SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of June
12, 2000, by and among XxxXxxxx.xxx Inc., a Nevada corporation, with
headquarters located at 0000 Xxxxxxx Xxxx, Xxxxxxxxxxx Xxx Xxxxxx (the
"Company"), and the Buyers listed on Schedule I attached hereto (individually, a
"Buyer" or collectively "Buyers" ).
WITNESSETH:
WHEREAS, the Company and the Buyer(s) are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D ("Regulation D") and/or Regulation
S as promulgated by the U.S. Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "1933 Act");
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Buyer(s),
as provided herein, and the Buyer(s) shall purchase Two Million Five Hundred
Thousand Dollars ($2,500,000) of convertible debentures (the "Convertible
Debentures"), which shall be convertible into shares of the Company's Common
Stock, (the "Common Stock") (as converted, the "Conversion Shares"), for a total
purchase price of Two Million Five Hundred Thousand Dollars ($2,500,000) (the
"Purchase Price") in the respective amounts set forth opposite each Buyer(s)
name on Schedule I ( the "Subscription Amount"); and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement substantially in the form attached hereto as Exhibit A (the
"Registration Rights Agreement") pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act and the rules and
regulations promulgated there under, and applicable state securities laws; and
WHEREAS, the Convertible Debentures are being offered through Xxxxxxxx
Kernaghan and Company, Limited only outside of the United States and only to
purchasers who are not citizens or residents of the United States, and by The
May Xxxxx Group, Inc. (the "Placement Agents"), as the Company's exclusive
placement agents for the offering; and
WHEREAS, the aggregate proceeds of the sale of the Convertible
Debentures contemplated hereby shall be held in escrow pursuant to the terms of
an escrow agreement substantially in the form of the Escrow Agreement attached
hereto as Exhibit B.
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Buyer(s)hereby agree
as follows:
1. PURCHASE AND SALE OF CONVERTIBLE DEBENTURES.
(a) Purchase of Convertible Debentures. Subject to the
satisfaction (or waiver) of the terms and conditions of this Agreement,
each Buyer agrees, severally and not jointly, to purchase at Closing
(as defined herein below) and the Company agrees to sell and issue to
each Buyer, severally and not jointly, at Closing, Convertible
Debentures in amounts corresponding with the Subscription Amount set
forth opposite each Buyer's name on Schedule I hereto. Upon execution
hereof by a Buyer, the Buyer shall wire transfer the Subscription
Amount set forth opposite his name on Schedule I in same-day funds or a
check payable to "First Union National Bank, as Escrow Agent for
XxxXxxxx.xxx Inc. / The May Xxxxx Group, Inc.", which Subscription
Amount shall be held in escrow pursuant to the terms of the Escrow
Agreement (as hereinafter defined) and disbursed in accordance
therewith. Notwithstanding the foregoing, a Buyer may withdraw his
Subscription Amount and terminate this Agreement as to such Buyer at
any time after the execution hereof and prior to Closing (as
hereinafter defined).
(b) Warrants. The Buyer(s) shall receive warrants to purchase
Shares of Common Stock equal to 30% of the number of the initial
Conversion Shares determined as of the Closing Date, with an exercise
price equal to 130% of the closing bid price prior to the Closing Date.
The Warrants shall have cashless exercise provisions. The term of the
Warrants shall be five years. The Warrants and the shares of Common
Stock issuable upon exercise of the Warrants shall have registration
rights as described in the Registration Rights Agreement, it being
understood that, if the SEC requires removal of the Warrants from any
registration statement in which the Warrants have a right by contract
to be included, the removal of the Warrants shall not constitute a
breach of contract by the Company, and the Company will use best
efforts to include the Warrants (or underlying shares) in a
registration statement in a manner acceptable to the SEC. Except as set
forth in the immediately preceding sentence, it is specifically
understood by the Company that the Company must register the Shares
underlying the Warrants for the Agent in the same registration
statement described in the Registration Rights Agreements between the
Company and purchasers and contemplated by the Purchase Agreement. The
Warrants shall be delivered by the Company to the Buyer simultaneous
with and contingent upon a Closing.
(c) Closing Date. The closing of the purchase and sale of the
Convertible Debentures (the "Closing") shall take place at 10:00 a.m.
Eastern Standard Time on the fifth business day ("Closing Date")
following the date hereof, subject to notification of satisfaction (or
waiver) of the conditions to the Closing set forth in Sections 6 and 7
below (or such later date as is mutually agreed to by the Company and
the Buyers). The Closing shall occur on the Closing Date at the offices
of Xxxxxx Xxxxxxxx, LLP, 0000 Xxxxxxxxxx Xxxxxx, Xxxxx 0, Xxxxx, XX
00000 (or such other place as is mutually agreed to by the Company and
the Buyers).
(d) Escrow Arrangements; Form of Payment. Upon execution
hereof by Buyer(s) and pending Closing, the aggregate proceeds of the
sale of the Convertible
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Debentures to Buyer(s) pursuant hereto, less the fess and expenses of
the Placement Agents, shall be deposited in a non-interest bearing
escrow account with First Union National Bank, as escrow agent ("Escrow
Agent"), pursuant to the terms of an escrow agreement between the
Company, the Placement Agents and the Escrow Agent in the form attached
hereto as Exhibit B (the "Escrow Agreement"). Subject to the
satisfaction of the terms and conditions of this Agreement, on the
Closing Date, (i) the Escrow Agent shall deliver to the Company in
accordance with the terms of the Escrow Agreement such aggregate gross
proceeds for the Convertible Debentures to be issued and sold to such
Buyer(s) at the Closing, by wire transfer of immediately available
funds in accordance with the Company's written wire instructions, and
(ii) the Company shall deliver to each Buyer, Convertible Debentures
which such Buyer(s) is purchasing in amounts indicated opposite such
Buyer's name on Schedule I, duly executed on behalf of the Company.
2. BUYER'S REPRESENTATIONS AND WARRANTEES.
Each Buyer represents and warrants, severally and not jointly,
that:
(a) Investment Purpose. Each Buyer is acquiring the
Convertible Debentures and, upon conversion of Convertible Debentures,
the Buyer will acquire the Conversion Shares then issuable, for its own
account for investment only and not with a view towards, or for resale
in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933 Act; provided,
however, that by making the representations herein, such Buyer reserves
the right to dispose of Conversion Shares at any time in accordance
with or pursuant to an effective registration statement covering such
Conversion Shares or an available exemption under the 1933 Act.
(b) Accredited Buyer Status. Each Buyer is an "accredited
Buyer" as that term is defined in Rule 501(a)(3) of Regulation D.
(c) Reliance on Exemptions. Each Buyer understands that the
Convertible Debentures and the Conversion Shares are being offered and
sold to it in reliance on specific exemptions from the registration
requirements of United States Federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth
herein in order to determine the availability of such exemptions and
the eligibility of such Buyer to acquire such securities.
(d) Information. Such Buyer and its advisors (and his or, its
counsel), if any, have been furnished with all materials relating to
the business, finances and operations of the Company and information he
deemed material to making an informed investment decision regarding his
purchase of the Convertible Debentures and the Conversion Shares, which
have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company and
its management. Neither such inquiries nor any other due diligence
investigations conducted by such
3
Buyer or its advisors, if any, or its representatives shall modify,
amend or affect such Buyer's right to rely on the Company's
representations and warranties contained in Section 3 below. Such Buyer
understands that its investment in the Convertible Debentures and the
Conversion Shares involves a high degree of risk. Buyer is in a
position regarding the Company, which, based upon employment, family
relationship or economic bargaining power, enabled and enables Buyer to
obtain information from the Company in order to evaluate the merits and
risks of this investment. Such Buyer has sought such accounting, legal
and tax advice, as it has considered necessary to make an informed
investment decision with respect to its acquisition of the Convertible
Debentures and the Conversion Shares.
(e) No Governmental Review. Such Buyer understands that no
United States Federal or state agency or any other government or
governmental agency has passed on or made any recommendation or
endorsement of the Convertible Debentures or the Conversion Shares, or
the fairness or suitability of the investment in the Convertible
Debentures or the Conversion Shares, nor have such authorities passed
upon or endorsed the merits of the offering of the Convertible
Debentures or the Conversion Shares.
(f) Transfer or Resale. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Convertible
Debentures and the Conversion Shares have not been and are not being
registered under the 1933 Act or any state securities laws, and may not
be offered for sale, sold, assigned or transferred unless (A)
subsequently registered there under, or (B) such Buyer shall have
delivered to the Company an opinion of counsel, in a generally
acceptable form, to the effect that such securities to be sold,
assigned or transferred may be sold, assigned or transferred pursuant
to an exemption from such registration requirements; (ii) any sale of
such securities made in reliance on Rule 144 under the 1933 Act (or a
successor rule thereto) ("Rule 144") may be made only in accordance
with the terms of Rule 144 and further, if Rule 144 is not applicable,
any resale of such securities under circumstances in which the seller
(or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 0000 Xxx) may require
compliance with some other exemption under the 1933 Act or the rules
and regulations of the SEC there under; and (iii) neither the Company
nor any other person is under any obligation to register such
securities under the 1933 Act or any state securities laws or to comply
with the terms and conditions of any exemption there under. The Company
reserves the right to place stop transfer instructions against the
shares and certificates for the Conversion Shares and Warrant Shares.
(g) Legends. Such Buyer understands that the certificates or
other instruments representing the stock certificates representing the
Conversion Shares shall bear a restrictive legend in substantially the
following form (and a stop transfer order may be placed against
transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES
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ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED
SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF
COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS.
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of the Conversion
Shares upon which it is stamped, if, unless otherwise required by state
securities laws, (i) in connection with a sale transaction, provided
the Conversion Shares are registered under the 1933 Act or (ii) in
connection with a sale transaction, such holder provides the Company
with an opinion of counsel, in form acceptable to the Company and its
counsel, to the effect that a public sale, assignment or transfer of
the Conversion Shares may be made without registration under the 1933
Act.
(h) Authorization, Enforcement. This Agreement has been duly
and validly authorized, executed and delivered on behalf of such Buyer
and is a valid and binding agreement of such Buyer enforceable in
accordance with its terms, except as such enforceability may be limited
by general principles of equity and to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar
laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
(i) Receipt of Documents. Such Buyer and his or its counsel
has received and read in their entirety: (i) this Agreement and each
representation, warranty and covenant set forth herein, the
Registration Rights Agreement, and the Escrow Agreement; (ii) all due
diligence and other information necessary to verify the accuracy and
completeness of such representations, warranties and covenants; (iii)
the Company's Registration Statement on Form SB-2 (as recently amended
on April 18, 2000); (iv) the Company's Form 10-QSB for the fiscal
quarter ended January 31, 2000; and (v) answers to all questions the
Buyer submitted to the Company regarding an investment in the Company;
and the Buyer has relied on the information contained therein and has
not been furnished any other documents, literature, memorandum or
prospectus.
(j) Due Formation of Corporate and Other Buyers. If the
Buyer(s) is a corporation, trust, partnership or other entity that is
not an individual person, it has been formed and validly exists and has
not been organized for the specific purpose of purchasing the
Convertible Debentures and is not prohibited from doing so.
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(k) Due Authorization of Fiduciary Buyers. If the Buyer(s) is
purchasing the in a fiduciary capacity for another person or entity,
including without limitation a corporation, partnership, trust or any
other entity, the Buyer(s) has been duly authorized and empowered to
execute this Agreement and such other person fulfills all the
requirements for purchase of the Convertible Debentures and agrees to
be bound by the obligations, representations, warranties, and covenants
contained herein. Upon request of the Company, the Buyer(s) will
provide true, complete and current copies of all relevant documents
creating the Buyers, authorizing its investment in the Company and/or
evidencing the satisfaction of the foregoing.
(l) Further Representations by Foreign Buyers. If Buyer(s) is
not a U.S. Person (as defined), such Buyer hereby represents that such
Buyer(s) is satisfied as to full observance of the laws of such Buyer's
jurisdiction in connection with any invitation to subscribe for the
securities or any use of this Agreement, including: (i) the legal
requirements of such Buyer's jurisdiction for the purchase of the
securities, (ii) any foreign exchange restrictions applicable to such
purchase, (iii) any governmental or other consents that may need to be
obtained, and (iv) the income tax and other tax consequences, if any,
which may be relevant to the purchase, holding, redemption, sale, or
transfer of the securities. Such Buyer's subscription and payment for,
and such Buyer's continued beneficial ownership of, the securities will
not violate any applicable securities or other laws of such Buyer's
jurisdiction. The term "U.S. Person" as used herein shall mean any
person who is a citizen or resident of the United States or Canada, or
any state, territory or possession thereof, including but not limited
to any estate of any such person, or any corporation, partnership,
trust or other entity created or existing under the laws thereof, or
any entity controlled or owned by any of the foregoing.
(m) No Legal Advice From the Company. The Buyer(s) acknowledge
that it had the opportunity to review this Agreement and the
transactions contemplated by this Agreement with his or its own legal
counsel and investment and tax advisors. The Buyer is relying solely on
such counsel and advisors and not on any statements or representations
of the Company or any of its representatives or agents for legal, tax
or investment advice with respect to this investment, the transactions
contemplated by this Agreement or the securities laws of any
jurisdiction.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyer (s) that:
(a) Organization and Qualification. The Company and its
subsidiaries are corporations duly organized and validly existing in
good standing under the laws of the jurisdiction in which they are
incorporated, and have the requisite corporate power to own
6
their properties and to carry on their business as now being conducted.
Each of the Company and its subsidiaries is duly qualified as a foreign
corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to
be so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries taken as a whole.
(b) Authorization, Enforcement, Compliance with Other
Instruments. (i) The Company has the requisite corporate power and
authority to enter into and perform this Agreement, the Registration
Rights Agreement and any related agreements, and to issue the
Convertible Debentures and the Conversion Shares, the Warrants (as
defined herein below), or shares of Common Stock issuable upon exercise
of the Warrants (the "Warrant Shares") in accordance with the terms
hereof and thereof, (ii) the execution and delivery of this Agreement,
the Registration Rights Agreement and any related agreements by the
Company and the consummation by it of the transactions contemplated
hereby and thereby, including without limitation the issuance of the
Convertible Debentures, the Conversion Shares and the Warrants and the
reservation for issuance and the issuance of the Conversion Shares and
the Warrant Shares issuable upon conversion or exercise thereof, have
been duly authorized by the Company's Board of Directors and no further
consent or authorization is required by the Company, its Board of
Directors or its stockholders, (iii) this Agreement and the
Registration Rights Agreement and any related agreements have been duly
executed and delivered by the Company, (iv) this Agreement, the
Registration Rights Agreement and any related agreements constitute the
valid and binding obligations of the Company enforceable against the
Company in accordance with their terms, except as such enforceability
may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of
creditors' rights and remedies.
(c) Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of 100,000,000 shares of Common
Stock, par value $0.00001 per share, of which as of June 12], 2000,
14,424,861 shares were issued and outstanding. All of such outstanding
shares have been validly issued and are fully paid and nonassessable.
Except as disclosed in Schedule 3(c), no shares of Common Stock are
subject to preemptive rights or any other similar rights or any liens
or encumbrances suffered or permitted by the Company. Except as
disclosed in Schedule 3(c), as of the date of this Agreement, (i) there
are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of
the Company or any of its subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its subsidiaries or options,
warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible
into, any shares of capital stock of the Company or any of its
subsidiaries, (ii) there are no outstanding debt securities and (iii)
there are no agreements or arrangements under which the Company or any
of its subsidiaries is obligated to register the sale of any
7
of their securities under the 1933 Act (except pursuant to the
Registration Rights Agreements). There are no securities or instruments
containing anti-dilution or similar provisions that will be triggered
by the issuance of the Convertible Debentures, the Conversion Shares,
the Warrants, or the Warrant Shares as described in this Agreement. The
Company has furnished to the Buyer true and correct copies of the
Company's Certificate of Incorporation, as amended and as in effect on
the date hereof (the "Certificate of Incorporation"), and the Company's
By-laws, as in effect on the date hereof (the "By-laws"), and the terms
of all securities convertible into or exercisable for Common Stock and
the material rights of the holders thereof in respect thereto other
than stock options issued to employees and consultants.
