EXHIBIT 10.55
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR
AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
CONVERSION AGREEMENT
THIS CONVERSION AGREEMENT, dated as of February 15, 2005, is
made by and between Xxxxxx Xxxxxxx Promotions, Inc., a corporation
("Company"), and Xxxx Xxxxxxxxx ("Holder").
WHEREAS, the Company issued to Holder those certain Promissory
Notes, dated September 19, 2002 and December 31, 2002 ("Note"); and
WHEREAS, Company and Holder wish to provide for the terms and
conditions pursuant to which a portion of the outstanding balance of the
Notes may be converted to common stock, par value .01 per share ("Common
Stock"), of the Company and the remainder of the Notes may be converted
into a new Note;
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which the parties hereby acknowledge, the parties
agree as follows:
1. Conversion of Note. The Company and Holder hereby agree that
a portion of the outstanding principal balance of the Notes ("Amount")
shall convert into shares of the Company's Common Stock at a per share
price equal to thirty six cents ($.36). The Company and Holder agree
that the Amount is seventy five thousand dollars ($75,000) and that upon
conversion and the issuance by the Company of (i) 208,333 shares of
Common Stock ("Conversion Shares") as full payment of the Amount, (ii)
250,000 shares of Common Stock as a penalty payment for the excessive
period of default ("Penalty Shares") and (iii) creation and execution of
a new promissory note to consolidate the remaining outstanding principal
balance of the Notes plus accrued but unpaid interest ("New Note"), a
copy of which is annexed hereto as Exhibit A, of which the Company and
Holder agree equals in the aggregate two hundred thousand dollars
($200,000) with terms to be mutually agreed upon by the parties., the
Company shall be forever released from all its obligations and
liabilities under the Notes.
2. Closing. At the Closing, Holder shall deliver the Notes to
the Company and the Company shall deliver the Conversion Shares, the
Penalty Shares and the New Note to Holder.
3. Further Assurances. In connection with the conversion of the
Note, the Holder, by entering into this Conversion Agreement, agrees to
execute all agreements and other documents as reasonably requested by
the Company.
4. Investor Representations and Warranties and Covenants~. The
Holder represents, warrants and covenants to the Company as follows:
a, No Registration. Such Holder understands that the Note,
the Conversion Shares and the Interest Shares have not been, and will
not be, registered under the Securities Act of 1933, as amended (the
"Securities Act") by reason of a specific exemption from the
registration provisions of the Securities Act, the availability of
which depends upon, among other things, the bona fide nature of the
investment intent and the accuracy of such Holder's representations as
expressed herein or otherwise made pursuant hereto.
b. Investment Intent. Such Holder has acquired the Note, and
is acquiring the Conversion Shares and Interest Shares, for investment
for its own account, not as a nominee or agent, and not with the view
to, or for resale in connection with, any distribution thereof, and
such Holder has no present intention of selling, granting any
participation in, or otherwise distributing the same. Such Holder
further represents that it will not violate the Securities Act and
does not have any contract, undertaking, agreement or arrangement with
any person or entity to sell, transfer or grant participation to such
person or entity or to any third person or entity with respect to the
Note, Conversion Shares and Interest Shares.
c. Investment Experience. Such Holder has substantial
experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company and
acknowledges that such Holder can protect its own interests. Such
Holder has such knowledge and experience in financial and business
matters so that such Holder is capable of evaluating the merits and
risks of its investment in the Company.
d. Residency. The residency of the Holder (or, in the case
of a partnership or corporation, such entity's principal place of
business) is correctly set forth on the signature page hereto.
e. Speculative Nature of Investment. Such Holder understands
and acknowledges that the Company has a limited financial and
operating history and that an investment in the Company is highly
speculative and involves substantial risks. Such Holder can bear the
economic risk of such Holder's investment and is able, without
impairing such Holder's financial condition, to hold the Conversion
Shares and Interest Shares for an indefinite period of time and to
suffer a complete loss of such Holder's investment.
f. Access to Data. The Holder and its advisors, if any, have
been furnished with or have been given access to all materials
relating to the business, finances and operations of the Company and
any reasonably requested materials requested by the Holder, The Holder
and its advisors, if any, have been afforded the opportunity to ask
questions of the Company and its management and have received complete
and satisfactory answers to any such inquiries. Without limiting the
generality of the foregoing, the Holder has had the opportunity to
obtain and to review the Company's filings available on the XXXXX web
site of the Securities and Exchange Commission (xxx.xxx.xxx).
