EXHIBIT 2.5
PREFERRED SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of acceptance
set forth below (this "Agreement"), is entered into by and between XXXXXXXX
TECHNOLOGIES, INC. a Florida corporation, with headquarters located at #000 - 00
Xxxxxxx Xxxx, Xxxxxxxxxx, XX 00000 (the "Company"), and the Xxxxx LLC (the
"Investor").
W I T N E S S E T H:
WHEREAS, the Company and the Investor are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration afforded, INTER ALIA, by Rule 506 under Regulation D ("Regulation
D") as promulgated by the United States Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "1933 Act"), and/or
Section 4(2) of the 1933 Act; and
WHEREAS, the Investor wishes to purchase, upon the terms and subject to
the conditions of this Agreement, 3,500 shares of Series D Convertible Preferred
Stock, par value $ .0001 per share and having a stated value of $1,000 per
share, of the Company (the "Preferred Stock") at an original issue discount of
two million ($2MM) dollars, which will be convertible into shares of common
stock, $.0001 par value per share of the Company (the "Common Stock"), upon the
terms and subject to the conditions of such Preferred Stock and subject to
acceptance of this Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
A. PURCHASE; CERTAIN DEFINITIONS.
(i) The undersigned hereby agrees to purchase at the Purchase Price
from the Company Preferred Stock in the amount set forth on the Investor's
signature page of this Agreement, and having the terms and conditions set forth
in the Certificate of Designation of the Series D Convertible Preferred Stock of
the Company attached hereto as ANNEX I (the "Certificate of Designation").
(ii) The aggregate purchase price to be paid by the Investor shall be
equal to the amount set forth on the Investor's signature page of this
Agreement, and shall be payable in United States Dollars.
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B. CERTAIN DEFINITIONS. As used herein, each of the following terms has
the meaning set forth below, unless the context otherwise requires:
(i) "Closing Date" means the date of the closing of the purchase and
sale of the Preferred Stock, as provided herein.
(ii) "Converted Shares" means the shares of Common Stock issuable upon
conversion of the Preferred Stock and pursuant to its terms as they relate to
the shares of Common Stock issuable upon conversion of the Preferred Stock.
(iii) [OMITTED]
(iv) "Last Audited Date" means June 30, 2003.
(v) "Principal Market" means the OTC Bulletin Board or such other
market or exchange on which the Common Stock is then traded.
(vi) "Purchase Price" means the purchase price for the Preferred Stock
at the original issue discount of two million ($2MM) dollars.
(vii) "Securities" means the Preferred Stock, and the Converted Shares.
(viii) "Shares" means the shares of Common Stock representing any or
all of the Converted Shares.
(ix) "Transaction Documents" means this Agreement and the Certificate
of Designation.
C. FORM OF PAYMENT; DELIVERY OF CERTIFICATES.
(i) The Investor shall pay the Purchase Price for the relevant
Preferred Stock by delivering immediately available good funds in United States
Dollars to Company on the relevant Closing Date.
(ii) No later than two days after the relevant Closing Date, but in any
event promptly following payment by the Investor of the relevant Purchase Price,
the Company shall deliver one or more certificates representing the Preferred
Stock and, if relevant to the transactions to be consummated on that Closing
Date, each duly executed on behalf of the Company and issued in the name of the
Investor (collectively, the "Certificates") to the Escrow Agent.
(iii) By signing this Agreement, each of the Investor and the Company
agrees to all of the terms and conditions of, and becomes a party to, the Joint
Escrow Instructions, all of the provisions of which are incorporated herein by
this reference as if set forth in full.
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D. METHOD OF PAYMENT. Payment of the Purchase Price shall be made by
wire transfer of funds to:
XX Xxxxxx Xxxxx Bank
ABA# 021-000021
For credit to the account of Xxxxxxxx Technologies, Inc.
Account No.: 227500432465
Not later than 5:00 p.m., New York time, on the date the Company shall have
accepted this Agreement, the Investor shall deposit with Company the Purchase
Price for the Preferred Stock in immediately available funds. Time is of the
essence with respect to such payment, and failure by the Investor to make such
payment, shall allow the Company to cancel this Agreement.
