IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
November 21, 2005
Corporate Stock Transfer
0000 Xxxxxx Xxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
RE: NEXICON, INC.
Ladies and Gentlemen:
Reference is made to that certain Securities Purchase Agreement (the
"Securities Purchase Agreement") of even date herewith by and between Nexicon,
Inc., a Nevada corporation (the "Company"), and the Buyers set forth on Schedule
I attached thereto (collectively the "Buyers") and that certain Pledge and
Escrow Agreement (the "Pledge Agreement") of even date herewith among the
Company, the Buyers and Xxxxx Xxxxxxxx, as escrow agent (the "Escrow Agent").
Pursuant to the Securities Purchase Agreement, the Company shall sell to the
Buyers, and the Buyers shall purchase from the Company, convertible debentures
(collectively, the "Debentures") in the aggregate principal amount of Two
Million Dollars ($2,000,000), plus accrued interest, which are convertible into
shares of the Company's common stock, par value $0.001 per share (the "Common
Stock"), at the Buyers discretion. The Company has also issued to the Buyer
warrants to purchase up to 15,000,000 shares of Common Stock, at the Buyer's
discretion (the "Warrant"). These instructions relate to the following stock or
proposed stock issuances or transfers:
1. Shares of Common Stock to be issued to the Buyers upon conversion of
the Debentures ("Conversion Shares") plus the shares of Common Stock
to be issued to the Buyers upon conversion of accrued interest and
liquidated damages into Common Stock (the "Interest Shares").
2. Up to 15,000,000 shares of Common Stock to be issued to the Buyer
upon exercise of the Warrant (the "Warrant Shares").
This letter shall serve as our irrevocable authorization and direction to
Corporate Stock Transfer (the "Transfer Agent") to do the following:
1. Conversion Shares and Warrant Shares.
a. Instructions Applicable to Transfer Agent. With respect to the
Conversion Shares, Warrant Shares and the Interest Shares, the
Transfer Agent shall issue the Conversion Shares, Warrant
Shares and the Interest Shares to the Buyers from time to time
upon delivery to the Transfer Agent of a properly completed
and duly executed Conversion Notice (the "Conversion Notice")
in the form attached as Exhibit A to the Debentures, or a
properly completed Exercise Notice (the "Exercise Notice") in
the form attached as Exhibit A to the Warrant, delivered on
behalf of the Company to the Transfer Agent by the Escrow
Agent. Upon receipt of a Conversion Notice or an Exercise
Notice, the Transfer Agent shall within three (3) Trading Days
thereafter (i) issue and surrender to a common carrier for
overnight delivery to the address as specified in the
Conversion Notice or the Exercise Notice, a certificate,
registered in the name of the Buyer or its designees, for the
number of shares of Common Stock to which the Buyer shall be
entitled as set forth in the Conversion Notice or Exercise
Notice or (ii) provided Transfer Agent are participating in
The Depository Trust Company ("DTC") Fast Automated Securities
Transfer Program, upon the request of the Buyers, credit such
aggregate number of shares of Common Stock to which the Buyers
shall be entitled to the Buyer's or their designees' balance
account with DTC through its Deposit Withdrawal At Custodian
("DWAC") system provided the Buyer causes its bank or broker
to initiate the DWAC transaction. For purposes hereof "Trading
Day" shall mean any day on which the Nasdaq Market is open for
customary trading.
b. The Company hereby confirms to the Transfer Agent and the
Buyer that certificates representing the Conversion Shares and
Warrant Shares shall not bear any legend restricting transfer
and should not be subject to any stop-transfer restrictions
and shall otherwise be freely transferable on the books and
records of the Company; provided that counsel to the Company
delivers (i) the Notice of Effectiveness set forth in Exhibit
I attached hereto and (ii) an opinion of counsel in the form
set forth in Exhibit II attached hereto, and that if the
Conversion Shares, Warrant Shares and the Interest Shares are
not registered for sale under the Securities Act of 1933, as
amended, then the certificates for the Conversion Shares,
Warrant Shares and Interest Shares shall bear the following
legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS,
OR AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO
THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO
RULE 144 UNDER SAID ACT."
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c. In the event that counsel to the Company fails or refuses to
render an opinion as required to issue the Conversion Shares
in accordance with the preceding paragraph (either with or
without restrictive legends, as applicable), then the Company
irrevocably and expressly authorizes counsel to the Buyer to
render such opinion. The Transfer Agent shall accept and be
entitled to rely on such opinion for the purposes of issuing
the Conversion Shares.
d. Instructions Applicable to Escrow Agent. Upon the Escrow
Agent's receipt of a properly completed Conversion Notice or
Exercise Notice and the Aggregate Exercise Price (as defined
in the Warrant), the Escrow Agent shall, within one (1)
Trading Day thereafter, send to the Transfer Agent the
Conversion Notice or Exercise Notice, which shall constitute
an irrevocable instruction to the Transfer Agent to process
such Conversion Notice or Exercise Notice in accordance with
the terms of these instructions.