(d) Issuance of Securities. The Convertible Debentures are
duly authorized and, upon issuance in accordance with the terms hereof,
shall be duly issued, fully paid and nonassessable, are free from all
taxes, liens and charges with respect to the issue thereof. The
Conversion Shares issuable upon conversion of the Convertible
Debentures have been duly authorized and reserved for issuance. Upon
conversion or exercise in accordance with the Convertible Debentures or
the terms of the Warrants and receipt of payment therefore (in the case
of the Warrant Shares), the Conversion Shares and the Warrant Shares
will be duly issued, fully paid and nonassessable.
(e) No Conflicts. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of this Agreement by the Company
and the consummation by the Company of the transactions contemplated
hereby will not (i) result in a violation of the Certificate of
Incorporation, any certificate of designations of any outstanding
series of preferred stock of the Company or By-laws 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 Company or any of its
subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state
securities laws and regulations and the rules and regulations of The
Nasdaq Stock Market Inc.'s OTC Bulletin Board on which the Common Stock
is quoted) applicable to the Company or any of its subsidiaries or by
which any property or asset of the Company or any of its subsidiaries
is bound or affected. Except as disclosed in Schedule 3(e), neither the
Company nor its subsidiaries is in violation of any term of or in
default under its Certificate of Incorporation or By-laws or their
organizational charter or by-laws, respectively, or any material
contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation applicable
to the Company or its subsidiaries. The business of the Company and its
subsidiaries is not being conducted, and shall not be conducted in
violation of any material law, ordinance, regulation of any
governmental entity. Except as specifically contemplated by this
Agreement and as required under the 1933 Act and any applicable state
securities laws, the Company 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 its obligations under or contemplated by this Agreement
or the Registration Rights Agreement in accordance with the terms
hereof or
8
thereof. Except as disclosed in Schedule 3(e), all consents,
authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof. The Company and
its subsidiaries are unaware of any facts or circumstance, which might
give rise to any of the foregoing.
(f) SEC Documents: Financial Statements. Since January 5,
2000, the Company has filed all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC under of
the Securities Exchange Act of 1934, as amended (the "1934 Act") (all
of the foregoing filed prior to the date hereof and all exhibits
included therein and financial statements and schedules thereto and
documents incorporated by reference therein, being hereinafter referred
to as the "SEC Documents"). The Company has delivered to the Buyers or
their representatives, or made available through the SEC's website at
xxxx://xxx.xxx.xxx., true and complete copies of the SEC Documents. As
of their respective dates, the financial statements of the Company
disclosed in the SEC Documents (the "Financial Statements") complied as
to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently
applied, during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or (ii) in
the case of un-audited interim statements, to the extent they may
exclude footnotes or may be condensed or summary statements) and fairly
present in all material respects the financial position of the Company
as of the dates thereof and the results of its operations and cash
flows for the periods then ended (subject, in the case of un-audited
statements, to normal year-end audit adjustments). No other information
provided by or on behalf of the Company to the Buyer which is not
included in the SEC Documents, including, without limitation,
information referred to in Section 2(d) and (i) of this Agreement,
contains any untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(g) 10(b)-5. The SEC Documents do not include any untrue
statements of material fact, nor do they omit to state any material
fact required to be stated therein necessary to make the statements
made, in light of the circumstances under which they were made, not
misleading.
(h) Absence of Litigation. Except as disclosed on Schedule
3(h), there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board, government agency,
self-regulatory organization or body pending against or affecting the
Company, the Common Stock or any of the Company's subsidiaries, wherein
an unfavorable decision, ruling or finding would (i) have a material
adverse effect on the transactions contemplated hereby (ii) adversely
affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, this Agreement or any
of the documents contemplated herein, or (iii) except as expressly
disclosed in the
9
SEC Documents, have a material adverse effect on the business,
operations, properties, financial condition or results of operation of
the Company and its subsidiaries taken as a whole.
(i) Acknowledgment Regarding Buyer's Purchase of the
Convertible Debentures. The Company acknowledges and agrees that the
Buyer(s) is acting solely in the capacity of an arm's length purchaser
with respect to this Agreement and the transactions contemplated
hereby. The Company further acknowledges that the Buyer(s) is not
acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by the Buyer(s) or any of
their respective representatives or agents in connection with this
Agreement and the transactions contemplated hereby is merely incidental
to such Buyer's purchase of the Convertible Debentures or the
Conversion Shares. The Company further represents to the Buyer that the
Company's decision to enter into this Agreement has been based solely
on the independent evaluation by the Company and its representatives.
(j) No General Solicitation. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the 0000 Xxx) in connection
with the offer or sale of the Convertible Debentures, the Conversion
Shares, the Warrants, or the Warrant Shares.
(k) No Integrated Offering. 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 require registration of the Convertible Debentures, the
Conversion Shares, the Warrants, or the Warrant Shares under the 1933
Act or cause this offering of the Convertible Debentures, the
Conversion Shares, the Warrants, or the Warrant Shares to be integrated
with prior offerings by the Company for purposes of the 1933 Act.
(l) Employee Relations. Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge of
the Company or any of its subsidiaries, is any such dispute threatened.
None of the Company's or its subsidiaries' employees is a member of a
union and the Company and its subsidiaries believe that their relations
with their employees are good.
(m) Intellectual Property Rights. The Company and its
subsidiaries own or possess adequate rights or licenses to use all
trademarks, trade names, service marks, service xxxx registrations,
service names, patents, patent rights, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and
rights necessary to conduct their respective businesses as now
conducted. The Company and its subsidiaries do not have any knowledge
of any infringement by the Company or its subsidiaries of trademark,
trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service xxxx registrations,
trade secret or other similar
10
rights of others, and, except as set forth on Schedule 3(n), to the
knowledge of the Company, there is no claim, action or proceeding being
made or brought against, or to the Company's knowledge, being
threatened against, the Company or its subsidiaries regarding
trademark, trade name, patents, patent rights, invention, copyright,
license, service names, service marks, service xxxx registrations,
trade secret or other infringement; and the Company and its
subsidiaries are unaware of any facts or circumstances which might give
rise to any of the foregoing.
(n) Environmental Laws. The Company and its subsidiaries are
(i) in compliance with any and all applicable foreign, federal, state
and local laws and regulations relating to the protection of human
health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), (ii) have
received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and conditions of
any such permit, license or approval.
(o) Title. The Company does not own any real property. Any
real property and facilities held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries.
(p) Insurance. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as management of the Company
believes to be prudent and customary in the businesses in which the
Company and its subsidiaries are engaged. Neither the Company nor any
such subsidiary has been refused any insurance coverage sought or
applied for and neither the Company nor any such subsidiary has any
reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not materially and adversely affect
the condition, financial or otherwise, or the earnings, business or
operations of the Company and its subsidiaries, taken as a whole.
(q) Regulatory Permits. The Company and its subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary
to conduct their respective businesses, and neither the Company nor any
such subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or
permit.
(r) Internal Accounting Controls. The Company and each of its
subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to
11
maintain asset accountability, and (iii) the recorded amounts for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(r) No Material Adverse Breaches, etc. Except as set forth in
the SEC Documents, neither the Company nor any of its subsidiaries is
subject to any charter, corporate or other legal restriction, or any
judgment, decree, order, rule or regulation which in the judgment of
the Company's officers has or is expected in the future to have a
material adverse effect on the business, properties, operations,
financial condition, results of operations or prospects of the Company
or its subsidiaries. Neither the Company nor any of its subsidiaries is
in breach of any contract or agreement which breach, in the judgment of
the Company's officers, has or is expected to have a material adverse
effect on the business, properties, operations, financial condition,
results of operations or prospects of the Company or its subsidiaries.
(s) Tax Status. The Company and each of its subsidiaries has
made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is
subject and (unless and only to the extent that the Company and each of
its subsidiaries has set aside on its books provisions reasonably
adequate for the payment of all unpaid and unreported taxes) has paid
all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which
such returns, reports or declarations apply. There are no unpaid taxes
in any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any
such claim.
(t) Certain Transactions. Except as set forth in the SEC
Documents and except for arm's length transactions pursuant to which
the Company makes payments in the ordinary course of business upon
terms no less favorable than the Company could obtain from third
parties and other than the grant of stock options disclosed on Schedule
3(c), none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services
to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or
any such employee has a substantial interest or is an officer,
director, trustee or partner.
(u) Fees and Rights of First Refusal. The Company is not
obligated to offer the securities offered hereunder on a right of first
refusal basis or otherwise to any third parties including, but not
limited to, current or former shareholders of the Company,
underwriters, brokers, agents or other third parties.
12
4. COVENANTS.
(a) Best Efforts. Each party shall use its best efforts timely
to satisfy each of the conditions to be satisfied by it as provided in
Sections 6 and 7 of this Agreement.
(b) Form D. The Company agrees to file a Form D with respect
to the Conversion Shares as required under Regulation D and to provide
a copy thereof to each Buyer promptly after such filing. The Company
shall, on or before the Closing Date, take such action as the Company
shall reasonably determine is necessary to qualify the Conversion
Shares for, or obtain exemption the Conversion Shares for, sale to the
Buyers at the Closing pursuant to this Agreement under applicable
securities or "Blue Sky" laws of the states of the United States, and
shall provide evidence of any such action so taken to the Buyers on or
prior to the Closing Date.
(c) Reporting Status. Until the earlier of (i) the date as of
which the Buyer(s) (as that term is defined in the Registration Rights
Agreement) may sell all of the Conversion Shares and the Warrant Shares
without restriction pursuant to Rule 144(k) promulgated under the 1933
Act (or successor thereto), or (ii) the date on which (A) the Buyer(s)
shall have sold all the Conversion Shares and (B) none of the
Convertible Debentures or the Warrants are outstanding (the
"Registration Period"), the Company shall file in a timely manner all
reports required to be filed with the SEC pursuant to the 1934 Act and
the regulations of the SEC there under, and the Company shall not
terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations there under
would otherwise permit such termination.
(d) Use of Proceeds. The Company will use the proceeds from
the sale of the Convertible Debentures for general corporate purposes.
(e) Reservation of Shares. The Company shall take all action
reasonably necessary to at all times have authorized, and reserved for
the purpose of issuance, such number of shares of Common Stock as shall
be necessary to effect the issuance of the Conversion Shares and the
Warrant Shares. If at any time the Company does not have available such
shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all of the Conversion Shares and the exercise
of the Warrant Shares the Company shall call and hold a special meeting
within thirty (30) days of such occurrence, for the sole purpose of
increasing the number of shares authorized. The Company's management
shall recommend to the shareholders to vote in favor of increasing the
number of shares of common stock authorized. Management shall also vote
all of its shares in favor of increasing the number of common shares
authorized.
(f) Listings or Quotation. The Company shall promptly secure
the listing or quotation of the Conversion Shares upon each national
securities exchange, automated
13
quotation system or over-the-counter bulletin board or other market, if
any, upon which shares of Common Stock are then listed or quoted
(subject to official notice of issuance) and shall use it best efforts
to maintain, so long as any other shares of Common Stock shall be so
listed, such listing of all Conversion Shares from time to time
issuable under the terms of this Agreement. The Company shall maintain
the Common Stock's authorization for quotation in the over-the counter
market
(g) Expenses. Each of the Company and the Buyer(s) shall pay
all costs and expenses incurred by such party in connection with the
negotiation, investigation, preparation, execution and delivery of this
Agreement and the Registration Rights Agreement. The costs and expenses
of the Placement Agents and its counsel shall be paid for by the
Company at Closing in accordance with the terms of the Placement Agency
Agreement between the Company and the Placement Agent, dated June 12,
2000.
(h) Corporate Existence. So long as any of the Convertible
Debentures remain outstanding, the Company shall not directly or
indirectly consummate any merger, reorganization, restructuring,
consolidation, sale of all or substantially all of the Company's assets
or any similar transaction or related transactions (each such
transaction, a "Sale of the Company") unless, prior to the consummation
of a Sale of the Company, the Company makes appropriate provision to
insure that, upon the consummation of such Sale of the Company, each of
the holders of the Convertible Debentures will thereafter have the
right to acquire and receive such shares of stock, securities or assets
as may be issued or payable with respect to or in exchange for the
number of shares of Common Stock immediately theretofore acquirable and
receivable upon the conversion of such holder's Convertible Debentures
had such Sale of the Company not taken place. In any such case, the
Company will make appropriate provision with respect to such holders'
rights and interests to insure that the provisions of this Section 4(i)
will thereafter be applicable to the Convertible Debentures.
(i) Transactions With Affiliates. So long as any Convertible
Debentures are outstanding, the Company shall not, and shall cause each
of its subsidiaries not to, enter into, amend, modify or supplement, or
permit any subsidiary to enter into, amend, modify or supplement any
agreement, transaction, commitment, or arrangement with any of its or
any subsidiary's officers, directors, person who were officers or
directors at any time during the previous two years, stockholders who
beneficially own 5% or more of the Common Stock, or affiliates or with
any individual related by blood, marriage, or adoption to any such
individual or with any entity in which any such entity or individual
owns a 5% or more beneficial interest (each a "Related Party"), except
for (a) customary employment arrangements and benefit programs on
reasonable terms, (b) any investment in an affiliate of the Company,
(c) any agreement, transaction, commitment, or arrangement on an
arms-length basis on terms no less favorable than terms which would
have been obtainable from a person other than such Related Party, (d)
any agreement transaction, commitment, or arrangement which is approved
by a majority of the disinterested directors of the Company, for
purposes hereof, any director who is also an officer of the Company or
any subsidiary of the Company shall not be disinterested
14
director with respect to any such agreement, transaction, commitment,
or arrangement. "Affiliate" for purposes hereof means, with respect to
any person or entity, another person or entity that, directly or
indirectly, (i) has a 10% or more equity interest in that person or
entity, (ii) has 10% or more common ownership with that person or
entity, (iii) controls that person or entity, or (iv) shares common
control with that person or entity. "Control" or "controls" for
purposes hereof means that a person or entity has the power, direct or
indirect, to conduct or govern the policies of another person or
entity.
(j) Warrant Issuances. Subject to the satisfaction of the
terms and condition of this Agreement, Xxxxxxxx Xxxxxxxxx & Company,
Limited, as the Placement Agent will receive on the Closing Date
warrants ("Convertible Warrants") to purchase 250,000 shares of Common
Stock (the "Convertible Warrant Shares") at an exercise price of $2.00
per share. The Warrants shall be exercisable for a period of five (5)
years from the date of issuance and shall be substantially in the form
of the form of Warrant hereto as Exhibit C.
(k) Transfer Agent. The Company covenants and agrees that, in
the event that the Company's agency relationship with the transfer
agent should be terminated for any reason prior to a date which is two
(2) years after the Closing Date, the Company shall immediately appoint
a new transfer agent and shall require that the transfer agent execute
and agree to be bound by the terms of the Irrevocable Instructions to
Transfer Agent.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions in the form
attached hereto as Exhibit D to its transfer agent to issue
certificates, registered in the name of the Buyer(s) or its respective
nominee(s), for the Conversion Shares and the Warrant Shares
representing such amounts of Convertible Debentures or Warrants as
specified from time to time by the Buyer(s) to the Company upon
conversion of the Convertible Debentures or the exercise of the
Warrants and payment therefore (the "Irrevocable Transfer Agent
Instructions"). Prior to registration of the Conversion Shares and the
Warrant Shares under the 1933 Act, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement. The
Company warrants that no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section 5, and stop
transfer instructions to give effect to Section 2(f) hereof (in the
case of the Conversion Shares or the Warrant Shares, prior to
registration of such shares under the 0000 Xxx) will be given by the
Company to its transfer agent and that the Conversion Shares or the
Warrant Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement
and the Registration Rights Agreement. Nothing in this Section 5 shall
affect in any way the Buyer's obligations and agreement to comply with
all applicable securities laws upon resale of Conversion Shares or the
Warrant Shares. If the Buyer(s) or Warrant holder provides the Company
with an opinion of counsel, reasonably satisfactory in form, and
substance to the Company, that registration of a resale by the Buyer(s)
of any of the Conversion Shares, or the Warrant
15
Shares is not required under the 1933 Act, the Company shall permit the
transfer, and, in the case of the Conversion Shares or the Warrant
Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by the
Buyer. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyer by vitiating the
intent and purpose of the transaction contemplated hereby. Accordingly,
the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 5 will be inadequate and agrees, in the
event of a breach or threatened breach by the Company of the provisions
of this Section 5, that the Buyer(s) shall be entitled, in addition to
all other available remedies, to an injunction restraining any breach
and requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being
required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the
Convertible Debentures to the Buyer(s) at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole
discretion:
(a) Each Buyer shall have executed this Agreement and the
Registration Rights Agreement and delivered the same to the Company.