2. INVESTOR REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Investor represents and warrants to, and covenants and agrees with,
the Company as follows:
a. Without limiting Investor's right to sell the Shares pursuant to
applicable law, the Investor is purchasing the Preferred Stock and will be
acquiring the Shares for its own account for investment only and not with a view
towards the public sale or distribution thereof and not with a view to or for
sale in connection with any distribution thereof.
b. The Investor is (i) an "accredited investor" as that term is defined
in Rule 501 of the General Rules and Regulations under the 1933 Act, (ii)
experienced in making investments of the kind described in this Agreement and
the related documents, (iii) able, by reason of the business and financial
experience of its officers and professional advisors (who are not affiliated
with or compensated in any way by the Company or any of its affiliates or
selling agents), to protect its own interests in connection with the
transactions described in this Agreement, and the related documents, and (iv)
able to afford the entire loss of its investment in the Securities.
c. All subsequent offers and sales of the Preferred Stock and the
Shares by the Investor shall be made pursuant to registration of the Shares
under the 1933 Act or pursuant to an exemption from registration.
d. The Investor understands that the Securities are being offered and
sold to it in reliance on specific exemptions from the registration requirements
of United States federal and state securities laws and that the Company is
relying upon the truth and accuracy of, and the Investor's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Investor set forth herein in order to determine the availability of such
exemptions and the eligibility of the Investor to acquire the Securities.
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e. The Investor and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Preferred Stock which have been
requested by the Investor. The Investor and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and have received
complete and satisfactory answers to any such inquiries. Without limiting the
generality of the foregoing, the Investor has also had the opportunity to obtain
and to review the Company's (1) Annual Report on Form 10-K for the fiscal year
ended June 30, 2003, (2) other reports filed pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended since the date of the filing of the
most recent Form 10-K, and (3) all other filings of the Company on XXXXX after
July 1, 2003 (collectively, the "Company's SEC Documents").
f. The Investor understands that its investment in the Securities
involves a high degree of risk.
g. The Investor understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities.
h. This Agreement and the other Transaction Documents to which the
Investor is a party have been duly and validly authorized, executed and
delivered on behalf of the Investor and are valid and binding agreements of the
Investor enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
i. The Investor is an entity duly organized, validly existing and in
good standing under the laws of the Cayman Islands and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Investor will fully observe the laws of such Investor's
jurisdiction in connection with the offer and sale of the Securities to the
Investor, the ownership of the Securities by the Investor, and the entering into
and performance of the Transaction Documents. The offer and sale of the
Securities, the ownership of the Securities by the Investor, and the entering
into and performance of the Transaction Documents will not violate any
applicable securities or other laws of the Investor's jurisdiction.
3. COMPANY REPRESENTATIONS, ETC. The Company represents and warrants to
the Investor as of the date hereof that, except as otherwise provided in the SEC
Documents, or as otherwise publicly disclosed by the Company in accordance with
Regulation FD:
a. CONCERNING THE PREFERRED STOCK AND THE SHARES. The Preferred Stock
has been duly authorized, and when issued and paid for in accordance with the
terms of this Agreement, will be duly and validly issued, fully paid and
non-assessable and will not subject the holder thereof to personal liability
solely by reason of acquiring the Preferred Stock hereunder. There are no
preemptive rights of any stockholder of the Company, as such, to acquire the
Preferred Stock or the Shares.
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b. REPORTING COMPANY STATUS. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida and has the requisite corporate power to own its properties and to carry
on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the business, operations
or financial condition or results of operation of the Company and its
subsidiaries taken as a whole. The Company has registered its Common Stock
pursuant to Section12 of the 1934 Act and is obligated to file reports pursuant
to Section 13 of the 1934 Act. The Company has received no notice, either oral
or written, with respect to the continued eligibility of the Common Stock for
such listing.
c. AUTHORIZED SHARES. The authorized capital stock of the Company
consists of (i) 500,000,000 shares of Common Stock, $.0001 par value per share,
of which approximately 32,000,000 shares have been issued and are outstanding as
of the date hereof and (ii) 5,000,000 of Preferred Stock, of which 40,000 shares
have been designated as Series D Preferred Stock, and ________ shares have been
issued and are outstanding as of the date hereof. All issued and outstanding
shares of Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable. As of the date of this Agreement, the Company has
sufficient authorized and unissued shares of Common Stock as may be necessary to
effect the issuance of the Shares upon conversion of the Preferred Stock, the
Shares will have been duly authorized and will be duly and validly issued, fully
paid and non-assessable and will not subject the holder thereof to personal
liability by reason of being such holder. [Xxxxx: you can reference SEC docs
with respect to o/s warrants]
d. SECURITIES PURCHASE AGREEMENT; AND STOCK. This Agreement and the
transaction contemplated thereby, has been duly and validly authorized by the
Company. This Agreement has been duly executed and delivered by the Company and
this Agreement is, and each of the other Transaction Documents, when executed
and delivered by the Company, will be, a valid and binding agreement of the
Company enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors'
rights generally.
