EXHIBIT 4.4.6
X.XXXXXXX CORPORATION
12% SUBORDINATED PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT
X.XXXXXXX CORPORATION
12% SUBORDINATED PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT
This 12% SUBORDINATED PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT (the
"AGREEMENT") is entered into by and among x.Xxxxxxx Corporation, a Delaware
corporation (the "COMPANY"), and each of those persons and entities, severally
and not jointly, whose names are set forth on the Schedule of Purchasers
attached hereto as Exhibit A (which persons and entities are hereinafter
collectively referred to as "PURCHASERS" and each individually as a
"PURCHASER").
RECITALS
Whereas, the Company has authorized the sale and issuance of an aggregate
of up to One Million Dollars ($1,000,000) of 12% Subordinated Promissory Notes
(the "NOTES") and warrants to purchase an aggregate of up to two million
(2,000,000) shares of its Common Stock (the "WARRANTS," and together with the
Notes, the "Securities");
Whereas, Purchasers desire to purchase the Securities on the terms and
conditions set forth herein; and
Whereas, the Company desires to issue and sell the Securities to
Purchasers on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE
1.1. AUTHORIZATION OF SHARES. On or prior to the Closing (as defined
in Section 2 below), the Company shall have authorized (i) the sale and issuance
to Purchasers of the Securities and (ii) the issuance of such shares of Common
Stock to be issued upon exercise of the Warrants (the "WARRANT SHARES"). The
Securities and the Warrant Shares shall have the rights, preferences, privileges
and restrictions set forth in the respective documents, herein and in the
Company's Certificate of Incorporation and Bylaws.
1.2. SALE AND PURCHASE. Subject to the terms and conditions hereof,
at the Closing or Closings (as hereinafter defined) the Company hereby agrees to
issue and sell to each Purchaser, severally and not jointly, and each Purchaser
agrees to purchase from the Company, severally and not jointly, a Note, in the
form attached hereto as Exhibit B, in the amount set forth opposite such
Purchaser's name on Exhibit A, and a Warrant, in the form attached hereto as
Exhibit C, to purchase the number of shares of Common Stock set forth opposite
such Purchaser's name on Exhibit A.
2. CLOSING, DELIVERY AND PAYMENT
2.1. CLOSING. The closing of the sale and purchase of the Securities
under this Agreement (the "CLOSING") shall take place at 2:00 p.m. on the date
hereof, at the offices of the Company at 00000 Xxxxxxx Xxxxx Xxxxx Xxxxx, Xxx
Xxxxx, Xxxxxxxxxx 00000 or at such other time or place as the Company and
Purchasers may mutually agree (such date is hereinafter referred to as the
"CLOSING DATE").
2.2. DELIVERY.
2.2.1. Each Purchaser shall pay the purchase price for the
Securities as set forth next to such Purchaser's name on Exhibit A hereto by
delivering immediately available funds in United States Dollars to the Company.
Promptly following execution of this Agreement by each party and payment by the
Purchaser to the Company of the purchase price for the Securities as set forth
next to such Purchaser's name on Exhibit A, but in no event later than five
business days after such payment, the Company shall deliver a duly executed Note
and Warrant, registered in the name of such Purchaser, to the Purchaser. The
Notes and Warrants shall be dated as of the date the Company is credited with
readily available funds accepted by the Company, irrespective of the Closing
Date. The Company may reject and return any funds received within five business
days, in whole or in part, for any reason in its sole discretion and in the
event of over-subscription for the Securities may prorate the Notes among
subscribers in any manner the Company deems necessary or advisable.
