EXHIBIT 99.1
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AMENDMENT AGREEMENT
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THIS AMENDMENT AGREEMENT (this "Amendment") is entered into as August
18, 2006 by and among XXXXXX.XXX, Inc., a Delaware corporation (the "Company")
and each of the other parties set forth on the signature page herein (each a
"Holder" and collectively, the "Holders").
WHEREAS, the Company previously entered into a Securities Purchase
Agreement dated December 28, 2005 (the "Purchase Agreement"), as amended on
February 1, 2006, February 24, 2006 and March 31, 2006, whereby the Company
issued and sold to the Holders, in the aggregate, the Company's 6% Secured
Convertible Debentures due December 28, 2008 (the "Debentures") as follows:
(a) $2,000,000 principal amount of Debentures on December 28, 2005,
(b) $375,884.38 principal amount of Debentures on February 1, 2006,
(c) $500,000 principal amount of Debentures on February 24, 2006 and
(d) $500,000 principal amount of Debentures on March 31, 2006,
for an aggregate principal amount of $3,375,884.38.
WHEREAS, in connection with the issuance of the Debentures pursuant to
the Purchase Agreement, the Holders were each issued common stock purchase
warrants to purchase shares of common stock of the Company (the "Warrants").
WHEREAS, in consideration for the Holders consenting to the issuance by
the Company of a new Series of the Company's 6% Secured Convertible Debentures
due December 28, 2006 with an aggregate principal amount of up to $3,275,000
(the "New Debentures" and collectively with the Debenture, the "Outstanding
Debentures") and common stock purchase warrants issued in connection therewith
(the "New Warrants," and collectively with the Warrants, the "Outstanding
Warrants"), the Company agrees to amend the terms of the Debentures such that
the terms of the Debentures and Warrants are the same as those of the New
Debentures and New Warrants, respectively.
WHEREAS, the Company and the purchasers of the New Debentures each
entered into a Securities Purchase Agreement dated as of June 30, 2006 (the "New
Purchase Agreement") and the Holders entered into a related Intercreditor
Agreement as of June 30, 2006.
NOW THEREFORE, for and in consideration of the above recitals, the
parties to this Amendment hereby agree as follows:
1. Definitions. All initially capitalized, undefined terms used herein
shall have the meanings ascribed to such terms in the Purchase Agreement and the
other agreements entered into in connection therewith.
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2. Waiver of Certain Provisions by Holders. Each Holder, severally and
not jointly with the other Holders, acknowledges and agrees that it is hereby
waiving the following rights it may have under the Purchase Agreement solely
with respect to the Debt Financing:
a.) each Holder hereby waives the Company's compliance with the
restrictions imposed by Sections 4.4, 4.13 and 4.14 of the Purchase
Agreement solely as it relates to the issuance of New Debentures and
New Warrants; and
b.) each Holder hereby waives the Company's compliance with the
negative covenant imposed by Sections 7(a), 7(b) and 7(e) of the
Debentures regarding the Company's agreement not to create indebtedness
and liens and to enter into agreements with respect thereto solely as
it relates to the issuance of the New Debentures and New Warrants.
The foregoing waivers and acknowledgements are given solely in respect
of the issuance and purchase of the issuance of the New Debentures and New
Warrants.
3. Amendments to the Purchase Agreement:
a.) Clause (b) of the definition of "Exempt Issuance" in Section 1
shall be amended so that the phrase of said clause "below $0.67 per
share (subject to adjustment for reverse and forward stock splits and
the like" shall be deleted.
b.) Clause (d) of the definition of "Exempt Issuances" in Section 1
shall be deleted and replaced with the following: "(D) THE ISSUANCE OF
WARRANTS TO EMERGING MARKETS CONSULTING LLC PURSUANT TO A CONSULTING
AGREEMENT, PROVIDED THAT THE EXERCISE PRICE OF SUCH WARRANTS EQUALS OR
EXCEEDS $0.85 PER SHARE AND SUCH ISSUANCE OF WARRANTS SHALL NOT EXCEED
180,000 IN ANY 3 CALENDAR MONTH PERIOD"
c.) The following paragraphs of Section 3.1 are amended:
(i) The first paragraph of Section 3.1 is amended to read as
follows: "Representations and Warranties of the Company. Except as
set forth in the disclosure schedule delivered to Purchasers
concurrently wit the execution of the Purchase Agreement, AS
AMENDED EFFECTIVE JUNE 30, 2006 BY THE DISCLOSURE SCHEDULE ANNEXED
TO THE SECURITIES PURCHASE AGREEMENT AND DELIVERED TO THE
PURCHASERS OF THE NEW DEBENTURES AS OF JUNE 30, 2006 (the
"Disclosure Schedules"), which Disclosure Schedules shall be deemed
a part hereof, the Company hereby makes the representations and
warranties set forth below to each Purchaser."