e. NON-CONTRAVENTION. The execution and delivery of this Agreement by
the Company, the issuance of the Securities pursuant to the assumptions set
forth in Section 3(c), and the consummation by the Company of the other
transactions contemplated by the Transaction Documents, and the terms of the
Preferred Stock do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under (i)
the articles of incorporation or by-laws of the Company, each as currently in
effect, (ii) any indenture, mortgage, deed of trust, or other material agreement
or instrument to which the Company is a party or by which it or any of its
properties or assets are bound, including any listing agreement for the Common
Stock except as herein set forth, or (iii) to its knowledge, any existing
applicable law, rule, or regulation or any applicable decree, judgment, or order
of any court, United States federal or state regulatory body, administrative
agency, or other governmental body having jurisdiction over the Company or any
of its properties or assets, except such conflict, breach or default which would
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not have a material adverse effect on the business, operations, condition
(financial or otherwise), or results of operations of the Company and its
subsidiaries, taken as a whole, or on the transactions contemplated herein.
f. APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Investor as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
g. SEC FILINGS. None of the Company's SEC Documents contained, at the
time they were filed, any untrue statement of a material fact with the exception
of the number of authorized shares on the Company's filing on form 10KSB for the
year ended June 30, 2003, or omitted to state any material fact required to be
stated therein or necessary to make the statements made therein in light of the
circumstances under which they were made, not misleading, provided, however,
that the Company makes no representation with respect to any and all disclosure
pertaining to the Investor, its transactions and relationship with the Company,
or its beneficial ownership of securities of the Company. The Company has since
June 30, 2003 timely filed all requisite forms, reports and exhibits thereto
with the SEC.
h. FULL DISCLOSURE. There is no fact known to the Company (other than
general economic conditions known to the public generally or as disclosed in the
Company's SEC Documents) that has not been disclosed in writing to the Investor
that (i) would reasonably be expected to have a material adverse effect on the
business, operations, condition (financial or otherwise), or results of
operations of the Company and its subsidiaries, taken as a whole , (ii) would
reasonably be expected to materially and adversely affect the ability of the
Company to perform its obligations pursuant to this Agreement or any of the
Transaction Documents, or (iii) would reasonably be expected to materially and
adversely affect the value of the rights granted to the Investor in the
Transaction Documents.
i. ABSENCE OF LITIGATION. There is no action, suit, proceeding, inquiry
or investigation before or by any court, public board or body pending or, to the
knowledge of the Company, threatened against or affecting the Company, wherein
an unfavorable decision, ruling or finding would have a material adverse effect
on the properties, business, operations, condition (financial or otherwise), or
results of operation of the Company and its subsidiaries taken as a whole or the
transactions contemplated by any of the Transaction Documents or which would
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, any of the Transaction
Documents.
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j. NO UNDISCLOSED LIABILITIES OR EVENTS. The Company has no liabilities
or obligations other than those disclosed in the Company's SEC Documents or
those incurred in the ordinary course of the Company's business, and which
individually or in the aggregate, do not or would not have a material adverse
effect on the properties, business, operations, condition (financial or
otherwise), or results of operations of the Company and its subsidiaries, taken
as a whole. Except for the possible acquisition referred to in the SEC
Documents, no event or circumstances has occurred or exists with respect to the
Company or its properties, business, operations, condition (financial or
otherwise), or results of operations, which, under applicable law, rule or
regulation, requires public disclosure or announcement prior to the date hereof
by the Company but which has not been so publicly announced or disclosed. Except
for the possible acquisition referred to in the SEC Documents, there are no
proposals currently under consideration or currently anticipated to be under
consideration by the Board of Directors or the executive officers of the Company
(other than the transactions contemplated by the Transaction Documents) which
proposal would (x) change the certificate of incorporation or other charter
document or by-laws of the Company, each as currently in effect, with or without
shareholder approval, which change would reduce or otherwise adversely affect
the rights and powers of the shareholders of the Common Stock or (y) materially
or substantially change the business, assets or capital of the Company,
including its interests in subsidiaries.
k. NO DEFAULT. The Company is not in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any material indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it or its property is
bound.
l. NO INTEGRATED OFFERING. Neither the Company nor any of its
affiliates nor any person acting on its or their behalf has, directly or
indirectly, at any time since December 31, 2003, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under Rule
506 of Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.
m. DILUTION. The number of Shares issuable upon conversion of the
Preferred Stock may increase substantially in certain circumstances. The
Company's executive officers and directors have studied and fully understand the
nature of the Securities being sold hereby and recognize that they have a
potential dilutive effect. The board of directors of the Company has concluded,
in its good faith business judgment, that such issuance is in the best interests
of the Company. The Company specifically acknowledges that its obligation to
issue the Shares upon conversion of the Preferred Stock is binding upon the
Company and enforceable regardless of the dilution such issuance may have on the
ownership interests of other shareholders of the Company, and the Company will
honor every Notice of Conversion (as defined in the Certificate of Designation)
relating to the conversion of the Preferred Stock unless the Company is subject
to an injunction (which injunction was not sought by the Company) prohibiting
the Company from doing so or unless the Company does not have sufficient
authorized and unissued shares of Common Stock as may be necessary to effect the
issuance of the Shares.