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2.2.2. METHOD OF PAYMENT. Payment of the purchase price for
the Securities shall be made by check payable to the Company, in a form
acceptable to the Company, or by wire transfer of funds to:
First National Bank
0000 Xxxxxxxxx Xxxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
ABA # 1 2 2 2 3 8 9 3 8
For Account of: x.Xxxxxxx Corporation
Account # 8 2 2 1 3 4 5 5
2.3. SUBSEQUENT SALES OF SECURITIES. Pursuant to the terms of the
offering, the Company need not sell any minimum amount of Securities prior to
Closing and the Company may have multiple closings. At any time on or before
June 30, 2004, the Company may sell up to the balance of the authorized Notes
and Warrants not sold at prior Closings to such persons as may be approved by
the Board of Directors of the Company. The Company at its discretion may extend
the final Closing by ten days if necessary. All such sales shall be made on the
terms and conditions set forth in this Agreement, including, without limitation,
the representations and warranties by such Purchasers as set forth in Section 4
and agreements provided in Section 7. Any Notes pursuant to this Section 2.3
shall be deemed to be "Notes" for all purposes under this Agreement, any
Warrants sold pursuant to this Section 2.3 shall be deemed "Warrants" for all
purposes under this Agreement, and any purchasers thereof shall be deemed to be
"Purchasers" for all purposes under this Agreement. For subsequent sales of
Notes and Warrants, they shall be dated as of the date the Company is credited
with readily available funds accepted by the Company, irrespective of the
subsequent Closing Date. The Company may reject and return any funds received
within five business days, in whole or in part, for any reason in its sole
discretion and in the event of over-subscription for the Securities may prorate
the Notes among subscribers in any manner the Company deems necessary or
advisable.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each Purchaser as of
the date of this Agreement as follows:
3.1. ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement and the Notes and Warrants and to issue and sell the Securities
and the Warrant Shares and to carry out the provisions of this Agreement, the
Notes and the Warrants and to carry on its business as presently conducted and
as presently proposed to be conducted. The Company is duly qualified and is
authorized to do business and is in good standing as a foreign corporation in
all jurisdictions in which the nature of its activities and of its properties
(both owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to do so would not have a material adverse effect
on the Company or its business.
3.2. SUBSIDIARIES. The Company operates through its wholly-owned
subsidiary, x.Xxxxxxx Corporation (a California corporation) and has no
ownership in other companies. The Company is not a participant in any joint
venture, partnership or similar arrangement.
3.3. CAPITALIZATION; VOTING RIGHTS. The authorized capital stock of
the Company consists of 200,000,000 shares of Common Stock, par value $.001 per
share, and 5,000,000 shares of preferred stock, par value $.001 per share. As of
June 7, 2004 the Company had 145,000 shares of convertible voting preferred
stock outstanding designated as Series D Preferred Stock and 8,620.50 shares of
convertible voting preferred stock outstanding designated as Series E Preferred
Stock. As of June 15, 2004, the Company had 162,914,541 shares of Common Stock
outstanding. An additional 7,569,632 shares of Common Stock are reserved for
future issuance under the Company's stock option grants and pursuant to
convertible securities, options and warrants as summarized below:
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Authorized Common
Shares Reserved
For Future Issuance
Outstanding Stock Option Grants 4,136,665
Stock Purchase Warrants 1,452,355
Series D & E Preferred Stock 10,713,912
Total Unissued but Reserved for Issuance 16,302,932
Accordingly, the Company has either outstanding or reserved an aggregate
of 179,217,473 of the 200,000,000 authorized shares of Common Stock.
All issued and outstanding shares of the Company's Common Stock (a) have
been duly authorized and validly issued, and (b) are fully paid and
nonassessable. When issued in compliance with the provisions of this Agreement,
the Notes and the Warrant Shares will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances; provided, however,
that the Notes, Warrants and the Warrant Shares may be subject to restrictions
on transfer under state and/or federal securities laws as set forth herein or as
otherwise required by such laws at the time a transfer is proposed.
3.4. RESERVATION OF SHARES. The Warrant Shares issuable upon
exercise of the Warrants have been duly authorized and reserved for future
issuance.
3.5. AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the
part of the Company, its officers, directors and stockholders necessary for the
authorization of this Agreement and the Notes and the Warrants, the performance
of all obligations of the Company hereunder and thereunder at the Closing or
Closings and the authorization, sale, issuance and delivery of the Securities
pursuant hereto and the Warrant Shares on exercise of the Warrants has been
taken or will be taken prior to the Closing. The Agreement and the Notes and the
Warrants, when executed and delivered, will be valid and binding obligations of
the Company enforceable in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights; and (b) general
principles of equity that restrict the availability of equitable remedies. The
sale of the Securities and the subsequent exercise of the Warrants into Warrant
Shares are not and will not be subject to any preemptive rights or rights of
first refusal that have not been properly waived or complied with.
