PROMISSORY NOTE PURCHASE AGREEMENT
Exhibit
10.1
THIS PROMISSORY NOTE PURCHASE
AGREEMENT (this "Agreement") is made effective as of March ___, 2010, by
and among Xxxxxxx Technologies Corporation, a Delaware corporation (the
"Company"), and the investor(s) listed on the Schedule of Investors attached
hereto (each an "Investor", and collectively the
"Investors").
WHEREAS,
the Company desires to raise capital in the amount of approximately Two Million
Five Hundred Thousand Dollars ($2,500,000.00) pursuant to this Agreement (the
"Loan");
WHEREAS,
the Investors desire to purchase, and the Company desires to sell to each
initial Investor (each an "Investor") who desires to participate in the Closing
(as defined below), a Promissory Note in the form attached hereto as Exhibit “A”
(with all such Promissory Notes issued in the Closing, as defined below,
referred to herein as the "Notes") in the principal amount set forth opposite
such Investor's name on either Schedule “A-1” or “A-2”, depending on whether the
Investor is an Option 1 or an Option 2 Investor, and cumulatively on Schedule
“A-3”), upon the terms and conditions set forth in this
Agreement;
WHEREAS,
the Company desires to offer and sell Notes to the Investors that elect to
participate in the Loan, each of whom will be an Investor pursuant to this
Agreement;
NOW,
THEREFORE, in consideration of the foregoing promises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Investors hereby agree as
follows:
1. Purchase and Sale of Notes;
Closing.
1.1 Sale and Issuance of Notes
to Investors at Closing. Subject to the terms and conditions of this
Agreement, the purchase and sale of the Notes, in the aggregate minimum
principal amount of not less than $1,000,000.00 and not greater than
$2,500,000.00, (Schedule “A-3” “Cumulative Schedule of Investors”, constitutes
the cumulative list of the Schedule “A-1” and “A-2” Investors), shall take place
at the principal office of the Company (the "Closing Location"), at 3:00 p.m.,
Central Standard Time, on February 23, 2010, or such other date and time as may
be mutually acceptable to the Company and the Investors (which time and place
are designated as the "Closing"). At the Closing, the Company shall deliver to
each Investor the original Note that such Investor is purchasing pursuant to
this Agreement at the Closing upon confirmation of receipt of payment of the
purchase price therefore, which purchase price shall equal the principal amount
of the Note purchased (the "Purchase Price") and shall be paid in cash by each
Initial Investor by wire transfer to the Company, pursuant to the instructions
attached hereto as Exhibit “B”. Each Investor shall be subject to the covenants
set forth in Section 1.4 below and as otherwise stated in this
Agreement.
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1.2 Investment
Commitment. Each Initial Investor hereby commits and is committed
to such
amounts as set forth in Schedule “A-3” under “Total Investment Amount”.
Each Investor, at his election prior to the Initial Closing shall determine on
Schedule “A-1” or Schedule “A-2”, whether such “Total Investment Amount” shall
be invested in either of the following methods:
1.2(a) Option A-1 Investment
Schedule: Investor hereby agrees and shall invest the Total
Investment Amount at the Closing as set forth in Schedule “A-1” (“Single Phase
Investor”). Investor shall have no further obligation hereunder to fund
any Successive Closing (as defined herein below in Section 1.3).
Investor’s IP Interest (“IP Interest” is defined in the Promissory Note as
“Additional Benefit”) shall be acquired as a result of his investment as
provided in this Option 1 Investment Schedule.
| Amount of Investment: ____________ |
Initials:
______
|
1.2(b) Option A-2 Investment
Schedule: Investor is unconditionally bound to and shall invest the
Total Investment Amount pursuant to Schedule “A-2” (“Multi Phase Investor”),
which shall be funded in accordance with each Successive Closing as hereinafter
defined in this Agreement.
1.2(b)1.
Investors participating in this Option 2 Investment Schedule, shall obtain their
IP Interest in a proportionate amount to the investment amount listed on
Schedule “A-2”, at each Successive Closing, which shall be
specifically set forth in the Promissory Note for that particular Successive
Closing.
|
Principal
Amount
of
Initial
Note
|
Principal
Amount
of
Second
Note
|
Principal
Amount
of
Third
Note
|
Principal
Amount
of
Fourth
Note
|
Total
Amount
Invested
by
Investor
|
| Total Amount of Investment: ____________ | Initials: ______ |
1.2(b)2.
Event of
Reversion - In the event Investor fails to fund any Successive Closing
pursuant to Schedule “A-2” (each failure to fund, an “Event of Reversion”), then
any IP Interest previously acquired by the Investor shall as of that date be
irrevocably and unconditionally relinquished and automatically forfeited by the
Investor and shall automatically revert back to the Company as of the date of
the Unfunded Closing. Investor, however, shall still have the obligation
to fund any and all Successive Closing(s) and shall have the right to acquire
any IP Interest associated with any such Successive Closing(s), only.
Notwithstanding any failure to fund by the Investor, Investor shall still be
entitled to receive payments of Principal and Interest pursuant to Sections 2
and 2.a of the Note, for all funds received by the Company regardless of when
the funding occurs. By participating in this Agreement, each Investor
hereby acknowledges and agrees that there shall be no excuse of performance of
Investor’s obligation to fund any and all Successive Closings, time being of the
essence. Investor further acknowledges and agrees that the Company will
not send any notices to perform under this Agreement, it being specifically
understood and agreed that it is the Investor’s responsibility to perform and
fund all Successive Closings agreed to in this Agreement without any further
notice from the Company. In the event Investor fails to fund any
Successive Closing(s) Investor shall be liable for all actual, compensatory and
consequential damages.