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n. BROKERS, FINDERS. The Company has taken no action which would give
rise to any claim by any person for brokerage commission, finder's fees or
similar payments by Investor relating to this Agreement or the transactions
contemplated hereby. Investor shall have no obligation with respect to such fees
or with respect to any claims made by or on behalf of other persons for fees of
a type contemplated in this Section 3(q) that may be due in connection with the
transactions contemplated hereby. The Company shall indemnify and hold harmless
each of Investor, its 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 and when incurred.
r. AMENDMENTS, MODIFICATION OR WAIVERS. The Company shall pay all
reasonable fees and expenses incurred by the Investor in connection with any
amendments, modifications or waivers of this Agreement incurred in connection
with the enforcement of this Agreement, including, without limitation, all
reasonable attorneys' fees and expenses. The Company shall pay all stamp or
other similar taxes and duties levied in connection with issuance of the Shares
pursuant hereto
s. TRADING IN SECURITIES. The Company specifically acknowledges that,
except to the extent specifically provided herein (but limited to the extent so
specified), the Investor retains the right (but is not otherwise obligated) to
buy, sell, engage in hedging transactions or otherwise trade in the securities
of the Company, including, but not necessarily limited to, the Securities, at
any time before, contemporaneous with or after the execution of this Agreement
or from time to time and in any manner whatsoever permitted by applicable
federal and state securities laws.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. TRANSFER RESTRICTIONS. The Investor acknowledges that (1) the shares
of Preferred Stock have not been and are not being registered under the
provisions of the 1933 Act and the Shares have not been and are not being
registered under the 1933 Act, and may not be transferred unless (A)
subsequently registered thereunder or (B) any proposed transferee agrees, in
writing to be bound by the terms of the Certificate of Designation and the
Investor shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Securities made in
reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other person is under any
obligation to register the Securities under the 1933 Act or to comply with the
terms and conditions of any exemption thereunder.
b. RESTRICTIVE LEGEND. The Investor acknowledges and agrees that the
Preferred Stock, and, until such time as the Converted Shares have been
registered under the 1933 Act and sold in accordance with an effective
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Registration Statement, certificates and other instruments representing any of
the Securities shall bear a restrictive legend in substantially the following
form (and a stop-transfer order may be placed against transfer of any such
Securities):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED
FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
c. [INTENTIONALLY OMITTED]
d. FILINGS. (i) The Company undertakes and agrees to promptly and
timely make all necessary filings and other applications in connection with the
sale of the Securities to the Investor under any United States laws and
regulations applicable to the Company, or by any domestic securities exchange or
trading market, and to provide a copy thereof to the Investor promptly after
such filing.
e. REPORTING STATUS. So long as the Investor beneficially owns any of
the Securities, the Company shall file all reports required to be filed with the
SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination. The Company will take all reasonable action under its control to
obtain and to continue the listing and trading of its Common Stock (including,
without limitation, all Converted Shares) on the principal exchange where it's
common stock is traded, and will comply in all material respects with the
Company's reporting, filing and other obligations, if any, under the by-laws or
rules of the National Association of Securities Dealers, Inc. ("NASD") or the
NASDAQ.
f. AVAILABLE SHARES. The Company shall, subsequent to obtaining the
Authorizations and the filing of all necessary amendments to the Articles of
Incorporation in connection therewith, have at all times thereafter authorized
and reserved for issuance, free from preemptive rights, shares of Common Stock
sufficient to yield the aggregate of one hundred and fifty percent (150%) of the
number of shares of Common Stock as may be required, from time to time to
satisfy the conversion rights of the Investor pursuant to the terms and
conditions of the Certificate of Designation.
h. LISTING OF COMMON STOCK. The Company shall use its commercially
reasonable efforts to cause the Converted Shares to be listed on the Principal
Market and to maintain the listing and trading of the Common Stock on the
Principal Market (including, without limitation, maintaining sufficient net
tangible assets) and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Principal Market.
