NOTE AND WARRANT PURCHASE AGREEMENT
THIS
NOTE
AND WARRANT PURCHASE AGREEMENT (this "Agreement"),
is
executed as of November 27, 2007, by and among Xxxxxx Science, Inc., a Delaware
corporation (the "Company"),
and
the purchaser set forth on the signature page attached hereto (the “Purchaser”).
WHEREAS,
the Company wishes to sell and issue, and the Purchaser wishes to purchase,
the
Company’s 10% senior secured note with an aggregate principal amount of
$600,000, and warrants to purchase the number of shares of Common Stock (as
defined below) set forth on the signature page hereto, which warrants shall
be
exercisable for three years at a purchase price of $0.25 per share;
and
WHEREAS,
the Purchaser is willing to provide such financing on the terms and subject
to
the conditions set forth herein.
NOW,
THEREFORE, in consideration of the mutual covenants and agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Purchaser,
intending to be legally bound, agree as follows:
ARTICLE
1
DEFINITIONS
1.1 Defined
terms.
Certain
capitalized terms used in this Agreement shall have the specific meanings
defined below:
“Business
Day”
shall
mean a day other than a Saturday, Sunday, or other day on which commercial
banks
are authorized or required by law to close.
“Closing
Date”
shall
mean November 27, 2007 or any other date mutually agreed to by the Company
and
the Purchasers.
“Indebtedness”
shall
mean (a) all indebtedness for borrowed money or other obligations, extensions
of
credit, commitments or liabilities, whether current or long term, contingent
or
matured, secured or unsecured, (b) all indebtedness of the deferred purchase
price of property or services whether represented by a note, promise to pay
or
security agreement, (c) all indebtedness created or arising under any
conditional sale or other title retention agreement (even though the rights
and
remedies of the seller or lender under such agreement in the event of default
may be limited to repossession or sale of such property), (d) all indebtedness
secured by a purchase money mortgage or other lien to secure all or part to
the
purchase price of property subject to such mortgage or lien regardless of
whether the indebtedness secured thereby shall have been assumed by the Company
or is non recourse to the credit of the Company, (e) all obligations under
leases that have been or must be, in accordance with United States Generally
Accepted Accounting Principles, recorded as capital leases in respect of which
the Company is liable as lessee, (f) any liability in respect of banker’s
acceptances or letters of credit, and (g) without duplication all indebtedness
that is guaranteed by the Company or that the Company has agreed (contingently
or otherwise) to purchase or otherwise acquire or in respect of which the
Company has otherwise assured a creditor against loss.
“SEC
Documents”
shall
mean complete and accurate copies of the Company’s (i) Annual Report on Form
10-KSB for the fiscal year ended December 31, 2006, together with all
amendments, supplements and exhibits thereto (the “Form
10-KSB”),
as
filed with the Securities and Exchange Commission (the “Commission”),
(ii)
Quarterly Report on Form 10-QSB for the quarterly period ended September 30,
2007, together with all amendments, supplements and exhibits thereto, as filed
with the Commission, and (iii) other reports filed by the Company with the
Commission since December 31, 2006, together with all amendments, supplements
and exhibits thereto, each as made available through the Commission’s website,
xxx.xxx.xxx.
1
ARTICLE
2
THE
CLOSING
2.1 Closing.
According to the terms and subject to the conditions of this Agreement, the
Company shall deliver to the Purchaser on the Closing Date: (a) a 10% senior
secured note in the form attached hereto as Exhibit
A
with an
aggregate principal amount of $600,000 (the “Note”),
and
(b) warrants to purchase a number of shares of the Company’s common
stock, $0.001 par value per share (“Common
Stock”), equal
to
the quotient obtained by dividing (i) an amount equal to 65% of the principal
amount of the Note by (ii) an exercise price of $0.25, in the form set forth
in
Exhibit
B
(the
“Warrant”).
For
example, if the principal amount of the Note is $600,000, then the Company
shall
issue to the Purchaser a Warrant to purchase 1,560,000 shares of
Common
Stock (($600,000*0.65)/$0.25). The Purchaser shall deliver to the Company on
the
Closing Date, via wire transfer to the account set forth in Exhibit
C,
the
purchase price set forth on the signature page hereto.
2.2 Interest.
The
Note shall bear interest ("Interest")
from
the Closing Date until the Maturity Date at the rate of 10% per annum
(calculated on the basis of the actual number of days elapsed over a year of
360
days).
2.3 Prepayment
of the Note.
