EXHIBIT 10.50
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT made as of the 9th day of November,
2004, by and between Xxxxxxxx Technologies, Inc. (the "COMPANY"), a corporation
organized under the laws of the State of Florida, with its principal offices at
#207 00 Xxxxxxx Xxxx, Xxxxxxxxxx, XX, 00000, and the purchaser whose name and
address is set forth on the signature page hereof (the "Purchaser") (each
agreement with a Purchaser shall be deemed a separate and independent agreement
between such Purchaser and the Company, except that each Purchaser acknowledges
and consents to the rights granted to each other Purchaser under this
Agreement);
WITNESSETH THAT:
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to sell Secured 8% Convertible Notes in
substantially the form of EXHIBIT I hereto (the "NOTES"), and five year warrants
to purchase shares the Company's Common Stock, $.0001 par value per share
("COMMON STOCK"), in substantially the form of EXHIBIT II hereto (the
"WARRANTS"); and
WHEREAS, the Purchaser understands and acknowledges that the Company
may enter into one or more substantially identical securities purchase
agreements with other persons purchasing Notes and Warrants;
IN CONSIDERATION of the mutual covenants contained in this Agreement,
and intending to be legally bound hereby, the Company and the Purchaser agree as
follows:
SECTION 1. AUTHORIZATION OF SALE OF THE SECURITIES. Subject to the terms and
conditions of this Agreement, the Company has authorized the sale to the
Purchaser of a Note in the aggregate principal amount indicated on the signature
page hereof, and a Warrant pursuant to which such Purchaser shall have the right
to acquire the number of shares of Common Stock indicated on the signature page
hereof.
SECTION 2. AGREEMENT TO SELL AND PURCHASE THE NOTE AND WARRANT. At the Closing
(as defined in SECTION 3), the Company will sell the Note and the Warrant to the
Purchaser, and the Purchaser will buy the Note and Warrant from the Company (the
"PURCHASED SECURITIES"), upon the terms and conditions hereinafter set forth, in
exchange for a cash payment of [__________] DOLLARS ($_______) (the "PURCHASE
PRICE"). The Purchase Price shall be paid by wire transfer of immediately
available funds to the account set forth on EXHIBIT III hereof.
SECTION 3. DELIVERY OF THE NOTE AND WARRANT AT THE CLOSING. The completion of
the purchase and sale of the Note and Warrant (the "CLOSING") shall occur
simultaneously with the execution hereof (the "CLOSING DATE"). At the Closing,
the Company will issue to the Purchaser a Note and a corresponding Warrant,
registered in the name of the Purchaser, or in such nominee name(s) as
designated by the Purchaser in writing. The name(s) in which the Note and
Warrant are to be registered are set forth in the Questionnaire attached hereto
as EXHIBIT IV. The Company's obligation to complete the purchase and sale of the
Note and Warrant being purchased hereunder and deliver such Note and Warrant to
the Purchaser at the Closing shall be subject to the following conditions, any
one or more of which may be waived by the Company: (a) receipt by the Company of
same-day funds in the full amount of the Purchase Price; and (b) the accuracy in
all material respects of the representations and warranties made by the
Purchaser and the fulfillment of those undertakings of the Purchaser to be
fulfilled prior to or at the Closing. The Purchaser's obligation to accept
delivery of such Note and Warrant and to pay for the Note and Warrant shall be
subject to the accuracy in all material respects of the representations and
warranties made by the Company herein and the fulfillment of those undertakings
of the Company to be fulfilled prior to or at the Closing.
SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The Company
hereby represents and warrants to, and covenants with, the Purchaser as follows:
4.1 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation; and the Company is duly qualified to do business
as a foreign corporation and is in good standing in each other jurisdiction in
which qualification is required, except where the failure to be so qualified
will not have a Material Adverse Effect, as defined in SECTION 4.4.
4.2 AUTHORIZED CAPITAL STOCK. The authorized capital stock of the
Company consists of 500,000,000 shares of Common Stock, $.0001 par value per
share, and 5,000,000 shares of Preferred Xxxxx, x.0000 par value per share. The
issued and outstanding shares of the Company's capital stock have been duly
authorized and validly issued, are fully paid and nonassessable, have been
issued in compliance with all applicable U.S. federal and state securities laws.