Initials: ______
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1.2(b)3. Event of Termination
– In the event the Qualcomm litigation is fully and finally resolved or settled,
or in the event of a final judgment in the Qualcomm litigation, or in the event
of dismissal of the Qualcomm litigation for any reason, no Investor under the
Option A-2 Investment Schedule shall have any further right to loan any further
funds to the company pursuant to any future Note or Successive
Closing. For the avoidance of doubt, if the Qualcomm litigation were
to be settled or otherwise finally disposed of in November 2010, Investor would
no longer have the right to invest in a Third Note or a Fourth Note or any other
Successive Closing.
Initials:
______
1.2(b)4. Right to Terminate -
In the event the Company has failed to obtain new lead trial counsel acceptable
to the Company’s Board of Directors in connection with the Company’s
representation in the Qualcomm litigation on or before the Second Closing (as
defined herein), then the Option A-2 Investors shall have the right to terminate
the Second, Third or Fourth Closings by providing 30 days written notice to the
Company, without forfeiture of any IP Interest previously acquired by the
Investor during a previous Closing held under this Agreement.
1.3 Sale
and Issuance of Notes at Second, Third and Fourth Closings. Subject
to this Section 1.3, after the Initial Closing, the Company shall deliver
additional IP Interest to the Initial Investors who have elected to fund the
Promissory Note pursuant to the Option A-2 Investment Schedule: (i) in the
amount of funds stated in the Promissory Note, at a second closing which shall
take place at the Closing Location, on or before Noon Central Time, on August
23, 2010, but in no event sooner than five (5) business days prior to said date
(which time and place is designated as the “Second Closing”);
(ii) in the amount of funds stated in the Promissory Note, at a third closing
which shall take place at the Closing Location, on or before Noon Central Time,
on February 23, 2011, but in no event sooner than five (5) business days prior
to said date (which time and place is designated as the “Third Closing,”); and
(iii) in the amount of funds stated in the Promissory Note, at a fourth closing
which shall take place at the Closing Location, on or before Noon Central Time,
on August 23, 2011, but in no event sooner than five (5) business days prior to
said date (which time and place is designated as the “Fourth Closing” and
collectively referred to herein along with the Initial, Second and Third
Closings as the “Closings,” or, as
applicable, each individually as the “Second Closing”, the
“Third
Closing”, or the “Fourth Closing”). In
the event Investor fails to make a purchase on or before any “Second Closing” date,
“Third Closing”
date, or “Fourth
Closing” date (“Unfunded Closing”), then the provisions of sub-paragraph
1.2(b)2 shall apply. The Second, Third and Fourth Closings are
sometimes herein referred to each individually as a “Successive Closing” and
collectively as “Successive Closings.”
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1.4 Investor
Covenants. The representations and warranties of the Company set
forth in Section 2 hereof shall be reaffirmed and in full force and effect as of
the date of each Closing, and the representations and warranties of each
applicable Investor in Section 3 hereof shall be reaffirmed and in full force
and effect as of the date of the Closing. At the Closing, the Company shall
deliver to each Investor the original Note that such Investor purchases at the
Closing upon confirmation of receipt of payment of the Purchase Price therefore,
which Purchase Price shall equal the principal amount of the Note purchased, and
shall be paid in cash by wire transfer to the Company, pursuant to the
instructions attached hereto as Exhibit “B”. Any Notes sold pursuant to this
Section 1 shall be deemed to be "Notes" for all purposes under this
Agreement.
1.5 Use of Proceeds. The
Company will use the proceeds from the sale of the Notes for the operations of
the Company, as approved by either the management of the Company, or the
directors of the Company, or both, but, without any further approval or veto
right by Investor.
2. Representations and
Warranties of the Company. In addition to the disclosures made
in
Exhibit “C” herein, the Company represents and warrants the
following:
2.1 Organization, Good Standing and Qualification. The Company is a corporation duly organized, under the laws of the State of Delaware. The Company is currently not in compliance with Delaware State Law, and/or Federal Law with respect to various legal requirements, as disclosed in Exhibit “C” hereto which is not intended to be a full recitation of each and every event constituting lack of compliance. Investor purchases this Note with full knowledge and understanding of these legal deficiencies as described in Exhibit “C” hereto and in the Company’s public filings. The Company may not be duly qualified to transact business and is not believed to be in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its business or properties.
2.2 Authorization. All
corporate action on the part of the Company, its officers, directors and
stockholders necessary for the authorization, execution and delivery of this
Agreement and the Notes, the performance of all obligations of the Company
hereunder and under the Notes, and the authorization, sale and issuance of the
Notes being sold hereunder, has been taken or will be taken prior to the
Closing. This Agreement and the Notes constitute valid and legally binding
obligations of the Company, enforceable in accordance with their respective
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies.
2.3
Offering.
Subject in part to the truth and accuracy of each Investor's representations set
forth in Section 3 of this Agreement, the issuance and sale of the Notes as
contemplated by this Agreement are intended to be exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities
Act").
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2.4
Compliance With Other
Instruments. The Company is believed to be in material violation of one
or more provisions of its Certificate of Incorporation as amended to date,
and/or the Bylaws of the Company. The execution and performance of this
Agreement or the Notes may constitute a violation or breach of one or more other
agreements between the Company and other persons or entities.
3.
Representations and
Warranties of the Investors. Each Investor, severally and not
jointly,
hereby represents, warrants and covenants that:
3.1 Authorization. Such
Investor has full power and authority to enter into this Agreement,
and this Agreement is a legal, valid and binding agreement of such Investor,
enforceable in accordance with its terms.