The Company further shall, if the Company applies to have the Common Stock
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traded on any other trading market, include in such application the Converted
Shares, if any, and shall take such other action as is necessary or desirable in
the reasonable opinion of Investor to cause the Common Stock to be listed on
such other trading market as promptly as possible.
i. REIMBURSEMENT. If (i) the Investor, other than by reason of its
gross negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by any shareholder of the Company,
in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents, or if the Investor is impleaded in
any such action, proceeding or investigation by any person, or (ii) the
Investor, other than by reason of its gross negligence or willful misconduct or
by reason of its trading of the Common Stock in a manner that is illegal under
the federal or state securities laws, becomes involved in any capacity in any
action, proceeding or investigation brought by the SEC against or involving the
Company or in connection with or as a result of the consummation of the
transactions contemplated by the Transaction Documents, or if the Investor is
impleaded in any such action, proceeding or investigation by any person, then in
any such case, the Company will reimburse the Investor for its reasonable legal
and other expenses (including the cost of any investigation and preparation)
incurred in connection therewith, as such expenses are incurred. In addition,
other than with respect to any matter in which Investor is a named party, the
Company will pay to the Investor reasonable out-of-pocket costs with respect to
assisting in preparation for hearings, trials or pretrial matters, or otherwise
with respect to inquiries, hearing, trials, and other proceedings relating to
the subject matter of this Agreement. The reimbursement obligations of the
Company under this SECTION 4(I) 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 Investor that 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 Investor and any such
affiliate, and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company, the Investor and any
such affiliate and any such person.
k. RELEASE. Effective upon the execution hereof, the Company, for
itself and on behalf of all affiliated persons and entities, representatives,
and all predecessors in interest, successors and assigns (collectively, the
"Releasing Parties"), that except for the matters related to the issuance and
terms of the Convertible Preferred Stock, hereby releases and forever discharges
each of Investor, and Investor's direct and indirect partners, officers,
directors, employees, affiliates, representatives, agents, trustees,
beneficiaries, predecessors in interest, successors in interest and nominees of
and from any and all claims, demands, actions and causes of action, whether
known or unknown, fixed or contingent, arising prior to the date of execution of
this Agreement, that the Company may have had, may now have or may hereafter
acquire with respect to any matters whatsoever under, relating to or arising
from any prior purchase agreement, registration statement, and the Documents
entered into in connection therewith (sometimes collectively referred to as the
"Prior Agreements"). The Company also fully waives any offsets it may have with
respect to the amounts owed under the Prior Agreements. Additionally, the
Company represents, warrants and covenants that it has not, and at the time this
release becomes effective will not have, sold, assigned, transferred, or
otherwise conveyed to any other person or entity all or any portion of its
rights, claims, demands, actions, or causes of action herein released.
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l. INDEMNIFICATION. If (i) the Investor becomes involved in any
capacity in any action, proceeding or investigation brought by any stockholder
of the Company, in connection with or as a result of the consummation of the
transactions contemplated by this Agreement, the Prior Agreements or the Note,
or if such the Investor impleaded in any such action, proceeding or
investigation by any person, or (ii) the Investor becomes involved in any
capacity in any action, proceeding or investigation brought by the Securities
and Exchange Commission, any self-regulatory organization or other body having
jurisdiction, against or involving the Company or in connection with or as a
result of the consummation of the transactions contemplated by this Agreement,
the Prior Agreements or the Note, or if the Investor is impleaded in any such
action, proceeding or investigation by any person, then in any such case, the
Company hereby agrees to indemnify, defend and hold harmless the Investor from
and against and in respect of all losses, claims, liabilities, damages or
expenses resulting from, imposed upon or incurred by the Investor, directly or
indirectly, and reimburse such Investor for its reasonable legal and other
expenses (including the cost of any investigation and preparation) incurred in
connection therewith, as such expenses are incurred. In addition, the Company
will reimburse the Investor for reasonable internal and overhead costs for the
time of any officers or employees of the Investor devoted to appearing and
preparing to appear as witnesses, assisting in preparation for hearings, trials
or pretrial matters, or otherwise with respect to inquiries, hearing, trials,
and other proceedings relating to the subject matter of this Agreement, the
Prior Agreements or the Note. The indemnification and 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 Investor 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 Investor and any such
affiliate, and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company, the Investor, any
such affiliate and any such person. The Company also agrees that neither the
Investor nor any such affiliate, partner, director, agent, employee or
controlling person shall have any liability to the Company or any person
asserting claims on behalf of or in right of the Company in connection with or
as a result of the consummation of this Agreement, the Prior Agreements or the
Note, except as provided in or contemplated by this Agreement.