4.3 ISSUANCE, SALE AND DELIVERY OF THE SECURITIES. The Note and Warrant
being purchased hereunder have been duly authorized and, when issued, delivered
and paid for in the manner set forth in this Agreement, will be duly authorized,
validly issued, fully paid and nonassessable. The Common Stock underlying the
Note (the "NOTE SHARES"), and the Warrant (the "WARRANT SHARES;" the Note, Note
Shares, Warrant and Warrant Shares referenced herein are sometimes refered to
collectively as the "SECURITIES"), when issued, delivered and paid for in
accordance with the terms of the Warrant, will be duly authorized, validly
issued, fully paid and nonassessable. No further approval or authority of the
stockholders or the Board of Directors of the Company will be required for the
issuance and sale of the Note and Warrant to be sold by the Company as
contemplated herein. The Company's issuance of the Note and Warrant shall be in
compliance with all applicable U.S. federal and state securities laws.
4.4 DUE EXECUTION, DELIVERY AND PERFORMANCE OF THE AGREEMENTS. The
Company has full legal right, corporate power and authority to enter into this
Agreement and perform the transactions contemplated hereby. This Agreement has
been duly authorized, executed and delivered by the Company. The execution,
delivery and performance of this Agreement by the Company and the consummation
by the Company of the transactions herein contemplated will not violate any
provision of the organizational documents of the Company. Except for the
liabilities and obligations created by this Agreement and related transactions,
the execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions herein contemplated will not
result in the creation of any lien, charge, security interest or encumbrance
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upon any assets of the Company pursuant to the terms or provisions of, or
conflict with, result in the breach or violation of, or constitute, either by
itself or upon notice or the passage of time or both, a default under any
material agreement, mortgage, deed of trust, lease, franchise, license,
indenture, permit or other instrument to which the Company is a party or by
which the Company or any of its properties may be bound or affected and in each
case which would have a material adverse effect on the condition (financial or
otherwise), properties, business, prospects, or results of operations of the
Company and its subsidiaries, taken as a whole (a "MATERIAL ADVERSE EFFECT"), or
any statute or any authorization, judgement, decree, order, rule or regulation
of any court or any regulatory body, administrative agency or other governmental
body applicable to the Company or any of its respective properties. Except as
disclosed in EXHIBIT V attached hereto, no consent, approval, authorization or
other order of any court, regulatory body, administrative agency or other
governmental body is required for the execution and delivery of this Agreement
or the consummation of the transactions contemplated by this Agreement, except
for compliance with all U.S. federal and state securities laws applicable to the
offering and sale of the Note and the Warrant. Upon its execution and delivery,
and assuming the valid execution thereof by the Purchaser, this Agreement will
constitute a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
4.6 NO DEFAULTS. The Company is not in violation of or default under
any provision of its Articles of Incorporation or by-laws, or other
organizational documents. The Company, and to the best of the Company's
knowledge, each other party thereto, is not in breach of or indefault with
respect to any provision of any agreement, judgement, decree, order, mortgage,
deed of trust, lease, franchise, license, indenture, permit or other instrument
to which the Company is a party or by which the Company or any of its properties
are bound which would have a Material Adverse Effect on the condition of the
business; and there does not exist any state of facts which, with notice or
lapse of time or both, would constitute an event of default as defined in such
documents on the part of the Company, and to the best of the Company's
knowledge, on the part of each other party thereto, except for such breaches and
defaults would not have a Material Adverse Effect.
4.7 NO ACTIONS. Except as disclosed in EXHIBIT VI attached hereto or
the Company's Information Documents, as defined in SECTION 4.14, there are no
legal or governmental actions, suits or proceedings pending or, to the best of
the Company's knowledge, threatened to which the Company or any of its
subsidiaries is or may be a party or of which property owned or leased by the
Company or any of its subsidiaries is or may be subject (except for threatened
litigation which individually or in the aggregate would not have a Material
Adverse Effect); and no labor disturbance by the employees of the Company or any
of its subsidiaries exists, or, to the best of the Company's knowledge, is
imminent. Neither the Company nor any of its subsidiaries is a party to or
subject to the provisions of any injunction, judgment, decree or order of any
court, regulatory body, administrative agency or other governmental body.