3.6. SEC REPORTS AND FILINGS. The Company has delivered to Purchaser
a complete and accurate copy (excluding copies of exhibits) of its Annual Report
on Form 10-K for the fiscal year ended March 31, 2003, the latest Quarterly
Report on Form 10-Q for the period ended December 31, 2004 and definitive proxy
statement filed by the Company on October 23, 2003 (the "SEC DOCUMENTS"). The
SEC Documents (i) complied with the requirements of the Securities Act of 1933,
as amended (the "SECURITIES ACT") or the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), as the case may be, at and as of the times they
were filed (or, if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) in all material respects and (ii)
did not at and as of the time they were filed (or, if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3.7. CHANGES. Since the date of the last of the SEC Documents, there
has been no material adverse change in the business, operations or financial
condition of the Company.
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3.8. TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has
good and marketable title to its properties and assets, including the properties
and assets reflected in the most recent balance sheet included in the SEC
Documents, and good title to its leasehold estates, in each case subject to no
mortgage, pledge, lien, lease, encumbrance or charge, other than (a) those
resulting from taxes which have not yet become delinquent, (b) minor liens and
encumbrances which do not materially detract from the value of the property
subject thereto or materially impair the operations of the Company, and (c)
those that have otherwise arisen in the ordinary course of business. All
facilities, machinery, equipment, fixtures, vehicles and other properties owned,
leased or used by the Company are in good operating condition and repair and are
reasonably fit and usable for the purposes for which they are being used. The
Company is in compliance with all material terms of each lease to which it is a
party or is otherwise bound.
3.9. COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of any term of its Certificate of Incorporation or Bylaws,
or of any provision of any mortgage, indenture, contract, agreement, instrument
or contract to which it is party or by which it is bound or of any judgment,
decree, order, writ or, to its knowledge, any statute, rule or regulation
applicable to the Company which would materially and adversely affect the
business, assets, liabilities, financial condition or operations of the Company.
The execution, delivery, and performance of and compliance with this Agreement,
the Notes and the Warrants, and the issuance and sale of the Securities pursuant
hereto and of the Warrant Shares, will not, with or without the passage of time
or giving of notice, result in any such material violation, or be in conflict
with or constitute a default under any such term, or result in the creation of
any mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company or the suspension, revocation, impairment, forfeiture or
nonrenewal of any permit license, authorization or approval applicable to the
Company, its business or operations or any of its assets or properties.
3.10. LITIGATION. There is no action, suit, proceeding or
investigation pending or to the Company's knowledge currently threatened in
writing against the Company that questions the validity of this Agreement or the
Warrants or the right of the Company to enter into any of such agreements, or to
consummate the transactions contemplated hereby or thereby, or which might
result, either individually or in the aggregate, in any material adverse change
in the assets, condition or affairs of the Company, financially or otherwise, or
any change in the current equity ownership of the Company, nor is the Company
aware that there is any basis for the foregoing. Notwithstanding the foregoing,
in April 2004, the Company filed a demand for arbitration against Eclipse by
Fujitsu Ten for numerous breaches of the contract signed by Eclipse. These
breaches include cancellation of the initial non-cancelable order, breach of
implied covenant of good faith and fair dealing, and misappropriation of our
intellectual property, confidential, proprietary and trade secret information.
As of the date hereof, the arbitration remains pending.
3.11. EMPLOYEES. The Company has no collective bargaining agreements
with any of its employees. There is no labor union organizing activity pending
or, to the Company's knowledge, threatened with respect to the Company.