m. NON PUBLIC INFORMATION. Each of the Company, its officers,
directors, employees and agents has not in connection with the negotiation and
execution of the Transaction Documents and shall in no event disclose non-public
information to Investor, advisors to or representatives of Investor, unless
prior to disclosure of such information, the Company identifies such information
as being non-public information and provides Investor, such advisors and
representatives with the opportunity to accept or refuse to accept such
non-public information for review.
n: USE OF PROCEEDS. Investor acknowledges that a portion of the
Purchase Price shall be used to redeem shares the Company's common stock held by
Syqwest, Inc., associated with an Amended and Restated Exchange Agreement, dated
July 24, 2003, between Syqwest, Inc. and the Company, pursuant to which Syqwest
was issued shares of common stock as payment for a $450,000 Company obligation
owed to Syqwest in connection with services rendered. Pursuant to the Amended
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and Restated Exchange Agreement, the Company shall exercise its option to
repurchase from Syqwest said shares.
5. TRANSFER AGENT INSTRUCTIONS.
a. The Company warrants that, with respect to the Securities, other
than the stop transfer instructions to give effect to Section 4(a) hereof, it
will give its transfer agent no instructions inconsistent with instructions to
issue Common Stock from time to time upon conversion of the Preferred Stock in
such amounts as specified from time to time by the Company to the transfer
agent, bearing the restrictive legend specified in Section 4(b) of this
Agreement prior to registration of the Shares under the 1933 Act, registered in
the name of the Investor or its nominee and in such denominations to be
specified by the Investor in connection with each conversion of the Preferred
Stock. Except as so provided, the Shares shall otherwise be freely transferable
on the books and records of the Company as and to the extent provided in this
Agreement, and applicable law. Nothing in this Section shall affect in any way
the Investor's obligations and agreement to comply with all applicable
securities laws upon resale of the Securities. If the Investor provides the
Company with an opinion of counsel reasonably satisfactory to the Company that
registration of a resale by the Investor of any of the Securities in accordance
with clause (1)(B) of Section 4(a) of this Agreement is not required under the
1933 Act, the Company shall (except as provided in clause (2) of Section 4(a) of
this Agreement) permit the transfer of the Securities and, in the case of the
Converted Shares, promptly instruct the Company's transfer agent to issue one or
more certificates for Common Stock without legend in such name and in such
denominations as specified by the Investor.
b. Subject to the provisions of this Agreement, the Company will permit
the Investor to exercise its right to convert the Preferred Stock in the manner
contemplated by the Certificate of Designation.
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c. The Company understands that a delay in the issuance of the Shares
of Common Stock beyond the Delivery Date (as defined in the Certificate of
Designation) could result in economic loss to the Investor. As compensation to
the Investor for such loss, the Company agrees to pay late payments to the
Investor for late issuance of Shares upon conversion in accordance with the
following schedule (where "No. Business Days Late" is defined as the number of
business days beyond two (2) business days from the Delivery Date):
Late Payment For Each $10,000
of Stated Value or Dividend
NO. BUSINESS DAYS LATE AMOUNT BEING CONVERTED
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000+$200 for each Business
Day Late beyond 10 days
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Nothing herein shall limit the Investor's right to
pursue actual damages for the Company's failure to issue and deliver the Common
Stock to the Investor. Furthermore, in addition to any other remedies which may
be available to the Investor, in the event that the Company fails for any reason
to effect delivery of such shares of Common Stock within two (2) business days
after the Delivery Date, the Investor will be entitled to revoke the relevant
Notice of Conversion by delivering a notice to such effect to the Company
whereupon the Company and the Investor shall each be restored to their
respective positions immediately prior to delivery of such Notice of Conversion.
d. If, by the relevant Delivery Date, the Company fails for any reason
to deliver the Shares to be issued upon conversion of Preferred Stock and after
such Delivery Date, the holder of the Preferred Stock being converted (a
"Converting Holder") purchases, in an arm's-length open market transaction or
otherwise, shares of Common Stock (the "Covering Shares") in order to make
delivery in satisfaction of a sale of Common Stock by the Converting Holder (the
"Sold Shares"), which delivery such Converting Holder anticipated to make using
the Shares to be issued upon such conversion (a "Buy-In"), the Converting Holder
shall have the right, to require the Company to pay to the Converting Holder, in
addition to the amounts due under Section 5(c) hereof (but in addition to all
other amounts contemplated in other provisions of the Transaction Documents, and
not in lieu of any such other amounts), the Buy-In Adjustment Amount (as defined
below). The "Buy-In Adjustment Amount" is the amount equal to the excess, if
any, of (x) the Converting Holder's total purchase price (including brokerage
13
commissions, if any) for the Covering Shares over (y) the net proceeds (after
brokerage commissions, if any) received by the Converting Holder from the sale
of the Sold Shares. The Company shall pay the Buy-In Adjustment Amount to the
Company in immediately available funds immediately upon demand by the Converting
Holder. By way of illustration and not in limitation of the foregoing, if the
Converting Holder purchases shares of Common Stock having a total purchase price
(including brokerage commissions) of $11,000 to cover a Buy-In with respect to
shares of Common Stock it sold for net proceeds of $10,000, the Buy-In
Adjustment Amount which Company will be required to pay to the Converting Holder
will be $1,000.
