May 25, 2006
May
25,
2006
AJW
Partners, LLC
New
Millennium Capital Partners II, LLC
AJW
Offshore, Ltd.
AJW
Qualified Partners, LLC
0000
Xxxxxxxx Xxxxxxxxx
Xxxxxx,
Xxx Xxxx 00000
Attn:
Xxxxxxxx X. Xxxxxxxxx,
General
Counsel
Re: Xxxxxxxx.xxx,
Incorporated (the “Company”)
Dear
Xxxxxxxx:
This
letter agreement outlines the terms and conditions pertaining to the Company’s
repayment (“Repayment”) of all amounts of principal and interest owing and
outstanding under those certain Callable Secured Convertible Notes (the “Notes”)
issued on or about August 31, 2005 and October 31, 2005 pursuant to that certain
Securities Purchase Agreement (the “SPA”) by and between the Company and AJW
Partners, LLC (“Partners”), New Millennium Capital Partners, II, LLC
(“Millennium”), AJW Offshore, Ltd. (“Offshore”) and AJW Qualified Partners, LLC
(“Qualified, with Partners, Millennium and Offshore, collectively, the “NIR
Group”). The Repayment shall be applied to the outstanding principal and
interest owing under the Notes and as consideration for the cancellation of
the
Stock Purchase Warrants (“Warrants”) issued to the NIR Group, and the
termination of any and all UCC-1s filed in favor of NIR. Currently, the Company
owes the NIR Group $3,000,000 in principal and $20,000 in interest under the
Notes and the Warrants are “out of the money” with an exercise price of $5.00
per share.
Further,
in connection with the SPA, Notes and Warrants, the following ancillary
documents were executed and/or filed: (1) Guaranty and Pledge Agreement, dated
August 31, 2005, by and between the Company, Xx. Xxxx Xxxxxxxx, the Company’s
President and Chief Executive Officer, and NIR (“Pledge Agreement”); (2)
Security Agreement by and between the Company and NIR, dated August 31, 2005
(“Security Agreement”); and (3) UCC-1 Financing Statements filed by NIR with the
Secretary of State of Nevada, Document Filing Number 2005036618-3 (the
“UCC-1”).
For
purposes of this Agreement, the Notes, SPA, Warrants, Pledge Agreement and
Security Agreement shall be referred to collectively as “Original
Documents”.
In
connection with the Repayment, the Company and NIR agree to execute and deliver
this letter agreement (the “Agreement”), a new promissory note (the “New
Notes”), attached hereto as Exhibit B, a new stock purchase warrant (the “New
Warrants”), attached hereto as Exhibit C, and a new registration rights
agreement (“New Registration Agreement”), attached hereto as Exhibit D. Further,
NIR shall file all appropriate UCC-3 Termination Statements (“UCC-3”) necessary
to terminate any perfected security interest they had obtained pursuant to
the
Security Agreement and the UCC-1.
For
purposes of the Agreement, the Agreement, New Notes, New Warrants and New
Registration Agreement and the UCC-3 shall be referred to collectively as the
“New Documents”.
The
following outlines the terms and conditions of the Repayment:
I. Cash
Payment
Upon
signing of Agreement, the Company shall make the Cash Payment to NIR in the
amount of $2,635,400, as more fully described on attached Schedule A. The Cash
Payment shall be applied to the repayment of all amounts of principal and
interest owing and outstanding under the Notes. If the Cash Payment provided
herein is not paid within twenty four (24) hours of signing this Agreement,
the
Agreement and the other New Documents shall be deemed null and
void.
II. New
Notes
Upon
signing of the Agreement, the Company shall issue to NIR the New Notes in the
aggregate amount of $1,200,000; the New Notes to be issued in accordance with
Schedule B attached hereto. The New Notes shall be self-amortizing over a
one-year time period commencing on July 1, 2006, with each installment payment
due on the twelve consecutive monthly anniversaries beginning July 1, 2006.
Further, pursuant to the New Notes, the Company will pay to NIR an aggregate
of
$100,000 per month, as more fully described on Schedule B. The New Notes may
be
prepaid by the Company at anytime without penalty.
III. New
Warrants
Upon
signing of the Agreement, the Company shall issue to NIR the New Warrants
exercisable into an aggregate of 750,000 shares of the Company’s Common Stock
(the “Warrant Shares”); the New Warrants shall be issued in accordance with
Schedule C attached hereto. The New Warrants shall have a term of five years
and
an exercise price equal to $1.79 per share. The New Warrants may be exercised
on
a cashless basis only in the event that there is no effective registration
statement covering the Warrant Shares. NIR may exercise the New Warrants by
utilizing any amounts still owing under the New Notes. The Company may buy
back
all of the New Warrants from NIR for an aggregate of $100,000, as more fully
described on Schedule C, at any time prior to the New Warrants being
exercised.
IV. New
Registration Agreement
Upon
signing of the Agreement, the Company and NIR shall execute and deliver the
New
Registration Agreement providing for the registration of the Warrant Shares
with
the Securities and Exchange Commission. The New Registration Agreement provides
for one piggyback registration right no sooner than six months from the date
of
hereof.
V. Agreement
Not to Short
NIR
agrees that it will comply
with the provisions of Section 9 of the Securities Exchange Act of 1934 Act,
as
amended, and the rules promulgated thereunder, with respect to transactions
involving the Company’s Common Stock. Further, NIR agrees not to sell the
Company's Common Stock short, either directly or indirectly through its
affiliates, principals or advisors.
VI. Termination
of Original Documents
The
Company and NIR mutually agree that the Original Documents shall be terminated
in all respects, shall be rendered null and void and shall no longer bind NIR
or
the Company to any obligations, duties and responsibilities contained therein.