3.12. COMPLIANCE WITH LAWS; PERMITS. To its knowledge, the Company
is not in violation of any applicable statute, rule, regulation, order or
restriction of any domestic or foreign government or any instrumentality or
agency thereof in respect of the conduct of its business or the ownership of its
properties which violation would materially and adversely affect the business,
assets, liabilities, financial condition or operations of the Company. No
governmental orders, permissions, consents, approvals or authorizations are
required to be obtained and no registrations or declarations are required to be
filed in connection with the execution and delivery of this Agreement and the
issuance of the Securities or the Warrant Shares, except such as has been duly
and validly obtained or filed, or with respect to any filings that must be made
after the Closing, as will be filed in a timely manner. The Company has all
franchises, permits, licenses and any similar authority necessary for the
conduct of its business as now being conducted by it, the lack of which could
materially and adversely affect the business, properties, prospects or financial
condition of the Company and believes it can obtain, without undue burden or
expense, any similar authority for the conduct of its business as planned to be
conducted.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser hereby represents and warrants to the Company as follows:
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4.1. REQUISITE POWER AND AUTHORITY. Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver this Agreement and to carry out its provisions. All action on
Purchaser's part required for the lawful execution and delivery of this
Agreement has been or will be effectively taken prior to the Closing. Upon its
execution and delivery, this Agreement will be a valid and binding obligation of
Purchaser, enforceable in accordance with its terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights, and (b) general
principles of equity that restrict the availability of equitable remedies.
4.2. INVESTMENT REPRESENTATIONS. Purchaser understands that neither
the Securities nor the Warrant Shares have been registered under the Securities
Act. Purchaser also understands that the Securities are being offered and sold
pursuant to an exemption from registration contained in the Securities Act based
in part upon Purchaser's representations contained in the Agreement. Purchaser
hereby represents and warrants as follows:
4.2.1. PURCHASER BEARS ECONOMIC RISK. Purchaser has
substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company so that it is
capable of evaluating the merits and risks of its investment in the Company and
has the capacity to protect its own interests. Purchaser must bear the economic
risk of this investment indefinitely unless the Securities (or the Warrant
Shares) are registered pursuant to the Securities Act, or an exemption from
registration is available. Purchaser understands that other than pursuant to the
terms of this Agreement the Company has no present intention of registering the
Securities, the Warrant Shares or any shares of its Common Stock. Purchaser also
understands that there is no assurance that any exemption from registration
under the Securities Act will be available and that, even if available, such
exemption may not allow Purchaser to transfer all or any portion of the
Securities or the Warrant Shares under the circumstances, in the amounts or at
the times Purchaser might propose.
4.2.2. ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring the
Securities and the Warrant Shares for Purchaser's own account for investment
only, and not with a view towards their distribution.
4.2.3. PURCHASER CAN PROTECT ITS INTEREST. Purchaser
represents that by reason of its, or of its management's, business or financial
experience, Purchaser has the capacity to protect its own interests in
connection with the transactions contemplated in this Agreement. Further,
Purchaser is aware of no publication of any advertisement or other general
solicitation in connection with the transactions contemplated in the Agreement.
4.2.4. ACCREDITED INVESTOR. Purchaser represents that it is an
accredited investor within the meaning of Section 501(a) of the Securities Act
or not a U.S. Person within the definition set forth in Regulation S and not an
affiliate of the Company.
4.2.5. COMPANY INFORMATION. Purchaser has received and read
the SEC Documents and has had an opportunity to discuss the Company's business,
management and financial affairs with directors, officers and management of the
Company and has had the opportunity to review the Company's operations and
facilities. Purchaser has also had the opportunity to ask questions of and
receive answers from, the Company and its management regarding the terms and
conditions of this investment.
4.2.6. RULE 144. Purchaser acknowledges and agrees that the
Securities, and, if issued, the Warrant Shares must be held indefinitely unless
they are subsequently registered under the Securities Act or an exemption from
such registration is available. Purchaser has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act as in effect from
time to time, which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things: the availability of certain current public information about the
Company, the resale occurring following the required holding period under Rule
144 and the number of shares being sold during any three-month period not
exceeding specified limitations.
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4.2.7. RESIDENCE. If the Purchaser is an individual, then the
Purchaser resides in the country, state or province identified in the address of
the Purchaser set forth on Exhibit A; if the Purchaser is a partnership,
corporation, limited liability company or other entity, then the office or
offices of the Purchaser in which its investment decision was made is located at
the address or addresses of the Purchaser set forth on Exhibit A.
