Xxxxxxxxx
With copies to: Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000 or (000) 000-0000
Attn: Xxxx X. Xxxxx, Esq.
Convertible Debenture
