WARRANT CANCELLATION AGREEMENT
Exhibit
99.2
This
WARRANT CANCELLATION AGREEMENT (the "Agreement")
is
made and entered into as of the 19th day of December, 2005 by and among
QSGI
INC., a
corporation organized and existing under the laws of the State of Delaware
(“QSGI”
or
the
“Company”)
and
XXXXXX PARTNERS LP (hereinafter referred to as “Investor”).
PRELIMINARY
STATEMENT:
WHEREAS,
Investor is the holder of a Common Stock Purchase Warrant dated May 18, 2004
which is currently exercisable to purchase up to 1,866,667 shares of the
Company’s Common Stock for $1.50 per share and the holder of a Common Stock
Purchase Warrant dated May 18, 2004 which is currently exercisable to purchase
up to 2,416,667 shares of the Company’s Common Stock for $3.60 per share
(together the “Warrants”); and
WHEREAS,
the
Investor and the Company intent to memorialize this Agreement whereby the
Warrants shall be cancelled for the consideration set forth herein;
and
NOW,
THEREFORE,
in
consideration of the mutual covenants and premises contained herein, and for
other good and valuable consideration, the receipt and adequacy of which are
hereby conclusively acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
ARTICLE
I
INCORPORATION
BY REFERENCE, SUPERSEDER AND DEFINITIONS
1.1 Incorporation
by Reference.
The
foregoing recitals are hereby acknowledged to be true and accurate and are
incorporated herein by this reference.
1.2 Superseder.
This
Agreement is the full and complete agreement between the parties relating to
the
Warrants and shall supersede any other instrument or understanding to the
fullest extent permitted by law. A copy of this Agreement shall be filed at
the
Company’s principal office.
ARTICLE
II
CANCELLATION
OF WARRANTS
2.1 Cancellation
of Warrants.
Upon the
terms and subject to the conditions set forth herein, and in accordance with
applicable law, Investor agrees that the Common Stock Purchase Warrant dated
May
18, 2004 which is currently exercisable to purchase up to 1,866,667 shares
of
the Company’s Common Stock for $1.50 per share and the Common Stock Purchase
Warrant dated May 18, 2004 which is currently exercisable to purchase up to
2,416,667 shares of the Company’s Common Stock for $3.60 per share are hereby
cancelled, no longer exercisable and of no further force and
effect.
2.2
Payment
to Investor.
The
Company shall pay the Investor the sum of One Million, Two Hundred Thousand
($1,200,000.00) Dollars for the cancellation of the Warrants. Payment to
Investor shall be payable in United States Dollars. Payment to the Investor
shall be made on the Closing Date by wire transfer of funds to the account
specified by the Investor and provided to the Company.
ARTICLE
III
CLOSING
DATE AND DELIVERIES AT CLOSING
3.1
Closing
Date The
closing of the transactions contemplated by this Agreement shall be held at
the
offices of the Company in Palm Beach, Florida at 10:00 a.m. local time, on
December 19, 2005 or on such other date and at such other place as may be
mutually agreed by the parties. Document signatures may be transmitted by
facsimile with originals to follow.
3.2 Deliveries
by the Company.
In
addition to and without limiting any other provision of this Agreement, the
Company agrees to deliver, or cause to be delivered, to the Investor the
following:
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(a)
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Payment
of Xxx Xxxxxxx, Xxx Xxxxxxx Xxxxxxxx (x0,000,000.00) Xxxxxx Xxxxxx
Dollars;
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(b)
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At
or prior to Closing, an executed
Agreement;
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(c)
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At
or prior to Closing, confirmation that the provisions of Article
IV herein
have been satisfied; and
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(d)
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Such
other documents or certificates as shall be reasonably requested
by the
Investor or its counsel.
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3.3 Deliveries
by Investor.
In
addition to and without limiting any other provision of this Agreement, Investor
agrees to deliver, or cause to be delivered, to the Company the following:
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(a)
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At
or prior to Closing, the originals of the
Warrants;
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(b)
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At
or prior to Closing, an executed
Agreement;
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(c)
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At
or prior to Closing, confirmation that the provisions of Article
V herein
have been satisfied; and
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(d)
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Such
other documents or certificates as shall be reasonably requested
by the
Company or its counsel.
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In
the
event any document provided to the other party pursuant to Articles 3.2 and
3.3
herein are provided by facsimile, the party shall forward an original document
to the other party within seven (7) business days of Closing.