5. CONDITIONS TO CLOSING.
5.1. CONDITIONS TO PURCHASERS' OBLIGATIONS AT THE CLOSING.
Purchasers' obligations to purchase the Securities at the Closing are subject to
the satisfaction, at or prior to the Closing Date, of the following conditions:
5.1.1. REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in Section 3
hereof shall be true and correct in all material respects as of the Closing Date
with the same force and effect as if they had been made as of the Closing Date,
and the Company shall have performed all obligations and conditions herein
required to be performed or observed by it on or prior to the Closing.
5.1.2. LEGAL INVESTMENT. On the Closing Date, the sale and
issuance of the Securities and the proposed issuance of the Warrant Shares shall
be legally permitted by all laws and regulations to which Purchasers and the
Company are subject.
5.1.3. CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement (except for such
as may be properly obtained subsequent to the Closing).
5.1.4. RESERVATION OF WARRANT SHARES. The Warrant Shares
issuable upon exercise of the Warrants shall be duly authorized and reserved for
issuance upon such exercise.
5.2. CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to issue and sell the Securities at the Closing is subject to the
satisfaction, on or prior to such Closing, of the following conditions:
5.2.1. REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties made by those Purchasers acquiring Securities in
Section 4 hereof shall be true and correct in all material respects at the date
of the Closing, with the same force and effect as if they had been made on and
as of said date.
5.2.2. PERFORMANCE OF OBLIGATIONS. Such Purchasers shall have
performed and complied with all agreements and conditions herein required to be
performed or complied with by such Purchasers on or before the Closing.
5.2.3. CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement (except for such
as may be properly obtained subsequent to the Closing).
5.2.4. PAYMENT. The Company shall have obtained collected
funds for the amount of the Notes purchased by the Purchaser.
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6. REGISTRATION RIGHTS AND PUBLIC OFFERING LOCKUP
6.1. REGISTRATION RIGHTS. The Company is providing the following
registration rights to the Purchasers in connection with the Warrant Shares:
6.1.1. If, at any time from issuance to June 30, 2007 (the
"EXERCISE PERIOD"), the Company proposes to prepare and file any registration
statements covering its Common Stock (in either case, other than in connection
with a merger or acquisition, pursuant to Form S-8 or any successor form, or
pursuant to any other form or type of registration in which Registrable
Securities (as defined below) cannot be appropriately included) (collectively,
the "Registration Statements"), it will give written notice as provided herein
at least thirty (30) days prior to the filing of each such Registration
Statement to the then holders of the Warrants ("HOLDER") and/or Warrant Shares
of its intention to do so. If the Holders of the Warrants and/or Warrant Shares
notify the Company within twenty (20) days after receipt of any such notice of
its or their desire to include the shares of Common Stock issuable upon exercise
of the Warrant or the Warrant Shares (collectively, the "REGISTRABLE
SECURITIES") in such proposed registration statement, the Company shall afford
the Holders of the Warrant and/or Warrant Shares the opportunity to have any
such Registrable Securities registered under such registration statement at the
Company's sole cost and expense.
6.1.2. Notwithstanding the provisions hereof, the Company
shall have the right at any time after it shall have given written notice
pursuant hereto (irrespective of whether a written request for inclusion of any
such securities shall have been made) to elect not to file any such proposed
registration statement, or to withdraw the same after the filing but prior to
the effective date thereof.
6.1.3. Notwithstanding any other provision of this Section 6,
if the underwriter managing such registration notifies the Holders in writing
that market or economic conditions limit the amount of securities which may
reasonably be expected to be sold, the Holders of such Registrable Securities
will be allowed to register their Registrable Securities pro rata based on the
number of shares of Registrable Securities held by such Holders, respectively.
No Registrable Securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration.