2. All Shares.
a. The Transfer Agent shall reserve for issuance to the Buyers a
minimum of 301,659,125 Conversion Shares and 15,000,000
Warrant Shares. All such shares shall remain in reserve with
the Transfer Agent until the Buyers provides the Transfer
Agent instructions that the shares or any part of them shall
be taken out of reserve and shall no longer be subject to the
terms of these instructions.
b. The Transfer Agent shall rely exclusively on the Conversion
Notice, the Escrow Notice, or the Exercise Notice and shall
have no liability for relying on such instructions. Any
Conversion Notice, Escrow Notice, or Exercise Notice delivered
hereunder shall constitute an irrevocable instruction to the
Transfer Agent to process such notice or notices in accordance
with the terms thereof. Such notice or notices may be
transmitted to the Transfer Agent by facsimile or any
commercially reasonable method.
c. The Company hereby confirms to the Transfer Agent and the
Buyers that no instructions other than as contemplated herein
will be given to Transfer Agent by the Company with respect to
the matters referenced herein. The Company hereby authorizes
the Transfer Agent, and the Transfer Agent shall be obligated,
to disregard any contrary instructions received by or on
behalf of the Company.
Certain Notice Regarding the Escrow Agent. The Company and the Transfer
Agent hereby acknowledge that the Escrow Agent is general counsel to the Buyers,
a partner of the general partner of the Buyers and counsel to the Buyers in
connection with the transactions contemplated and referred herein. The Company
and the Transfer Agent agree that in the event of any dispute arising in
connection with this Agreement or otherwise in connection with any transaction
or agreement contemplated and referred herein, the Escrow Agent shall be
permitted to continue to represent the Buyers and neither the Company nor the
Transfer Agent will seek to disqualify such counsel.
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The Company hereby agrees that it shall not replace the Transfer Agent as
the Company's transfer agent without the prior written consent of the Buyers.
Any attempt by Transfer Agent to resign as the Company's transfer agent
hereunder shall not be effective until such time as the Company provides to the
Transfer Agent written notice that a suitable replacement has agreed to serve as
transfer agent and to be bound by the terms and conditions of these Irrevocable
Transfer Agent Instructions.
The Company herby confirms and the Transfer Agent acknowledges that while
any portion of the Debenture remains unpaid and unconverted the Company and the
Transfer Agent shall not, without the prior consent of the Buyers, (i) issue any
Common Stock or Preferred Stock without consideration or for a consideration per
share less than closing bid price determined immediately prior to its issuance,
(ii) issue any Preferred Stock, warrant, option, right, contract, call, or other
security or instrument granting the holder thereof the right to acquire Common
Stock without consideration or for a consideration per share less than the
closing bid price of the Common Stock determined immediately prior to its
issuance, (iii) issue any S-8 shares of the Company's Common Stock.
The Company and the Transfer Agent hereby acknowledge and confirm that
complying with the terms of this Agreement does not and shall not prohibit the
Transfer Agent from satisfying any and all fiduciary responsibilities and duties
it may owe to the Company.
The Company and the Transfer Agent acknowledge that the Buyers is relying
on the representations and covenants made by the Company and the Transfer Agent
hereunder and are a material inducement to the Buyers purchasing convertible
debentures under the Securities Purchase Agreement. The Company and the Transfer
Agent further acknowledge that without such representations and covenants of the
Company and the Transfer Agent made hereunder, the Buyers would not purchase the
Debentures.
Each party hereto specifically acknowledges and agrees that in the event
of a breach or threatened breach by a party hereto of any provision hereof, the
Buyers will be irreparably damaged and that damages at law would be an
inadequate remedy if these Irrevocable Transfer Agent Instructions were not
specifically enforced. Therefore, in the event of a breach or threatened breach
by a party hereto, including, without limitation, the attempted termination of
the agency relationship created by this instrument, the Buyers shall be
entitled, in addition to all other rights or remedies, to an injunction
restraining such breach, without being required to show any actual damage or to
post any bond or other security, and/or to a decree for specific performance of
the provisions of these Irrevocable Transfer Agent Instructions.
[SIGNATURE PAGE FOLLOWS; REMAINDER OF PAGE INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties have caused this letter agreement
regarding Irrevocable Transfer Agent Instructions to be duly executed and
delivered as of the date first written above.
COMPANY:
NEXICON, INC.
By:
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Name: Xxxx Xxxxx
Title: Chief Executive Officer
Xxxxx Xxxxxxxx, Esq.
ACKNOWLEDGED, AGREED TO, AND ACCEPTED BY:
CORPORATE STOCK TRANSFER
By:
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Name:
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Title:
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SCHEDULE I-1
SCHEDULE I
SCHEDULE OF BUYERS
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Address/Facsimile
Name Signature Number of Buyers
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Cornell Capital Partners, LP By: Yorkville Advisors, LLC 000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxx: Xxxxxxx Xxxxxxx Xxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
By:_____________________________
Name: Xxxx Xxxxxx
Its: Portfolio Manager
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SCHEDULE I-1
EXHIBIT I
TO IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
_________, 2005
Corporate Stock Transfer
0000 Xxxxxx Xxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: ___________________
RE: NEXICON, INC.