The
Company may from time to time prepay all or any portion of the Note and all
accrued but unpaid interest thereon without premium or penalty of any type.
The
Company shall give the Purchaser at least three Business Days prior written
notice of its intention to prepay the Note, specifying the date of payment
and
the total amount of the Note and the accrued but unpaid interest to be paid
on
such date. In the event that the Company elects to partially prepay the Note,
such prepayment will be made pro rata based on the principal balance of the
Note
held by the Purchaser.
2.4 Maturity
Date.
Unless
the Note is earlier accelerated or prepaid pursuant to the terms hereof, the
Note and all accrued interest thereon shall be due and payable in full on May
27, 2008, the 6 month anniversary of the Closing Date (the “Maturity
Date”);
provided,
however,
that
the Maturity Date of the Note may be extended as set forth in Section 2.5 below.
2.5 Payment
Extension Options.
In the
event that the Company does not pay the Note in full by May 27, 2008, the
Maturity Date shall be extended to November 27, 2008, so long as the interest
due as of May 27, 2008 is paid by the Company and the Company issues to the
Purchaser a Warrant to purchase a number of shares of
Common
Stock equal to the quotient obtained by dividing (i) an amount equal to 12.5%
of
the outstanding principal amount of the Note, less any amount of such Note
prepaid by the Company prior to May 27, 2008, by (ii) an exercise price of
$0.25. For example, if the principal amount of the Note is $600,000, then the
Company shall issue to the Purchaser an additional Warrant to purchase 300,000
shares of
Common
Stock (($600,000*.125)/$0.25).
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ARTICLE
3
CONDITIONS
PRECEDENT TO THE LOAN
(a) Conditions
on the Closing Date.
The
obligation of the Purchaser to purchase the Note pursuant to Section 2.1 shall
be subject to the condition that: (i) the Company shall have duly executed
and
delivered to the Purchaser the Note and Warrants; (ii) the representations
and
warranties made by the Company in Section 4 hereof shall be true and
correct at the Closing Date, with the same force and effect as if they had
been
made on and as of such date, the business and assets of the Company shall not
have been adversely affected in any material way prior to the Closing Date,
and
the Company shall have performed and complied with all obligations and
conditions herein required to be performed or complied with by it on or prior
to
the Closing Date; (iii)
all
corporate and other proceedings in connection with the transactions contemplated
at the Closing Date, and all documents and instruments incident to such
transactions, shall be reasonably satisfactory in substance and form to the
Purchaser, which shall have received all such counterpart originals or certified
or other copies of such documents as they may reasonably request; (iv) the
Company shall have reserved for issuance shares of Common Stock issuable upon
conversion of the Note or exercise of the Warrants; (v) all authorizations,
approvals, or permits, if any, of any governmental authority or regulatory
body
of the United States or of any state or foreign government that are required
in
connection with and prior to the lawful sale and issuance of the Note and
Warrants pursuant to this Agreement shall have been duly obtained and shall
be
effective on and as of the Closing Date; and (vi) no order enjoining the sale
of
the Note and Warrants shall have been issued and no proceedings for such purpose
shall be pending or, to the Company’s knowledge, threatened by any governmental
authority having jurisdiction over this transaction and at the Closing Date
the
sale and issuance of the Note and Warrants shall be legally permitted by all
laws and regulations to which the Purchaser and the Company are
subject.
ARTICLE
4
CREATION
OF SECURITY INTEREST
4.1 Grant
of Security Interest.
The
Company’s obligations under the Note shall be secured by a security interest of
first priority in all right, title and interest of the Company in and to the
property described in Attachment
1
of, and
granted in accordance with the terms and form of, the Security Agreement
attached hereto as Exhibit
C
(the
“Security
Agreement”).
The
Company may not grant a security interest in, or otherwise pledge, any of its
assets to any third party, other than the Purchaser, without the prior written
consent of the Purchaser.
If this
Agreement is terminated, the Purchaser’s interests in the Collateral (as defined
in the Security Agreement) shall continue until the Company’s obligations
hereunder are repaid in full. Upon payment in full of the Company’s obligations
hereunder, the Purchaser shall release its interest in the Collateral and all
rights therein shall revert to the Company.
4.2 Authorization
to File Financing Statements.
The
Company hereby authorizes the Purchaser, and grants the Purchaser a power of
attorney, to file financing statements and such other documents, upon prior
notice to the Company, with all appropriate jurisdictions to perfect or protect
the Purchaser’s interests or rights hereunder.