3.4 Further
Assurances.
The
Company and Investor shall, upon request, on or after the Closing Date,
cooperate with each other by furnishing any additional information, executing
and delivering any additional documents and/or other instruments and doing
any
and all such things as may be reasonably required to consummate or otherwise
implement the transactions contemplated by this Agreement
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company represents and warrants to the Investor (which warranties and
representations shall survive the Closing regardless of examinations,
inspections, audits and other investigations the Investor has heretofore made
or
may hereinafter make with respect to such warranties and representations) as
follows:
4.1 Organization
and Qualification.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted.
4.2 Authority
to Enter Into Agreement.
The
Company has all requisite corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation of the transactions contemplated hereby
have
been duly authorized by all necessary corporate action and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby except as disclosed in
this Agreement. This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as may
be
limited by bankruptcy, insolvency, reorganization, moratorium, or
other
similar
laws affecting the enforcement of creditors' rights generally and general
principles of equity.
4.3 No
Conflict; Required Filings and Consents. The
execution and delivery of this Agreement by the Company does not, and the
performance by the Company of the obligations hereunder will not: (i) conflict
with or violate the Articles or By-Laws of the Company; (ii) conflict with,
breach or violate any federal, state, foreign or local law, statute, ordinance,
rule, regulation, order, judgment or decree (collectively, "Laws")
in
effect as of the date of this Agreement and applicable to the Company; or (iii)
result in any breach of, constitute a default (or an event that with notice
or
lapse of time or both would become a default) under, give to any other entity
any right of termination, amendment, acceleration or cancellation of, require
payment under, or result in the creation of a lien or encumbrance on any of
the
properties or assets of the Company pursuant to any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company is a party. Excluding from the
foregoing are such violations, conflicts, breaches, defaults, terminations,
accelerations, creations of liens, or incumbency that would not, in the
aggregate, have a material adverse effect upon the Company.
4.4 Brokers.
No
broker, finder or investment banker is entitled to any brokerage, finder's
or
other fee or commission in connection with the transactions contemplated by
this
Agreement based upon arrangements made by or on behalf of the
Company.
4.5 SEC
Documents.
Investor acknowledges that the Company is a publicly held company and has made
available to the Investor true and complete copies of any requested SEC
Documents. The Company has registered its Common Stock pursuant to Section
12 of
the 1934 Act, and the Common Stock is listed and traded on the Pacific Exchange.
The Company has received no notice, either oral or written, with respect to
the
continued eligibility of the Common Stock for such listing, and the Company
has
maintained all requirements for the continuation of such listing. The Company
has not provided to the Investor any information that, according to applicable
law, rule or regulation, should have been disclosed publicly prior to the date
hereof by the Company, but which has not been so disclosed. As of their
respective dates, the SEC Documents complied in all material respects with
the
requirements of the 1934 Act and rules and regulations of the SEC promulgated
thereunder and the SEC Documents did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
4.6 Full
Disclosure.
No
representation or warranty made by the Company in this Agreement and no
certificate or document furnished or to be furnished to the Investor pursuant
to
this Agreement contains or will contain any untrue statement of a material
fact,
or omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
4.7 Patriot
Act. The
Company and Investor certify that they have not been
designated,
and are not owned or controlled by, a “suspected terrorist” as defined in
Executive Order 13224. The parties seek to comply with all applicable laws
concerning money laundering and related activities. In furtherance of those
efforts, the Company hereby represents and warrants that: (i) none of the cash
that the Company will pay to Investor will or has been or shall be derived
from,
or related to, any activity that is deemed criminal under United States law;
(ii) no disbursement by the Company to the Investor, to the extent within the
Company’s control, shall cause any party to be in violation of the United States
Bank Secrecy Act, the United States International Money Laundering Control
Act
of 1986 or the United States International Money Laundering Abatement and
Anti-Terrorist Financing Act of 2001; (iii) the Company has complied with the
United States Bank Secrecy Act, the United States International Money Laundering
Control Act of 1986 and/or the United States International Money Laundering
Abatement and Anti-Terrorist Financing Act of 2001 and the Company’s business is
not derived from, or related to, any activity that is deemed criminal under
United States law. The Company shall promptly notify the Investor if any of
these representations ceases to be true and accurate regarding the Company.