g. Accredited Investor. The Holder is an "accredited
investor' within the meaning of Regulation D, Rule 50 1(a),
promulgated by the Securities and Exchange Commission under the
Securities Act and shall submit to the Company such further assurances
of such status as may be reasonably requested by the Company.
h. Rule 144. Such Holder acknowledges that the Conversion
Shares and Interest Shares must be held indefinitely unless
subsequently registered under the Securities Act or an exemption from
such registration is available. Such Holder is aware of the provisions
of Rule 144 promulgated under the Securities Act which permit limited
resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including among other things, the
existence of a public market for the shares, the availability of
certain current public information about the Company, the resale
occurring not less than one year after a party has purchased and paid
for the security to be sold, the sale being effected through a
"broker's transaction" or in transactions directly with a "market
maker" and the number of shares being sold during any three-month
period not exceeding specified limitations. Such Holder acknowledges
that, in the event all of the requirements of Rule 144 are not met,
registration under the Securities Act or an exemption from
registration will be required for any disposition of the Conversion
Shares or Interest Shares Such Holder understands that, although Rule
144 is not exclusive, the Securities and Exchange Commission has
expressed its opinion that persons proposing to sell restricted
securities received in a private offering other than in a registered
offering or pursuant to Rule 144 will have a substantial burden of
proof in establishing that an exemption from registration is available
for such offers or sales and that such persons and the brokers who
participate in the transactions do so at their own risk.
i. Authorization.
i. Such Holder has all requisite power and authority to
execute and deliver this Conversion Agreement, and to carry out and
perform its obligations under the terms hereof. All action on the part
of the Holder necessary for the authorization, execution, delivery and
performance of this Conversion Agreement, and the performance of all
of the Holder's obligations herein, has been taken.
ii. This Conversion Agreement, when executed and delivered
by the Holder, will constitute valid and legally binding obligations
of the Holder, enforceable in accordance with its terms except: (i) as
limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement
of creditors' rights generally, and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or
other equitable remedies or by general principles of equity.
iii. No consent, approval, authorization, order, filing,
registration or qualification of or with any court, governmental
authority or third person is required to be obtained by the Holder in
connection with the execution and delivery of this Conversion
Agreement by the Holder or the performance of the Holder's obligations
hereunder.
j. Brokers or Finders. Such Holder has not engaged any
brokers, finders or agents, and the Company has not, and will not,
incur, directly or indirectly, as a result of any action taken by the
Holder, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Conversion
Agreement and the transactions related hereto.
k. Tax Advisors. Such Holder has reviewed with its own tax
advisors the U.S. federal, state, local and foreign tax consequences
of this investment and the transactions contemplated by this
Conversion Agreement. With respect to such matters, such Holder relies
solely on such advisors and not on any statements or representations
of the Company or any of its agents, written or oral. The Holder
understands that it (and not the Company) shall be responsible for its
own tax liability that may arise as a result of this investment or the
transactions contemplated by this Conversion Agreement.
1. Legends. Such Holder understands and agrees that the
certificates evidencing the Conversion Shares and Interest Shares
shall bear a legend in substantially the form as follows (in addition
to any legend required by any other applicable agreement or under
applicable state securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED U1'~DER SUCH ACT AND/OR
APPLICABLE STATE SECURITIES LAWS, OR UNLESS THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR
OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE
COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION
IS NOT REQUIRED."
5. Registration Rights. The Company hereby agrees that if, at
any time the Company proposes to register any of its securities under
the Securities Act, (other than in connection with a merger or pursuant
to Form S-8 or other comparable form), the Company shall automatically
include the Shares offered herein (referred to as the "Registrable
Securities") in such registration statement, provided however that in
connection with such registration, if the Company shall determine for
any reason not to register or to delay the registration of such
Registrable Securities, the Company may give written notice of such
determination to each Holder and thereupon shall be relieved of its
obligation to register any Registrable Securities issued or issuable in
connection with such registration (but not from its obligation to pay
registration expenses in connection therewith or to register the
Registrable Securities in a subsequent registration); and in the case of
a determination to delay a registration, shall thereupon be permitted to
delay registering any Registrable Securities for the same period as the
delay in respect of securities being registered for the Company's own
account.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
by their respective officers thereonto duly authorized as of the day and year
first above written.