e. In lieu of delivering physical certificates representing the Common
Stock issuable upon conversion, provided the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, upon request of the Investor and its compliance with the
provisions contained in this paragraph, so long as the certificates therefor do
not bear a legend and the Investor thereof is not obligated to return such
certificate for the placement of a legend thereon, the Company shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Investor by crediting the account of
Investor's Prime Broker with DTC through its Deposit Withdrawal Agent Commission
system.
f. If, at any time (i) the Company challenges, disputes or denies the
right of a holder of Preferred Stock to effect a conversion of the Preferred
Stock into Common Stock or otherwise dishonors or rejects any Conversion Notice
delivered in accordance with the terms of this Agreement or the Certificate of
Designation, or (ii) any third party who is not and has never been an Affiliate
of such holder commences any lawsuit or proceeding or otherwise asserts any
claim before any court or public or governmental authority, which lawsuit,
proceeding or claim seeks to challenge, deny, enjoin, limit, modify, delay or
dispute the right of such holder to effect the conversion of the Preferred Stock
into Common Stock, and the Company refuses to honor any such Conversion Notice,
then such holder shall have the right, by written notice to the Company, to
require the Company to promptly redeem the Preferred Stock as set forth in
Section 7 of the Certificate of Designation (the "Mandatory Purchase Amount");
provided, however, that the Company shall have a period of sixty (60) days
within which to (i) have the lawsuit or proceeding dismissed and honor the
Conversion Notice, or (ii) raise the capital required to redeem the Mandatory
Purchase Amount, as the case may be. Under any of the circumstances set forth
above, the Company shall be responsible for the payment of all costs and
expenses of such holder, including, but not necessarily limited to, reasonable
legal fees and expenses, as and when incurred in connection with such holder's
disputing any such action or pursuing such holder's rights hereunder (in
addition to any other rights such holder may have hereunder or otherwise). The
Mandatory Purchase Amount will be payable to such holder in cash within five (5)
business days from the date such holder gives the Company written notice that it
is exercising its rights under this paragraph, to the extent that the funds of
the Company legally available for redemption are sufficient.
g. The holder of any Preferred Stock shall be entitled to exercise its
conversion privilege with respect to the Preferred Stock notwithstanding the
commencement of any case under 11 U.S.C. ss.101 et SEQ. (the "Bankruptcy Code").
14
In the event the Company is a debtor under the Bankruptcy Code, the Company
hereby waives, to the fullest extent permitted, any rights to relief it may have
under 11 U.S.C. ss.362 in respect of such holder's conversion privilege. The
Company hereby waives, to the fullest extent permitted, any rights to relief it
may have under 11 U.S.C. ss.362 in respect of the conversion of the Preferred
Stock. The Company agrees, without cost or expense to such holder, to take or to
consent to any and all action necessary to effectuate relief under 11 U.S.C.
ss.362.
6. CLOSING DATE.
A. The Closing Date shall occur on or before June ___, 2004.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Investor understands that the Company's obligation to sell the
relevant Preferred Stock to the Investor pursuant to this Agreement on the
relevant Closing Date, unless waived by the Company, is conditioned upon:
a. The Investor's execution and delivery of this Agreement and the
other Transaction Documents contemplated to be signed by the Investor;
b. Delivery by the Investor to the Company of good funds as payment in
full of an amount equal to the Purchase Price for the relevant Preferred Stock
in accordance with this Agreement;
c. The accuracy on such Closing Date of the representations and
warranties of the Investor contained in this Agreement, each as if made on such
date, and the performance by the Investor on or before such date of all
covenants and agreements of the Investor required to be performed on or before
such date;
d. Except to the extent contemplated by specific provisions of the
Transaction Documents, there shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby to an extent