3.2
Purchase Entirely For
Own Account. This Agreement is made with such Investor in reliance upon
such Investor's representations to the Company, which by such Investor's
execution of this Agreement such Investor hereby confirms, that the Notes to be
received by such Investor will be acquired for investment for such Investor's
own account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that such Investor has no present
intention of selling, granting any participation in or otherwise distributing
the same. By executing this Agreement, such Investor further represents that
such Investor does not have any contract, undertaking, agreement or arrangement
with any person to sell, transfer or grant participations to such person or to
any third person, with respect to the Note(s).
3.3 Disclosure of
Information. Notwithstanding the partial disclosures made in Exhibit “C”,
such Investor has received all the information it requested from the Company for
deciding whether to purchase the Notes. Such Investor further represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Notes and the
business, properties, prospects, litigation matters, and financial condition of
the Company, including but not limited to information relating to litigation the
Company is currently engaged in with Qualcomm, Inc.
3.4 Investment
Experience. Such Investor is an investor in securities of companies of
this type and
acknowledges that it is able to fend for itself, can bear the economic risk of
its investment, and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
in the Notes. If other than an individual, such Investor also represents it has
not been organized for the purpose of acquiring the Notes.
3.5 Accredited Investor.
Such Investor is an “accredited investor” as defined in Rule 501 of
Regulation D promulgated by the Securities and Exchange Commission (the “SEC”)
under the Securities Act.
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3.6
Restricted
Securities. Such Investor understands that the Notes to be purchased
hereunder are characterized as “restricted securities” under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such Notes may be resold without registration under the
Securities Act only in certain limited circumstances. In the absence of an
effective registration statement covering the Notes or an available exemption
from registration under the Securities Act, the Notes must be held indefinitely.
In this connection, such Investor represents that it is familiar with SEC Rule
144 promulgated under the Securities Act, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act,
including without limitation the Rule 144 condition that current information
about the Company be available to the public. Such information is not now
available.
3.7 Legends. Such
Investor understands and acknowledges that each Note shall be endorsed
with the legend set forth below:
THIS NOTE
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR
ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, OR OTHERWISE
TRANSFERRED OR DISPOSED OF UNLESS AND UNTIL THIS NOTE IS REGISTERED UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM SUCH
REGISTRATIONISAVAILABLE.
3.8 True and Correct
Information. All information that Investor has provided or caused to be
provided to the Company in connection with the purchase of the Notes hereunder
is correct and complete as of the date set forth on the Investor’s signature
page of this Agreement.
3.9 Reliance. Such
Investor understands that the acceptance of this Agreement by the Company will
be based, in part, on the Investor’s representations, warranties, covenants and
acknowledgements set forth in this Section 3. The Investor agrees to indemnify
the Company from any and all claims, losses, damages and expenses (including
without limit attorneys’ fees and disbursements) arising out of any alleged
material breach of this Agreement by the Investor or material inaccuracy of any
representation or warranty by the Investor.
3.10
Further Limitations on
Disposition. Without in any way limiting the representations set forth
above, such Investor further agrees not to make any disposition of all or any
portion of the Notes unless and until:
Such
transferee has agreed in writing for the benefit of the Company to be bound by
this Agreement; and
Such Investor shall have notified the Company in writing of the proposed
disposition, and shall
have furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition, and if requested by the Company, such
Investor shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company that such disposition will not require registration
under the Securities Act.
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3.11
Tax Advisors.
Such Investor has reviewed with such Investor’s own tax advisors the foreign,
federal, state and local tax consequences of this investment, where applicable,
and the transactions contemplated by this Agreement. Each such Investor is
relying solely on such advisors and not on any statements or representations of
the Company or any of its agents and understands that each such Investor (and
not the Company) shall be responsible for such Investor’s own tax liability that
may arise as a result of this investment or the transactions contemplated by
this Agreement.
3.12
Investor
Review. Such Investor acknowledges that such Investor has had the
opportunity to review this Agreement, and all exhibits attached hereto including
specifically the form of the Note, EXHIBIT “C” hereto, the
XXXXXXX TECHNOLOGIES CORPORATION CORPORATE DISCLOSURE DOCUMENT which is
not intended to be a full recitation of each and every event constituting lack
of compliance, and the transactions contemplated by this Agreement and to
consult with such Investor’s own legal counsel and advisors. Each such Investor
is relying solely on such Investor’s legal counsel, if consulted, and not on any
statements or representations of the Company or any of the Company’s agents for
legal advice with respect to this investment or the transactions contemplated by
this Agreement.
3.13 No Reliance on Representations of Company Management or Company
Directors. NOTWITHSTANDING THE
DISCLOSURES MADE IN EXHIBIT “C”, INVESTOR UNDERSTANDS THAT HE IS MAKING THIS
INVESTMENT WITHOUT RELYING ON ANY ORAL OR WRITTEN STATEMENT MADE BY ANY CURRENT
OR FORMER OFFICER, DIRECTOR OR AGENT OF THE COMPANY. The
Company has recommended to the Investor that he or she discuss with his or her
professional, legal, tax and financial advisors the suitability of an investment
in the Company for his or her particular financial situation. Neither the
Company nor any representative of the Company, including legal
counsel/accountants/auditors have advised the Investor in this or any other
regard. The Investor warrants that he or she has consulted with his
or her tax advisor regarding the impact of the Tax Reform Act of 1986 on his or
her investment in the Company and has not relied on any advice from the Company
or the General Partner. Each
Investor warrants and represents that he/she has received and has been
represented by independent legal counsel in connection with this Note Purchase
Agreement and further warrants and represents that he/she has entered into this
Note Purchase Agreement based upon discussions and consultations with his/her
own independent legal counsel. All Investors, further warrant
and represent that they have each been advised by this writing that they must
seek independent legal counsel of their own to evaluate and examine the
propriety of executing this Note Purchase Agreement.