(ii) Section 3.1(n) shall be amended to reflect the disclosure
of Liens in Schedule 3.1(n) that may affect the property of the
Company, its Subsidiaries and the personal property owned by them
by restating that section to say: "The Company and the Subsidiaries
have good and marketable title in fee simple to all real property
owned by them that is material to the business of the Company and
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the Subsidiaries and good and marketable title in all personal
property owned by them that is material to the business of the
Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens DISCLOSED ON SCHEDULE 3.1(N) HERETO OR
LIENS as do not materially affect the value of such property and do
not materially interfere with the use made and proposed to be made
of such property by the Company and the Subsidiaries and Liens for
the payment of federal, state or other taxes, the payment of which
is neither delinquent nor subject to penalties."
(iii) The final sentence of 3.1(o) is hereby amended to state,
"EXCEPT AS SET FORTH ON SCHEDULE 3.1(O) HERETO, the Company and its
Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of all of their intellectual
properties, except where failure to do so could not, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(iv) 3.1(q) is hereby amended to include the Company's Chairman
and his affiliates participating as Purchasers pursuant to the New
Agreement in an amount up to $775,000 in the exception to the
representation and warranty that none of the executive officers or
directors of the Company and, to the knowledge of the Company, none
of the employees of the Company is presently a party to any
transaction with the Company or any subsidiary (other than for
services as employees, executive officers and directors).
(v) Section 3.1(z) shall be amended by the addition of the
parenthetical "(EXCEPT FOR THE SALE OF THE DEBENTURES, NEW
DEBENTURES AND RELATED WARRANTS)" to qualify the representation and
warranty that, assuming the accuracy of the Purchasers'
representations and warranties set forth in Section 3.2, neither
the Company, nor any of its affiliates, nor any Person acting on
its or their behalf has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy any security,
under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the Company for
purposes of the Securities Act or any applicable shareholder
approval provisions, including, without limitation, under the rules
and regulations of any Trading Market on which any of the
securities of the Company are listed or designated.
(vi) Section 3.1(aa) is hereby amended to state, "Based on the
financial condition of the Company as of the Closing Date after
giving effect to the receipt by the Company of the proceeds from
the sale of $2,775,000 OF THE SECURITIES UNDER THE NEW PURCHASE
AGREEMENT, (i) the Company's fair saleable value of its assets
exceeds the amount that will be required to be paid on or in
respect of the Company's existing debts and other liabilities
(including known contingent liabilities) as they mature; (ii) the
Company's assets do not constitute unreasonably small capital to
carry on its business and as proposed to be conducted until OCTOBER
2006 including its capital needs taking into account the particular
capital requirements of the business conducted by the Company; and
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(iii) the current cash flow of the Company, together with the
proceeds the Company would receive, were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash,
would be sufficient to pay all amounts on or in respect of its debt
due on or before OCTOBER 2006. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking
into account the timing and amounts of cash to be payable on or in
respect of its debt). Assuming the ability to raise $5 million
before OCTOBER 2006, the Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for
reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the
Closing Date. The SEC Reports set forth as of the dates thereof all
outstanding secured and unsecured Indebtedness of the Company or
any Subsidiary, or for which the Company or any Subsidiary has
commitments. For the purposes of this Agreement, "Indebtedness"
shall mean (a) any liabilities for borrowed money or amounts owed
in excess of $50,000 (other than trade accounts payable incurred in
the ordinary course of business), (b) all guaranties, endorsements
and other contingent obligations in respect of Indebtedness of
others, whether or not the same are or should be reflected in the
Company's balance sheet (or the notes thereto), except guaranties
by endorsement of negotiable instruments for deposit or collection
or similar transactions in the ordinary course of business; and (c)
the present value of any lease payments in excess of $50,000 due
under leases required to be capitalized in accordance with GAAP.
Neither the Company nor any Subsidiary is in default with respect
to any Indebtedness.
(vii) Section 3.1(ee) is hereby amended to state, "Accountants.
The Company's accountants are set forth on Schedule 3.1(EE) of the
Disclosure Schedule. To the knowledge of the Company, such
accountants, who the Company expects will express their opinion
with respect to the financial statements to be included in the
Company's Annual Report on Form 10-KSB for the year ending May 31,
2006 are a registered public accounting firm as required by the
Securities Act."
(viii) Section 3.1(ff) shall be amended to state, "Seniority.
EXCEPT AS SET FORTH ON SCHEDULE 3.1(FF), as of June 30, 2006, no
indebtedness or other equity of the Company is senior to the
Debentures in right of payment, whether with respect to interest or
upon liquidation or dissolution, or otherwise, other than
indebtedness secured by purchase money security interests (which is
senior only as to underlying assets covered thereby) and capital
lease obligations (which is senior only as to the property covered
thereby).
d.) Section 4.6 is hereby amended such that consents and approvals
of any disclosure or public releases thereunder that require consent
and approval may be obtained by holders holding 51% of the principal
amount, in the aggregate, of the Outstanding Debentures.