6.1.4. Each Holder of Warrants and Warrant Shares to be sold
pursuant to any Registration Statement (each, a "DISTRIBUTING HOLDER") shall
severally, and not jointly, indemnify and hold harmless the Company, its
officers and directors, each underwriter and each person, if any, who controls
the Company and such underwriter, against any loss, claim, damage, expense or
liability, joint or several, as incurred, to which any of them may become
subject under the Securities Act or any other statute or at common law, in so
far as such loss, claim, damage, expense or liability (or actions in respect
thereof) arises out of or is based upon any untrue statement or alleged untrue
statement of any material fact contained in any such Registration Statement, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by such Distributing Holder specifically for use therein. Such
Distributing Holder shall reimburse the Company, such underwriter and each such
officer, director or controlling person for any legal or other expenses
reasonably incurred by any of them in connection with investigating or defending
any such liability, as incurred. Notwithstanding the foregoing, such indemnity
with respect to such preliminary prospectus or such final prospectus shall not
inure to the benefit of the Company, its officers or directors, or such
underwriter (or such controlling person of the Company or the underwriter) if
the person asserting any such loss, claim, damage, expense or liability
purchased the securities that are the subject thereof and did not receive a copy
of the final prospectus (or the final prospectus as then amended, revised or
supplemented) at or prior to the time such furnishing is required by the
Securities Act in any case where any such untrue statement or omission of a
material fact contained in the preliminary prospectus was corrected in the final
prospectus (or, if contained in the final prospectus, was subsequently corrected
by amendment, revision or supplement).
6.2. PUBLIC OFFERING LOCK-UP. In connection with any public
registration of this Company's securities, the Holder (and any transferee of
Holder) agrees, upon the request of the Company or the underwriter(s) managing
such offering of the Company's securities, not to sell, make any short sale of,
loan, grant any option for the purchase of, or otherwise dispose of this
Warrant, any of the shares of Common Stock issuable upon exercise of this
Warrant without the prior written consent of the Company and such
underwriter(s), as the case may be, for a period of time not to exceed on
hundred eighty (180) days from the effective date of the registration. Upon
request by the Company, Holder (and any transferee of Holder) agrees to enter
into any further agreement in writing in a form reasonably satisfactory to the
Company and/or such underwriter(s). The Company may impose stop-transfer
instructions with respect to the securities subject to the foregoing
restrictions until the end of said 180-day period. Any shares issued upon
exercise of this Warrant shall bear an appropriate legend referencing this
lock-up provision.
7. INTERCREDITOR AGREEMENT
Each Note issued to a Purchaser is one of a duly authorized issue of Notes
of the Company designated as its 12% Subordinated Promissory Notes limited in
aggregate principal amount to $1,000,000. Each Purchaser understands and agrees
that a default is not an Event of Default (as defined in the Note) until the
holders of at least 25% in aggregate principal amount of the Notes then
outstanding notify the Company of such default and the Company does not cure it
within sixty (60) days after receipt of such notice, which must specify the
default, demand that it be remedied and state that it is a "NOTICE OF DEFAULT."
If an Event of Default occurs and is continuing, the Noteholder(s) by notice to
the Company, may declare the principal of and accrued interest on the Notes to
be due and payable immediately; provided, however, that the holders of at least
51% in aggregate principal amount of the Notes then outstanding, by written
notice to the Company, may rescind and annul such declaration and its
consequences.
The Company shall only make principal reductions pro rata among the
Noteholders. Likewise any Noteholder who receives any payments or proceeds from
any enforcement of a security interest or any distribution in connection with a
bankruptcy, liquidation, reorganization, dissolution, winding-up or similar
proceedings, shall be obligated to pro rate such amounts among the other
Noteholders of the series.
8. MISCELLANEOUS.
8.1. GOVERNING LAW. This Agreement shall be governed in all respects
by the laws of the State of California as such laws are applied to agreements
between California residents entered into and performed entirely in California.
8.2. SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
8.3. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Securities from time to time.
8.4. ENTIRE AGREEMENT. This Agreement, the Note, the Exhibits and
Schedules hereto, the Warrants and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
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8.5. SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
8.6. AMENDMENT AND WAIVER.
8.6.1. This Agreement may be amended or modified only upon the
written consent of the Company and holders of at least fifty-one percent (51%)
in the aggregate principal amount of the Notes outstanding.
8.6.2. The obligations of the Company and the rights of the
holders of the Notes, the Warrants and the Warrant Shares under the Agreement
may be waived only with the written consent of the holders of at least fifty-one
percent (51%) in the aggregate principal amount of the Notes outstanding.