3.14 Confidentiality. Investor
understands, agrees and acknowledges that this Agreement constitutes and
contains confidential information of the utmost sensitivity. Investor
hereby warrants and represents that Investor shall forever keep the existence,
financial terms and provisions of this Agreement and the accompanying Promissory
Note completely confidential. Investor further hereby agrees,
warrants and represents that Investor will not hereafter disclose any
information concerning the existence, facts, amount, or terms of this Agreement
and the accompanying Promissory Note, to any other person, party or entity,
other than Investor’s attorney, who will be informed of and be bound by this
Agreement and this Confidentiality provision. Investor’s
representations in this provision shall survive the term and the existence of
this Agreement.
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3.15 Subordination. Investor
understands, agrees and acknowledges that the Company is seeking representation
by legal counsel firms (“Counsel”) that may require that the Investor sign a
subordination agreement. In this respect, Investor understands,
hereby agrees and acknowledges that Investor’s right to receive any payment or
benefit under this Agreement or the accompanying Promissory Note is and shall at
all times continue to be subject and subordinate in all respects to Counsel’s
right to receive payment from the Company in the event that the Minimum IP
Threshold, as defined in the Note, is not achieved. Investor hereby
agrees, warrants and represents that Investor shall execute any additional
subordination agreement requested by Counsel or by the Company in order to allow
Counsel to be engaged by the Company.
3.16 To the extent applicable, Investor hereby agrees, represents and
warrants to be bound by the terms and provisions of the Promissory Note attached
herein as Exhibit “A” and shall faithfully perform each and every obligation
contained therein as applicable to Investor.
4. Conditions of Investors’
Obligations at the Closings. The obligations of each Investor with
respect to each Closing are subject to the fulfillment on or before the
applicable Closing of each of the following conditions, the waiver of which
shall not be effective against any Investor who does not consent in writing
thereto.
4.1 Representations and
Warranties. The representations and warranties of the Company contained
in Section 2 shall be true on and as of the applicable Closing with the same
effect as though such representations and warranties had been made on and as of
the date of such Closing.
4.2 Performance. The
Company shall have performed and complied with all material agreements,
obligations and conditions contained in this Agreement that are required to be
performed or complied with by it on or before the applicable
Closing.
5. Conditions of the Company’s
Obligations at Closing. The obligations of the Company to each Investor
under this Agreement are subject to the fulfillment on or before the applicable
Closing of each of the following conditions by that Investor:
5.1 Representations and
Warranties. The representations and warranties of the Investor contained
in Section 3 shall be true on and as of the Closing with the same effect as
though such representations and warranties had been made on and as of such
Closing.
5.2 Payment of Purchase
Price. The Investor shall have delivered the applicable Purchase Price as
provided for in Section 1.
6. Miscellaneous.
6.1 Survival.
The warranties, representations and covenants of the Investors contained in or
made pursuant to this Agreement shall survive the execution and delivery of this
Agreement and each Closing. The warranties, representations and covenants of the
Company shall survive execution and delivery of this Agreement and each
Closing.
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6.2 Successors and
Assigns. Except as otherwise provided herein, the terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties (including transferees of any Notes).
Nothing in this Agreement, express or implied, is intended to confer upon any
party, other than the parties hereto or their respective successors and assigns,
any rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
6.3 Choice of Law;
Jurisdiction. This Agreement shall be governed by and construed under the
laws of the State of Delaware as applied to agreements among California
residents entered into and to be performed entirely within California. Any lawsuit or litigation arising
under, out of, in connection with, or in relation to this Agreement, any
amendment hereof, or the breach hereof, shall be brought in the courts of Los
Angeles, California, which courts shall have exclusive jurisdiction over any
such lawsuit or litigation.
6.4 Titles and Subtitles.
The titles and subtitles used in this Agreement are used for convenience only
and are not to be considered in construing or interpreting this
Agreement.
6.5 Notices. All notices
required or permitted hereunder shall be in writing and shall be deemed
effectively given: (i) upon personal delivery to the party to be notified, (ii)
upon transmission when sent via e-mail; (iii) when sent by confirmed facsimile
if sent during normal business hours of the recipient, if not, then on the next
business day; (iv) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or (v) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt. All communications shall be
sent to the address as set forth on the signature page hereof or at such other
address as such party may designate by ten (10) days advance written notice to
the other parties hereto.
6.6 Finder’s Fee.
Excepting the Company’s Fee Agreement with Xxxxxxx Xxxxx (“Xxxxx”), which Fee
Agreement Investors acknowledge advisement of, each Investor represents that it
neither is nor will be obligated for any finders' fee or commission in
connection with this transaction. Each Investor agrees to indemnify and to hold
harmless the Company from any liability for any commission or compensation in
the nature of a finders' fee (and the costs and expenses of defending against
such liability or asserted liability) for which such Investor or any of its
officers, partners, employees or representatives is responsible. The
Fee Agreement with Xxxxx calls for the payment of a Finder's Fee to Xxxxx in the
amount of five percent (5.00%) of the total amount of capital raised in this
Loan transaction. The Fee Agreement further calls for the payment of
the Finder's Fee to Xxxxx only upon the funding of the Closing and the
Successive Closing(s), as funds are received by the Company.