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4.8 PROPERTIES. The Company and each of its subsidiaries has, as of the
applicable dates referred to therein, good and marketable title to all the
properties and assets reflected as owned by it in the financial statements
included in the Company's Information Documents subject to no lien, mortgage,
pledge, charge or encumbrance of any kind except (i) those existing liens listed
in EXHIBIT VII ("PERMITTED LIENS"), (ii) those, if any, reflected in such
financial statements, or (iii) those which are not material in amount and do not
adversely affect the use made and currently proposed to be made of such property
by the Company or such subsidiary. The Company and its subsidiaries hold their
leased properties under valid and binding leases. The Company and its
subsidiaries own or lease all such properties as are necessary to their
operations as now conducted.
4.9 COMPLIANCE. The Company has not been advised, or has no reason to
believe, that the Company or any of its subsidiaries is not conducting business
in compliance with all applicable laws, rules and regulations of the
jurisdictions in which it is conducting business, except where failure to be so
in compliance would not have a Material Adverse Effect.
4.10 INTEGRATION, ETC. Neither the Company nor any of its Affiliates
(as defined in Rule 501(b) of Regulation D under the Securities Act of 1933, as
amended (the "SECURITIES ACT") has directly, or through any agent, (i) sold,
offered for sale, solicited offers to buy or otherwise negotiated in respect of,
any "security" (as defined in the Securities Act) which is or could be
integrated with the sale of the Notes and Warrants in a manner that would
require the registration under the Securities Act of the Notes and Warrants or
(ii) engaged in any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Securities Act) in connection
with the offering of the Notes and Warrants.
4.11 INSURANCE. The Company and its subsidiaries maintain insurance of
the types and in the amounts that the Company and its subsidiaries reasonably
believe is adequate for their respective businesses, including, but not limited
to, insurance against theft, damage, destruction, acts of vandalism and all
other risks customarily insured against by similarly situated companies, all of
which insurance is in full force and effect.
4.12 REPORTING COMPANY; LISTED SECURITIES. The Company has filed all
reports required to be filed by Sections 13(a) or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act") during the twelve (12) months
preceding the Closing Date and has been subject to such filing requirements for
such twelve (12) month period.
4.13 ADDITIONAL INFORMATION. The Company has made available to the
Purchaser a true and complete copy of each report, schedule, registration
statement and definitive proxy statement filed by the Company with the SEC under
the Securities Act and the Exchange Act since December 31, 2003 (as such
documents have since the time of their filing been amended, the "INFORMATION
DOCUMENTS"), which are all the documents (other than preliminary material) that
the Company was required to file with the Commission since such date. As of
their respective dates, the Information Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations of the Commission thereunder
applicable to the Information Documents or such other forms, reports or other
documents, and none of the Information Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
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circumstances under which they were made, not misleading. The financial
statements of the Company included in the Information Documents comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the Commission with respect thereto, have
been prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited statements, as permitted by the rules and regulations of
the Commission) and fairly present (subject, in the case of the unaudited
statements, to normal, recurring audit adjustments, which were not individually
or in the aggregate material) in all material respects the financial position of
the Company as at the dates thereof and the results of its operations and cash
flows for the periods then ended.
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER.
5.1 ACCREDITED INVESTOR. The Purchaser represents and warrants to, and
covenants with, the Company that: (i) the Purchaser is knowledgeable,
sophisticated and experienced in making, and is qualified to make, decisions
with respect to investments in securities representing an investment decision
like that involved in the purchase of the Notes and Warrants, including
investments in securities issued by the Company, and has requested, received,
reviewed and understood all information it deems relevant in making an informed
decision to purchase the Notes and Warrants, including, without limitation, the
information contained in the Information Documents; (ii) it acknowledges that
the offering of the Notes and Warrants pursuant to this Agreement has not been
reviewed by the Commission or any state regulatory authority; (iii) the
Purchaser is acquiring the Note and Warrant set forth in the signature page
hereto, for its own account for investment only and with no present intention of
distributing any of such Note and Warrant or any arrangement or understanding
with any other persons regarding the distribution of such Note and Warrant; (iv)
the Purchaser will not, directly or indirectly, offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) the Note or Warrant except in compliance with the
Securities Act and the rules and regulations promulgated thereunder and any
applicable state securities or blue sky laws; (v) the Purchaser has completed or
caused to be completed the Questionnaire attached hereto as EXHIBIT IV, for use
in preparation of the Registration Statement, and the answers thereto are true
and correct as of the date hereof and will be true and correct as of the
effective date of the Registration Statement; (vi) the Purchaser has, in
connection with its decision to purchase the Note and Warrant, not relied upon
any representations or other information (whether oral or written) other than as
set forth in the Information Documents and the representations and warranties of
the Company contained herein; (vii) the Purchaser has had an opportunity to
discuss this investment with representatives of the Company and ask questions of
them and such questions have been answered to the full satisfaction of the
Purchaser; and (viii) the Purchaser is an "accredited investor" within the
meaning of Rule 501 of Regulation D promulgated under the Securities Act.