(b) The Buyer(s) shall have delivered to the Escrow Agent the
Purchase Price for Convertible Debentures in respective amounts as set
forth next to each Buyer as outlined on Schedule and the Escrow Agent
shall have delivered such funds to the Company by wire transfer of
immediately available U.S. funds pursuant to the wire instructions
provided by the Company.
(c) The representations and warranties of the Buyer(s) shall
be true and correct in all material respects as of the date when made
and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and
the Buyer(s) shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with
by the Buyer(s) at or prior to the Closing Date.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer(s) hereunder to purchase the
Convertible Debenture at the Closing is subject to the satisfaction, at
or before the Closing Date, of each of the following conditions,
provided that these conditions are for the Buyer's sole benefit and may
be waived by the Buyer(s) at any time in its sole discretion:
16
(a) The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Buyer(s).
(b) The Common Stock shall be authorized for quotation on The
Nasdaq Stock Market, Inc.'s OTC Bulletin Board, trading in the Common
Stock shall not have been suspended for any reason and all of the
Conversion Shares issuable upon conversion of the Convertible
Debentures shall be approved for listing or quotation on The Nasdaq
Stock Market, Inc.'s OTC Bulletin Board.
(c) The representations and warranties of the Company shall be
true and correct in all material respects (except to the extent that
any of such representations and warranties is already qualified as to
materiality in Section 3 above, in which case, such representations and
warranties shall be true and correct without further qualification) as
of the date when made and as of the Closing Date as though made at that
time (except for representations and warranties that speak as of a
specific date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or
complied with by the Company at or prior to the Closing Date. The Buyer
shall have received a certificate, executed by the Chief Executive
Officer of the Company, dated as of the Closing Date, to the foregoing
effect and as to such other matters as may be reasonably requested by
the Buyer including, without limitation an update as of the Closing
Date regarding the representation contained in Section 3(c) above.
(e) The Company shall have executed and delivered to the
Buyer(s) the Convertible Debentures in the respective amounts set forth
opposite each Buyer(s) name on Schedule I.
(f) As of the Closing Date, the Company shall have reserved
out of its authorized and unissued Common Stock, solely for the purpose
of effecting the conversion of the Convertible Debentures and
permitting the exercise of the Warrants, 5,000,000 shares of Common
Stock to effect the conversion of all of the Conversion Shares and the
exercise of all the Warrants then outstanding.
(g) The Irrevocable Transfer Agent Instructions, in form and
substance satisfactory to the Buyer, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
8. INDEMNIFICATION.
(a) In consideration of the Buyer's execution and delivery of
this Agreement and acquiring the Convertible Debentures and the
Conversion Shares hereunder, and in addition to all of the Company's
other obligations under this Agreement, the Company shall defend,
protect, indemnify and hold harmless the Buyer(s) and each other holder
of the Convertible Debentures and the Conversion Shares, and all of
their officers, directors,
17
employees and agents (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement)
(collectively, the " Buyer Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Buyer Indemnitee is a party to the
action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified
Liabilities"), incurred by the Buyer Indemnitees or any of them as a
result of, or arising out of, or relating to (a) any misrepresentation
or breach of any representation or warranty made by the Company in this
Agreement, the Convertible Debentures or the Registration Rights
Agreement or any other certificate, instrument or document contemplated
hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement, the Certificate
of Designations, or the Registration Rights Agreement or any other
certificate, instrument or document contemplated hereby or thereby, or
(c) any cause of action, suit or claim brought or made against such
Indemnitee and arising out of or resulting from the execution,
delivery, performance or enforcement of this Agreement or any other
instrument, document or agreement executed pursuant hereto by any of
the Indemnities, any transaction financed or to be financed in whole or
in part, directly or indirectly, with the proceeds of the issuance of
the Convertible Debentures or the status of the Buyer or holder of the
Convertible Debentures, the Conversion Shares, as an Buyer in the
Company. To the extent that the foregoing undertaking by the Company
may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.
(b) In consideration of the Company's execution and delivery
of this Agreement, and in addition to all of the Buyer's other
obligations under this Agreement, the Buyer shall defend, protect,
indemnify and hold harmless the Company and all of it's officers,
directors, employees and agents (including, without limitation, those
retained in connection with the transactions contemplated by this
Agreement) (collectively, the Company Indemnitees") from and against
any and all Indemnified Liabilities incurred by the Indemnitees or any
of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by
the Buyer(s) in this Agreement, , instrument or document contemplated
hereby or thereby executed by the Buyer, (b) any breach of any
covenant, agreement or obligation of the Buyer(s) contained in this
Agreement, the Registration Rights Agreement or any other certificate,
instrument or document contemplated hereby or thereby executed by the
Buyer, or (c) any cause of action, suit or claim brought or made
against such Company Indemnitee based on material misrepresentations or
due to a material breach and arising out of or resulting from the
execution, delivery, performance or enforcement of this Agreement or
any other instrument, document or agreement executed pursuant hereto by
any of the Company Indemnities. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.
18
9. GOVERNING LAW: MISCELLANEOUS.
(a) Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York
without regard to the principles of conflict of laws. The parties
further agree that any action between them shall be heard in New York
City, New York, and expressly consent to the jurisdiction and venue of
the Supreme Court of New York and the United States District Court for
the Southern District of New York for the adjudication of any civil
action asserted pursuant to this Paragraph.
(b) Counterparts. This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one and
the same agreement and shall become effective when counterparts have
been signed by each party and delivered to the other party. In the
event any signature page is delivered by facsimile transmission, the
party using such means of delivery shall cause four (4) additional
original executed signature pages to be physically delivered to the
other party within five (5) days of the execution and delivery hereof
(c) Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(d) Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other
jurisdiction.
(e) Entire Agreement, Amendments. This Agreement supersedes
all other prior oral or written agreements between the Buyer(s), the
Company, their affiliates and persons acting on their behalf with
respect to the matters discussed herein, and this Agreement and the
instruments referenced herein contain the entire understanding of the
parties with respect to the matters covered herein and therein and,
except as specifically set forth herein or therein, neither the Company
nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in
writing signed by the party to be charged with enforcement.
(f) Notices. Any notices, consents, waivers, or other
communications required or permitted to be given under the terms of
this Agreement must be in writing and will be deemed to have been
delivered (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile, provided a copy is mailed by U.S.
certified mail, return receipt requested; (iii) three (3) days after
being sent by U.S. certified mail, return receipt requested, or (iv)
one (1) day after deposit with a nationally recognized
19
overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company, to:
XXXXXXXX.XXX INC.
0000 Xxxxxxx Xxxx - 0xx Xxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxxxx, President
and Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxx, Xxxxx & Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: W.Xxxxxxx Xxxxxxxxx, Esq.
Xxxxxxx Xxxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Transfer Agent, to:
American Stock Transfer and Trust, Inc.
00000 Xxxx Xxxxxxx Xxxxxxx
Xxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Buyer(s), to its address and facsimile number on
Schedule I, with copies to the Buyer's counsel as set forth on Schedule
I. Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number.
(g) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective
successors and assigns. Neither the Company nor any Buyer shall assign
this Agreement or any rights or obligations hereunder without the prior
written consent of the other party hereto.
(h) No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
(i) Survival. Unless this Agreement is terminated under
Section 9(l), the representations and warranties of the Company and the
Buyers contained in Sections 2
20
and 3, the agreements and covenants set forth in Sections 4, 5 and 9,
and the indemnification provisions set forth in Section 8, shall
survive the Closingfor a period of one (1) year following the date on
which the Convertible Debentures are converted in full. The Buyer(s)
shall be responsible only for its own representations, warranties,
agreements and covenants hereunder.
(j) Publicity. The Company and the Buyer(s) shall have the
right to approve, before issuance any press release or any other public
statement with respect to the transactions contemplated hereby made by
any party; provided, however, that the Company shall be entitled,
without the prior approval of the Buyer(s), to issue any press release
or other public disclosure with respect to such transactions required
under applicable securities or other laws or regulations (the Buyer(s)
shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release and Buyer(s)
shall be provided with a copy thereof upon release thereof).
(k) Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and
shall execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request in
order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated hereby.
(1) Termination. In the event that the Closing shall not have
occurred with respect to the Buyers on or before five (5) business days
from the date hereof due to the Company's or the Buyer's failure to
satisfy the conditions set forth in Sections 6 and 7 above (and the
non-breaching party's failure to waive such unsatisfied condition(s)),
the non-breaching party shall have the option to terminate this
Agreement with respect to such breaching party at the close of business
on such date without liability of any party to any other party;
provided, however, that if this Agreement is terminated pursuant to
this Section 9(l), the Company shall remain obligated to reimburse the
Buyer(s) for the expenses described in Section 4(h) above.
(m) Finder. The Company acknowledges that it has engaged The
May Xxxxx Group, Inc., and Xxxxxxxx Xxxxxxxxx and Company, Ltd., as
placement agents in connection with the sale of the Convertible
Debentures. The Company shall be responsible for the payment of any
placement agent fees (which includes cash and warrants to Xxxxxxxx
Kernaghan and Company, Ltd., to purchase Common Stock) relating to or
arising out of the transactions contemplated hereby and from the
proceeds thereof.
(n) No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will
be applied against any party.
[THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK.]
21
IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
XXXXXXXX.XXX, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Chief Operating Officer
CALP II LIMITED PARTNERSHIP
By: /s/ (illegible)
-----------------------------------
Name:
--------------------------
Title:
--------------------------
22
SCHEDULE I
SCHEDULE OF BUYERS
Amount of
Name Address/Facsimile Number of Buyer Subscription
--------------------------------- --------------------------------------------------- ---------------------
CALP II LIMITED PARTNERSHIP $2,500,000
SCHEDULE 3(c)
A. OPTIONS^
-------
Option Holder Options
------------- -------
1. Xxxxx Xxxxx 60,000
2. Xxx Xxxxxx 10,000
3. Xxxxxx, Xxxxxx & Associates, Inc. 65,000
4. Xxxx Xxxxxxxx 30,000
5. L. Xxxxxxx Xxx 10,000*
6. Xxxx Xxxxxxxx 20,000**
7. Xxxxxxx X. Xxxx 20,000**
8. Xxxx Xxxxxx 40,000**
9. Xxxxx Xxxxxx 30,000**
10. Xxxxxxx Response Television, Inc. 10,000***
11. Xxxxxx X. Xxxxxxx 50,000
12. Xxx Xxxxxxx 200,000
13. Xxxxxxx X. Xxxxxxxxx 20,000
14. Xxxxx Xxxxxxx Xxxxxxx 100,000
15. Xxxxxxx Xxxxxxx 7,500****
16. Xxxxx Xxxxx 10,000
17. Xxxxxxx Xxxxxxxxx 40,000
18. Xxxxxx Xxxxxxxxx 10,000
19. Casper Kennerdale 10,000
20. Xxxx Xxxxx 5,000
21. Xxxx Xxxxxxxx 12,500
22. Xxxxxx Xxxxx 12,500
23. Xxxxx Xxxxxx 100,000
24. Xxxxx Xxxxxx 25,000
25. Xxxx Xxxxxx 25,000
26. Xxx Xxxxx 3,000
27. Xxxxx Xxxxxx 200,000
28. Xxxxx Xxxxxxxx 50,000
29. Xxxxxx Xxxx 80,500
30. Xxxxxx X. Xxxxx 73,750
31. Xxxxxx Xxxxxxxx 45,750
32. Strategic Growth International, Inc. 500,000*****
33. Xxxxx Xxxxxxx 60,000
^ Unless otherwise provided, all options are exercisable at $2.00 per share.
* Plus 15,000 options in year 2 of his commentator agreement.
** Number of shares per year.
*** Plus 1,000 shares per 1,000 infomercial subscription.
**** If the Company opts to extend the term of employment, Xxxxxxx will
receive a second option to purchase 10,000 shares.
***** These options are exercisable at $3.50 per share.
B. WARRANTS
--------
Warrant Holder Warrants
-------------- --------
1. S.A.C. Capital Associates, LLC 225,000
2. Xxxxxxx Xxxxx 3,800
3. Circle T International, Ltd. 25,800
4. Circle T Partners L.P. 50,000
5. Xxxxxx Street Partners 41,670
6. Xxxxxx Xxxxxxx 2,050
7. Xxxxxx X. XxXxxxxx 1,025
8. Xxxxxx X. XxXxxxxx XXX 1,025
9. Xxxxxx X. Xxxx 4,170
10. Xxxxxxx X. Xxxxx 66,670
11. ASC Capital Partners 41,670
12. Xxxxx Xxxxx, Xx. 380
13. Xxxxxxxxx X. Xxxxx 380
14. Xxxxx and Xxxxx Xxxxxx 8,340
15. Xxxx Xxxxxx 8,340
16. Xxxxxx Xxxxxx 3,800
17. Xxxxxx X. Xxxxxx 4,170
18. Xxxxxx Capital Management L.P. 3,500
19. Apex Limited Partners L.P. 15,200
20. AIG Trading Group Inc. Deferred
Compensation Plan Trust 33,340
21. Xxxx X. Xxxxxx 2,000
22. Delaware Charter Guarantee & Trust TTE FBO
Xxxxx Xxxxxxxx SEP XXX 2,200
23. Xxxxx Xxxxx 7,500
24. Xxxx X. Xxxxxx 2,100
25. L. Xxxxxxx Xxxx 1,000
26. X.X. Xxxxxxx & Co., Inc. 750,000
C. REGISTRATION RIGHTS
1. Registration rights with respect to 2,468,520 shares of common
stock already registered pursuant to the XxxXxxxx.xxx Inc.
("JagNotes") Registration Statement on Form SB-2, effective
January 5, 2000, and with respect to which there may be an
obligation to continue registration.
2. Registration rights with respect to 500,000 shares of common
stock in favor of Strategic Growth International, Inc. ("SGI")
pursuant to an Agreement, dated March 14, 2000, between JagNotes
and SGI.
3. Registration rights with respect to 750,000 warrants in favor of
X.X. Xxxxxxx & Co., Inc. ("MSF") pursuant to a Consulting
Agreement, dated March 15, 2000, between JagNotes and MSF.
4. Registration rights of certain employees and commentators of
JagNotes named in Part A of this Schedule 3(c) to have stock
options and/or underlying shares of JagNotes registered on a
Registration Statement on Form S-8, if available.
SCHEDULE 3(e)
Conflicts
None
SCHEDULE 3(h)
Litigation
None
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of June
12, 2000, is made and entered into by and between XxxXxxxx.xxx Inc., a Nevada
corporation (the "Company"), and CALP II Limited Partnership (the "Investor").
WITNESSETH:
WHEREAS, the Company and the Investor (the "Convertible Investor") have
entered into a Securities Purchase Agreement, dated as of the date hereof (the
"Securities Purchase Agreement"), pursuant to which the Company issued and sold
to Investors identified on Schedule I to the Securities Purchase Agreement,
$2,500,000 worth of convertible debentures (the "Convertible Debentures" ),
which may be converted into shares of the Company's common stock, (the "Common
Stock"), pursuant to the terms of the Convertible Debentures; and
WHEREAS, in connection with the sale of the Convertible Debentures the
Company is granting to the Convertible Investor the right to purchase upon the
conversion of Debentures the number of shares of common stock of the Company,
par value $0.00001 per share (the "Common Stock"), at the price per share (the
"Conversion Price") equal to the lesser of $1.31 or 75% of the average of the
five (5) lowest Closing Bid Prices for the previous twenty (20) trading days
immediately preceding the conversion date; and.
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Investor's agreement to enter into the Securities Purchase Agreement, the
Company has agreed to provide the Convertible Investor with certain registration
rights with respect to the Registrable Securities (as defined herein).
WHEREAS, the Company and the Investor identified on the equity line of
credit agreement (the "Equity Line of Credit Investor") dated as of the date
hereof, pursuant to which, from time to time the Company shall issue and sell to
the Investor, and the Investor shall purchase up to Ten Million ($10,000,000)
Dollars of the Company's common stock (the "Common Stock") for a total purchase
price of Ten Million ($10,000,000) Dollars; and
WHEREAS, in connection with the sale of the Equity Line of Credit the
Company is granting to the Equity Line of Credit Investor the right to purchase
shares of common stock of the Company, par value $0.001 per share (the "Common
Stock") at a purchase price of 85% of the Market Price as defined in the Equity
Line of Credit.