materially greater than contemplated herein, or requiring any consent or
approval which shall not have been obtained; and
8. CONDITIONS TO THE INVESTOR'S OBLIGATION TO PURCHASE.
The Company understands that the Investor's obligation to purchase the
Preferred Stock on the relevant Closing Date, unless waived by the Investor, is
conditioned upon:
a. The execution and delivery of this Agreement by the Company;
b. Delivery by the Company to Investors the relevant Certificates in
accordance with this Agreement;
15
c. The accuracy in all material respects on such Closing Date of the
representations and warranties of the Company contained in this Agreement, each
as if made on such date, and the performance by the Company on or before such
date of all covenants and agreements of the Company required to be performed on
or before such date;
d. Except to the extent contemplated by specific provisions of the
Transaction Documents, there shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby to an extent
materially greater than contemplated herein, or requiring any consent or
approval which shall not have been obtained;
e. The trading of the Common Stock shall not have been suspended by the
SEC or the OTC Bulletin Board and trading in securities generally on The OTC
Bulletin Board shall not have been suspended or limited, nor shall minimum
prices been established for securities traded on The NASDAQ Bulletin Board, nor
shall there be any outbreak or escalation of hostilities involving the United
States, the effect of which on the financial markets of the United States is
such as to make it, in the reasonable judgment of the Investor, impracticable or
inadvisable to purchase the Preferred Stock; and
9. GOVERNING LAW: MISCELLANEOUS.
a. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York for contracts to be wholly performed in
such state and without giving effect to the principles thereof regarding the
conflict of laws. Each of the parties consents to the exclusive jurisdiction of
the federal courts whose districts encompass any part of the City of New York or
the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement OR ANY OF THE OTHER
TRANSACTION DOCUMENTS and hereby waives, to the maximum extent permitted by law,
any objection, including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions. To the extent determined
by such court, the Company shall reimburse the Investor for any reasonable legal
fees and disbursements incurred by the Investor in enforcement of or protection
of any of its rights under any of the Transaction Documents.
b. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
c. This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.
d. All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
16
e. This Agreement may be signed in one or more counterparts, each of
which shall be deemed an original.
f. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
g. If any provision of this Agreement shall be invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
h. This Agreement may be amended only by an instrument in writing
signed by the party to be charged with enforcement thereof.
i. This Agreement supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof.
17
10. NOTICES. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (a) personally served,(b) deposited
in the mail, registered or certified, return receipt requested, postage prepaid,
(c) delivered by reputable courier service which provides evidence of delivery
with charges prepaid, (d) transmitted by hand delivery, or (e) by facsimile,
addressed as set forth below or to such other address as such party shall have
specified most recently by written notice given in accordance herewith. Any
notice or other communication required or permitted to be given hereunder shall
be deemed effective (i) upon hand delivery or delivery at the address or number
designated below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day following such
delivery (if delivered other than on a business day during normal business hours
where such notice is to be received) (ii) on the second business day following
the date of mailing by express courier service or on the fifth business day
after deposited in the mail, in each case, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur or
(iii) if by facsimile, upon confirmation of receipt by the recipient or
confirmation of transmission in another manner provided in this SECTION 10. The
addresses for such communications shall be:
IF TO THE COMPANY:
------------------
XXXXXXXX TECHNOLOGIES
#000 - 00 Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
ATTENTION: Xxx Xxxxx, Xx.
----------
Tel No.: (000)000-0000
WITH A COPY TO:
XXXXX XXXXXXXX, ESQ.
XXXXX XXXX LLP
000 XXXXXXX XXXX.
XXXXXX, XX 00000
IF TO INVESTOR:
---------------
Xxxxx LLC
At the address set forth on the signature page of
this Agreement.
18
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE) TO:
---------------------------------------------------
Xxxxxxx & Xxxxxx, LLP
00 Xxxxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
ATTENTION: Xxxxxx X. Xxxxxxx, Esq.
---------
Tel No.: (000) 000-0000
Fax No: (000) 000-0000
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 10 by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto. Any notice required or permitted hereunder shall be given in writing
(unless otherwise specified herein).
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and the
Investor's representations and warranties herein shall survive the execution and
delivery of this Agreement and the delivery of the Certificates and the payment
of the Purchase Price and shall inure to the benefit of the Investor and the
Company and their respective successors and assigns.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
Investor by one of its officers thereunto duly authorized as of the date set
forth below.
STATED VALUE OF PREFERRED STOCK: $3,500,000
-----------
PURCHASE PRICE OF PREFERRED STOCK: $2,000,000
19
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf on June ____, 2004.
XXXXX, LLC
----------------------------------- ---------------------------------------
Address
-----------------------------------
By:
Telecopier No. (Signature of Authorized Person)
----------------------
--------------------------------------
----------------------------------- Printed Name and Title
Jurisdiction of Incorporation
or Organization
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
XXXXXXXX TECHNOLOGIES
By: _______________________________
President
Date: June ___, 2004
20