5.2 COMPLIANCE WITH SECURITIES ACT. The Purchaser hereby covenants with
the Company not to make any sale of any Securities without satisfying the
requirements of the Securities Act.
5.3 AUTHORITY. The Purchaser further represents and warrants to, and
covenants with, the Company that (i) the Purchaser has full right, power,
authority and capacity to enter into this Agreement and to consummate the
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transactions contemplated hereby and has taken all necessary action to authorize
the execution, delivery and performance of this Agreement, (ii) the Purchaser is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization, (iii) the execution, delivery and performance of
this Agreement by Purchaser and the consummation by the Purchaser of the
transactions contemplated by this Agreement will not violate any provision of
the organizational documents of Purchaser or conflict with, result in the breach
or violation of, or constitute, either by itself or upon notice or the passage
of time or both, a default under any material agreement, mortgage, deed of
trust, lease, franchise, license, indenture, permit or other instrument to which
the Purchaser is a party or, any statute or any authorization, judgment, decree,
order, rule or regulation of any court or any regulatory body, administrative
agency or other governmental body applicable to the Purchaser, (iv) no consent,
approval, authorization or other order of any court, regulatory body,
administrative agency or other governmental body is required on the part of the
Purchaser for the execution and delivery of this Agreement or the consummation
of the transactions contemplated by this Agreement, and (v) upon the execution
and delivery of this Agreement, this Agreement shall constitute a valid and
binding obligation of the Purchaser enforceable in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and (vi) there is not in effect any order
enjoining or restraining the Purchaser from entering into or engaging in any of
the transactions contemplated by this Agreement.
5.4 RISK. The Purchaser recognizes that an investment in the Securities
is speculative and involves a high degree of risk, including a risk of total
loss of the Purchaser's investment.
5.5 INFORMATION ABOUT PURCHASER. All of the information provided to the
Company or its agents or representatives concerning the Purchaser's suitability
to invest in the Company and the representations and warranties contained
herein, are complete, true and correct as of the date hereof. The Purchaser
understands that the Company is relying on the statements contained herein to
establish an exemption from registration under U.S. federal and state securities
laws.
5.6 ADDRESS. The address set forth in the signature page hereto is the
Purchaser's true and correct domicile.
5.7 PLAN OF DISTRIBUTION. The Purchaser covenants to provide the
Company an updated, accurate and complete plan of distribution at all times
during which the Company is required to keep the Registration Statement in
effect.
5.8 LEGEND. The Purchaser understands and agrees that each certificate
or other document evidencing any of the Securities shall be endorsed with the
legends in substantially the form set forth in EXHIBIT VIII as well as any other
legends required by applicable law, and the Purchaser covenants that the
Purchaser shall not transfer any Securities represented by any such security
without complying with the restrictions on transfer described in the legends
endorsed on such security.
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SECTION 6. SURVIVAL OF REPRESENTATIVES, WARRANTIES AND AGREEMENTS.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
the Purchaser herein and in any certificates or documents delivered pursuant
hereto or in connection therewith shall survive following the delivery to the
Purchaser of the Note and Warrant being purchased and the payment therefor.
SECTION 7. REGISTRATION OF THE NOTE SHARES AND WARRANT SHARES IN COMPLIANCE WITH
THE SECURITIES ACT.