6.7 No Joint Venture.
Nothing in this Agreement shall create or be deemed to create a joint venture or
partnership among the parties. Each party agrees not to hold itself out as
having any authority or as being in a relationship contrary to this Section
6.7.
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6.8 Expenses; Attorneys’
Fees. Each party shall pay all costs and expenses that it incurs with
respect to the negotiation, execution, delivery and performance of this
Agreement and the Notes. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement or the Notes, the prevailing
party shall be entitled to reasonable attorneys’ fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
6.9 Severability. If one
or more provisions of this Agreement are held to be unenforceable under
applicable law, such provision shall be excluded from this Agreement to the
minimum extent necessary to comply with the laws of the relevant jurisdiction
and the balance of the Agreement shall be interpreted as if such provision were
so excluded in such jurisdiction and shall be enforceable in accordance with its
terms.
6.10
Entire
Agreement. This Agreement and the documents referred to herein constitute
the entire agreement among the parties.
6.11
Counterparts.
This Agreement may be executed in two (2) or more original or facsimile
counterparts all of which together shall constitute one and the same
instrument.
[Signature
Page Follows]
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IN
WITNESS WHEREOF, the parties have executed this Promissory
Note Purchase Agreement as of the date first above
written.
“COMPANY”:
XXXXXXX
TECHNOLOGIES CORPORATION,
a
Delaware Corporation
By:
/s/ XXXXXX
XXXXX
Name:
Xxxxxx Xxxxx, CEO and President
Xxxxxxx
Technologies Corporation
“INVESTOR”:
Investor:
_________________________
Name:
Company
Name:
Address:
Social
Security or Tax ID Number: ____________________
E-mail:
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SCHEDULE
“A-1”
SINGLE EVENT
INVESTOR
|
Investor
|
Principal
Amount
of
Initial
Note
|
Date
of
Initial
Investment
|
Total
Amount
Invested
by
Investor
|
|
TOTAL
|
$
|
Address:
Social
Security or Tax ID Number: ____________________
E-mail:
12
|
SCHEDULE
“A-2”
|
MULTI-PHASE
INVESTOR
|
Investor
|
Principal
Amount
of
Initial
Note
|
Date
of
Initial
Investment
|
Principal
Amount
of
Second
Note
|
Principal
Amount
of
Third
Note
|
Principal
Amount
of
Fourth
Note
|
Total
Amount
Invested
by
Investor
|
|
TOTAL
|
$
|
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SCHEDULE
“A-3”
CUMULATIVE SCHEDULE OF
INVESTORS
|
Investor
|
Principal
Amount
of
Initial
Note
|
Principal
Amount
of
Second
Note
|
Principal
Amount
of
Third
Note
|
Principal
Amount
of
Fourth
Note
|
Total
Amount
Invested
by
Investor
|
|
TOTAL
|
$
|
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EXHIBIT
“A”
Promissory
Note
THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD,
PLEDGED, OR OTHERWISE TRANSFERRED OR DISPOSED OF UNLESS AND UNTIL THIS NOTE IS
REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
XXXXXXX TECHNOLOGIES
CORPORATION
PROMISSORY
NOTE
This
Promissory Note must be read in conjunction with the accompanying
| $____________ | March____, 2010 |
FOR VALUE RECEIVED, the undersigned, Xxxxxxx
Technologies Corporation, a Delaware corporation (“Company”), promises to pay to
the order of ______________________ (“Lender”) the principal sum of
_________________________ Dollars ($____________) (the “Principal”), pursuant to
the Promissory Note Purchase Agreement executed by Lender contemporaneously
herewith, at the Interest Rate hereinafter defined, which amount shall be due
and payable in lawful money of the United States of America at such place as
Lender may from time to time designate, at the time and in accordance with the
terms and conditions provided in Sections 2
below.
1. Interest
Rate and Maturity Date. Interest shall accrue on the Principal at six
percent (6.00%)
per annum (the “Interest Rate”) commencing on the date of this Note.
Interest shall be computed on the actual number of days elapsed based on a
365-day year. The balance of the Principal sum and all Interest thereon shall be
due and payable on the funding of the IP Event (as defined below) (the “Maturity
Date”). For the purposes of this Note, “IP Event” is defined as the recovery
and/or receipt by the Company or any of its subsidiaries of any amount paid or
to be paid by or on behalf of any person, entity, defendant or third party, or
the amount of other value received, including the present fair market value of
any business/non-monetary consideration, which amounts relate directly or
indirectly to the Qualcomm Dispute, as defined below, regardless of whether such
payments are made in cash, stock, by payment or assumption of Company
liabilities, or otherwise, and regardless of whether such payment is styled as
an amount paid in settlement, a royalty, a licensing fee, a purchase price for
the sale or transfer of stock or assets of the Company or any of its
subsidiaries, merger consideration or otherwise. The “Qualcomm
Dispute” is defined as, without limitation, all claims asserted by the Company
in Civil Action No. 3:08-CV-1992 pending in the United States District Court for
the Southern District of California, San Diego
Division.
A-1
2.