8.7. DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement, shall impair any
such right, power or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of or in
any similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent or approval of any kind or character on
any Purchaser's part of any breach, default or noncompliance under this
Agreement or any waiver on such party's part of any provisions or conditions of
the Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, or otherwise afforded to any party, shall be cumulative and not
alternative.
8.8. NOTICES. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (a) upon personal delivery to
the party to be notified; (b) when sent by facsimile if sent during normal
business hours of the recipient, if not, then on the next business day; (c) five
(5) days after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (d) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the Company at the
address as set forth on the signature page hereof and to Purchaser at the
address set forth on Exhibit A attached hereto or at such other address as the
Company or Purchaser may designate by ten (10) days advance written notice to
the other parties hereto.
8.9. EXPENSES. Each party shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
this Agreement, the Notes and the Warrants.
8.10. ATTORNEYS' FEES. In the event that any dispute among the
parties to this Agreement should result in litigation, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
8.11. TITLES AND SUBTITLES. The titles of the sections and
subsections of the Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
8.12. COUNTERPARTS. This Agreement may be executed at various dates
by the Purchasers through June 30, 2004 in any number of counterparts, by
facsimile, or both, each of which shall be an original, but all of which
together shall constitute one instrument. Subsequent sales after a first
Closing, as provided in Section 2.3, shall be added to this agreement to
constitute one instrument binding on all parties thereto.
8
8.13. BROKER'S FEES. No agent, broker, investment banker, person or
firm acting on behalf of or under the authority of such party hereto is or will
be entitled to any broker's or finder's fee or any other commission directly or
indirectly in connection with the transactions contemplated herein. Each party
hereto further agrees to indemnify each other party for any claims, losses or
expenses incurred by such other party as a result of the representation in this
Section 8.13 being untrue.
8.14. EXCULPATION AMONG PURCHASERS. Each Purchaser acknowledges that
it is not relying upon any person, firm, or corporation, other than the Company
and its officers and directors, in making its investment or decision to invest
in the Company. Each Purchaser agrees that no Purchaser nor the respective
controlling persons, officers, directors, partners, agents, or employees of any
Purchaser shall be liable for any action heretofore or hereafter taken or
omitted to be taken by any of them in connection with the Securities, Notes and
Warrant Shares. 8.15. PRONOUNS. All pronouns contained herein, and any
variations thereof, shall be deemed to refer to the masculine, feminine or
neutral, singular or plural, as to the identity of the parties hereto may
require. 8.16. ARBITRATION. Any controversy or claim relating to this Agreement
or investment in the Notes, Warrants or Warrant Shares shall be resolved before
a panel of three arbitrators selected pursuant to and run in accordance with the
rules then prevailing of the American Arbitration Association. Any such
arbitration shall be held in San Diego, California. The prevailing party in the
arbitration shall be entitled to an award of all expenses and reasonable
attorneys' fees incurred in bringing or defending the arbitration.
(THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK;
INDIVIDUAL SIGNATURE PAGE(S) FOLLOW)
9
EDIGITAL CORPORATION
SIGNATURE PAGE TO PURCHASE AGREEMENT
In Witness Whereof, the parties hereto have executed the 12% Subordinated
Promissory Note and Warrant Purchase Agreement as of June __, 2004.
COMPANY: PURCHASER:
X.XXXXXXX CORPORATION _____________________________
13114 Evening Creek Drive South Name
Xxx Xxxxx, Xxxxxxxxxx 00000
By: ____________________________ By: _________________________
Xxxxxx X. Xxxx
President and CEO Title: ______________________
Street Address: _____________
_____________________________
Phone #: ____________________
E-mail: _____________________
SS #: ______________________
SUBSCRIPTION AMOUNT
$:___________________________
EDIGITAL CORPORATION
SIGNATURE PAGE TO PURCHASE AGREEMENT
10
LIST OF EXHIBITS
Schedule of Purchasers Exhibit A
12% Subordinated Promissory Note Exhibit B
Warrant Agreement Exhibit C
i
12% SUBORDINATED PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT
EXHIBIT A
SCHEDULE OF PURCHASERS
Name and Address Aggregate Shares of Common
Purchase Price and Note Stock Underlying
Principal Warrant
[TO BE SUPPLIED]
Total: $___________ __________
ii