7.1 REGISTRATION PROCEDURES AND EXPENSES. The Company shall:
(a) the Company shall file with the SEC on Form SB-2, or such
other form as appropriate ("REGISTRATION STATEMENT"), the resale pursuant to
Rule 415 under the Securities Act of the Note Shares and Warrant Shares (the
"REGISTRABLE SECURITIES") by the Purchaser from time to time on the facilities
of any securities market on which shares of the Common Stock are then traded or
in privately-negotiated transactions, and specifically excluding underwritten
offerings;
(b) if: (i) a Registration Statement is not filed on or prior
to the 45th day following the Closing Date, or (ii) a Registration Statement is
not declared effective by the SEC on or prior to the 90th day following the
Closing Date, or (iii) after the SEC first declares a Registration Statement
effective, without regard for the reason thereunder or efforts therefore, such
Registration Statement ceases for any reason to be effective and available to
the holders of the Registrable Securities as to all Registrable Securities
registered under such Registration Statement at any time prior to the earlier
date when the Registrable Securities have been sold or may be sold without
volume restrictions pursuant to Rule 144(k) as determined by counsel to the
Company, for more than an aggregate of 20 Trading Days in any twelve month
period (which need not be consecutive) (any such failure or breach being
referred to as an "EVENT," and for purposes of clauses (i) or (ii) the date on
which such Event occurs, or for purposes of clause (iii) the date which such 20
Trading Day period is exceeded, being referred to as "EVENT DATE"), then on each
such Event Date, and on the same day as such Event Date in each subsequent month
until the applicable Event is cured (the Event Date and each such subsequent
date, a "PAYMENT DATE") the Company shall pay to each holder an amount, as
partial liquidated damages and not as a penalty, equal to 2.0% of the Purchase
Price paid by such holder for Securities at closing pursuant to this Securities
Purchase Agreement, such payment being 1% in cash and 1% in Common Stock,
PROVIDED, that in the event the Company fails to deliver such Common Stock by
the 10th Trading Day following such Payment Date, such payment shall be, at the
discretion of the Holder, in all cash. If the Company fails to pay any partial
liquidated damages pursuant to this Section in full within seven days after the
date payable, the Company will pay interest thereon at a rate of 10% per annum
(or such lesser maximum amount that is permitted to be paid by applicable law)
to the holder, accruing daily from the date such partial liquidated damages are
due until such amounts, plus all such interest thereon, are paid in full. The
partial liquidated damages pursuant to the terms hereof shall apply on a daily
pro-rata basis for any portion of a month prior to the cure of an Event, except
in the case of the first Event Date. Liquidated damages payable in Common Stock
pursuant to this section shall be determined by calculating the quotient of the
dollar amount of such liquidated damages divided by either (1) the average of
the closing bid prices of the Common Stock for the five (5) Trading Days prior
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to the Payment Date and (2) the closing bid price of the Common Stock on the day
preceding the date such Common Stock is delivered pursuant to this SECTION 7(B),
whichever of (1) and (2) yields a greater number of shares;
(c) The Company shall, notwithstanding any termination of this
Agreement, indemnify and hold harmless each Purchaser and the officers,
directors, agents and employees of each such Purchaser, to the fullest extent
permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, reasonable costs of
preparation and reasonable attorneys' fees) and expenses (collectively,
"LOSSES"), as incurred, arising out of or relating to any untrue or alleged
untrue statement of a material fact contained in any Registration Statement, any
Prospectus or any form of prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading, except to the extent, but only to the extent,
that (1) such untrue statements or omissions are based solely upon information
regarding such Purchaser furnished in writing to the Company by such Purchaser
expressly for use therein, or to the extent that such information relates to
such Purchaser or such Purchaser's proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in writing by
such Purchaser expressly for use in the Registration Statement, such Prospectus
or such form of prospectus or in any amendment or supplement thereto or (2) the
use by such Purchaser of an outdated or defective prospectus after the Company
has notified such Purchaser in writing that the Prospectus is outdated or
defective and prior to the receipt by such Purchaser of an advice or an amended
or supplemented prospectus.