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e.) Section 4.13(e) is hereby amended and restated as follows: "IF
BY 5:30 P.M. (NEW YORK CITY TIME) ON THE 5TH TRADING DAY AFTER THE
PRE-NOTICE WAS DELIVERED TO ALL OF THE HOLDERS OF OUTSTANDING
DEBENTURES, THE COMPANY RECEIVES RESPONSES TO A SUBSEQUENT FINANCING
NOTICE FROM HOLDERS OF OUTSTANDING DEBENTURES SEEKING TO PURCHASE MORE
THAN THE AGGREGATE AMOUNT OF THE PARTICIPATION MAXIMUM, EACH SUCH
HOLDER OF OUTSTANDING DEBENTURES SHALL HAVE THE RIGHT TO PURCHASE THE
GREATER OF (A) THEIR PRO RATA PORTION (AS DEFINED BELOW) OF THE
PARTICIPATION MAXIMUM AND (B) THE DIFFERENCE BETWEEN THE PARTICIPATION
MAXIMUM AND THE AGGREGATE AMOUNT OF PARTICIPATION BY ALL OTHER HOLDERS
OF OUTSTANDING DEBENTURES. "PRO RATA PORTION" IS THE RATIO OF (X) THE
SUBSCRIPTION AMOUNT OF SECURITIES PURCHASED ON THE CLOSING DATE BY A
HOLDER OF OUTSTANDING DEBENTURES PARTICIPATING UNDER THIS SECTION 4.13
AND (Y) THE SUM OF THE AGGREGATE SUBSCRIPTION AMOUNTS OF SECURITIES
PURCHASED ON THE CLOSING DATE BY ALL HOLDERS OF OUTSTANDING DEBENTURES
PARTICIPATING UNDER THIS SECTION 4.13." Section 4.13 is hereby amended
so as to make such other changes to reflect the equal treatment of the
Holders of all Outstanding Debentures as if the Debentures and New
Debentures were issued as part of a single class MUTATIS MUTANDIS.
f.) Section 4.14(c) is hereby amended to insert the words "Short
Term" before the first occurrence of the word "Warrants."
g.) Section 5.5 shall be amended and restated as follows:
"AMENDMENTS; WAIVERS. NO PROVISION OF THIS AGREEMENT MAY BE WAIVED,
MODIFIED, SUPPLEMENTED OR AMENDED EXCEPT IN A WRITTEN INSTRUMENT
SIGNED, IN THE CASE OF AN AMENDMENT, BY THE COMPANY AND HOLDERS OF AT
LEAST 60% OF THE OUTSTANDING DEBENTURES. NO WAIVER OF ANY DEFAULT WITH
RESPECT TO ANY PROVISION, CONDITION OR REQUIREMENT OF THIS AGREEMENT
SHALL BE DEEMED TO BE A CONTINUING WAIVER IN THE FUTURE OR A WAIVER OF
ANY SUBSEQUENT DEFAULT OR A WAIVER OF ANY OTHER PROVISION, CONDITION OR
REQUIREMENT HEREOF, NOR SHALL ANY DELAY OR OMISSION OF EITHER PARTY TO
EXERCISE ANY RIGHT HEREUNDER IN ANY MANNER IMPAIR THE EXERCISE OF ANY
SUCH RIGHT."
4. Amendments to the Debentures:
a.) The following additional definitions are hereby added to
Section 1 of the Debentures:
"CASH SALE REDEMPTION AMOUNT" SHALL EQUAL THE SUM OF (I) 100%
OF THE PRINCIPAL AMOUNT OF THIS DEBENTURE TO BE PREPAID, PLUS ALL
ACCRUED AND UNPAID INTEREST THEREON, (II) THE PRINCIPAL AMOUNT OF
THIS DEBENTURE TO BE PREPAID, PLUS ALL OTHER ACCRUED AND UNPAID
INTEREST HEREON, DIVIDED BY THE CONVERSION PRICE ON THE CLOSING
DATE OF THE APPLICABLE EVENT MULTIPLIED BY THE "EFFECTIVE PRICE"
(DEFINED BELOW), AND (III) ALL OTHER AMOUNTS, COSTS, EXPENSES AND
LIQUIDATED DAMAGES DUE IN RESPECT OF THIS DEBENTURE. THE "EFFECTIVE
PRICE" SHALL BE THE CASH CONSIDERATION PAID BY THE ACQUIRER IN SUCH
EVENT (LESS THE AMOUNT SET FORTH IN CLAUSE (I) ABOVE) DIVIDED BY
THE SUM OF; (X) THE ISSUED AND OUTSTANDING SHARES OF COMMON STOCK
OF THE COMPANY THEN OUTSTANDING AND (Y) THE SHARES OF COMMON STOCK
INTO WHICH THE OUTSTANDING DEBENTURES MAY BE CONVERTED ON THE DAY
IMMEDIATELY PRECEDING THE
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RECORD DATE FIXED FOR DETERMINING THE HOLDERS OF SHARES OF COMMON
STOCK ELIGIBLE TO RECEIVE A DISTRIBUTION (OR IF NO SUCH DATE HAS
BEEN FIXED, THE DATE OF THE DAY IMMEDIATELY PRECEDING THE CLOSING
OF THE TRANSACTION) AND (Z) THE NUMBER OF SHARES DEEMED ISSUABLE TO