XXXXXX XXXXXXX PROMOTIONS, INC.
/s/Xxxxx XxXxxxxxx
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By: Xxxxx Xxxxxxxxx, Vice President
/s/ Xxxx Xxxxxxxxx
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By: Xx. Xxxx Xxxxxxxxx
00 Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
EXHIBIT A
PROMISSORY NOTE
$200,000 February 15, 2005
FOR VALUE RECEIVED, the undersigned, Xxxxxx Xxxxxxx Promotions, Inc., a
Delaware corporation with its address as 1414 Avenue of the Americas, Xxxxx 000,
Xxx Xxxx, Xxx Xxxx 00000 ("Maker") hereby promises to pay to the order of Xxxx
Xxxxxxxxx, and individual residing at 00 Xxxxxx Xxxxx, Xxxxxxxxxx, Xxx Xxxxxx
00000 ("Holder") the principal sum of TWO HUNDRED THOUSAND DOLLARS ($200,000)
(the "Principal Amount"), with an Interest Rate (as defined below) upon the
Principal Amount, in lawful money of the United States of America in immediately
available funds on or before August 15, 2005 (the "Maturity Date").
Maker agrees that the loan shall bear interest (computed on the basis of
the actual number of days elapsed and a year of 360 days) on the Principal
Amount thereof outstanding from time to time, from and including the date hereof
until such principal balance is repaid in full, at a annual rate (the "Interest
Rate") equal to seven percent (7%) per annum. Accumulated interest which shall
accrue at the Maturity Date, shall be payable by the Maker in cash on the
Maturity Date.
The occurrence of any one or more of the following events shall constitute
a "Default" under this Note: (a) Maker's failure to pay any Principal Amount
under this Note and such non-payment shall continue uncured for twenty (20)
business days after written notice from the Holder of such non-payment and an
opportunity to cure; (b) a breach of any of the Maker's covenants under this
Note and such breach shall continue uncured for a period of twenty (20) business
days after written notice from Holder of such breach; (c) the dissolution,
liquidation or termination of legal existence of the Maker; (d) the appointment
of a receiver, trustee or similar judicial officer or agent to take charge of or
liquidate any property of assets of the Maker, or action by any court to take
jurisdiction of all or substantially all of the property or assets of the Maker;
and (e) the commencement of any proceeding under any provision of the Bankruptcy
Code of the United States, as now in existence of hereafter amended, or of any
other proceeding under the any federal or state law, now existing or hereafter
in effect, relating to bankruptcy, reorganization, insolvency, liquidation or
otherwise, for the relief of debtors or readjustment of indebtedness, by or
against the Maker.
Upon the occurrence and continuance of a Default for a period of ten (10)
business days following the expiration of any cure periods set forth above, the
Holder shall have the right, without further notice, demand, presentment, notice
of nonpayment or nonperformance, protest, notice of protest, notice of intent to
accelerate, notice of acceleration or any other notice, all of which are hereby
irrevocably and unconditionally waived by the Maker, to declare the unpaid
outstanding Principal Amount due and payable.
Maker hereby waives diligence, presentment, demand, protest and notice of
any kind whatsoever. The non-exercise by Holder of any of its rights hereunder
in any particular instance shall not constitute a waiver thereof in that or any
subsequent instance. Maker shall pay on demand all reasonable out-of-pocket
costs and expenses of collection, including reasonable attorney fees incurred or
paid by Holder in enforcing this Promissory Note.
This Promissory Note shall be construed in accordance with and governed by
the laws of the State of New York. Maker hereby irrevocably (i) agrees that any
litigation, action or proceeding arising out of or relating to this Promissory
Note may be instituted in any state or federal court in the State of New York
and (ii) waives any objection which it may have to the venue of any such
litigation, action or proceeding and by its signature below consents to the
personal jurisdiction of such courts if litigation is initiated to collect the
sums due under this Promissory Note.
This Promissory Note cannot be modified except by a written instrument
signed by each of Maker and Holder.
XXXXXX XXXXXXX PROMOTIONS, INC.
By: /s/ Xxxxxx Xxxxxxx
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Name: Xxxxxx Xxxxxxx
Title: President