(d) Each Purchaser shall, severally and not jointly, indemnify
and hold harmless the Company, its directors, officers, agents and employees,
and each person who controls the Company, to the fullest extent permitted by
applicable law, from and against all Losses, as incurred, arising solely out of
or based solely upon: (x) such Purchaser's failure to comply with the prospectus
delivery requirements of the Securities Act or (y) any untrue statement of a
material fact contained in any Registration Statement, any prospectus, or any
form of prospectus, or in any amendment or supplement thereto, or arising solely
out of or based solely upon any omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading to the
extent, but only to the extent that, (1) such untrue statements or omissions are
based solely upon information regarding such Purchaser furnished in writing to
the Company by such Purchaser expressly for use therein, or to the extent that
such information relates to such Purchaser or such Purchaser's proposed method
of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Purchaser expressly for use in the Registration
Statement, such prospectus or such form of prospectus or in any amendment or
supplement thereto or (2) the use by such Purchaser of an outdated or defective
prospectus after the Company has notified such Purchaser in writing that the
Prospectus is outdated or defective and prior to the receipt by such Purchaser
of an advice or an amended or supplemented prospectus.
(e) If any proceeding shall be brought or asserted against any
person entitled to indemnity hereunder (an "INDEMNIFIED PARTY"), such
Indemnified Party shall promptly notify the person from whom indemnity is sought
(the "INDEMNIFYING PARTY") in writing, and the Indemnifying Party shall assume
the defense thereof, including the employment of counsel reasonably satisfactory
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to the Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any Indemnified
Party to give such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except (and only) to the
extent that it shall be finally determined by a court of competent jurisdiction
(which determination is not subject to appeal or further review) that such
failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in
any such proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such proceeding; or (3) the named
parties to any such proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such proceeding.
All reasonable fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within fifteen (15) Trading Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
The indemnity agreements contained in this SECTION 7 are in addition to any
liability that the Indemnifying Parties may have to the Indemnified Parties.
(f) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus used in connection
therewith as may be necessary to keep the Registration Statement effective until
the earlier of (i) the second anniversary of the Closing Date, (ii) the date on
which the Purchaser may sell all the Note Shares or Warrant Shares then held by
the Purchaser within a three-month period in accordance with Rule 144 under the
Securities Act ("RULE 144"), or (iii) such time as all the Note Shares and
Warrant Shares which the Purchaser has a right to acquire have been sold
pursuant to a registration statement;
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(g) so long as the Registration Statement is effective
covering the resale of the Note Shares and Warrant Shares owned by the
Purchaser, furnish to the Purchaser with respect to the Note Shares and Warrant
Shares registered under the Registration Statement such reasonable number of
copies of prospectuses and such other documents as the Purchaser may reasonably
request, in order to facilitate the public sale or other disposition of all or
any of the Note Shares and Warrant Shares by the Purchaser;
(h) file documents required of the Company for blue sky
clearance in states specified in writing by the Purchaser; provided, however,
that the Company shall not be required to qualify to do business or consent to
service of process in any jurisdiction in which it is not so qualified or has
not so consented;
(i) with a view to making available to the Purchaser the
benefits of Rule 144 (or its successor rule) and any other rule or regulation of
the Commission that may at any time permit the Purchaser to sell the Note Shares
and Warrant Shares to the public without registration, the Company covenants and
agrees to: (i) make and keep public information available, as those terms are
understood and defined in Rule 144, until the earlier of (A) such date as all of
the Purchaser's Note Shares and Warrant Shares may be resold within a given
three-month period pursuant to Rule 144 or any other rule of similar effect or
(B) such date as all of the Purchaser's Shares shall have been resold and (ii)
file with the Commission in a timely manner all reports and other documents
required of the Company under the Securities Act and under the Exchange Act.
7.3 MARKET STAND-OFF.
(a) The Purchaser agrees that until the date that is forty
(40) Trading Days following the date upon which the SEC declares the
Registration Statement effective (the "EFFECTIVE DATE"), the Purchaser shall
not, offer, pledge, sell, grant any right, option or warrant to purchase or
otherwise transfer or dispose of, directly or indirectly, any Note Shares or
Warrant Shares. For purposes of this Agreement "Trading Day" shall mean any day
during which the principal trading market for the Common Stock shall be open for
business.
SECTION 8. SECURITY AGREEMENT.