THE WARRANT HOLDERS PURSUANT TO THE MANDATORY REDEMPTION PROVISIONS
IN THE WARRANTS WHICH TAKE EFFECT UPON SALE OF ASSETS FOR CASH
CONSIDERATION WHETHER OR NOT ANY WARRANT HOLDER SHALL HAVE ELECTED
TO HAVE THEIR WARRANTS REDEEMED; PROVIDED, HOWEVER, THAT THE NUMBER
OF SHARES OF COMMON STOCK ISSUABLE ON CONVERSION OF THE DEBENTURES
AND ISSUABLE UPON EXERCISE OF THE WARRANTS FOR THIS PURPOSE SHALL
BE DETERMINED ON A FULLY CONVERTED OR EXERCISED BASIS AND IGNORING
ANY CONVERSION OR EXERCISE LIMITATIONS THEREIN).
"WARRANTS" SHALL HAVE THE MEANING SET FORTH IN THE PURCHASE
AGREEMENT.
b.) Clause (ix) of the definition of "Equity Conditions" in Section
1 of the Debenture is hereby amended and restated as follows: "FOR A
PERIOD OF 20 CONSECUTIVE TRADING DAYS PRIOR TO THE APPLICABLE DATE IN
QUESTION, THE DAILY TRADING VOLUME FOR THE COMMON STOCK ON THE TRADING
MARKET EXCEEDS 200,000 SHARES PER TRADING DAY (SUBJECT TO ADJUSTMENT
FOR FORWARD AND REVERSE STOCK SPLITS AND THE LIKE) IN THE CASE OF A
FORCED CONVERSION PURSUANT TO SECTION 6."
c.) The following definitions are hereby deleted from Section 1 of
the Debentures: "Option Redemption", "Optional Redemption Amount",
Optional Redemption Date", "Optional Redemption Notice" and "Optional
Redemption Notice Date".
d.) The reference to Schedule 3.1(gg) in the definition of
Permitted Indebtedness is hereby corrected to refer to Schedule
3.1(aa).
e.) The phrase "July 1, 2006, on each Optional Redemption Date (as
to that principal amount being redeemed" in the first sentence of
Section 2(a) is hereby amended and replaced with "JANUARY 1, 2007, UPON
A REDEMPTION EVENT PURSUANT TO SECTION 6(A)".
f.) A new Section 5(b)(iv) is hereby added as follows:
"NOTWITHSTANDING THE FOREGOING, NO ADJUSTMENT SHALL BE MADE PURSUANT TO
THIS SECTION 5(B) FOR AN EXEMPT ISSUANCE (DEFINED IN THE PURCHASE
AGREEMENT)."
g.) Section 6(a) and 6(b) are hereby deleted and of no further
force or effect and replaced with new Section 6(a) as follows:
"REDEMPTION AT ELECTION OF HOLDER. IF THE COMPANY SHALL AGREE TO SELL
SUBSTANTIALLY ALL OF ITS ASSETS IN ONE OR MORE TRANSACTIONS IN WHICH
THE CONSIDERATION CONSISTS SOLELY OF CASH, CASH EQUIVALENTS, ASSUMPTION
OF INDEBTEDNESS, OR ANY COMBINATION THEREOF, THE HOLDER SHALL HAVE THE
RIGHT TO REQUIRE THE COMPANY, BY WRITTEN NOTICE TO THE COMPANY, TO
REDEEM THIS DEBENTURES, IN FULL AND IN CASH, AT THE CLOSING OF SUCH
CHANGE OF CONTROL TRANSACTION, FUNDAMENTAL TRANSACTION OR SALE OF
ASSETS. THE AGGREGATE AMOUNT PAYABLE UPON SUCH CHANGE OF CONTROL
TRANSACTION, FUNDAMENTAL TRANSACTION OR SALE OF ASSETS
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SHALL BE EQUAL TO THE CASH SALE REDEMPTION AMOUNT. IN THE EVENT THAT
THE COMPANY FAILS TO PAY THE CASH SALE REDEMPTION AMOUNT ON OR PRIOR
TO THE APPLICABLE CLOSING DATE, THE INTEREST RATE ON THIS DEBENTURE
SHALL ACCRUE AT THE RATE OF 18% PER ANNUM, OR SUCH LOWER MAXIMUM
AMOUNT OF INTEREST PERMITTED TO BE CHARGED UNDER APPLICABLE LAW, UNTIL
THE CASH SALE REDEMPTION AMOUNT IS PAID IN FULL. CONCURRENTLY WITH THE
PAYMENT IN FULL OF THE CASH SALE REDEMPTION AMOUNT, THE HOLDER SHALL
SURRENDER THIS DEBENTURE TO OR AS DIRECTED BY THE COMPANY (OR THE
SUCCESSOR COMPANY). THE HOLDER MAY ELECT TO CONVERT THE OUTSTANDING
PRINCIPAL AMOUNT OF THE DEBENTURE PURSUANT TO SECTION 4 PRIOR TO
ACTUAL PAYMENT IN CASH FOR THE REDEMPTION UNDER THIS SECTION 6 BY FAX
DELIVERY OF A NOTICE OF CONVERSION TO THE COMPANY."