Payments
of Principal and Interest. To the extent funds are available from the Net
Proceeds (as hereinafter defined) of an IP Event, and to the extent Lender is
not in Breach of the Note Purchase Agreement, or to the extent this Agreement is
not Terminated [ie: Event of Termination, as defined in the Note Purchase
Agreement, para. 1.2(b)3] or to the extent an Investor has not exercised his
Right to Terminate [ie: Right of Termination, as defined in the Note Purchase
Agreement, para. 1.2(b)4], the Company shall pay to each Lender (on a pro-rata
basis) in this round of financing, payments of Principal and Interest, with all
payment amounts being applied first to accrued Interest and then to Principal,
from the “Net Proceeds” of the IP Event which for purposes of this Note shall
mean IP Event proceeds after deduction of all company expenses and obligations
required to be paid by the company (“Expenses”), which include but are not
limited to: IP Event expenses, fees, court costs, any and all financing expenses
, litigation costs, all attorneys fees (but not including any Qualcomm Dispute
IP Event percentage/contingent attorneys fees), obligations to the IRS and other
Federal, State and local tax authorities, employee wages, secured loans,
judgments and all company debts. If full repayment of Interest and
Principal is not made after the payment to Lender from the first IP Event, then
Lender shall be paid from each successive IP Event in proportion to the amount
of the funding received by the Company (i.e. if the Company receives the IP
Event funding in five (5) separate fundings, then the Investor(s) shall receive
the total amounts due to them in five (5) separate fundings with each payment to
the Investor(s) in equal proportion to the amount received by the Company),
until Lender is paid all Interest and Principal due and owing.
2.a.
Modification
of Definition of “Expenses” and “Net Proceeds”. In the event of an
IP Event recognizing an amount less than $150,000,000.00 in proceeds (“Minimum
IP Threshold”), the definition of “Expenses” in Section 2 above shall include
Qualcomm Dispute IP Event percentage/contingent attorneys fees, and the
resulting “Modified Net Proceeds” shall be adjusted
accordingly.
2.1
Lien.
To the extent Lender is not in Breach of the Note Purchase Agreement (ie: Event
of Reversion as defined in the Note Purchase Agreement), Lender shall have a
lien, for all unpaid sums due under this Note, on all claims or causes of action
that are the subject of any event set forth above in this Section 2. This lien
shall attach to any recovery, whether by settlement, award, verdict, judgment,
or other order.
2.2
Additional
Benefits. In addition to the Principal amount and Interest on this Note,
in return for every $100,000.00 loaned by a Lender to the Company, to the extent
funds are available following the deduction of all Expenses (i.e., from Net
Proceeds or Modified Net Proceeds as the case may be), and the repayment of all
Principal and accrued Interest (“Net Profit” defined as Net Proceeds or Modified
Net Proceeds minus all Principal and accrued Interest), Lender shall have the
right to receive eight tenths of one percent (0.80%) of the Net Profit (the
“Additional Benefit”) [“Additional Benefit” is also referred to as “IP Interest”
in the Promissory Note Purchase Agreement]. In the event a Lender loans
the Company an amount less than $100,000.00 pursuant to this Note, said Lender
shall receive a pro-rata portion of the aforementioned Additional Benefit.
Payment of the Additional Benefits described in this Section 2.2 shall be made
no later than ten (10) business days after the final and complete funding by the
funding party of the IP Event.
A-2
3. Attorney’s
Fees. If the indebtedness represented by this Note or any part thereof is
collected in bankruptcy, receivership or other judicial proceedings or if this
Note is placed in the hands of attorneys for collection after default, the
Company agrees to pay, in addition to the Principal and Interest payable
hereunder, reasonable attorney’s fees and costs incurred by
Lender.
4. Pari
Passu; Notes, Subordination. The Lender acknowledges and agrees that the
payment of all or any portion of the outstanding Principal amount of this Note
and all Interest hereon shall be pari passu in right of payment and in all other
respects to the other Notes. In the event the Lender receives payments in excess
of the Lender’s pro rata share of the Company’s payments to the holders of all
of the Notes outstanding, then the Lender shall hold in trust all such excess
payments for the benefit of the holders of the other Notes and shall pay such
amounts held in trust to such other holders upon demand by such holders. The
Lender acknowledges and agrees that this Note will be subordinate in priority
and right of payment to all current and future indebtedness of the Company to
banks and other financial institutions which may be required for secured
financing in the future, and that no other writing shall be required to affect
same.
5. Surrender
of Note. The Lender shall surrender this Note pursuant to the foregoing
provisions.
6. Notices.
Any notice, other communication or payment required or permitted hereunder shall
be in writing and shall be deemed to have been given upon delivery.
7. Waivers.
The Company hereby waives presentment, demand for performance, notice of
nonperformance, protest, notice of protest and notice of dishonor. No delay on
the part of Lender in exercising any right hereunder shall operate as a waiver
of such right or any other right.
8. Assignment.
This Note may not be assigned by Lender without the prior written consent of the
Company; provided however, that any such assignment by Lender shall be in
compliance with all applicable federal and state securities
laws.
9. Choice
of Law; Jurisdiction. This Note shall be construed in accordance
with the laws of the State of Delaware, without regard to the conflicts of laws
provisions thereof. Any lawsuit or litigation arising under, out of, in
connection with, or in relation to this Note, any amendment or restatement
thereof, or the breach thereof, shall be brought in the courts of Los Angeles,
CA, which courts shall have exclusive jurisdiction over any such lawsuit or
litigation.
A-3
IN
WITNESS WHEREOF, Xxxxxxx Technologies Corporation has caused this Promissory
Note to be executed by its officer thereunto duly authorized.