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Equity Line of Credit Investor's agreement to enter into the Equity Line of
Credit Agreement, the Company has agreed to provide the Equity Line of Credit
Investor with certain registration rights with respect to the Registrable
Securities;
NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements contained herein and in the Securities
Purchase Agreement, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, intending to be legally bound
hereby.
Definitions
All capitalized terms not hereinafter defined shall have the meanings
ascribed to them in the Securities Purchase Agreement.
"Commission." United States Securities and Exchange Commission or any
successor regulatory body.
"Exchange Act." Securities Exchange Act of 1934, as amended.
"Registration." A registration effected by preparing and filing a
registration statement or statements or similar documents in compliance with the
Securities Act and the declaration or ordering of effectiveness of such
registration statement or document by the Commission; included in such
definition shall be correlative terms "Register" and "Registered."
"Registrable Securities." The shares of Common Stock issuable upon (i)
the conversion of the Debentures that have not previously been sold pursuant to
a Registration Statement or Rule 144 and that are not eligible for sale under
Rule 144(k) (or any successor provision.), (ii) the exercise of warrants sold to
the Investors, and (iii) the Exercise of warrants issued to Xxxxxxxx Xxxxxxxxx
and Company, Ltd..
"Registration Statement." The registration statement under the
Securities Act covering the resale of the Registrable Securities.
"Rule 144." Rule 144 under the Securities Act.
"Rule 415." Rule 415 under the Securities Act, or any successor rule
providing for offering securities on a continuous basis.
"Securities Act." As defined in the third recital hereof.
"Violations." As defined in Section 4.01 (a) hereof.
ARTICLE I
REGISTRATION RIGHTS
Section 1.1 Form S-1, SB-2 or S-3 Registration Statements.
2
(a) Filing of Registration Statement. Subject to the terms and
conditions of this Agreement, the Company shall prepare and, within forty- five
(45) calendar days following the date hereof (the "Filing Deadline"), file with
the Commission a registration statement on Form S-1 or SB-2 (or, if the Company
is then eligible, on Form S-3) under the Securities Act (the "Initial
Registration Statement") for the registration for the resale by all Investors
who purchased Convertible Debentures pursuant to the Securities Purchase
Agreement up to 5,000,000 shares of Common Stock to be issued upon conversion of
the Convertible Debentures, upon the exercise of Warrants sold to Investors and
up to 10,000,000 shares of Common Stock covering the resale of the Registrable
Securities issuable pursuant to the Equity Line of Credit Agreement 250,000
shares underlying the warrants issued to Xxxxxxxx Kernaghan and Company, Ltd.,
to be declared effective and the Company shall cause the Registration Statement
to remain effective until all of the Registrable Securities have been sold.
Prior to the filing of the Initial Registration Statement with the Commission,
the Company shall furnish a copy of the Initial Registration Statement to
Investors, the Placement Agent and Xxxxxx Xxxxxxxx, LLP for their review and
comment together with a selling shareholder questionnaire in form prepared by
the Company. Investors, the Placement Agent and Xxxxxx Xxxxxxxx, LLP shall
furnish comments on the Initial Registration Statement and an executed selling
shareholder questionnaire to the Company within five (5) days of the receipt
thereof from the Company.
(b) Effectiveness of the Initial Registration Statement. The
Company shall use its commercially reasonable efforts (i) to have the Initial
Registration Statement declared effective by the Commission by no later than one
hundred and twenty (120) days after the date hereof (the "Scheduled Effective
Deadline") and (ii) to insure that the Initial Registration Statement and any
subsequent Registration Statement remains in effect throughout the term of this
Agreement as set forth in Section 4.2, subject to the terms and conditions of
this Agreement.
(c) Failure to File or Obtain Effectiveness of the Initial
Registration Statement. In the event the Registration Statement is not filed by
the Company with the Commission by the Filing Deadline, the conversion
percentage to be used in determining the conversion price shall be reduced by an
additional 2% for the first (30) days and every thirty (30) days thereafter the
Registration Statement is not filed.
In the event the Registration Statement is not declared
effective by the SEC by the applicable Scheduled Effective Deadline then the
conversion percentage to be used in determining the conversion price shall be
reduced by an additional 2% for the first (30) days and every thirty (30) days
thereafter the Registration Statement is not declared effective.
In addition if the Registration Statement is not declared effective by the
Commission by the applicable Scheduled Effective Deadline, or if after the
Registration Statement has been declared effective by the Commission, sales
cannot be made pursuant to the Registration Statement (whether because of a
failure to keep the Registration Statement effective, to disclose such
information as is necessary for sales to be made pursuant to the Registration
Statement, to register sufficient shares of Common Stock or otherwise), then, as
partial relief for the damages to any holder by reason of any such delay in or
reduction of its ability to sell the underlying shares of Common Stock (which
3
remedy shall not be exclusive of any other remedies at law or in equity), the
Company will pay liquidated damages to the Investor in immediately available
funds into an account designated by the Investor an amount equal to two percent
(2%) of the aggregate purchase price of all of the Registrable Securities then
held by the Investor for each thirty (30) calendar day period (prorated for
partial periods) of such Ineffective Period. The payments required by this
Section 1.1(d) shall be made on the first trading day after the expiration of an
Ineffective Period (or if an Ineffective Period shall last more than thirty (30)
calendar days, the expiration of each additional thirty (30) calendar day period
of an Ineffective Period). As used herein, "Ineffective Period shall mean any
period of time following the Scheduled Effective Deadline during which the
Company's Registration Statement covering the Registrable Securities is not
effective. Notwithstanding the foregoing the Company shall not be required to
pay liquidated damages to any Investor in connection with any Ineffective Period
commencing upon the filing of a post-effective amendment to such Registration
Statement and ending upon the date on which such post effective amendment is
declared effective by the Commission.
(d) Liquidated Damages. The Company and the Investor hereto
acknowledge and agree that the sums payable under subsections 1(c) or 1(d) above
shall constitute liquidated damages and not penalties. The parties further
acknowledge that (i) the amount of loss or damages likely to be incurred is
incapable or is difficult to precisely estimate, (ii) the amounts specified in
such subsections bear a reasonable relationship to, and are not plainly or
grossly disproportionate to the probable loss likely to be incurred in
connection with any failure by the Company to obtain or maintain the
effectiveness of a Registration Statement, (iii) one of the reasons for the
Company and the Investor reaching an agreement as to such amounts was the
uncertainty and cost of litigation regarding the question of actual damages, and
(iv) the Company and the Investor are sophisticated business parties and have
been represented by sophisticated and able legal counsel and negotiated this
Agreement at arm's length.
ARTICLE II
REGISTRATION PROCEDURES
Section 2.1 Filings; Information. The Company will effect the
registration and sale of the Registrable Securities in accordance with the
intended methods of disposition thereof. Without limiting the foregoing, the
Company in each such case will do the following as expeditiously as possible,
but in no event later than the deadline, if any, prescribed therefore in this
Agreement:
(a) The Company shall (i) prepare and file with the Commission
a Registration Statement on Form S-1 or SB-2 (or, if the Company is then
eligible, Form S-3) within forty- five (45) calendar days from the date hereof
(if use of such form is then available to the Company pursuant to the rules of
the Commission and, if not, on such other form promulgated by the Commission for
which the Company then qualifies, that counsel for the Company shall deem
appropriate and which form shall be available for the sale of the Registrable
Securities to be registered there under in accordance with the provisions of
this Agreement and in accordance with
4
the intended method of distribution of such Registrable Securities); (ii) use
commercially reasonable efforts to cause such filed Registration Statement to
become effective within one hundred and twenty (120) days of the date hereof and
remain effective during the period set forth in Section 1.1(b) hereof (pursuant
to Rule 415 under the Securities Act or otherwise); (iii) prepare and file with
the Commission such amendments and supplements to such Registration Statement
and the prospectus used in connection therewith as may be necessary to keep such
Registration Statement effective for the time period prescribed by Section
1.1(b); and (iv) comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such Registration Statement
during such period in accordance with the intended methods of disposition by the
Investor set forth in such Registration Statement.
(b) The Company shall file all necessary amendments and
supplements to any Registration Statement in order to effectuate the purpose of
this Agreement and the Securities Purchase Agreement.
(c) No later than ten (10) days prior to filing any amendment
or supplement to the Initial Registration Statement or any subsequent
Registration Statement or prospectus, or any amendment or supplement thereto
(excluding, in each case, amendments deemed to result from the filing of
documents incorporated by reference therein), or such shorter period as is
reasonable under the circumstances, the Company shall deliver to the Investor
and one firm of counsel representing the Investor, in accordance with the notice
provisions of Section 4.8, copies of such Registration Statement as proposed to
be filed, together with exhibits thereto, which documents will be subject to
review by the Investor and such counsel, and thereafter deliver to the Investor
and such counsel, in accordance with the notice provisions of Section 4.8, such
number of copies of the Registration Statement, each amendment and supplement
thereto (in each case including all exhibits thereto), the prospectus included
in such Registration Statement (including each preliminary prospectus) and such
other documents or information as the Investor or counsel may reasonably request
in order to facilitate the disposition of the Registrable Securities.
(d) The Company shall deliver, in accordance with the notice
provisions of Section 4.8, to each seller of Registrable Securities covered by a
Registration Statement such number of conformed copies of such Registration
Statement and of each amendment and supplement thereto (in each case including
all exhibits and documents incorporated by reference), such number of copies of
the prospectus contained in any Registration Statement (including each
preliminary prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 promulgated under the Securities Act relating to such
seller's Registrable Securities, and such other documents, as such seller may
reasonably request to facilitate the disposition of its Registrable Securities.
(e) After the filing of a Registration Statement, the Company
shall promptly notify the Investor of any stop order issued or threatened by the
Commission in connection therewith and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered.
5
(f) The Company shall use its commercially reasonable efforts
to (i) register or qualify the Registrable Securities under such other
securities or blue sky laws of such jurisdictions in the United States as the
Investor may reasonably request in light of its intended plan of distribution
and (ii) cause the Registrable Securities to be registered with or approved by
such other governmental agencies or authorities in the United States as may be
necessary by virtue of the business and operations of the Company and do any and
all other acts and things that may be reasonably necessary or advisable to
enable the Investor to consummate the disposition of the Registrable Securities
in light of its intended plan of distribution; provided, however, that the
Company will not be required to qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
paragraph (f), subject itself to taxation in any such jurisdiction, or consent
or subject itself to general service of process in any such jurisdiction.
(g) The Company shall immediately notify the Investor upon the
occurrence of any of the following events in respect of a Registration Statement
or related prospectus in respect of an offering of Registrable Securities: (i)
receipt of any request by the Commission or any other federal or state
governmental authority for additional information, amendments or supplements to
such Registration Statement or related prospectus; (ii) the issuance by the
Commission or any other federal or state governmental authority of any stop
order suspending the effectiveness of such Registration Statement or
notification of the initiation of any proceedings for that purpose; (iii)
receipt of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) the happening of any event that makes any statement made in such
Registration Statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in such Registration Statement, related
prospectus or documents so that, in the case of such Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, in the light of the circumstances under which they were
made, and that in the case of the related prospectus, it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; and (v) the
Company's reasonable determination that a post-effective amendment to such
Registration Statement would be appropriate, and the Company will promptly make
available to the Investor any such supplement or amendment to the related
prospectus.
(h) The Company shall enter into customary agreements and take
such other customary actions as are reasonably required in order to expedite or
facilitate the disposition by the Investor of such Registrable Securities
(whereupon the Investor may, at its option, require that any or all of the
representations, warranties and covenants of the Company also be made to and for
the benefit of the Investor).
(i) The Company shall make available to the Investor (and will
deliver to Investor's counsel), subject to restrictions imposed by the United
States federal government or any agency or instrumentality thereof, copies of
all correspondence between the Commission and the
6
Company, its counsel or its auditors and will also make available for inspection
by the Investor and any attorney, accountant or other professional retained by
the Investor (collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of the Company (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's officers and employees to
supply all information reasonably requested by any Inspectors in connection with
a Registration Statement. Records that the Company determines, in good faith, to
be confidential and that it notifies the Inspectors are confidential shall not
be disclosed by the Inspectors unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement or (ii) the disclosure or release of such Records is requested or
required pursuant to oral questions, interrogatories, requests for information
or documents or a subpoena or other order from a court of competent jurisdiction
or other legal process; provided, however, that prior to any disclosure or
release pursuant to clause (ii), the Inspectors shall provide the Company with
prompt notice of any such request or requirement so that the Company may seek an
appropriate protective order or waive such Inspectors' obligation not to
disclose such Records; and, provided, further, that if failing the entry of a
protective order or the waiver by the Company permitting the disclosure or
release of such Records, the Inspectors, upon advice of counsel, are compelled
to disclose such Records, the Inspectors may disclose that portion of the
Records that counsel has advised the Inspectors that the Inspectors are
compelled to disclose. The Investor agrees that information obtained by it as a
result of such inspections (not including any information obtained from a third
party who, insofar as is known to the Investor after reasonable inquiry, is not
prohibited from providing such information by a contractual, legal or fiduciary
obligation to the Company) shall be deemed confidential and shall not be used by
it as the basis for any market transactions in the securities of the Company
unless and until such information has been made generally available to the
public. The Investor further agrees that it will, upon learning that disclosure
of such Records is sought in a court of competent jurisdiction, give notice to
the Company and allow the Company, at its expense, to undertake appropriate
action to prevent disclosure of the Records deemed confidential.
(j) The Company shall otherwise comply with all applicable
rules and regulations of the Commission, including, without limitation,
compliance with applicable reporting requirements under the Exchange Act.
(k) The Company may require the Investor to promptly furnish
in writing to the Company such information as may be legally required in
connection with such registration including, without limitation, all such
information as may be requested by the Commission or the National Association of
Securities Dealers, Inc. ("NASD"). The Investor agrees to provide such
information requested in connection with such registration within five (5)
calendar days after receiving such written request, or such shorter period as is
reasonable under the circumstances, and the Company shall not be responsible for
any delays in obtaining or maintaining the effectiveness of any Registration
Statement caused by the Investor's failure to timely provide such information.
(l) The Company shall use its best efforts either: (i) to
secure the inclusion for quotation on The Nasdaq Stock Market Inc.'s OTC
Bulletin Board Bulletin for such Resgistrable Securities, or (ii) if, despite
the Company's best efforts to satisfy the preceding clause (i), the
7
Company is unsuccessful in satisfying the preceding clause (i), to secure the
inclusion for quotation in the "pink sheets" for such Registrable Securities,
and, without limiting the generality of the foregoing, in the case of clause (i)
or (ii), to arrange for at least two market makers to register with the NASD, as
such with respect to such Registrable Securities. The Company shall pay all fees
and expenses in connection with satisfying its obligation under this Section
2(l).
Section 2.2 Registration Expenses. In connection with each Registration
Statement, the Company shall pay all registration expenses incurred in
connection with the registration there under (the "Registration Expenses"),
including, without limitation: (a) all registration, filing, securities exchange
listing and fees required by the NASD, (b) all registration, filing,
qualification and other fees and expenses of compliance with securities or blue
sky laws (including reasonable fees and disbursements of counsel for the
Company), (c) all word processing, duplicating, printing, messenger and delivery
expenses, (d) the Company's internal expenses (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), and (e) reasonable fees and disbursements of counsel for the
Company and customary fees and expenses for independent certified public
accountants retained by the Company; but excluding underwriting fees, discounts,
transfer taxes or commissions, if any, attributable to the sale of the
Registrable Securities, which shall be payable by each holder of Registrable
Securities pro rata on the basis of the number of Registrable Securities of each
holder that are included under this Agreement.
ARTICLE III
INDEMNIFICATION AND CONTRIBUTION
Section 3.1 Indemnification.