The
Company agrees to provide the Investor any additional information regarding
the
Company that the Investor deems necessary or convenient to ensure compliance
with all applicable laws concerning money laundering and similar activities.
The
parties understand and agree that if at any time it is discovered that any
of
the foregoing representations are incorrect, or if otherwise required by
applicable law or regulation related to money laundering similar activities,
the
parties may undertake appropriate actions to ensure compliance with applicable
law or regulation. The parties understand that either may release information
about the other and, if applicable, any underlying beneficial owners, to proper
authorities, in their sole discretion, if they determine that it is in their
best interests in light of relevant rules and regulations under the laws set
forth in this section.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF THE INVESTOR
The
Investor represents and warrants to the Company that:
5.1 Organization
and Standing of the Investor.
The
Investor is duly organized, validly existing and in good standing under the
laws
of the state in which it was formed.
5.2 Authorization
and Power.
The
Investor has the requisite power and authority to enter into and perform this
Agreement. The execution, delivery and performance of this Agreement by the
Investor and the consummation by the Investor of the transactions contemplated
hereby have been duly authorized by all necessary action where appropriate.
This
Agreement has been duly executed and delivered by the Investor and at the
Closing shall constitute valid and binding
obligations
of the Investor enforceable against the Investor in accordance with their terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
5.3 No
Conflicts.
The
execution, delivery and performance of this Agreement and the consummation
by
the Investor of the transactions contemplated hereby or relating hereto do
not
and will not (i) result in a violation of the Investor's charter documents
or
bylaws where appropriate or (ii) conflict with, or constitute a default (or
an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument to which the Investor
is
a party, or result in a violation of any law, rule, or regulation, or any order,
judgment or decree of any court or governmental agency applicable to the
Investor or its properties
(except
for such conflicts, defaults and violations as would not, individually or in
the
aggregate, have a material adverse effect on such Investor). The Investor is
not
required to obtain any consent, authorization or order of, or make any filing
or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of the Investor’s obligations under this Agreement.
5.4 Accredited
Investor.
The
Investor is (i) an “accredited investor” as that term is defined in Rule 501 of
Regulation D promulgated under the 1933 Act by reason of Rule 501(a)(3) and
(6),
(ii) experienced in making investments and engaging in transactions of the
kind
described in this Agreement, (iii) able, by reason of the business and financial
experience of its officers (if an entity) 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.
5.5 Brokers.
No
broker, finder or investment banker is entitled to any brokerage, finder's
or
other fee or Commission in connection with the transactions contemplated by
this
Agreement based upon arrangements made by or on behalf of the
Investor.
5.6 Knowledge
of Company.
Investor
and Investor’s advisor(s-), if any, have been, upon request, furnished with all
materials relating to the business, finances and operations of the Company.
The
Investor and the Investor’s 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.
5.7 Full
Disclosure.
No
representation or warranty made by the Investor in this Agreement and no
certificate or document furnished or to be furnished to the Company pursuant
to
this Agreement contains or will contain any untrue statement of a material
fact,
or omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading. Except as set forth or referred
to
in this Agreement, Investor does not have any agreement
or understanding with any other person relating to acquiring,
holding, voting
or
disposing of any equity securities of the Company.
ARTICLE
VI
CONDITIONS
PRECEDENT TO THE COMPANY’S OBLIGATIONS
The
obligation of the Company to consummate the transactions contemplated hereby
shall be subject to the fulfillment, on or prior to Closing Date, of the
following conditions:
6.1 No
Termination.
This
Agreement shall not have been terminated pursuant to Article VIII
hereof.
6.2 Representations
True and Correct.
The
representations and warranties of the Investor contained in this Agreement
shall
be true and correct in all material respects on and as of the Closing Date
with
the same force and effect as if made on as of the Closing Date.
6.3 Compliance
with Covenants.
The
Investor shall have performed and complied in all material respects with all
covenants, agreements, and conditions required by this Agreement to be performed
or complied by it prior to or at the Closing Date.
6.4 No
Adverse Proceedings. On
the
Closing Date, no action or proceeding shall be pending by any public authority
or individual or entity before any court or administrative body to restrain,
enjoin, or otherwise prevent the consummation of this Agreement or the
transactions contemplated hereby or to recover any damages or obtain other
relief as a result of the transactions proposed hereby.
