CONVERTIBLE DEBT AGREEMENT
This
Convertible
Debt Agreement
(“Agreement”),
dated
as of March 27, 2006 (the “Effective
Date”),
is
entered into by and among Xxxxx
Networks, Inc.,
a
Nevada
corporation
(“Xxxxx”)
Xxxxx
Networks, Inc,
a
Delaware corporation and wholly owned subsidiary of Xxxxx, (“Xxxxx
Delaware”)
and
____________
(“Investor”)
and
documents an oral agreement between Xxxxx Delaware and the Investor on or about
the date on which Investor entered into the Subscription Agreement by and
between Investor and Xxxxx Delaware.
Whereas: Investor
made an investment in Xxxxx Delaware in contemplation of a merger of Xxxxx
Delaware into a public shell corporation (the “Reverse
Merger”).
Whereas:
At
the
time of the investment, the agreement between the Investor and Xxxxx Delaware
was that the funds would be held as convertible debt and later converted into
shares of the parent corporation at a conversion price of $1.00 per share
following the closing of the Reverse Merger.
Whereas:
As
drafted the investment documents executed by the Investor and Xxxxx Delaware
reflect the purchase of shares in Xxxxx Delaware, instead of the actual
agreement between the parties to hold the investment as convertible debt and
to
later convert the funds into shares of the parent corporation following
assumption of such debt by the parent upon the consummation of the Reverse
Merger.
Whereas:
If
the
funds delivered by the Investor were used to purchase shares of Xxxxx Delaware,
which were subsequently converted into shares of Xxxxx as a result of the
Reverse Merger, the Investor would have received only approximately 19% of
the
shares which Xxxxx Delaware and the Investor believed the Investor was entitled
to purchase.
Whereas:
Neither
Xxxxx nor Xxxxx Delaware has issued any shares of their respective capital
stock
to the Investor.
Whereas:
Xxxxx
and
the Investor desire to clarify their understanding of the investment made by
the
Investor.
Now,
therefore,
in
consideration of the foregoing premises and the mutual covenants contained
in
this Agreement, the parties agree as follows:
1. Acknowledgement
of Convertible Debt.
Xxxxx,
Xxxxx Delaware and Investor each hereby acknowledges and agrees that the funds
delivered by Investor in connection with the Subscription Agreement by and
between Xxxxx Delaware and the Investor (the “Subscription
Agreement”)
were
intended to be held in the form of convertible debt to be converted into shares
of a public parent corporation following the completion of the Reverse Merger
at
a conversion price of $1.00 per share.
(2)
(b)
2. Conversion
of Convertible Debt.
Investor hereby agrees to convert all such convertible debt held by Investor
at
a conversion price of $1.00 per share into _____________ shares of Xxxxx common
stock effective as of the date of this Agreement.
3. 144
Acknowledgement.
Xxxxx
acknowledges that, because the investment has been held as convertible debt,
for
purposes of sales under Rule 144 of the Securities Act of 1933, as amended,
the
date of acquisition of Xxxxx stock obtained upon conversion of the convertible
debt hereunder will tack back to April 1, 2005, the date the convertible debt
was assumed by Xxxxx upon the closing of the Reverse Merger.
4. Subscription
Agreement and Registration Rights Agreements.
Investor, Xxxxx and Xxxxx Delaware each hereby agrees and acknowledges that
the
Subscription Agreement and the related Registration Rights Agreement by and
between Xxxxx Delaware and the Investor (the “Registration
Rights Agreement”)
are
hereby terminated and cancelled in all respects, and Investor, Xxxxx and Xxxxx
Delaware shall have no further obligation, duty or liability under the
Subscription Agreement or the Registration Rights Agreement.
5. Release.
(a) Investor,
for itself and its employees, shareholders, officers, directors,
representatives, heirs, successors and assigns and all other persons acting
on
behalf of them or claiming under them, do hereby forever release, acquit and
discharge Xxxxx, its affiliates and their respective employees, shareholders,
officers, directors, representatives, heirs, successors and assigns
(collectively referred to herein as the “Xxxxx
Released Parties”)
from
any and all lawsuits, liabilities, actions, causes of action, claims, demands,
damages, costs and debts of any kind whatsoever, both at law and in equity,
whether known or unknown, which Investor has or may have against the Xxxxx
Released Parties based on acts or omissions occurring up to and including the
date of this Agreement, arising out of the Subscription Agreement, the related
Registration Rights Agreement and any other acts of omissions of any nature
whatsoever, including, without limitation, the failure to issue the stock
contemplated by the Subscription Agreement. Nothing herein shall constitute:
(i)
a release, discharge or waiver of the rights of Investor to enforce this
Agreement; or (ii) a release or waiver of Investor’s claims against any other
person or entity.
(b) Investor
represents
to Xxxxx and its affiliates that, as of the date of execution of this Agreement,
Investor has not filed with any agency or court any complaints or lawsuits
against any of the Xxxxx Released Parties. Investor agrees that it will not,
directly or indirectly, institute, be a party to, or participate in, any action,
lawsuit or administrative proceeding against any of the Xxxxx Released Parties
arising from any claim of any type or nature either occurring before or existing
as of the date of execution of this Agreement, except as required by law;
provided, however, that nothing contained in this Agreement will be construed
to
prohibit an action for breach of the Agreement itself. Investor agrees to
indemnify the Xxxxx Released Parties from all claims, costs and expenses,
including all attorneys' fees, arising out of any breach of this Agreement
by
Investor or any misrepresentation of fact made by Investor which is contained
in
or made the basis of this Agreement. Investor agrees to execute, at the request
of either Xxxxx or its affiliates, such additional waivers, releases,
indemnities or other instruments as either Xxxxx or its affiliates will
reasonably deem necessary to effectuate the provisions of this
Agreement.
(2)
(b)
|
6.
|
Miscellaneous.
|
6.1 Governing
Law; Jurisdiction. This
Agreement, and all disputes arising out of or relating to this Agreement, shall
be governed by, and construed and interpreted in accordance with, the laws
of
the State of California, without regard to conflicts of laws principles of
California or any other jurisdiction.
6.2 Modification.
No
amendment or modification of any provision of this Agreement shall be effective
unless in writing signed by both parties. No provision of this Agreement shall
be varied, contradicted or explained by any oral agreement, course of dealing
or
performance or any other matter not set forth in an agreement in writing and
signed by both parties.
6.3 Severability.
If any
provision of this Agreement should be held invalid, illegal or unenforceable
in
any jurisdiction, the parties shall negotiate in good faith a valid, legal
and
enforceable substitute provision that most nearly reflects the original intent
of the parties and all other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in order to carry
out the intentions of the parties hereto as nearly as may be possible. Such
invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of such provision in any other jurisdiction.
6.4 Entire
Agreement.
The
parties acknowledge that this Agreement sets forth the entire agreement and
understanding of the parties with respect to the subject matter hereof, and
supersedes all prior and contemporaneous discussions, agreements and writings
in
respect hereto.
6.5 Counterparts.
This
Agreement may be executed in counterparts, each of which shall be deemed an
original, but both of which together shall constitute one and the same
instrument.
(2)
(b)
IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed by their
duly authorized representatives, and it will be effective as of the date first
above written.
|
XXXXX
NETWORKS, INC., a Nevada corporation
|
INVESTOR
|
|
By:
Name:
Xxxxxx X. Xxxxx
Title:
President and CEO
|
By:
Name:
Title:
|
|
XXXXX
NETWORKS, INC., a Delaware corporation
|
|
|
By:
Name:
Xxxxxx X. Xxxxx
Title:
President and CEO
|
(2)