(a) Indemnification by the Company. The Company agrees to
indemnify and hold harmless the Investor, its partners, affiliates, officers,
directors, employees, counsel and duly authorized agents, and each Person or
entity, if any, who controls the Investor within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act, together with the
partners, Affiliates, officers, directors, employees, counsel and duly
authorized agents of such controlling Person or entity (collectively, the "
Controlling Persons"), from and against any loss, claim, damage, liability,
costs and expenses (including, without limitation, reasonable attorneys' fees
and disbursements and costs and expenses of investigating and defending any such
claim) (collectively, "Damages"), joint or several, and any action or proceeding
in respect thereof to which the Investor, its partners, Affiliates, officers,
directors, employees and duly authorized agents, and any Controlling Person, may
become subject under the Securities Act or otherwise, as incurred, insofar as
such Damages (or actions or proceedings in respect thereof) arise out of, or are
based upon, any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, preliminary prospectus or prospectus
relating to the Registrable Securities or arises out of, or are based upon, any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made, except insofar as any
such untrue statement, alleged untrue statement, omission or alleged omission is
made in reliance upon and in conformity with written information
8
furnished to the Company by the Investor which is specifically intended by the
Investor for use in the preparation of any such Registration Statement,
preliminary prospectus or prospectus, and shall reimburse the Investor, its
partners, Affiliates, officers, directors, employees, counsel and duly
authorized agents, and each such Controlling Person, for any legal and other
expenses reasonably incurred by the Investor, its partners, Affiliates,
officers, directors, employees, counsel and duly authorized agents, or any such
Controlling Person, as incurred, in investigating or defending or preparing to
defend against any such Damages or actions or proceedings; provided, however,
that the Company shall not be liable to the Investor to the extent that any such
Damages arise out of or are based upon an untrue statement or omission made in
any preliminary prospectus if (i) the Investor failed to send or deliver a copy
of the final prospectus delivered by the Company to the Investor with or prior
to the delivery of written confirmation of the sale by the Investor to the
Person asserting the claim from which such Damages arise, and (ii) the final
prospectus would have corrected such untrue statement or alleged untrue
statement or such omission or alleged omission.
(b) Indemnification by the Investor. The Investor agrees to
indemnify and hold harmless the Company, its Affiliates, officers, directors,
employees, counsel and duly authorized agents, and each Controlling Persons of
the Company, from and against any and all Damages, joint or several, and any
action or proceeding in respect thereof to which the Investor, its partners,
Affiliates, officers, directors, employees, counsel and duly authorized agents,
and any such Controlling Person, may become subject under the Securities Act or
otherwise, as incurred, insofar as such Damages (or actions or proceedings in
respect thereof) arise out of, or are based upon, any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement, preliminary prospectus or prospectus relating to the Registrable
Securities or arises out of, or are based upon, any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances under
which they were made, but only to the extent that any such untrue statement,
alleged untrue statement, omission or alleged omission is made in reliance upon
and in conformity with written information furnished to the Company by the
Investor which is specifically intended by the Investor for use in the
preparation of any such Registration Statement, preliminary prospectus or
prospectus, and shall reimburse the Company, its partners, Affiliates, officers,
directors, employees, counsel and duly authorized agents, and each such
Controlling Person, for any legal and other expenses reasonably incurred by the
Investor, its partners, Affiliates, officers, directors, employees, counsel and
duly authorized agents, or any such Controlling Person, as incurred, in
investigating or defending or preparing to defend against any such Damages or
actions or proceedings.
Section 3.2 Conduct of Indemnification Proceedings. Promptly after
receipt by any person or entity in respect of which indemnity may be sought
pursuant to Section 3.1 (an "Indemnified Party") of notice of any claim or the
commencement of any action, the Indemnified Party shall, if a claim in respect
thereof is to be made against the person or entity against whom such indemnity
may be sought (the "Indemnifying Party"), notify the Indemnifying Party in
writing of the claim or the commencement of such action. In the event an
Indemnified Party shall fail to give such notice as provided in this Section 3.2
and the Indemnifying Party to whom notice was not given was unaware of the
proceeding to which such notice would have related and was prejudiced by the
9
failure to give such notice, the indemnification provided for in Section 3.1
shall be reduced to the extent of any actual prejudice resulting from such
failure to so notify the Indemnifying Party; provided, however, that the failure
to notify the Indemnifying Party shall not relieve the Indemnifying Party from
any liability that it may have to an Indemnified Party otherwise than under
Section 3.1. If any such claim or action shall be brought against an Indemnified
Party, and it shall notify the Indemnifying Party thereof, the Indemnifying
Party shall be entitled to participate therein, and, to the extent that it
wishes, jointly with any other similarly notified Indemnifying Party, to assume
the defense thereof with counsel reasonably satisfactory to the Indemnified
Party. After notice from the Indemnifying Party to the Indemnified Party of its
election to assume the defense of such claim or action, the Indemnifying Party
shall not be liable to the Indemnified Party for any legal or other expenses
subsequently incurred by the Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
the Indemnified Party shall have the right to employ separate counsel to
represent the Indemnified Party and its Controlling Persons who may be subject
to liability arising out of any claim in respect of which indemnity may be
sought by the Indemnified Party against the Indemnifying Party, but the fees and
expenses of such counsel shall be for the account of such Indemnified Party,
unless (i) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (ii) in the reasonable judgment of
the Indemnifying Party and the Indemnified Party, representation of both parties
by the same counsel would be inappropriate due to actual or potential conflicts
of interest between them, it being understood, however, that the Indemnifying
Party shall not, in connection with any one such claim or action or separate but
substantially similar or related claims or actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all Indemnified Parties, or for fees
and expenses that are not reasonable. No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
claim or pending or threatened proceeding in respect of which the Indemnified
Party is or could have been a party and indemnity is sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability arising out of such claim or
proceeding. Whether or not the defense of any claim or action is assumed by the
Indemnifying Party, such Indemnifying Party will not be subject to any liability
for any settlement made without its consent, which consent will not be
unreasonably withheld.
Section 3.3 Other Indemnification. Indemnification similar to that
specified in the preceding paragraphs of this Article III (with appropriate
modifications) shall be given by the Company with respect to any required
registration or other qualification of securities under any federal or state law
or regulation of any governmental authority other than the Securities Act. The
provisions of this Article III shall be in addition to any other rights to
indemnification, contribution or other remedies which an Indemnified Party may
have pursuant to law, equity, contract or otherwise.
Section 3.4 Contribution. If the indemnification and reimbursement
obligations provided for in any section of this Article III is unavailable or
insufficient to hold harmless the Indemnified Parties in respect of any Damages
referred to herein, then the Indemnifying Party, in
10
lieu of indemnifying such Indemnified Party, shall contribute to the amount paid
or payable by such Indemnified Party as a result of such Damages as between the
Company on the one hand and the Investor on the other, in such proportion as is
appropriate to reflect the relative fault of the Company and of the Investor in
connection with such statements or omissions, as well as other equitable
considerations. The relative fault of the Company on the one hand and of the
Investor on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by such party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Investor agree that it would not be just and
equitable if contribution pursuant to this Section 3.4 were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of the
Damages referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 3.4, the Investor shall in no event be required to contribute any amount
in excess of the amount by which the total price at which the Registrable
Securities of the Investor were sold to the public (less underwriting discounts
and commissions) exceeds the amount of any damages which the Investor has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
ARTICLE IV
MISCELLANEOUS
Section 4.1 No Outstanding Registration Rights. Except for registration
rights with respect to (i) shares of Common Stock which have already been
registered and with respect to which there may be an obligation to continue
registration, (ii) registration rights with respect to 500,000 Shares of Common
Stock in favor of Strategic Growth International, Inc., and (iii) registration
rights with respect to 750,000 warrants in favor of X.X. Xxxxxxx and Co, Inc.,
the Company represents and warrants to the Investor that there is not in effect
on the date hereof any agreement by the Company pursuant to which any holders of
securities of the Company have a right to cause the Company to register or
qualify such securities under the Securities Act or any securities or blue sky
laws of any jurisdiction.
Section 4.2 Term. The obligations of the Company and the rights
provided to the holders of Registrable Securities hereunder shall terminate at
such time as all Registrable Securities have been issued and have ceased to be
Registrable Securities. Notwithstanding the foregoing, Section 1.1(c) and (d),
Article III, Section 4.8, and Section 4.9 shall survive the termination or
expiration of this Agreement until the end of the relevant statutory
limitations.
11
Section 4.3 Rule 144. The Company will use its commercially reasonable
efforts to file in a timely manner information, documents and reports in
compliance with the Securities Act and the Exchange Act and will, at its
expense, promptly take such further action as holders of Registrable Securities
may reasonably request to enable such holders of Registrable Securities to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144, as such Rule may be
amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the Commission. If at any time the Company is not required to file
such reports, it will, at its expense, forthwith upon the written request of any
holder of Registrable Securities, make available adequate current public
information with respect to the Company within the meaning of paragraph (c)(2)
of Rule 144 or such other information as necessary to permit sales pursuant to
Rule 144. Upon the request of the Investor, the Company will deliver to the
Investor a written statement, signed by the Company's principal executive or
financial officer, as to whether it has complied with such requirements.
Section 4.4 Certificate. The Company will, at its expense, forthwith
upon the request of any holder of Registrable Securities, deliver to such holder
a certificate, signed by the Company's principal financial officer, stating (a)
the Company's name, address and telephone number (including area code), (b) the
Company's Internal Revenue Service identification number, (c) the Company's
Commission file number, (d) the number of shares of each class of capital stock
outstanding as shown by the most recent report or statement published by the
Company, and (e) whether the Company has filed the reports required to be filed
under the Exchange Act for a period of at least ninety (90) days prior to the
date of such certificate and in addition has filed the most recent annual report
required to be filed there under.
Section 4.5 Amendment and Modification. No provision of this Agreement
may be waived, unless such waiver is set forth in a writing executed by both
parties to this Agreement. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the Company has obtained the written consent of the holders of a majority
of the then outstanding Registrable Securities. Notwithstanding the foregoing,
the waiver of any provision hereof with respect to a matter that relates
exclusively to the rights of holders of Registrable Securities whose securities
are being sold pursuant to a Registration Statement and does not directly or
indirectly affect the rights of other holders of Registrable Securities may be
given by holders of at least a majority of the Registrable Securities being sold
by such holders; provided that the provisions of this sentence may not be
amended, modified or supplemented except in accordance with the provisions of
the immediately preceding sentence. No course of dealing between or among any
Person having any interest in this Agreement will be deemed effective to modify,
amend or discharge any part of this Agreement or any rights or obligations of
any person under or by reason of this Agreement.
Section 4.6 Successors and Assigns; Entire Agreement. This Agreement
and all of the provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns. The
Investor may assign its rights under this
12
Agreement to any subsequent holder of the Registrable Securities, provided that
the Company shall have the right to require any holder of Registrable Securities
to execute a counterpart of this Agreement as a condition to such holder's claim
to any rights hereunder. This Agreement, together with the Securities Purchase
Agreement, sets forth the entire agreement and understanding between the parties
as to the subject matter hereof and merges and supersedes all prior discussions,
agreements and understandings of any and every nature among them.
Section 4.7 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that such severability shall be
ineffective if it materially changes the economic benefit of this Agreement to
any party.
Section 4.8 Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (a) personally served,
(b) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (c) delivered by reputable air courier service with charges
prepaid, or (d) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice given in accordance herewith. Any notice or
other communication required or permitted to be given hereunder shall be deemed
effective (i) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (ii) on the second business day
following the date of mailing by express courier service or on the fifth
business day after deposited in the mail, in each case, fully prepaid, addressed
to such address, or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be:
If to the Company, to:
XxxXxxxx.xxx Inc.
0000 Xxxxxxx Xxxx 0xx Xxxxx
Xxxxxxxxxxx, XX 00000
Attn: President
Facsimile: (000) 000-0000
With Copy to:
Xxxxxx, Xxxxx & Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: W. Xxxxxxx Xxxxxxxxx, Esq.
Xxx Xxxxxxxxxx, Esq.
Facsimile: (000) 000-0000
13
If to the Investor, to: CALP II Limited Partnership
________________________________
________________________________
________________________________
Attention:
___________________
Telephone: (___) ___-____
Facsimile: (___) ___-____
Either party hereto may from time to time change its address or
facsimile number for notices under this Section 4.8 by giving at least ten (10)
days' prior written notice of such changed address or facsimile number to the
other party hereto.
Section 4.9 Governing Law, Jurisdiction. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of New York
without regard to the principles of conflicts of law. The parties hereto hereby
submit to the exclusive jurisdiction of the United States Federal and state
courts located in New York, New York with respect to any dispute arising under
this Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby.
Section 4.10 Title and Subtitles. The titles and subtitles used in this
Agreement are used for the convenience of reference and are not to be considered
in construing or interpreting this Agreement.
Section 4.11 Counterparts. This Agreement may be executed in multiple
counterparts, each of which may be executed by less than all of the parties and
shall be deemed to be an original instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument. This Agreement, once executed by a
party, may be delivered to the other parties hereto by facsimile transmission of
a copy of this Agreement bearing the signature of the parties so delivering this
Agreement.
Section 4.12 Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
Section 4.13 No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
14
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.
XXXXXXXX.XXX INC.
By:
-------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Chief Operating Officer
CALP II LIMITED PARTNERSHIP
By:
-------------------------------------
Name:
----------------------------
Title:
----------------------------
16
EXHIBIT B
FORM OF ESCROW AGREEMENT
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made and entered into as of
June 12, 2000, by and Xxxxxxxx Xxxxxxxxx and Company, Ltd., a Canadian
Corporation, and The May Xxxxx Group, a Maryland corporation (the "Placement
Agents"), XxxXxxxx.xxx Inc., a Nevada Corporation (the "Company"), and First
Union National Bank, a national banking association, as Escrow Agent hereunder
(the "Escrow Agent").
BACKGROUND
WHEREAS, the Company and the Placement Agents have entered
into a Placement Agency Agreement (the "Placement Agency Agreement"), dated as
of June 12, 2000, pursuant to which the Company proposes to offer for sale to
investors ("Investors") through the Placement Agents on a "best efforts", basis
Two Million Five Hundred Thousand Dollars ($2,500,000) of Debentures for a total
purchase price of Two Million Five Hundred Thousand Dollars ($2,500,000). (the
"Proceeds") The Securities will be sold to Buyer(s) pursuant to a Securities
Purchase Agreement (the "Securities Purchase Agreement") between the Company and
each Buyer listed on Schedule I thereto. The Securities Purchase Agreement
provides that the Buyer(s) shall deposit the purchase price of the Securities
purchased pursuant to the Securities Purchase Agreement in a segregated escrow
account to be held by Escrow Agent in order to effectuate a disbursement of the
$2,500,000 to the Company at a closing to be held as set forth in the Securities
Purchase Agreement. (the "Closing")
WHEREAS, the Placement Agents intend to sell the Securities as
the Company's agent on a "best efforts, basis (the "Offering").
WHEREAS, Escrow Agent has agreed to accept, hold, and disburse
the funds deposited with it in accordance with the terms of this agreement.
WHEREAS, in order to establish the escrow of funds and to
effect the provisions of the Securities Purchase Agreement, the parties hereto
have entered into this Agreement.
NOW THEREFORE, in consideration of the foregoing, it is hereby agreed
as follows:
1. Definitions. The following terms shall have the following meanings when used
herein:
a. "Escrow Funds" shall mean the funds deposited with the Escrow Agent
pursuant to this Agreement, which funds shall include, without limitation, the
sum of $2,500,000.
b. "Joint Written Direction" shall mean a written direction executed by
the Placement Agents and the Company directing Escrow Agent to disburse all or a
portion of the Escrow Funds or to take or refrain from taking any action
pursuant to this Agreement.
c. "Escrow Period" shall begin with the commencement of the Offering
and shall terminate upon the earlier to occur of the following dates:
(i) The date upon which the Escrow Agent confirms that it has received
in the Escrow Account all of the Proceeds;
(ii) The expiration of ten (10) days from the date of commencement of
the Offering (unless extended by mutual written agreement between the Company
and the Placement Agent with a copy of such extension to the Escrow Agent); or
(iii) The date upon which a determination is made by the Company and
the Placement Agents to terminate the Offering prior to the sale of all the
Securities.
During the Escrow Period, the Company and the Placement Agents are aware that
they are not entitled to any funds received into escrow and no amounts deposited
in the Escrow Account shall become the property of the Company or the Placement
Agents or any other entity, or be subject to the debts of the Company or the
Placement Agents or any other entity.