XXXXXXX
TECHNOLOGIES CORPORATION,
a
Delaware Corporation
By:
/s/
XXXXXX
XXXXX
Name: Xxxxxx
Xxxxx
Its: CEO
and President
A-4
ADDENDUM
TO
This
addendum (“Addendum”) to the Promissory Note Purchase Agreement ("Agreement") is
made effective as of March ___, 2010, by and among Xxxxxxx Technologies
Corporation, a Delaware corporation (the "Company"), and the investor(s) listed
on the Schedule of Investors attached to the Agreement (each an "Investor", and
collectively the "Investors").
|
1.
|
The
last sentence in Section 1.2(b)2 of the Agreement shall be deleted in its
entirety, and shall be replaced with the
following:
|
“In
the event Investor fails to fund any Successive Closing(s), Investor shall be
liable for all actual, compensatory and consequential damages, not to exceed
three (3) times the Total Amount Invested by Investor as stated on Schedule
“A-1” or Schedule “A-2” as applicable.”
|
2.
|
Section
1.2(b)4 shall be deleted in its entirety, and replaced with the
following:
|
“Right
to Terminate - In the event the Company has failed to obtain new lead
trial counsel acceptable to the Company’s Board of Directors in connection with
the Company’s representation in the Qualcomm litigation on or before the Second
Closing (as defined herein), the Company shall give written notice of such
failure to the Investors (“Failure Notice”). The Option A-2 Investors
shall then have the right to terminate the Second, Third or Fourth Closings by
providing written notice to the Company within five (5) days of receipt of the
Failure Notice, without forfeiture of any IP Interest previously acquired by the
Investor during a previous Closing held under this
Agreement.”
All
other provisions of the Agreement shall remain undisturbed and in full force and
effect.
[Signature Page
Follows]
A-5
IN
WITNESS WHEREOF, the parties have executed this Addendum
to the Promissory Note Purchase Agreement as of the date
first above written.
“COMPANY”:
XXXXXXX
TECHNOLOGIES CORPORATION,
a
Delaware Corporation
By:
/s/
XXXXXX
XXXXX
Name:
Xxxxxx Xxxxx, CEO and President
Xxxxxxx
Technologies Corporation
“INVESTOR”:
Investor:
_________________________
Name:
Company
Name:
Address:
Social
Security or Tax ID Number: ____________________
E-mail:
A-6
EXHIBIT
“B”
XXXXXXX
TECHNOLOGIES CORPORATION WIRE INSTRUCTIONS
[See attached]
B-1
EXHIBIT
“C”
XXXXXXX
TECHNOLOGIES CORPORATION CORPORATE DISCLOSURE DOCUMENT
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1.
|
Withdrawal
of Former Attorneys
|
Xxxxxxx
came to the end of its relationship with its former attorneys in the Qualcomm
case and in other Xxxxxxx corporate, patent, etc. matters at the end of 2009.
Xxxxxxx is now in arbitration with its former attorneys on the matter of
attorneys' fees and potentially other matters. Gabriel's directors believe that
the termination of this relationship was/is in the best interests of Xxxxxxx in
general, and particularly in its efforts against Qualcomm. We expect Gabriel's
California counsel to remain involved in the Qualcomm case for the foreseeable
future.
|
2.
|
New
Xxxxxxx Attorneys For Qualcomm Case
|
After a
diligent search, Xxxxxxx is working to engage one of several well-qualified law
firms to succeed our former attorneys in the Qualcomm case. We hope to make an
announcement in the next month or so that a new law firm is representing Xxxxxxx
as lead trial counsel against Qualcomm.
|
3.
|
Next
Stages of Qualcomm Lawsuit
|
Gabriel's
Fourth Amended Complaint in the Qualcomm lawsuit was med January 11, 2010.
Qualcomm's Answer to Gabriel's Fourth Amended Complaint was filed on or about
January 21. We expect discovery to begin as soon as parties meet and confer to
establish a discovery plan - likely within the next 30 to 60 days.
|
4.
|
Xxxxxxx
Historical Financial Statements
|
Under the
management of its former officer and directors, Xxxxxxx did not file reports
with the SEC, including historical financial statements, since 2006. The current
management has prepared Gabriel's 2007 annual financial statements, and is
working with the Xxxxxxx auditors to formalize them. We intend to file Gabriel's
historical annual financial statements with the SEC and make them public when
this work is completed. As part of the audit process, Gabriel's auditors will be
examining financial statements filed by Xxxxxxx in 2006 and before - to assure
the accuracy of those previously filed financial statements. The current Xxxxxxx
management and directors cannot verify as accurate the previously filed
financial statements of Xxxxxxx, until this audit process is
complete.
C-1
|
5.
|
Action
Against Select Former Xxxxxxx Officers, Directors and Third
Parties
|
An action
against select former Xxxxxxx officers and directors, and certain third parties,
was filed in 2008 at the direction of the former directors of Xxxxxxx. The
current Xxxxxxx directors have been assessing this lawsuit, and believe that it
may be insufficient in its naming of alleged defendants and in the causes of
action alleged. Gabriel's primary goal in this lawsuit is to possibly recapture
for Xxxxxxx monies, securities, and/or interests in the Qualcomm case from
persons/entities who may have received them improperly. New counsel has been
retained to reassess this lawsuit and to make recommendations to the directors
as to the possible filing of an amended complaint.
|
6.
|
Xxxxxxx
Operations Financing Transaction
|
Although
approximately $5.7 million was invested in Xxxxxxx in late 2007 and early 2008,
when the new Xxxxxxx directors were appointed in June of 2009 Xxxxxxx had little
or no cash on hand, and was more than $800,000 past due in its payments to its
attorneys, its landlord, its insurers, and other creditors. An investment group,
including several of Gabriel's current directors, furnished Xxxxxxx
approximately $1 million of financing in 2009; however, this financing is
insufficient to pay for future operations of Xxxxxxx. Therefore, Xxxxxxx
recently completed a $500,000 short-term debt transaction to provided needed
funds to pay continuing operations of the Company, and Xxxxxxx is now working
with its investment bankers on a possible means of securing long-term financing
of Gabriel's operations. Any and all long-term operations financing transactions
entered into by Xxxxxxx will be completed only as necessary, only on the most
favorable terms available to Xxxxxxx, and only upon advice and approval of
Gabriel's investment bankers and other advisors that such transactions are fair
to the shareholders of Xxxxxxx. There can be no assurance, however, whether or
on what terms, Xxxxxxx will be able to complete a long-term
financing.