Section 6(c) is now Section 6(b) and all references to said Section
are hereby revised accordingly. In addition, Section 6(b) as so
re-designated, is hereby amended to strike the numbers and symbols
"200%" and substitute "400%" in their place.
h.) The opening sentence of Section 7 is hereby amended and
restated as follows: "SO LONG AS ANY PORTION OF THIS DEBENTURE IS
OUTSTANDING, THE COMPANY WILL NOT AND WILL NOT PERMIT ANY OF ITS
SUBSIDIARIES TO DIRECTLY OR INDIRECTLY WITHOUT THE PRIOR WRITTEN
CONSENT OF THE HOLDERS OF AT LEAST 60% OF THE PRINCIPAL AMOUNT OF
OUTSTANDING DEBENTURES THEN OUTSTANDING:"
i.) A new Section 7(g) is hereby added as follows: "ENTER INTO ANY
FUNDAMENTAL TRANSACTION OR CHANGE OF CONTROL TRANSACTION WITHOUT THE
CONSENT OF THE HOLDERS OF 60% OF THE OUTSTANDING PRINCIPAL AMOUNT OF
THE DEBENTURES, EXCEPT WITH RESPECT TO A SALE OF ASSETS OF THE COMPANY
PURSUANT TO WHICH THE COMPANY IS REQUIRED TO (I) REDEEM ALL OUTSTANDING
DEBENTURES UNDER SECTION 6(A) HEREOF AND (II) REDEEM ALL THE WARRANTS
PURSUANT TO SECTION 1(F) THEROF."
j.) Sections 8(a)(ix) and 8(a)(x) are hereby deleted and of no
further force or effect. Section 8(a)(viii) is hereby amended and
restated as follows: "THE COMPANY SHALL REDEEM OR REPURCHASE MORE THAN
A DE MINIMIS NUMBER OF ITS OUTSTANDING SHARES OF COMMON STOCK OR OTHER
EQUITY SECURITIES OF THE COMPANY (OTHER THAN REDEMPTIONS OF CONVERSION
SHARES AND REPURCHASES OF SHARES OF COMMON STOCK OR OTHER EQUITY
SECURITIES OF DEPARTING OFFICERS AND DIRECTORS OF THE COMPANY, PROVIDED
THAT SUCH REPURCHASES SHALL NOT EXCEED $200,000, IN THE AGGREGATE, FOR
ALL OFFICERS, DIRECTORS AND EMPLOYEES DURING ANY 12 MONTH PERIOD)"
5. Amendments to Registration Rights Agreement:
a.) The definition of "Effectiveness Date in Section 1 is hereby
amended and restated as follows: ""EFFECTIVENESS DATE" MEANS, WITH
RESPECT TO THE INITIAL REGISTRATION STATEMENT REQUIRED TO BE FILED
HEREUNDER, THE 90TH CALENDAR DAY FOLLOWING THE FILING DATE AND, WITH
RESPECT TO ANY ADDITIONAL REGISTRATION STATEMENTS WHICH MAY BE REQUIRED
PURSUANT TO SECTION 3(C), THE 60TH CALENDAR DAY FOLLOWING THE DATE ON
WHICH THE COMPANY IS NOTIFIED IN WRITING BY THE HOLDERS OF THE
REQUISITE PERCENTAGE OF REGISTRABLE SECURITIES THAT SUCH ADDITIONAL
REGISTRATION STATEMENT IS REQUIRED HEREUNDER; PROVIDED, HOWEVER, IN
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THE EVENT THE COMPANY IS NOTIFIED BY THE COMMISSION THAT ONE OF THE
ABOVE REGISTRATION STATEMENTS WILL NOT BE REVIEWED OR IS NO LONGER
SUBJECT TO FURTHER REVIEW AND COMMENTS, THE EFFECTIVENESS DATE AS TO
SUCH REGISTRATION STATEMENT SHALL BE THE FIFTH TRADING DAY FOLLOWING
THE DATE ON WHICH THE COMPANY IS SO NOTIFIED IF SUCH DATE PRECEDES THE
DATES REQUIRED ABOVE."