2. Appointment of and Acceptance by Escrow Agent. The Placement Agents and the
Company hereby appoint Escrow Agent to serve as Escrow Agent hereunder. Escrow
Agent hereby accepts such appointment and, upon receipt by wire transfer of the
Escrow Funds in accordance with Section 3 below, agrees to hold, invest and
disburse the Escrow Funds in accordance with this Agreement.
3. Creation of Escrow Funds. On or prior to the date of the commencement of the
Offering, the parties shall establish an escrow account with the Escrow Agent,
which escrow account shall be entitled as follows: XxxXxxxx.xxx Inc./May Xxxxx
Group, Inc. Escrow Account for the deposit of the Escrow Funds. The Placement
Agents will instruct subscribers to wire funds to the account of the Escrow
Agent as follows:
Bank: First Union National Bank of New Jersey
Routing # 000000000
Account # 2020000659170
Name on Account: Xxxxxx Xxxxxxxx, LLP/First Union Escrow Account
Name on Sub-Account: XxxXxxxx.xxx Inc./May Xxxxx Group, Inc.
Escrow account
Reference Sub-Account # 1130-00
2
Attn: Xxxxxx Xxxxxxx (000) 000-0000
Xxxxxxx Xxxxxxxxx (000) 000-0000
Only wire transfers shall be accepted.
4. Deposits into the Escrow Account. The Placement Agents agree that
they shall promptly deliver all monies received from subscribers for the payment
of the Securities to the Escrow Agent for deposit in the Escrow Account.
5. Disbursements from the Escrow Account.
(a) At such time as Escrow Agent has collected and deposited
instruments of payment in the total amount of the Proceeds, Escrow Agent shall
notify the Company and the Placement Agents. The Escrow Agent will continue to
hold such funds until Placement Agents and Company execute a Joint Written
Direction directing the Escrow Agent to disburse the Proceeds pursuant to a
closing statement signed by the Company (the "Closing Statement"). In disbursing
such funds, Escrow Agent is authorized to rely upon such Closing Statement from
Company and may accept any signatory from the Company listed on the signature
page to this Agreement and any signature from the Placement Agents that Escrow
Agent already has on file.
In the event the Escrow Agent does not receive the minimum deposits
from the investors totaling $2,500,000 prior to the expiration of the Escrow
Period (the "Minimum Deposits"), the Escrow Agent shall notify the Company and
the Placement Agents. Upon receipt of payment instructions from the Company, the
Escrow Agent shall refund to each subscriber without interest the amount
received from each investor, without deduction, penalty, or expense to the
subscriber. The purchase money returned to each subscriber shall be free and
clear of any and all claims of the Company, the Placement Agents or any of their
creditors.
In the event the Escrow Agent does receive deposits totaling the
Minimum Deposits prior to expiration of the Escrow Period, in no event will the
Escrow Funds be released to the Company until such amount is received by the
Escrow Agent in collected funds. For purposes of this Agreement, the term
"collected funds" shall mean all funds received by the Escrow Agent which have
cleared normal banking channels and are in the form of cash.
6. Collection Procedure. The Escrow Agent is hereby authorized to
forward each wire for collection and, upon collection of the proceeds of each
wire deposit the collected proceeds in the Escrow Account.
Any wires returned unpaid to the Escrow Agent shall be returned to the
Placement Agents. In such cases, the Escrow Agent will promptly notify the
Company for such return.
If the Company rejects any subscription for which the Escrow Agent has
already collected funds, the Escrow Agent shall promptly issue a refund check or
wire to the
3
rejected subscriber. If the Company rejects any subscription for which the
Escrow Agent has not yet collected funds but has submitted the subscriber's wire
for collection, the Escrow Agent shall promptly issue a check or wire the amount
of the subscriber's wire to the rejected subscriber after the Escrow Agent has
cleared such funds. If the Escrow Agent has not yet submitted a rejected
subscriber's wire for collection, the Escrow Agent shall promptly remit the
subscriber's wire directly to the subscriber. The Company shall provide payment
instructions to the Escrow Agent.
7. Suspension of Performance: Disbursement Into Court. If at any time,
there shall exist any dispute between the Company and the Placement Agents with
respect to holding or disposition of any portion of the Escrow Funds or any
other obligations of Escrow Agent hereunder, or if at any time Escrow Agent is
unable to determine, to Escrow Agent's sole satisfaction, the proper disposition
of any portion of the Escrow Funds or Escrow Agent's proper actions with respect
to its obligations hereunder, or if the parties have not within 30 days of the
furnishing by Escrow Agent of a notice of resignation pursuant to Section 9
hereof, appointed a successor Escrow Agent to act hereunder, then Escrow Agent
may, in its sole discretion, take either or both of the following actions:
a. suspend the performance of any of its obligations (including
without limitation any disbursement obligations) under this
Escrow Agreement until such dispute or uncertainty shall be
resolved to the sole satisfaction of Escrow Agent or until a
successor Escrow Agent shall be appointed (as the case may
be); provided however, Escrow Agent shall continue to invest
the Escrow Funds in accordance with Section 9 hereof; and/or
b. petition (by means of an interpleader action or any other
appropriate method) any court of competent jurisdiction in
any venue convenient to Escrow Agent, for instructions with
respect to such dispute or uncertainty, and to the extent
required by law, pay into such court, for holding and
disposition in accordance with the instructions of such
court, all funds held by it in the Escrow Funds, after
deduction and payment to Escrow Agent of all fees and
expenses (including court costs and attorneys' fees) payable
to, incurred by, or expected to be incurred by Escrow Agent
in connection with performance of its duties and the
exercise of its rights hereunder.
c. Escrow Agent shall have no liability to the Company, the
Placement Agent, or any person with respect to any such
suspension of performance or disbursement into court,
specifically including any liability or claimed liability
that may arise, or be alleged to have arisen, our of or as a
result of any delay in the disbursement of funds held in the
Escrow Funds or any delay in with respect to any other
action required or requested of Escrow Agent.
8. Investment of Escrow Funds. The Escrow Agent shall deposit the
Escrow Funds in a non-interest bearing money market account.
4
If Escrow Agent has not received a Joint Written Direction at any time
that an investment decision must be made, Escrow Agent shall invest the Escrow
Fund, or such portion thereof, as to which no Joint Written Direction has been
received, in investments described above. The foregoing investments shall be
made by the Escrow Agent. Notwithstanding anything to the contrary contained,
Escrow Agent may, without notice to the parties, sell or liquidate any of the
foregoing investments at any time if the proceeds thereof are required for any
release of funds permitted or required hereunder, and Escrow Agent shall not be
liable or responsible for any loss, cost or penalty resulting from any such sale
or liquidation. With respect to any funds received by Escrow Agent for deposit
into the Escrow Funds or any Joint Written Direction received by Escrow Agent
with respect to investment of any funds in the Escrow Funds after ten o'clock,
a.m., New Jersey time, Escrow Agent shall not be required to invest such funds
or to effect such investment instruction until the next day upon which banks in
New Jersey are open for business.
9. Resignation and Removal of Escrow Agent. Escrow Agent may resign
from the performance of its duties hereunder at any time by giving ten (10)
days' prior written notice to the parties or may be removed, with or without
cause, by the parties, acting jointly, by furnishing a Joint Written Direction
to Escrow Agent, at any time by the giving of ten (10) days' prior written
notice to Escrow Agent as provided herein below. Upon any such notice of
resignation or removal, the representatives of the Placement Agents and the
Company identified in Sections 13a. (iv) and 13b. (iv), below, jointly shall
appoint a successor Escrow Agent hereunder, which shall be a commercial bank,
trust company or other financial institution with a combined capital and surplus
in excess of $10,000,000.00. Upon the acceptance in writing of any appointment
of Escrow Agent hereunder by a successor Escrow Agent, such successor Escrow
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Escrow Agent, and the retiring Escrow
Agent shall be discharged from its duties and obligations under this Escrow
Agreement, but shall not be discharged from any liability for actions taken as
Escrow Agent hereunder prior to such succession. After any retiring Escrow
Agent's resignation or removal, the provisions of this Escrow Agreement shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Escrow Agent under this Escrow Agreement. The retiring Escrow Agent shall
transmit all records pertaining to the Escrow Funds and shall pay all funds held
by it in the Escrow Funds to the successor Escrow Agent, after making copies of
such records as the retiring Escrow Agent deems advisable and after deduction
and payment to the retiring Escrow Agent of all fees and expenses (including
court costs and attorneys' fees) payable to, incurred by, or expected to be
incurred by the retiring Escrow Agent in connection with the performance of its
duties and the exercise of its rights hereunder.
10. Liability of Escrow Agent.
a. Escrow Agent shall have no liability or obligation with respect to the
Escrow Funds except for Escrow Agent's willful misconduct or gross negligence.
Escrow Agent's sole responsibility shall be for the safekeeping, investment, and
disbursement of the Escrow Funds in accordance with the terms of this Agreement.
Escrow Agent shall
5
have no implied duties or obligations and shall not be charged with knowledge or
notice o any fact or circumstance not specifically set forth herein. Escrow
Agent may rely upon any instrument, not only as to its due execution, validity
and effectiveness, but also as to the truth and accuracy of any information
contained therein, which Escrow Agent shall in good faith believe to be genuine,
to have been signed or presented by the person or parties purporting to sign the
same and conform to the provisions of this Agreement. In no event shall Escrow
Agent be liable for incidental, indirect, special, and consequential or punitive
damages. Escrow Agent shall not be obligated to take any legal action or
commence any proceeding in connection with the Escrow Funds, any account in
which Escrow Funds are deposited, this Agreement or the Securities Purchase
Agreement, or to appear in, prosecute or defend any such legal action or
proceeding. Escrow Agent may consult legal counsel selected by it in any event
of any dispute or question as to construction of any of the provisions hereof or
of any other agreement or its duties hereunder, or relating to any dispute
involving any party hereto, and shall incur no liability and shall be fully
indemnified from any liability whatsoever in acting in accordance with the
opinion or instructions of such counsel. The Company and the Placement Agent
jointly and severally shall promptly pay, upon demand, the reasonable fees and
expenses of any such counsel.
b. The Escrow Agent is hereby authorized, in its sole discretion, to comply with
orders issued or process entered by any court with respect to the Escrow Funds,
without determination by the Escrow Agent of such court's jurisdiction in the
matter. If any portion of the Escrow Funds is at any time attached, garnished or
levied upon under any court order, or in case the payment, assignment, transfer,
conveyance or delivery of any such property shall be stayed or enjoined by any
court order, or in any case any order judgment or decree shall be made or
entered by any court affecting such property or ay part thereof, then and in any
such event, the Escrow Agent is authorized, in its sole discretion, to rely upon
and comply with any such order, writ judgment or decree which it is advised by
legal counsel selected by its binding upon without the need for appeal or other
action; and if the Escrow Agent complies with any such order, writ, judgment or
decree, it shall not be liable to any of the parties hereto or to any other
person or entity by reason of such compliance even though such order, writ
judgment or decree may be subsequently reversed, modified, annulled, set aside
or vacated.
11. Indemnification of Escrow Agent. From and at all times after the date
of this Agreement, the parties jointly and severally, shall, to the fullest
extent permitted by law and to the extent provided herein, indemnify and hold
harmless Escrow Agent and each director, officer, employee, attorney, agent and
affiliate of Escrow Agent (collectively, the "Indemnified Parties") against any
and all actions, claims (whether or not valid), losses, damages, liabilities,
costs and expenses of any kind or nature whatsoever (including without
limitation reasonable attorney's fees, costs and expenses) incurred by or
asserted against any of the Indemnified Parties from and after the date hereof,
whether direct, indirect or consequential, as a result of or arising from or in
any way relating to any claim, demand, suit, action, or proceeding (including
any inquiry or investigation) by any person, including without limitation the
parties to this Agreement, whether threatened or initiated, asserting a claim
for any legal or equitable remedy against any
6
person under any statute or regulation, including, but not limited to, any
federal or state securities laws, or under any common law or equitable cause or
otherwise, arising from or in connection with the negotiation, preparation,
execution, performance or failure of performance of this Agreement or any
transaction contemplated herein, whether or not any such Indemnified Party is a
party to any such action or proceeding, suit or the target of any such inquiry
or investigation; provided, however, that no Indemnified Party shall have the
right to be indemnified hereunder for liability finally determined by a court of
competent jurisdiction, subject to no further appeal, to have resulted solely
from the gross negligence or willful misconduct of such Indemnified Party. If
any such action or claim shall be brought or asserted against any Indemnified
Party, such Indemnified Party shall promptly notify the Company and the
Placement Agent hereunder in writing, and the Placement Agents and the Company
shall assume the defense thereof, including the employment of counsel and the
payment of all expenses. Such Indemnified Party shall, in its sole discretion,
have the right to employ separate counsel (who may be selected by such
Indemnified Party in its sole discretion) in any such action and to participate
and to participate in the defense thereof, and the fees and expenses of such
counsel shall be paid by such Indemnified Party, except that the Placement
Agents and/or the Company shall be required to pay such fees and expense if (a)
the Placement Agents or the Company agree to pay such fees and expenses, or (b)
the Placement Agents and/or the Company shall fail to assume the defense of such
action or proceeding or shall fail, in the sole discretion of such Indemnified
Party, to employ counsel satisfactory to the Indemnified Party in any such
action or proceeding, (c) the Placement Agents and the Company is the plaintiff
in any such action or proceeding or (d) the named or potential parties to any
such action or proceeding (including any potentially impleaded parties) include
both Indemnified Party the Company and/or the Placement Agents Indemnified Party
shall have been advised by counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to the
Company or the Placement Agents. The Placement Agents and the Company shall be
jointly and severally liable to pay fees and expenses of counsel pursuant to the
preceding sentence, except that any obligation to pay under clause (a) shall
apply only to the party so agreeing. All such fees and expenses payable by the
Company and/or the Placement Agents pursuant to the foregoing sentence shall be
paid from time to time as incurred, both in advance of and after the final
disposition of such action or claim. The obligations of the parties under this
section shall survive any termination of this Agreement, and resignation or
removal of the Escrow Agent shall be independent of any obligation of Escrow
Agent.
The parties agree that neither payment by the Company or the Placement
Agents of any claim by Escrow Agent for indemnification hereunder shall impair,
limit, modify, or affect, as between the Placement Agents and the Company, the
respective rights and obligations of Placement Agents, on the one hand, and the
Company, on the other hand, under the Placement Agency Agreements.
12. Expenses of Escrow Agent. The Company shall reimburse Escrow Agent for all
of its reasonable out-of-pocket expenses, including attorneys' fees, travel
expenses, telephone and facsimile transmission costs, postage (including express
mail and overnight delivery charges), copying charges and the like. All of the
compensation and
7
reimbursement obligations set forth in this Section shall be payable by the
Company, upon demand by Escrow Agent. The obligations of the Company under this
Section shall survive any termination of this Agreement and the resignation or
removal of Escrow Agent.
13. Warranties.
a. Placement Agents makes the following representations and warranties
to Escrow Agent:
(i) Placement Agents have full power and authority to execute
and deliver this Escrow Agreement and to perform its
obligations hereunder.
(ii) This Escrow Agreement has been duly approved by all
necessary corporate action of Placement Agents, including any
necessary shareholder approval, has been executed by duly
authorized officers of the Placement Agents, enforceable in
accordance with its terms.
(iii) The execution, delivery, and performance of the
Placement Agents of this Agreement will not violate, conflict
with, or cause a default under the certificate of
incorporation or bylaws of Placement Agents, any applicable
law or regulation, any court order or administrative ruling or
degree to which the Placement Agents is a party or any of its
property is subject, or any agreement, contract, indenture, or
other binding arrangement.
(iv) Xxxxxxx Xxxxxx has been duly appointed to act as the
representative of The May Xxxxx Group, Inc., hereunder and has
full power and authority to execute, deliver, and perform this
Escrow Agreement, to execute and deliver any Joint Written
Direction, to amend, modify, or waive any provision of this
Agreement, and to take any and all other actions as the
Placement Agent's representative under this Agreement, all
without further consent or direction form, or notice to, the
Placement Agent or any other party.
(v) Xxxxxxxx XxXxxxxx has been duly appointed to act as the
representative of the Xxxxxxxx Kernaghan and Company, Ltd.,
hereunder and has full power and authority to execute,
deliver, and perform this Escrow Agreement, to execute and
deliver any Joint Written Direction, to amend, modify, or
waive any provision of this Agreement, and to take any and all
other actions as the Placement Agent's representative under
this Agreement, all
8
without further consent or direction form, or notice to, the
Placement Agent or any other party.