Further, NIR and the Company mutually agree that the New Documents shall
supersede the Original Documents in all respects.
In
connection with the termination of the Original Documents, NIR shall deliver
to
the Company upon execution of the Agreement, the original Notes and Warrants
issued by the Company on August 31, 2005 and October 31, 2005, to be cancelled
on the Company’s book and records. Moreover, NIR shall deliver to Xx. Xxxx
Xxxxxxxx his stock certificate representing 3,000,000 shares of the Company’s
Common Stock that was pledge by Xx. Xxxxxxxx pursuant to the Pledge
Agreement.
VII. Withdrawal
of Registration Statement
NIR
acknowledges that upon execution of this Agreement, the Company may file a
Form
AW to withdraw the Registration Statement on Form SB-2 (File No. 333-129278)
currently on file with the Securities and Exchange Commission covering the
shares of common stock underlying the Notes and the Warrants.
| VIII. |
Termination
of UCC Filings
|
All
security interests perfected by NIR on the “Collateral” (as defined in the
Security Agreement), pursuant to the Original Documents, including the Security
Agreement, shall be terminated. Accordingly, NIR agrees to file within (2)
days
of this Agreement, UCC-3 Termination Statements to terminate the UCC-1 Financing
Statements were filed pursuant to the Security Agreement. NIR shall deliver
to
the Company all filing receipts for such UCC-3 filings upon receipt from the
Jurisdictions.
IX. Miscellaneous
(a)
This
Agreement constitutes the entire agreement of the parties with respect to the
subject matter hereof and is intended to supersede all prior negotiations,
understandings and agreements with respect thereto. Except as specifically
set
forth in this Agreement, no provision of this Agreement may be modified or
amended except by a written agreement specifically referring to this Agreement
and signed by the parties hereto.
(b) In
the event that any provision of this Agreement is held to be invalid, prohibited
or unenforceable in any jurisdiction for any reason, unless such provision is
narrowed by judicial construction, this Agreement shall, as to such
jurisdiction, be construed as if such invalid, prohibited or unenforceable
provision had been more narrowly drawn so as not to be invalid, prohibited
or
unenforceable. If, notwithstanding the foregoing, any provision of this
Agreement is held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision, as to such jurisdiction, shall be ineffective
to
the extent of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other provisions
of
this Agreement and without affecting the validity or enforceability of such
provision or the other provisions of this Agreement in any other
jurisdiction.
(c) No
waiver of any breach or default or any right under this Agreement shall be
considered valid unless in writing and signed by the party giving such waiver,
and no such waiver shall be deemed a waiver of any subsequent breach or default
or right, whether of the same or similar nature or otherwise.
(d) This
Agreement shall be binding upon and inure to the benefit of each party hereto
and its successors and assigns.
(e) Each
party shall take such further action and execute and deliver such further
documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.
(f) This
Agreement shall be construed in accordance with the laws of the State of New
York, except to the extent the validity, perfection or enforcement of a security
interest hereunder in respect of any particular Collateral which are governed
by
a jurisdiction other than the State of New York in which case such law shall
govern. Each of the parties hereto irrevocably submit to the exclusive
jurisdiction of any New York State or United States Federal court sitting in
Manhattan county over any action or proceeding arising out of or relating to
this Agreement, and the parties hereto hereby irrevocably agree that all claims
in respect of such action or proceeding may be heard and determined in such
New
York State or Federal court. The parties hereto agree that a final judgment
in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
The parties hereto further waive any objection to venue in the State of New
York
and any objection to an action or proceeding in the State of New York on the
basis of forum non conveniens.
(g) EACH
PARTY HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. THE SCOPE
OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY DISPUTES THAT MAY
BE
FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATER OF THIS AGREEMENT,
INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS
AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES
THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO A
BUSINESS RELATIONSHIP, THAT EACH PARTY HAS ALREADY RELIED ON THIS WAIVER IN
ENTERING INTO THIS AGREEMENT AND THAT EACH PARTY WILL CONTINUE TO RELY ON THIS
WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY FURTHER WARRANTS AND
REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT
SUCH PARTY HAS KNOWINGLY AND VOLUNTARILY WAIVES ITS RIGHTS TO A JURY TRIAL
FOLLOWING SUCH CONSULTATION. THIS WAIVER IS IRREVOCABLE, MEANING THAT,
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS AND SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. IN THE EVENT OF
A
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY
THE
COURT.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF, the parties hereto have caused this Security Agreement to
be
duly executed on the day and year first above written.
XXXXXXXX.XXX,
INCORPORATED
By:
/s/
Xxxx Xxxxxxxx
Xxxx
Xxxxxxxx
Chief
Executive Officer
AJW
PARTNERS, LLC
By:
SMS
Group, LLC
By:
/s/
Xxxxx X. Xxxxxxxx
Xxxxx
X.
Xxxxxxxx
Manager
AJW
OFFSHORE, LTD.
By:
First
Street Manager II, LLC
By:
/s/
Xxxxx X. Xxxxxxxx
Xxxxx
X.
Xxxxxxxx
Manager
AJW
QUALIFIED PARTNERS, LLC
By:
AJW
Manager, LLC
By:
/s/
Xxxxx X. Xxxxxxxx
Xxxxx
X.
Xxxxxxxx
Manager
NEW
MILLENNIUM CAPITAL PARTNERS II, LLC
By:
First
Street Manager II, LLC
By:
/s/
Xxxxx X. Xxxxxxxx
Xxxxx
X.
Xxxxxxxx
Manager