b.) The definition of "Filing Date" in Section 1 is hereby amended
and restated as follows: ""FILING DATE" MEANS, WITH RESPECT TO THE
INITIAL REGISTRATION STATEMENT REQUIRED HEREUNDER, THE 45TH CALENDAR
DAY FOLLOWING THE DATE THAT THE COMPANY RECEIVES A WRITTEN DEMAND
NOTICE FROM HOLDERS OF THE REQUISITE PERCENTAGE OF REGISTRABLE
SECURITIES, (BUT IN NO EVENT SHALL THE FILING DATE BE PRIOR TO OCTOBER
15, 2006) AND, WITH RESPECT TO ANY ADDITIONAL REGISTRATION STATEMENTS
WHICH MAY BE REQUIRED PURSUANT TO SECTION 3(C), THE 30TH DAY FOLLOWING
THE DATE ON WHICH THE COMPANY RECEIVES WRITTEN NOTICE FROM THE HOLDERS
OF THE REQUISITE PERCENTAGE OF REGISTRABLE SECURITIES THAT SUCH
ADDITIONAL REGISTRATION STATEMENT IS REQUIRED HEREUNDER."
c.) The following definition is added to Section 1: "Requisite
Percentage of Registrable Securities" means 60.1% of the sum of the
Registrable Securities and any "Registrable Securities" as that term is
defined under the Registration Rights Agreement, dated June 30, 2006,
by and among the Company and the holders signatory thereto that are not
already included in the definition of Registrable Securities"
d.) Section 3(c) is hereby amended and restated as follows: "IF
DURING THE EFFECTIVENESS PERIOD, THE NUMBER OF REGISTRABLE SECURITIES
AT ANY TIME EXCEEDS 90% OF THE NUMBER OF SHARES OF COMMON STOCK THEN
REGISTERED IN A REGISTRATION STATEMENT AND THE COMPANY RECEIVES A
WRITTEN DEMAND NOTICE FROM HOLDERS OF THE REQUISITE PERCENTAGE OF
REGISTRABLE SECURITIES, THEN THE COMPANY SHALL FILE AS SOON AS
REASONABLY PRACTICABLE BUT IN ANY CASE PRIOR TO THE APPLICABLE FILING
DATE, AN ADDITIONAL REGISTRATION STATEMENT COVERING THE RESALE BY THE
HOLDERS OF NOT LESS THAN 130% OF THE NUMBER OF SUCH REGISTRABLE
SECURITIES."
e.) The last sentence of Section 6(b) is amended and restated as
follows: "THE COMPANY SHALL NOT FILE THE REGISTRATION STATEMENT PRIOR
TO DEMAND BY AT LEAST A REQUISITE PERCENTAGE OF REGISTRABLE SECURITIES.
OTHER THAN A REGISTRATION STATEMENT FOR A FIRM COMMITMENT PUBLIC
OFFERING OF COMMON STOCK UNDERWRITTEN BY A REPUTABLE, NATIONALLY
RECOGNIZED INVESTMENT BANK WITH NET PROCEEDS OF AT LEAST $20 MILLION
AND WITH A PER SHARE PURCHASE PRICE OF NOT LESS THAN $3 PER SHARE,
SUBJECT FOR REVERSE AND FORWARD STOCK SPLITS THAT THE LIKE, THE COMPANY
SHALL NOT FILE ANY OTHER REGISTRATION STATEMENTS UNTIL THE INITIAL
REGISTRATION STATEMENT REQUIRED HEREUNDER IS DECLARED EFFECTIVE BY THE
COMMISSION, PROVIDED THAT THIS SECTION 6(B) SHALL NOT PROHIBIT THE
COMPANY FROM FILING AMENDMENTS TO REGISTRATION STATEMENTS ALREADY
FILED."
f.) Section 6(f) is hereby amended such that amendments,
modifications and waivers to the Registration Rights Agreement may be
made by the then outstanding Requisite Percentage of Registrable
Securities.