ARTICLE
VII
CONDITIONS
PRECEDENT TO INVESTOR’S OBLIGATIONS
The
obligation of the Investor to consummate the transactions contemplated hereby
shall be subject to the fulfillment, on or prior to Closing Date unless
specified otherwise, of the following conditions:
7.1 No
Termination.
This
Agreement shall not have been terminated pursuant to Article VIII
hereof.
7.2 Representations
True and Correct.
The
representations and warranties of the Company contained in this Agreement shall
be true and correct in all material respects on and as of the Closing Date
with
the same force and effect as if made on as of the Closing Date.
7.3 Compliance
with Covenants .
The
Company shall have performed and complied in all material respects with all
covenants, agreements, and conditions required by this Agreement to be performed
or complied by it prior to or at the Closing Date.
7.4 No
Adverse Proceedings. On
the
Closing Date, no action or proceeding shall be pending by any public authority
or individual or entity before any court or administrative body to restrain,
enjoin, or otherwise prevent the consummation of this Agreement or the
transactions contemplated hereby or to recover any damages or obtain other
relief as a result of the transactions proposed hereby.
ARTICLE
VIII
TERMINATION,
AMENDMENT AND WAIVER
8.1 Termination.
This
Agreement may be terminated at any time prior to the Effective
Time:
8.1.1 by
mutual
written consent of the Investor and the Company;
8.1.2 by
the
Company upon a material breach of any representation, warranty, covenant or
agreement on the part of the Investor set forth in this Agreement, or by the
Investor upon a material breach of any representation, warranty, covenant or
agreement on the part of the Company set forth in this Agreement, or if any
representation or warranty of the Company or the Investor, respectively, shall
have become untrue, in either case such that any of the conditions set forth
in
Article VI or Article VII hereof would not be satisfied (a "Terminating
Breach"),
and
such breach shall, if capable of cure, not have been cured within five (5)
days
after receipt by the party in breach of a notice from the non-breaching party
setting forth in detail the nature of such breach;
8.1.3 by
either
party prior to closing, if the Closing Date is after December 31, 2005.
8.2 Effect
of Termination.
In the
event of the termination of this Agreement pursuant to Paragraph 8.1 hereof,
there shall be no liability on the party of the Company or the Investor or
any
of their respective officers, directors, agents or other representatives and
all
rights and obligations of any party hereto shall cease,.
8.3 Amendment.
This
Agreement may be amended by the parties hereto in writing any time prior to
the
Closing Date by an instrument in writing signed by the parties
hereto.
ARTICLE
IX
GENERAL
PROVISIONS
9.1 Transaction
Costs.
Except
as otherwise provided herein, each of the parties shall pay all of his or its
costs and expenses (including attorney fees and other legal costs and expenses
and accountants’ fees and other accounting costs and expenses) incurred by that
party in connection with this Agreement.
9.2 Indemnification.
Investor agrees to defend and hold the Company (following the Closing Date)
and
its officers and directors harmless against and in respect of any and all
claims, demands, losses, costs, expenses, obligations, liabilities or damages,
including interest, penalties and reasonable attorney’s fees, that it shall
incur or suffer, which arise out of, result from or relate to any breach of
this
Agreement by such Investor or failure by such Investor to perform with respect
to any of its representations, warranties or covenants contained in this
Agreement or in any exhibit or other instrument furnished or to be furnished
under this Agreement. The Company agrees to defend and hold the Investor
harmless against and in respect of any and all claims, demands, losses, costs,
expenses, obligations, liabilities or damages, including interest, penalties
and
reasonable attorney’s fees, that it shall incur or suffer, which arise out of,
result from or relate to any breach of this Agreement or failure by the Company
to perform with respect to any of its representations, warranties or covenants
contained in this Agreement or in any exhibit or other instrument furnished
or
to be furnished under this Agreement.
9.3 Headings.
The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of
this Agreement.
9.4 Entire
Agreement.
This
Agreement constitute the entire agreement of the parties with respect to the
Warrants and supersede all prior agreements and undertakings, both written
and
oral, between the parties, or any of them, with respect to the subject matter
hereof.