(a) EXHIBIT IX is the Security Agreement, dated September 21,
2004, by and among the Company and the Secured Parties named therein (the
"SECURITY AGREEMENT"). The Company hereby grants, effective upon the Closing, to
the Purchaser a security interest and lien in (i) all Accounts, (ii) all Chattel
Paper, (iii) all Commercial Tort Claims, (iv) all Documents, (v) all Equipment,
(vi) all General Intangibles, (vii) all Goods, (viii) all Instruments, (ix) all
Insurance, (x) all Inventory; (xi) all Letter of Credit Rights, (xii) all other
goods and other personal property of such Grantor, whether tangible or
intangible, (xiii) to the extent not otherwise included in clauses (i) through
(xiii) of this Section, all Collateral Records, Collateral Support and
Supporting Obligations in respect of any of the foregoing, (xiv) to the extent
not otherwise included in clauses (i) through (xiv) of this Section, all other
property in which a security interest may be granted under the UCC or which may
be delivered to and held by the Agent pursuant to the terms hereof, and (xv) to
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the extent not otherwise included in clauses (i) through (xv) of this Section,
all Proceeds, products, substitutions, accessions, rents and profits of or in
respect of any of the foregoing (the "COLLATERAL") of the Company on the same
terms and conditions as the Security Agreement (the "SECURITY INTEREST") and
that the Company and the Purchaser shall have the same rights, duties, and
obligations as if Purchaser was a party to the Security Agreement; PROVIDED
THAT: (a) the Purchaser shall not be considered a "Secured Party" for purposes
of Section 15 of the Security Agreement, until the Secured 8% Convertible Notes
dated September 21, 2004, made by the Company pursuant to the Security
Agreement, have been converted or paid in full, (b) the Purchasers shall not
have a right to prevent the Company from granting further security interests,
and (c) the Security Interest shall be subject to the provisions of SECTIONS
8(B) below.
(b) The Security Interest, this Agreement and the transactions
contemplated hereby are intended to comply with the requirements for
subordination under, and to the fullest extent necessary to so comply are
expressly subordinated to, the security interest granted to the holders of the
Promissory Notes (the "EOIR NOTES"), dated June 29, 2004, made by EOIR pursuant
to a Security Agreement, dated June 29, 2004, between EOIR and the holders of
the EOIR Notes, (the "EOIR SECURITY AGREEMENT"), without limiting the generality
of the foregoing, the Security Interest created by this Agreement is junior to
and subordinated to the Liens (as defined in the EOIR Security Agreement) to the
extent necessary for it to be a "Permitted Lien" within the terms of the EOIR
Security Agreement and the Purchaser agrees that they will execute and deliver
any and all documents and take any actions that the holders of the EOIR Notes
and the beneficiaries of the EOIR Security Agreement may request to evidence or
effect this subordination.
SECTION 9. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing, shall be mailed by first-class registered or
certified airmail, confirmed facsimile or nationally recognized overnight
express courier postage prepaid, and shall be deemed given when so mailed and
shall be delivered as addressed as follows:
if to the Company, to:
Xxxxxxxx Technologies, Inc.
#000 00 Xxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxxxxx 00000
Facsimile: (000)000-0000
Attention: Xxxxxxx Xxxxx, Xx., CFO
with a copy to:
Xxxxx Xxxx, LLP
000 Xxxxxxx Xxxxxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxxx, Esq.
or to such other person at such other place as the Company shall designate to
the Purchaser in writing; and
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if to the Purchaser, at its address as set forth at the end of this Agreement,
or at such other address or addresses as may have been furnished to the Company
in writing.
SECTION 10. CHANGES. This Agreement may not be modified or amended except
pursuant to an instrument in writing, signed by the Company and the Purchaser.
SECTION 11. HEADINGS. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be part of this Agreement.
SECTION 12. SEVERABILITY. In case any provision contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
SECTION 13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to any
choice of law provisions thereof.
SECTION 14. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but both of which,
when taken together, shall constitute but one instrument, and shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other party.
SECTION 15. ENTIRE AGREEMENT. This Agreement (including the attachments and
exhibits hereto) contains the entire agreement of the parties with respect to
the subject matter hereof and supersedes and is in full substitution for any and
all prior oral or written agreements and understandings between them related to
such subject matter, and neither party hereto shall be liable or bound to the
other party hereto in any manner with respect to such subject matter by any
representations, indemnities, covenants or agreements except as specifically set
forth herein.
SECTION 16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
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