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6. Amendments to Warrants:
a.) Section 2(f) is hereby deleted and of no further force or
effect and replaced with a new Section 2(f) as following:
"REDEMPTION AT ELECTION OF HOLDER. IF THE COMPANY SHALL AGREE
TO SELL SUBSTANTIALLY ALL OF ITS ASSETS IN ONE OR MORE TRANSACTIONS
IN WHICH THE CONSIDERATION CONSISTS SOLELY OF CASH, CASH
EQUIVALENTS, ASSUMPTION OF INDEBTEDNESS, OR ANY COMBINATION
THEREOF, THE HOLDER SHALL HAVE THE RIGHT TO REQUIRE THE COMPANY, BY
WRITTEN NOTICE TO THE COMPANY, TO REDEEM THIS WARRANT, IN FULL AND
IN CASH, AT THE CLOSING OF SUCH SALE OF ASSETS. THE AGGREGATE
AMOUNT PAYABLE IN FULL REDEMPTION OF THE WARRANTS REQUIRED TO BE
REDEEMED UPON SUCH SALE OF ASSETS SHALL BE EQUAL TO THE WARRANT
CASH SALE REDEMPTION AMOUNT (AS DEFINED BELOW). IN THE EVENT THAT
THE COMPANY FAILS TO PAY THE WARRANT CASH SALE REDEMPTION AMOUNT
WITHIN THREE BUSINESS DAYS OF THE CLOSING OF THE SALE TRANSACTION,
INTEREST SHALL ACCRUE ON THE UNPAID WARRANT CASH REDEMPTION AMOUNT
AT THE RATE OF 18% PER ANNUM, OR SUCH LOWER MAXIMUM AMOUNT OF
INTEREST PERMITTED TO BE CHARGED UNDER APPLICABLE LAW, UNTIL THE
WARRANT CASH SALE REDEMPTION AMOUNT IS PAID IN FULL. CONCURRENTLY
WITH THE PAYMENT IN FULL OF THE WARRANT CASH SALE REDEMPTION
AMOUNT, THE HOLDER SHALL SURRENDER THIS WARRANT TO OR AS DIRECTED
BY THE COMPANY (OR THE SUCCESSOR COMPANY). THE HOLDER MAY ELECT TO
EXERCISE THIS WARRANT PURSUANT TO SECTIONS 2(A) OR 2(C) HEREOF
PRIOR TO ACTUAL PAYMENT IN CASH FOR THE REDEMPTION."
b.) New Section 2(g) is added as follows:
DEFINITIONS APPLICABLE TO SECTION 2(F). FOR THE PURPOSES OF SECTION
2(F):
I. "WARRANT CASH SALE REDEMPTION AMOUNT" SHALL EQUAL THE SUM OF
(I) ALL UNEXERCISED WARRANT SHARES UNDERLYING THIS WARRANT IF
THE WARRANTS WERE ISSUED PURSUANT TO A CASHLESS EXERCISE
EXERCISED ON THE DATE THE REDEMPTION RIGHT HEREUNDER IS
EXERCISED BASED ON THE EFFECTIVE PRICE (AS DEFINED BELOW) AND
(II) ALL OTHER AMOUNTS, COSTS, EXPENSES AND LIQUIDATED DAMAGES
DUE IN RESPECT OF THIS DEBENTURE THE "EFFECTIVE PRICE" SHALL BE
THE CASH CONSIDERATION PAID BY THE ACQUIRER IN SUCH EVENT (LESS
THE AMOUNT PAID IN REDEMPTION OF THE DEBENTURES IN CLAUSE (I)
OF THE DEFINITION OF CASH SALE REDEMPTION AMOUNT SET FORTH
THEREIN) DIVIDED BY THE SUM OF; (X) THE ISSUED AND OUTSTANDING
SHARES OF COMMON STOCK OF THE COMPANY THEN OUTSTANDING AND (Y)
THE SHARES OF COMMON STOCK INTO WHICH THE OUTSTANDING
DEBENTURES MAY BE CONVERTED ON THE DAY IMMEDIATELY PRECEDING
THE RECORD DATE FIXED FOR DETERMINING THE HOLDERS OF SHARES OF
COMMON STOCK ELIGIBLE TO RECEIVE A DISTRIBUTION (OR IF NO SUCH
DATE HAS BEEN FIXED, THE DATE OF THE DAY IMMEDIATELY PRECEDING
THE CLOSING OF THE TRANSACTION) AND (Z) THE NUMBER OF SHARES
DEEMED ISSUABLE TO THE WARRANT HOLDERS PURSUANT TO THE
MANDATORY REDEMPTION PROVISIONS IN THIS AND THE
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OTHER WARRANTS WHICH TAKE EFFECT UPON SALE OF ASSETS FOR CASH
CONSIDERATION WHETHER OR NOT ANY WARRANT HOLDER SHALL HAVE
ELECTED TO HAVE THEIR WARRANTS REDEEMED; PROVIDED, HOWEVER,
THAT THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE ON
CONVERSION OF THE DEBENTURES AND ISSUABLE UPON EXERCISE OF THE
WARRANTS FOR THIS PURPOSE SHALL BE DETERMINED ON A FULLY
CONVERTED OR EXERCISED BASIS AND IGNORING ANY CONVERSION OR
EXERCISE LIMITATIONS THEREIN.
c.) Section 6(m) shall be amended and restated as follows:
"AMENDMENT. THIS WARRANT MAY BE MODIFIED OR AMENDED OR THE PROVISIONS
HEREOF WAIVED WITH THE WRITTEN CONSENT OF THE COMPANY AND THE HOLDERS
OF 60.1% OF THE THEN UNEXERCISED WARRANT SHARES."