(v) No party other than the parties hereto and the Investors
have, or shall have, any lien, claim or security interest in
the Escrow Funds or any part thereof. No financing statement
under the Uniform Commercial Code is on file in any
jurisdiction claiming a security interest in or describing
(whether specifically or generally) the Escrow Funds or any
part thereof.
(vi) All of the representations and warranties of the
Placement Agents contained herein are true and complete as of
the date hereof and will be true and complete at the time of
any disbursement from the Escrow Funds.
b. The Company makes the following representations and
warranties to Escrow Agent:
(i) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Nevada, and has full power and authority to execute and
deliver this Escrow Agreement and to perform its obligations
hereunder.
(ii) This Escrow Agreement has been duly approved by all
necessary corporate action of the Company, including any
necessary shareholder approval, has been executed by duly
authorized officers of the Company, enforceable in accordance
with its terms.
(iii) The execution, delivery, and performance by the Company
of this Escrow Agreement is in accordance with the Securities
Purchase Agreement and will not violate, conflict with, or
cause a default under the certificate of incorporation or
bylaws of the Company, any applicable law or regulation, any
court order or administrative ruling or decree to which the
Company is a party or any of its property is subject, or any
agreement, contract, indenture, or other binding arrangement,
including without limitation to the Securities Purchase
Agreement, to which the Company is a party or any of its land
is subject.
(iv) Xxxxx Xxxxxxxxx has been duly appointed to act as the
representatives of the Company hereunder and has full power
and authority to execute, deliver, and perform this Escrow
Agreement, to execute and deliver any Joint Written Direction,
to amend, modify or waive any provision of this Agreement and
to take all other actions as the Company's Representative
under this
9
Agreement, all without further consent or direction from, or
notice to, the Company or any other party.
(v) No party other than the parties hereto and the Investors
have, or shall have, any lien, claim or security interest in
the Escrow Funds or any part thereof. No financing statement
under the Uniform Commercial Code is on file in any
jurisdiction claiming a security interest in or describing
(whether specifically or generally) the Escrow Funds or any
part thereof.
(vi) All of the representations and warranties of the Company
contained herein are true and complete as of the date hereof
and will be true and complete at the time of any disbursement
from the Escrow Funds.
14. Consent to Jurisdiction and Venue. In the event that any party
hereto commences a lawsuit or other proceeding relating to or arising from this
Agreement, the parties hereto agree that the United States District Court for
the District of New Jersey shall have the sole and exclusive jurisdiction over
any such proceeding. If all such courts lack federal subject matter
jurisdiction, the parties agree that the Superior Court Division of New Jersey,
Chancery Division of Essex County shall have sole and exclusive jurisdiction.
Any of these courts shall be proper venue for any such lawsuit or judicial
proceeding and the parties hereto waive any objection to such venue. The parties
hereto consent to and agree to submit to the jurisdiction of any of the courts
specified herein and agree to accept the service of process to vest personal
jurisdiction over them in any of these courts.
15. Notice. All notices and other communications hereunder shall be in
writing and shall be deemed to have been validly served, given or delivered five
(5) days after deposit in the United States mails, by certified mail with return
receipt requested and postage prepaid, when delivered personally, one (1) day
delivered to any overnight courier, or when transmitted by facsimile
transmission and addressed to the party to be notified as follows:
If to Placement Agents, to:
The May Xxxxx Group, Inc.
Xxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxx
Facsimile: (000) 000-0000
With Copy to:
Xxxxxx Xxxxxxxx, LLP
0000 Xxxxxxxxxx Xxxxxx
00
Xxxxx #0
Xxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
Xxxxxxxx Kernaghan & Co., Ltd.
000 Xxx Xxxxxx 00xx Xxxxx
Xxxxxxx, Xxxxxxx X0X0X0
With Copy to:
Xxxx X. Xxxx, Esq.
0000 Xxxx Xxx Xxxx. Xxxxx 000
Xxxxxxx, Xx 00000
Facsimile: (000) 000-0000
If to Company, to:
Xxxxxxxx.xxx Inc.
0000 Xxxxxxx Xxxx 0xx Xxxxx
Xxxxxxxxxxx, XX 00000
Attn: President
Facsimile: (000) 000-0000
With Copy to:
Xxxxxx, Xxxxx & Xxxxxxx, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX (000) 000-0000
Attn: W. Xxxxxxx Xxxxxxxxx, Esq.
Xxx Xxxxxxxxxx, Esq.
Facsimile: (000) 000-0000
If to Escrow Agent, to:
First Union National Bank,
000 Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxx
Xxxxxxx Xxxxxxxxx
Facsimile: (000) 000-0000
11
Or to such other address as each party may designate for itself by like
notice.
16. Amendments or Waiver. This Agreement may be changed, waived,
discharged or terminated only by a writing signed by the parties of the Escrow
Agent. No delay or omission by any party in exercising any right with respect
hereto shall operate as waiver. A waiver on any one occasion shall not be
construed as a bar to, or waiver of, any right or remedy on any future occasion.
17. Severability. To the extent any provision of this Agreement is
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition, or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
18. Governing Law. This Agreement shall be construed and interpreted in
accordance with the internal laws of the State of New Jersey without giving
effect to the conflict of laws principles thereof.
19 Entire Agreement. This Agreement constitutes the entire Agreement
between the parties relating to the holding, investment, and disbursement of the
Escrow Funds and sets forth in their entirety the obligations and duties of the
Escrow Agent with respect to the Escrow Funds.
20. Binding Effect. All of the terms of this Agreement, as amended from
time to time, shall be binding upon, inure to the benefit of and be enforceable
by the respective heirs, successors and assigns of the Placement Agent, the
Company, or the Escrow Agent.
21. Execution of Counterparts. This Agreement and any Joint Written
Direction may be executed in counter parts, which when so executed shall
constitute one and same agreement or direction.
22. Termination. Upon the first to occur of the disbursement of all
amounts in the Escrow Funds pursuant to Joint Written Directions or the
disbursement of all amounts in the Escrow Funds into court pursuant to Section 7
hereof, this Agreement shall terminate and Escrow Agent shall have no further
obligation or liability whatsoever with respect to this Agreement or the Escrow
Funds.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
12
IN WITNESS WHEREOF the parties have hereunto set their hands and seals
the day and year above set forth.
COMPANY:
XXXXXXXX.XXX INC.
By:
-------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Chief Operating Officer
ESCROW AGENT:
FIRST UNION NATIONAL BANK
By:
-------------------------------
Name: Xxxxxx Xxxxxxx
Title: As Agent
PLACEMENT AGENT:
THE MAY XXXXX GROUP, INC.
By:
-------------------------------
Name: Xxxxxxx Xxxxxx
Title: Managing Director
XXXXXXXX KERNAGHAN & COMPANY, LTD.
By:
-------------------------------
Name:
Title:
13
EXHIBIT C
FORM OF WARRANT
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW
TOWARD RESALE OR DISTRIBUTION. THIS WARRANT MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE
REASONABLY ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID
ACT.
XXXXXXXX.XXX INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.: Number of Shares Issuable:
Date of Issuance:
XxxXxxxx.xxx Inc., a Nevada corporation (the "Company"), hereby
certifies that, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, _________________, the registered holder
hereof or its permitted assigns, is entitled, subject to the terms set forth
below, to purchase from the Company upon surrender of this Warrant, at any time
or times on or after the date hereof, but not after 5:00 P.M. Eastern Standard
Time on the Expiration Date (as defined herein) ______________ (__________)
fully paid nonassessable shares of Common Stock (as defined herein) of the
Company (the "Warrant Shares") at the Warrant Exercise Price per share provided
in Section l(b) below;
Section 1.
(a) Letter Agreement. This Warrant is one of the warrants (the
"Warrants") issued pursuant to the terms of the Securities Purchase Agreement
between the Company and ____________, dated June 12, 2000.
(b) Definitions. The following words and terms as used in this Warrant
shall have the following meanings:
(i) "Common Stock" means (i) the Company's common stock, par value
$0.0001 per share, and (ii) any capital stock into which such Common Stock shall
have been changed or any capital stock resulting from a reclassification of such
Common Stock.
(ii) "Common Stock Deemed Outstanding" means, at any given time, the
number of shares of Common Stock actually outstanding at such time, plus the
number of shares of Common Stock
1
deemed to be outstanding pursuant to Sections 8(b)(i) and 8(b)(ii) hereof
regardless of whether the Options (as defined below) are actually exercisable or
convertible at such time, but excluding any shares of Common Stock owned or held
by or for the account of the Company or issuable upon exercise of the Warrants.
(iii) "Convertible Securities" means any stock or securities (other
than Options) directly or indirectly convertible into or exchangeable for Common
Stock.
(iv) "Expiration Date" means the date five (5) years from the date of
the issuance of the Warrant or, if such date falls on a Saturday, Sunday or
other day on which banks are required or authorized to be closed in the City of
New York or the State of New York (a "Holiday"), the next preceding date that is
not a Holiday.
(v) "Options" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
(vi) "Other Securities" means other Warrants.
(vii) "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
(viii) "Principal Market" means the Nasdaq Bulletin Board System,
Nasdaq Small-Cap Market, or American Stock Exchange.
(ix) "Securities Act" means the Securities Act of 1933, as amended.
(x) "Warrant" shall mean this warrant and all warrants issued in
exchange, transfer or replacement of any thereof.
(xi) "Warrant Exercise Price" shall be equal to $_________, subject to
adjustment as hereinafter provided.
(b) Other Definitional Provisions.
(i) Except as otherwise specified herein, all references
herein (A) to the Company shall be deemed to include the Company's
successors and (B) to any applicable law defined or referred to herein,
shall be deemed references to such applicable law as the same may have
been or may be amended or supplemented from time to time.
(ii) When used in this Warrant, the words "herein," "hereof,"
and "hereunder," and words of similar import, shall refer to this
Warrant as a whole and not to any provision of this Warrant, and the
words "Section," "Schedule," and "Exhibit" shall refer to Sections of,
and Schedules and Exhibits to, this Warrant unless otherwise specified.
2
(iii) Whenever the context so requires, the neuter gender
includes the masculine or feminine, and the singular number includes
the plural, and vice versa.
Section 2. Exercise of Warrant.
(a) Subject to the terms and conditions hereof, this Warrant may be
exercised by the holder hereof then registered on the books of the Company, in
whole or in part, at any time on any business day or after the opening of
business on the date hereof and prior to 11:59 P.M. Eastern Standard Time on the
Expiration Date by (i) delivery of a written notice, in the form of the
subscription notice attached as Exhibit A hereto, of such holder's election to
exercise this Warrant, which notice shall specify the number of Warrant Shares
to be purchased, (ii) (A) payment to the Company of an amount equal to the
Warrant Exercise Price multiplied by the number of Warrant Shares as to which
the Warrant is being exercised (plus any applicable issue or transfer taxes)
(the "Aggregate Exercise Price") in cash or by check or wire transfer, or (B) by
notifying the Company that it should subtract from the number of Warrant Shares
Issuable to the holder upon such exercise an amount of Warrant Shares having a
last reported sale price (as reported by Bloomberg) or fair market value on the
date immediately preceding the date of the subscription notice equal to the
Aggregate Exercise Price of the Warrant Shares for which this warrant is being
exercised (a "Cashless Exercise"), and (iii) the surrender of this Warrant, to a
common carrier for delivery to the Company as soon as practicable following such
date, this Warrant (or an indemnification undertaking with respect to this
Warrant in the case of its loss, theft, or destruction); provided that if such
Warrant Shares are to be issued in any name other than that of the registered
holder of this Warrant, such issuance shall be deemed a transfer and the
provisions of Section 7 shall be applicable. In the event of any exercise of the
rights represented by this Warrant in compliance with this Section 2, a
certificate or certificates for the Warrant Shares so purchased, in such
denominations as may be requested by the holder hereof and registered in the
name of, or as directed by, the holder, shall be delivered at the Company's
expense to, or as directed by, such holder as soon as practicable after such
rights shall have been so exercised, and in any event no later than five (5)
business days after the Company's receipt of the Exercise Notice, the Aggregate
Exercise Price and this Warrant (or indemnification undertaking with respect to
this Warrant in the case of its loss, theft or destruction) Upon delivery of the
Exercise Notice and Aggregate Exercise Price referred to in clause (ii) (A)
above or notification to the Company of a Cashless exercise referred to in
clause (ii) (B) above, the holder of this Warrant shall be deemed for all
corporate purposes to have become the holder of record of the Warrant Shares
with respect to which this Warrant has been exercised, irrespective of the date
of delivery of this Warrant as required by clause (iii) above or the
certificates evidencing such Warrant Shares. In the case of a dispute as to the
determination of the Warrant Exercise Price or the Average Market Price of a
security or the arithmetic calculation of the Warrant Shares, the Company shall
promptly issue to the holder the number of shares of Common Stock that is not
disputed and shall submit the disputed determinations or arithmetic calculations
to the holder via facsimile within five (5) business days of receipt of the
holder's subscription notice. If the holder and the Company are unable to agree
upon the determination of the Warrant Exercise Price or Average Market Price or
arithmetic calculation of the Warrant Shares within five (5) business days of
such disputed determination or arithmetic calculation being submitted to the
holder, then the Company shall immediately submit via facsimile (i) the disputed
determination of the Warrant Exercise Price or the Average Market Price to an
independent, reputable investment banking firm or (ii) the disputed arithmetic
calculation of the Warrant Shares to its independent, outside accountant. The
Company shall cause the investment banking firm or the accountant, as the case
may be, to perform the determinations or calculations and notify the
3
Company and the holder of the results no later than forty-eight (48) hours from
the time it receives the disputed determinations or calculations. Such
investment bank's or accountant's determination or calculation, as the case may
be, shall be deemed conclusive absent manifest error and the Company shall be
liable for the costs and expenses related to such determination or calculation.
(b) Unless the rights represented by this Warrant shall have expired or
shall have been fully exercised, the Company shall, as soon as practicable and
in any event no later than five (5) business days after any exercise and at its
own expense, issue a new Warrant identical in all respects to the Warrant
exercised except (i) it shall represent rights to purchase the number of Warrant
Shares purchasable immediately prior to such exercise under the Warrant
exercised, less the number of Warrant Shares with respect to which such Warrant
is exercised, and (ii) the holder thereof shall be deemed for all corporate
purposes to have become the holder of record of such Warrant Shares immediately
prior to the close of business on the date on which the Warrant is surrendered
and payment of the amount due in respect of such exercise and any applicable
taxes is made, irrespective of the date of delivery of certificates evidencing
such Warrant Shares, except that, if the date of such surrender and payment is a
date when the stock transfer books of the Company are properly closed, such
person shall be deemed to have become the holder of such Warrant Shares at the
opening of business on the next succeeding date on which the stock transfer
books are open. Upon presentation of a duly executed Subscription Form in the
Form of Exhibit A to this Warrant, the holder shall be entitled to exercise this
Warrant in whole or in part, if the holder shall have previously exercised and
surrendered this Warrant and the Company shall not have issued a new Warrant
representing the number of shares issuable following such prior exercise.
(c) No fractional shares of Common Stock are to be issued upon the
exercise of this Warrant, but rather the number of shares of Common Stock issued
upon exercise of this Warrant shall be rounded up or down to the nearest whole
number.
(d) If the Company shall fail for any reason or for no reason to issue
to holder on a timely basis as described under this Section 2, a certificate for
the number of shares of Common Stock to which the holder is entitled upon the
holder's exercise of this, the Company shall, in addition to any other remedies
under this Agreement or otherwise available to such holder pay as additional
damages in cash to such holder for each day such issuance is not timely effected
an amount equal to .25% of the product of (A) the sum of the number of shares of
Common Stock not issued to the holder on a timely basis and to which the holder
is entitled, and (B) the sum derived by subtracting (1) the Warrant exercise
price then in effect, from (2) the average of the closing bid price of the
Common Stock on the last possible date which the Company could have issued
Common Stock, as the case may be, to the holder without violating this Section
2.