Ladies and Gentlemen:
We are counsel to Nexicon, Inc., (the "Company"), and have represented the
Company in connection with that certain Securities Purchase Agreement, dated as
of November __, 2005 (the "Securities Purchase Agreement"), entered into by and
among the Company and the Buyers set forth on Schedule I attached thereto
(collectively the "Buyers") pursuant to which the Company has agreed to sell to
the Buyers up to Two Million Dollars ($2,000,000) of secured convertible
debentures, which shall be convertible into shares (the "Conversion Shares") of
the Company's common stock, par value $0.001 per share (the "Common Stock"), in
accordance with the terms of the Securities Purchase Agreement. Pursuant to the
Securities Purchase Agreement, the Company also has entered into a Registration
Rights Agreement, dated as of November ___, 2005, with the Buyers (the "Investor
Registration Rights Agreement") pursuant to which the Company agreed, among
other things, to register the Conversion Shares under the Securities Act of
1933, as amended (the "1933 Act"). In connection with the Company's obligations
under the Securities Purchase Agreement and the Registration Rights Agreement,
on _______, 2005, the Company filed a Registration Statement (File No.
___-_________) (the "Registration Statement") with the Securities and Exchange
Commission (the "SEC") relating to the sale of the Conversion Shares.
In connection with the foregoing, we advise the Transfer Agent that a
member of the SEC's staff has advised us by telephone that the SEC has entered
an order declaring the Registration Statement effective under the 1933 Act at
____ P.M. on __________, 2005 and we have no knowledge, after telephonic inquiry
of a member of the SEC's staff, that any stop order suspending its effectiveness
has been issued or that any proceedings for that purpose are pending before, or
threatened by, the SEC and the Conversion Shares are available for sale under
the 1933 Act pursuant to the Registration Statement.
EXHIBIT I-1
The Buyers has confirmed it shall comply with all securities laws and
regulations applicable to it including applicable prospectus delivery
requirements upon sale of the Conversion Shares.
Very truly yours,
By:
--------------------------------
EXHIBIT I-2
EXHIBIT II
TO IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
FORM OF OPINION
________________ 2005
VIA FACSIMILE AND REGULAR MAIL
Corporate Stock Transfer
0000 Xxxxxx Xxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: ___________________
RE: NEXICON, INC.
Ladies and Genlemen:
We have acted as special counsel to Nexicon, Inc. (the "Company"), in
connection with the registration of ___________shares (the "Shares") of its
common stock with the Securities and Exchange Commission (the "SEC"). We have
not acted as your counsel. This opinion is given at the request and with the
consent of the Company.
In rendering this opinion we have relied on the accuracy of the Company's
Registration Statement on Form SB-2, as amended (the "Registration Statement"),
filed by the Company with the SEC on _________ ___, 2005. The Company filed the
Registration Statement on behalf of certain selling stockholders (the "Selling
Stockholders"). This opinion relates solely to the Selling Shareholders listed
on Exhibit "A" hereto and number of Shares set forth opposite such Selling
Stockholders' names. The SEC declared the Registration Statement effective on
__________ ___, 2005.
We understand that the Selling Stockholders acquired the Shares in a
private offering exempt from registration under the Securities Act of 1933, as
amended. Information regarding the Shares to be sold by the Selling Shareholders
is contained under the heading "Selling Stockholders" in the Registration
Statement, which information is incorporated herein by reference. This opinion
does not relate to the issuance of the Shares to the Selling Stockholders. The
opinions set forth herein relate solely to the sale or transfer by the Selling
Stockholders pursuant to the Registration Statement under the Federal laws of
the United States of America. We do not express any opinion concerning any law
of any state or other jurisdiction.
In rendering this opinion we have relied upon the accuracy of the
foregoing statements.
EXHIBIT II
Based on the foregoing, it is our opinion that the Shares have been
registered with the United States Securities and Exchange Commission under the
Securities Act of 1933, as amended, and that ________ may remove the restrictive
legends contained on the Shares. This opinion relates solely to the number of
Shares set forth opposite the Selling Stockholders listed on Exhibit "A" hereto.
This opinion is furnished to Transfer Agent specifically in connection
with the issuance of the Shares, and solely for your information and benefit.
This letter may not be relied upon by Transfer Agent in any other connection,
and it may not be relied upon by any other person or entity for any purpose
without our prior written consent. This opinion may not be assigned, quoted or
used without our prior written consent. The opinions set forth herein are
rendered as of the date hereof and we will not supplement this opinion with
respect to changes in the law or factual matters subsequent to the date hereof.
Very truly yours,
EXHIBIT II-2
EXHIBIT A
EXHIBIT A
(LIST OF SELLING STOCKHOLDERS)
Name: No. of Shares:
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EXHIBIT A