7. Any Holder may request from the Company, and the Company shall
deliver to the Holder within 5 Trading Days, an amended and restated Debenture
and/or Warrant reflecting the terms of this Amendment. In the event a Holder
reasonably believes that any of the terms and conditions of the New Debentures
or New Warrants are more favorable than the terms and conditions granted under
the Debentures and Warrants, upon notice to the Company by such Holder the
Company shall further amend the terms of the Debentures and Warrants as to the
Holders so as to give the Holders the benefit of such more favorable terms or
conditions.
8. This Amendment may be executed in any number of counterparts with
the same effect as if all of the parties had signed the same document. All
counterparts shall be construed together and shall constitute one and the same
instrument. In the event that any signature is delivered by facsimile
transmission or by e-mail delivery of a ".pdf" format data file, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
facsimile or ".pdf" signature page were an original thereof.
9. This Amendment and the rights and obligations of the parties
hereunder shall be construed in accordance with and governed pursuant to the
terms of the Purchase Agreement. The address for notice of the Company is
currently 000 Xxx Xxx Xxxxxxxxx Xxxx, 0xx Xxxxx, Xxxxxxxxxx, XX 00000.
10. Except as expressly set forth herein, all of the terms and
conditions of the Purchase Agreement, the Debentures, the Registration Rights
Agreement and the Warrants shall continue in full force and effect after the
execution of this Amendment, and shall not be in any way changed, modified or
superseded by the terms set forth herein and the provisions of this Amendment,
if not expressly set forth herein, shall otherwise be subject to the provisions
of the Purchase Agreement.
11. The obligations of each Holder under this Amendment are several and
not joint with the obligations of any other Holder, and no Holder shall be
responsible in any way for the performance of the obligations of any other
Holder under this Amendment. Nothing contained herein or in this Amendment, and
no action taken by any Holder pursuant thereto, shall be deemed to constitute
the Holders as a partnership, an association, a joint venture or any
10
other kind of entity, or create a presumption that the Holders are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by this Amendment. Each Holder shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Amendment, and it shall not be necessary for any
other Holder to be joined as an additional party in any proceeding for such
purpose. Each Holder has been represented by its own separate legal counsel in
their review and negotiation of this Amendment. For reasons of administrative
convenience only, Holders and their respective counsel have chosen to
communicate with the Company through FW.
REMAINDER INTENTIONALLY LEFT BLANK
11
IN WITNESS WHEREOF, each party has executed this Amendment as of the
date first written above.
XXXXXX.XXX, INC.
By: /s/ Xxxx Xxxxxxxx
---------------------
Name: Xxxx Xxxxxxxx
Title: President and CEO
12
[SIGNATURE PAGE OF HOLDERS TO CDKN AMENDMENT]
Name of Holder: Bushido Capital Master Fund, LP
SIGNATURE OF AUTHORIZED SIGNATORY OF HOLDER: /s/ Xxxxxxxxxxx Xxxxxxx
--------------------------
Name of Authorized Signatory: Xxxxxxxxxxx Xxxxxxx
Title of Authorized Signatory: Managing Director, Bushido Capital
Partners, Ltd.
[SIGNATURE PAGES CONTINUE]
13
[SIGNATURE PAGE OF HOLDERS TO CDKN AMENDMENT]
Name of Holder: Gamma Opportunity Capital Partners, LP Class A
-------------------------------------------------------
SIGNATURE OF AUTHORIZED SIGNATORY OF HOLDER: /s/ Xxxxxxxx X. Xxxxxx
---------------------------
Name of Authorized Signatory: Xxxxxxxx X. Xxxxxx
-----------------------------------------
Title of Authorized Signatory: President / Director
-----------------------------------------
[SIGNATURE PAGES CONTINUE]
14
[SIGNATURE PAGE OF HOLDERS TO CDKN AMENDMENT]
Name of Holder: Gamma Opportunity Capital Partners, LP Class C
-------------------------------------------------------
SIGNATURE OF AUTHORIZED SIGNATORY OF HOLDER: /s/ Xxxxxxxx X. Xxxxxx
---------------------------
Name of Authorized Signatory: Xxxxxxxx X. Xxxxxx
-----------------------------------------
Title of Authorized Signatory: President / Director
-----------------------------------------
[SIGNATURE PAGES CONTINUE]
15
[SIGNATURE PAGE OF HOLDERS TO CDKN AMENDMENT]
Name of Holder: Cargo Holdings LLC
SIGNATURES AND TITLES OF AUTHORIZED SIGNATORIES OF HOLDER:
By: /s/ Xxxxx Xxxxxxxx
--------------------------------
Xxxxx Xxxxxxxx, Member
By: /s/ Gennaro Vendome
--------------------------------
Gennaro Vendome, Member
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