9.5 Notices.
All
notices and other communications hereunder shall be in writing and shall be
deemed to have been given (i) on the date they are delivered if delivered in
person; (ii) on the date initially received if delivered by facsimile
transmission followed by registered or certified mail confirmation or overnight
courier service; (iii) on the date delivered by an overnight courier service;
or
(iv) on the third business day after it is mailed by registered or certified
mail, return receipt requested with postage and other fees prepaid as
follows:
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If
to the Company:
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QSGI
INC.
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00
Xxxx Xxxxx
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Xxxxxxxxxx,
XX 00000
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With
a copy to:
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Burger,
Xxxxxx & Xxxxx, X.X.
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0000
Xxxxx Xxxxx, Xxxxx 000
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Xxxx
Xxxx Xxxxx, Xxxxxxx 00000
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Telephone
Number: (000) 000-0000
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Facsimile
Number: (000) 000-0000
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If
to the Investor:
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With
a copy to:
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WARRANT
CANCELLATION AGREEMENT
BETWEEN
QSGI INC. AND XXXXXX PARTNERS LP
PAGE
9 OF
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9.6 Severability.
If any
term or other provision of this Agreement is invalid, illegal or incapable
of
being enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon
such
determination that any such term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith
to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
9.7 Binding
Effect.
All the
terms and provisions of this Agreement whether so expressed or not, shall be
binding upon, inure to the benefit of, and be enforceable by the parties and
their respective administrators, executors, legal representatives, heirs,
successors and assignees.
9.8 Preparation
of Agreement.
This
Agreement shall not be construed against any party regardless of who was
responsible for its preparation. The parties acknowledge each contributed and
is
equally responsible for its preparation.
9.9 Governing
Law.
This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of Florida, without giving effect to applicable principles of
conflicts of law.
9.10 Jurisdiction.
This
Agreement shall be exclusively governed by and construed in accordance with
the
laws of the State of Florida. If any action is brought among the parties
with
respect to this Agreement or otherwise, by way of a claim or counterclaim,
the
parties agree that in any such action, and on all issues, the parties
irrevocably waive their right to a trial by jury. Exclusive jurisdiction
and
venue for any such action shall be the State Courts of Florida. In the event
suit or action is brought by any party under this Agreement to enforce any
of
its terms, or in any appeal therefrom, it is agreed that the prevailing party
shall be entitled to reasonable attorneys fees to be fixed by the arbitrator,
trial court, and/or appellate court.
9.11 Further
Assurances, Cooperation.
Each
party shall, upon reasonable request by the other party, execute and deliver
any
additional documents necessary or desirable to complete the transactions
herein
pursuant to and in the manner contemplated by this Agreement. The parties
hereto
agree to cooperate and use their respective best efforts to consummate the
transactions contemplated by this Agreement.
9.12 Survival.
The
representations, warranties, covenants and agreements made herein shall survive
the Closing of the transaction contemplated hereby.
WARRANT
CANCELLATION AGREEMENT
BETWEEN
QSGI INC. AND XXXXXX PARTNERS LP
PAGE
10 OF
11
9.13 Third
Parties
Except
as disclosed in this Agreement, nothing in this Agreement, whether express
or
implied, is intended to confer any rights or remedies under or by reason of
this
Agreement on any persons other than the parties hereto and their respective
administrators, executors, legal representatives, heirs, successors and
assignees. Nothing in this Agreement is intended to relieve or discharge the
obligation or liability of any third persons to any party to this Agreement,
nor
shall any provision give any third persons any right of subrogation or action
over or against any party to this Agreement.
9.14 Failure
or Indulgence Not Waiver; Remedies Cumulative.
No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty, covenant or
agreement herein, nor shall nay single or partial exercise of any such right
preclude other or further exercise thereof or of any other right. All rights
and
remedies existing under this Agreement are cumulative to, and not exclusive
of,
any rights or remedies otherwise available.
9.15 Counterparts.
This
Agreement may be executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed shall
be
deemed to be an original, but all of which taken together shall constitute
one
and the same agreement. A facsimile transmission of this signed Agreement shall
be legal and binding on all parties hereto.
IN
WITNESS WHEREOF,
the
Investor and the Company have as of the date first written above executed this
Agreement.
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QSGI
INC.
By:
____________________________
Title:___________________________
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INVESTOR
XXXXXX
PARTNERS LP
By:_____________________________
Title:___________________________
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WARRANT
CANCELLATION AGREEMENT
BETWEEN
QSGI INC. AND XXXXXX PARTNERS LP
PAGE
11 OF
11