|
7.
|
Assignment
of Interests in Possible Proceeds of Qualcomm
Lawsuit
|
In
connection with certain financing transactions by Xxxxxxx, and to pay Gabriel's
creditors, Gabriel's former directors began the practice, several years ago, of
assigning percentage interests in a settlement amount or favorable judgment, if
any, that may be obtained by Xxxxxxx in its action against Qualcomm. We are
currently reevaluating this practice. In the meantime, you should be aware that
we estimate that the total percentage interests in the possible proceeds from
the Qualcomm lawsuit that previously have been committed by Xxxxxxx, and that
might be committed by Xxxxxxx to third parties, etc. in the foreseeable future,
will be not less than seventy-five percent (75%) and may be as much as
ninety-five percent (95%). This estimate includes the possible percentage
interests that we may assign in connection with the engagement of new lead trial
counsel, to obtain litigation financing, and to procure long-term financing for
Xxxxxxx. These interests of third parties in any proceeds from the Qualcomm
lawsuit effectively reduce the amount of such proceeds, if any, that will be
available to Xxxxxxx and its shareholders. Of course, there can be no assurance
that Xxxxxxx will be able financially to continue to prosecute the Qualcomm
lawsuit or, if so, that it will achieve a favorable outcome or receive any
significant proceeds from that lawsuit.
C-2
8. Actions
Taken Prior To Appointment of New Xxxxxxx Directors
Prior to
the current Xxxxxxx directors appointment earlier this year, actions taken at
Xxxxxxx over the past several years include, but were not limited
to:
A.
Issuance of all sixty million authorized shares of Gabriel’s stock (and possibly
more than sixty million authorized shares of Gabriel’s stock), in the form of
stock, and/or stock warrants, and/or Stock Equivalent Units, and or
otherwise;
B.
Subsequent to the issuance of all authorized stock/warrants, the issuance of
stock equivalency units, or SEUs, which are the equivalent of common
stock. The total amount of SEUs issued is being ascertained, as there is
no transfer agent for such securities as SEUs to track their
issuance;
C.
Investment in Xxxxxxx of $5.7 million in short-term notes, some of which are
redeemable by the note holders for double their face value beginning in January
2011;
D.
Expenditures by Xxxxxxx on corporate matters alone (i.e. not including attorneys
fees to prosecute the Company’s legal action with Qualcomm) with Gabriel’s
former attorneys - in excess of $1 million;
E. The former
directors’ issuance to themselves of percentage interests in the result of
Gabriel’s action against Qualcomm;
F. The
failure to hold an annual shareholders meeting within the past three
years. A Company annual shareholders meeting still cannot be held due to
the failure to have current financials filed with the SEC. This fact
continues to hamper Gabriel’s efforts to raise financing for the Company, since
additional Xxxxxxx stock cannot be authorized by Delaware State authorities
without such a shareholders meeting approving such additional stock
authorization. This requires the Xxxxxxx directors to continue to rely on
the possible proceeds, if any, of Gabriel’s action against Qualcomm to obtain
needed financing for the Company.
9. No Lead Trial
Counsel and No Litigation Funding for Action vs Qualcomm – The Company is
currently searching for both lead trial counsel and funding to prosecute its
action vs Qualcomm. The Company cannot represent nor guarantee that the Company
will obtain either lead trial counsel or funding to prosecute its action vs
Qualcomm.
C-3
10. Arbitration
Action By Former Company President and COO – The Company was recently
served (on or about 2/3/10) with a Demand For Arbitration by Xxx Xxxxxx (the
“Demand”), the Company’s former President and CEO. The Company believes it has
sufficient defenses to the Demand to overcome its claims, but there is no
guarantee of a successful outcome of the Demand in favor of the Company. The
primary claims of the Demand are severance pay, repayment of loans made by Xx.
Xxxxxx, and other claims. The total monetary amount of the Demand is
approximately two hundred and fifty thousand dollars ($250,000).
THIS
DOCUMENT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 21E
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SUCH STATEMENTS INVOLVE
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER
MATERIALLY FROM THE EVENTS OR RESULTS DESCRIBED IN THE FORWARD-LOOKING
STATEMENTS, INCLUDING RISKS RELATING TO GABRIEL'S ABILITY TO ACHIEVE ONE OR MORE
OF THE OBJECTIVES DESCRIBED IN THIS LETTER, RISKS RELATING TO GABRIEL'S ABILITY
TO OBTAIN FUNDING TO PROSECUTE THE QUALCOMM LAWSUIT AND OTHER LITIGATION
DESCRIBED IN THIS LETTER, AND THE RISKS AND UNCERTAINTIES REGARDING THE TIMING
AND EVENTUAL OUTCOME OF THE QUALCOMM LAWSUIT AND OTHER LITIGATION. ALL
FORWARD-LOOKING STATEMENTS ARE BASED UPON INFORMATION CURRENTLY AVAILABLE TO
XXXXXXX. XXXXXXX UNDERTAKES NO OBLIGATION TO PUBLICLY UPDATE OR REVISE ANY
FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE
EVENTS OR OTHERWISE.
C-4