(e) The Company shall not effect any exercise of any Warrant and no
holder of any Warrant shall have the right to exercise any Warrant pursuant to
Section 2 to the extent that after giving to such exercise such person (together
with such Persons affiliates) (A) would beneficially owned in excess of 4.9% of
the outstanding shares of Common Stock following such conversion and (B) would
have acquired, through exercise of any Warrant or otherwise, in excess of 4.9%
of the outstanding shares of the Common Stock following such exercise during the
60-day period ending on and including such exercise date. For purposes of the
foregoing sentence, the number of shares of Common Stock beneficially owned by a
person and its affiliates or acquired by a person and its affiliates, as the
case may be, shall include the number of shares of Common Stock issuable upon
the exercise of the Warrants
4
with respect to which the determination of such sentence is being made, but
shall exclude the number of shares of Common Stock which would be issuable upon
(i) exercise of the remaining, non exercisable Warrants beneficially owned by
such person and its affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company
subject to limitation on conversion or exercise analogous to the limit contained
herein beneficially owned by such Person and its affiliates. Except as set forth
in the preceding sentence, for purposes of this section 2(e), beneficial
ownership shall be calculated in accordance with Section 13 (d) of the
Securities Exchange Act of 1934, as amended. Notwithstanding anything to the
contrary contained herein, each Exercise Notice shall constitute a
representation by the holder submitting such Exercise Notice that, after giving
effect to such Exercise Notice (A) the holder will not beneficially own (as
determined in accordance with this Section 2(e)) and (B) during the 60-day
period ending on and including such exercise date, the holder will not have
acquired, through exercise of any Warrant or otherwise, a number of shares of
Common Stock in excess of 4.9% of the outstanding shares of Common Stock as
reflected in the Company's most recent Form 10-QSB or Form 10-KSB, as the case
may be, or more recent public release or other public notice by the Company
setting forth the number of Shares of Common Stock outstanding, but after giving
effect to exercise of any Warrant by such holder since the date as of which such
numbers of outstanding shares of the Common Stock was reported.
Section 3. Covenants as to Common Stock. The Company hereby covenants
and agrees as follows:
(a) This Warrant is, duly authorized and validly issued.
(b) All Warrant Shares which may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be validly issued, fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof.
(c) During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved at least the number of shares of Common Stock needed to provide for the
exercise of the rights then represented by this Warrant and the par value of
said shares will at all times be less than or equal to the applicable Warrant
Exercise Price.
(d) The Company shall promptly secure the listing of the shares of
Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or automated quotation system, if any, or
over-the-counter-bulletin board upon which shares of Common Stock are then
listed or quoted (subject to official notice of the over-the-counter bulletin
board of issuance upon exercise of this Warrant) and shall maintain, so long as
any other shares of Common Stock shall be so listed or quoted, such listing or
quotation of all shares of Common Stock from time to time issuable upon the
exercise of this Warrant; and the Company shall so list or obtain quotation on
each such national securities exchange, automated quotation system or
over-the-counter bulletin board, as the case may be, and shall maintain such
listing in quotation of, any other shares of capital stock of the Company
issuable upon the exercise of this Warrant if and so long as any shares of the
same class shall be listed on such national securities exchange, automated
quotation system or over-the-counter bulletin board.
(e) The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any
5
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed by it hereunder, but will at all
times in good faith assist in the carrying out of all the provisions of this
Warrant and in the taking of all such action as may reasonably be requested by
the holder of this Warrant in order to protect the exercise privilege of the
holder of this Warrant against dilution or other impairment, consistent with the
tenor and purpose of this Warrant. Without limiting the generality of the
foregoing, the Company (i) will not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the Exercise
Price then in effect, and (ii) will take all such actions as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant.
(f) This Warrant will be binding upon any entity succeeding to the
Company by merger, consolidation or acquisition of all or substantially all of
the Company's assets.
(g) If at any time the Company proposes to file with the Securities and
Exchange Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its
securities (other than on Form S-4 or Form S-8 (or their equivalents at such
time relating to securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans) the Company shall
promptly send to the Holder's written notice of the Company's intention to file
a registration statement and of the holder's rights under this section and, if
within five (5) days after receipt of such notice, the holder hereof shall so
request in writing, the Company shall include in such registration statement all
or any part of the Common Stock underlying this Warrant the holder requests to
be registered. If a registration pursuant this section is to be an underwritten
public offering and the managing underwriters advise the Company in writing,
that in their reasonable good faith opinion, marketing or other factors dictate
that a limitation on the number of shares of Company common stock which may be
included in the registration statement is necessary to facilitate and not
adversely affect the proposed offering, then the Company shall include in such
registration : (1) first, all securities the Company proposes to sell for its
own account, (2) second, up to the full number of securities proposed to be
registered for the account of the holders of securities entitled to inclusion of
their securities requested to be registered by the holder hereof and other
holders of securities entitled to participate in the registration, as of the
date hereof, drawn from them pro rata based on the number each has requested to
be included in such registration.
Section 4. Taxes. The Company shall not be required to pay any tax or
taxes attributable to the initial issuance of the Warrant Shares or any
permitted transfer involved in the issue or delivery of any certificates for
Warrant Shares in a name other than that of the registered holder hereof or upon
any permitted transfer of this Warrant.
Section 5. Warrant Holder Not Deemed a Stockholder. Except as otherwise
specifically provided herein, no holder, as such, of this Warrant shall be
entitled to vote or receive dividends or be deemed the holder of shares of the
Company for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to
6
the holder of this Warrant of the Warrant Shares which he or she is then
entitled to receive upon the due exercise of this Warrant.
In addition, nothing contained in this Warrant shall be construed as
imposing any liabilities on such holder to purchase any securities or as a
stockholder of the Company, whether such liabilities are asserted by the Company
or by creditors of the Company. Notwithstanding this Section 5, the Company will
provide the holder of this Warrant with copies of the same notices and other
information given to the stockholders of the Company generally,
contemporaneously with the giving thereof to the stockholders.
Section 6. Representations of Holder. The holder of this Warrant, by
the acceptance hereof, represents (and any assignor shall represent) that it is
acquiring this Warrant and the Warrant Shares for its own account for investment
purposes and not with a view to, or for sale in connection with, any
distribution hereof, and not with any present intention of distributing any of
the same. The holder of this Warrant further represents (and any assignor shall
represent), by acceptance hereof, that, as of this date, such holder is an
"accredited investor" as such term is defined in Rule 501(a)(1) of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act
(an "Accredited Investor"). Upon exercise of this Warrant, the holder shall, if
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the Warrant Shares so purchased are being acquired solely for the
holder's own account and not as a nominee for any other party, for investment,
and not with a view toward distribution or resale and that such holder is an
Accredited Investor. If such holder cannot make such representations because
they would be factually incorrect, it shall be a condition to such holder's
exercise of the Warrant that the Company receive such other representations as
the Company considers reasonably necessary to assure the Company that the
issuance of its securities upon exercise of the Warrant shall not violate any
United States Federal or state securities laws.
Section 7. Ownership and Transfer.
(a) The Company shall maintain at its principal executive offices (or
such other office or agency of the Company as it may designate by notice to the
holder hereof), a register for this Warrant, in which the Company shall record
the name and address of the person in whose name this Warrant has been issued,
as well as the name and address of each permissible transferee. The Company may
treat the person in whose name any Warrant is registered on the register as the
owner and holder thereof for all purposes, notwithstanding any notice to the
contrary, but in all events recognizing any transfers made in accordance with
the terms of this Warrant.
(b) This Warrant and the rights granted to the holder hereof are
transferable, in whole or in part, upon surrender of this Warrant, together with
a properly executed warrant power in the form of Exhibit B attached hereto;
provided, however, that any transfer or assignment shall subject to the
conditions set forth in Section 6 above and Section 7(c) below.
(c) The holder of this Warrant understands that this Warrant has not
been and is not expected to be, registered under the Securities Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred
unless (a) subsequently registered thereunder, or (b) such holder shall have
delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company, to the effect that the securities to be
sold, assigned or transferred may be sold, assigned or
7
transferred pursuant to an exemption from such registration. Any sale of such
securities made in reliance on Rule 144 promulgated under the Securities Act may
be made only in accordance with the terms of said Rule and further, if said Rule
is not applicable, any resale of such securities under circumstances in which
the seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the Securities and Exchange Commission thereunder; and neither
the Company nor any other person is under any obligation to register the Series
A Preferred Share Warrants under the Securities Act or any state securities laws
or to comply with the terms and conditions of any exemption thereunder except as
set forth in Section 7(d) below.
(d) The Company is obligated to register the Warrant Shares for resale
under the Securities Act pursuant to the Registration Rights Agreement dated as
of June 12 , 2000, by and between the Company and the Buyers listed on the
signature page thereto (the "Registration Rights Agreement") and the initial
holder of this Warrant (and certain assignees thereof) is entitled to the
registration rights in respect of the Warrant Shares as set forth in the
Registration Rights Agreement.
Section 8. Adjustment of Warrant Exercise Price. In order to prevent
dilution of the rights granted under this Warrant, the Warrant Exercise Price
shall be adjusted from time to time as follows:
(a) Adjustment of Warrant Exercise Price upon Subdivision or
Combination of Common Stock. If the Company at any time after the date of
issuance of this Warrant, subdivides (by any stock split, stock dividend,
re-capitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Warrant Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and
the number of shares of Common Stock obtainable upon exercise of this Warrant
will be proportionately increased. If the Company at any time after the date of
issuance of this Warrant combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, the Warrant Exercise Price in effect immediately prior
to such combination will be proportionately increased and the number of shares
of Common Stock obtainable upon exercise of this Warrant will be proportionately
decreased.
(b) Reorganization, Reclassification, Consolidation, Merger or Sale.
Any re-capitalization, reorganization reclassification, consolidation, merger,
sale of all or substantially all of the Company's assets to another Person or
other similar transaction which is effected in such a way that holders of Common
Stock are entitled to receive (either directly or upon subsequent liquidation)
stock, securities or assets with respect to or in exchange for Common Stock is
referred to herein as in "Organic Change." Prior to the consummation of any
Organic Change, the Company will make appropriate provision to insure that, upon
the consummation of such Organic Change, each of the holders of the Warrants
will thereafter have the right to acquire and receive in lieu of the Common
Stock, such shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for the number of shares of Common Stock
immediately theretofore acquirable and receivable upon exercise of the Warrants
had such Organic Change not taken place. In any such case, the Company will make
appropriate provision with respect to such holders' rights and interests to
insure that the provisions of this Section 8(b) will thereafter be applicable to
the Warrants.
8
(c) Notices.
(i) Immediately upon any adjustment of the Warrant Exercise
Price pursuant to this Section 8, the Company will give written notice thereof
to the holder of this Warrant, setting forth in reasonable detail and certifying
the calculation of such adjustment.
(ii) The Company will give written notice to the holder of
this Warrant at least twenty (20) days prior to the date on which the Company
closes its books or takes a record (A) with respect to any dividend or
distribution upon the Common Stock, (B) with respect to any pro rata
subscription offer to holders of Common Stock or (C) for determining rights to
vote with respect to any Organic Change, dissolution or liquidation, except that
in no event shall such notice be provided to such holder prior to such
information being made known to the public.
(iii) The Company will also give written notice to the holder of
this Warrant at least twenty (20) days prior to the date on which any Organic
Change, dissolution or liquidation will take place.
Section 9. (a) Purchase Rights. If at any time the Company grants,
issues or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of any
class of Common Stock (the "Purchase Rights"), then the holder of this Warrant
will be entitled to acquire, upon the terms applicable to such Purchase Rights,
the aggregate Purchase Rights which such holder could have acquired if such
holder had held the number of shares of Common Stock acquirable upon complete
exercise of this Warrant immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights, or, if no such record
is taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this
Warrant is lost, stolen, mutilated or destroyed, the Company shall, on receipt
of an indemnification undertaking, issue a new Warrant of like denomination and
tenor as the Warrant so lost, stolen, mutilated or destroyed.
Section 11. Notice. Any notices, consents, waivers, or other
communications required or permitted to be given under the terms of this Warrant
must be in writing and will be deemed to have been delivered (i) upon receipt,
when delivered personally; (ii) upon receipt, when sent by facsimile, provided a
copy is mailed by U.S. certified mail, return receipt requested; (iii) three (3)
days after being sent by U.S. certified mail, return receipt requested; or (iv)
one (1) day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
If to the Company: XxxXxxxx.xxx Inc.
0000 Xxxxxxx Xxxx 0xx Xxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxxx, Chief
Operating Officer
9
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxx, Xxxxx and Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: W. Xxxxxxx Xxxxxxxxx, Esq.
Xxxxxxx Xxxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to a holder of this Warrant, to it at the address set forth below
such holder's signature on the signature page hereof. Each party shall provide
five (5) days' prior written notice to the other party of any change in address
or facsimile number.
Section 12. Amendments. This Warrant and any term hereof may be
changed, waived, discharged, or terminated only by an instrument in writing
signed by the Company or holder.
Section 13. Date. The date of this Warrant is June 12 , 2000. This
Warrant, in all events, shall be wholly void and of no effect after the close of
business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 7 shall continue in full force and
effect after such date as to any Warrant Shares or other securities issued upon
the exercise of this Warrant.
Section 14. Amendment and Waiver. Except as otherwise provided herein,
the provisions of the Warrants may be amended and the Company may take any
action herein prohibited, or omitted to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
holders of Warrants representing a majority of the shares of Common Stock
obtainable upon exercise of the Warrants then outstanding, provided that no such
action may increase the Warrant Exercise Price of the Warrants or decrease the
number of shares or class of stock obtainable upon exercise of any warrants with
out the written consent of the holder of such warrant.
Section 15. Descriptive Headings; Governing Law. The descriptive
headings of the several sections of this Warrant are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof. This
Warrant shall be governed by and interpreted under the laws of the State of New
York, without giving effect to any choice of law or conflict of law provision .
This Warrant has been duly executed by the Company as of the date first
set forth above.
XXXXXXXX.XXX INC.
By:
---------------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Chief Operating Officer
10
[HOLDER]
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
Address:
----------------------------------
----------------------------------
11
EXHIBIT A
FORM OF SUBSCRIPTION
--------------------
(Complete and sign only exercise of the Warrant in whole or in part.)
TO: XxxXxxxx.xxx Inc.
The undersigned, the holder of the attached Warrant to which this Form
of Subscription applies, hereby irrevocably elects to exercise the purchase
rights represented by such warrant for and to purchase thereunder _______ shares
of Common Stock, par value $0.00001 per share (the "Shares"), from XxxXxxxx.xxx
Inc., (or such other securities issuable pursuant to the terms of the Warrant)
and either: (i) herewith makes payment of $_______ therefor in cash or by
certified or official bank check or (ii) elects to make payment upon a cashless
basis pursuant to Section 2 (a)(ii)(B) of the Warrant and hereby exercises
______ Warrants and the Average Market Price Per Share for purposes hereof is
$_______. The undersigned hereby requests that the certificate(s) representing
such securities be issued in the name(s) and delivered the address(es) as
follows:
Name:
-------------------------------------------------
Address:
-------------------------------------------------
Social Security Number:
-------------------------------------------------
Deliver to:
-------------------------------------------------
Address:
-------------------------------------------------
This the foregoing subscription evidences an exercise of the Warrant to
purchase fewer than all of the Shares (or other securities issuable pursuant to
the terms of the Warrant) to which the undersigned is entitled under such
warrant, please issue a new warrant, of like tenor, relating to the remaining
portion of the securities issuable upon exercise of such warrant (or other
securities issuable pursuant to the terms of such warrant) in the name(s), and
deliver the same to the address(es), as follow:
Name:
-------------------------------------------------
Address:
-------------------------------------------------
-------------------------------------------------
Dated:
-------------------------------------------------
----------------------------- ------------------------------------------
(Name of Holder) (Social Security or Taxpayer Identification
Number of Holder, if applicable)
-----------------------------
(Signature of Holder or Authorized
Signatory)
Signature Guaranteed:
-------------------------
12
EXHIBIT B
FORM OF WARRANT POWER
FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
____________________________________________ Federal Identification No.______, a
warrant to purchase shares of the capital stock of XxxXxxxx.xxx Inc., a Nevada
corporation, represented by warrant certificate No._________, standing in the
name of the undersigned on the books of said corporation. The undersigned does
hereby irrevocably constitute and appoint ____________________________, attorney
to transfer the warrants of said corporation, with full power of substitution in
the premises.
Dated: _______________________
By:
-----------------------
Its:
-----------------------
13
EXHIBIT D
TRANSFER AGENT INSTRUCTIONS