Upon
termination of the Purchaser’s interests in the Collateral in accordance with
Section 4.1, the Purchaser will promptly file a termination statement
terminating any financing statement filed hereunder, and if the Purchaser does
not file such termination statement as and when required, the Purchaser hereby
authorizes the Company to file such termination statement.
ARTICLE
5
COMPANY’S
REPRESENTATIONS AND WARRANTIES
5.1 Due
Authorization.
The
Company has full right, power and authority to enter into this Agreement, to
make the borrowings hereunder and execute and deliver the Note as provided
herein and to perform all of its duties and obligations under this Agreement
and
the Note. The execution and delivery of this Agreement will not, nor will the
observance or performance of any of the matters and things herein or therein
set
forth, violate or contravene any provision of law or the Company's bylaws or
certificate of incorporation. All necessary and appropriate corporate action
on
the part of the Company has been taken to authorize the execution and delivery
of this Agreement.
3
5.2 Enforceability.
This
Agreement has been validly executed and delivered by the Company and constitutes
a legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its respective terms, subject to applicable
bankruptcy, insolvency, reorganization or similar laws relating to or affecting
the enforcement of creditors’ right and to the availability of the remedy of
specific performance.
5.3 Compliance
with Laws.
The
nature and transaction of the Company's business and operations and the use
of
its properties and assets do not, and during the term of this Agreement shall
not, violate or conflict with in any material respect any applicable law,
statute, ordinance, rule, regulation or order of any kind or
nature.
5.4 Absence
of Conflicts.
The
execution, delivery and performance by the Company of this Agreement, and the
transactions contemplated hereby, do not constitute a breach or default, or
require consents under, any agreement, permit, contract or other instrument
to
which the Company is a party, or by which the Company is bound or to which
any
of the assets of the Company is subject, or any judgment, order, writ, decree,
authorization, license, rule, regulation, or statute to which the Company is
subject, and except as set forth herein, will not result in the creation of
any
lien upon any of the assets of the Company.
5.5 Indebtedness.
Except
for Indebtedness reflected in the SEC Documents or Indebtedness incurred by
the
Company in the ordinary course of its business since the filing of the SEC
Documents, the Company has no material Indebtedness outstanding at the date
hereof and will incur no material Indebtedness prior to the Closing
Date.
5.6 Litigation.
Except
as set forth in the SEC Documents, there is no action, suit, proceeding or
investigation pending or, to the Company’s knowledge, currently threatened
against the Company or any of its subsidiaries that questions the validity
of
this Agreement or the right of the Company to enter into it, or to consummate
the transactions contemplated hereby, or that could reasonably be expected
to
result, either individually or in the aggregate, in a material adverse effect
on
the Company.
5.7 Authorized
Capital Stock.
The
authorized capital stock of the Company consists of 480,000,000 shares of Common
Stock and 20,000,000 shares of preferred stock, $0.001 par value per share
(“Preferred
Stock”).
As of
November 15, 2007, 40,315,705 shares of Common Stock and no shares of Preferred
Stock were validly issued and outstanding, fully paid and nonassessable and
no
shares of Common Stock or Preferred Stock have been issued since then. Except
as
disclosed in the SEC Documents, there are no outstanding options, warrants
and
convertible securities of the Company, or any other rights to acquire securities
of the Company. The principal stockholders of the Company are as set forth
in
the Form 10-KSB.
5.8 Material
Contracts.
Except
as set forth in the SEC Documents, the Company is not a party to or otherwise
bound by any contract that is material to its financial condition, operations,
business or assets, and the Company is not a party to or otherwise bound by
any
contract that may materially and adversely affect its ability to consummate
the
transactions contemplated hereby.
5.9 Validity
of Securities.
The
sale of the Note and Warrants, and the issuance of shares of Common Stock upon
conversion of the Note (the “Conversion
Shares”)
or
exercise of the Warrants (the “Warrant
Shares”)
(the
Note, Warrants, the Conversion Shares and Warrant Shares shall be referred
to
herein as the “Securities”),
are
not subject to any preemptive rights or rights of first refusal and, when
issued, sold and delivered in compliance with the provisions of this Agreement,
will be duly and validly issued, fully paid and nonassessable, and will be
free
of any liens, encumbrances or restrictions on transfer; provided,
however,
that
the Securities 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.
4
5.10 Compliance
with Other Instruments.
The
Company is not in violation of any term of (i) its Certificate of
Incorporation or Bylaws, (ii) any mortgage, indenture, contract, agreement
or instrument, or (iii) any judgment, decree or order, or any statute, rule
or regulation applicable to it or its properties, the violation of which, in
the
case of clause (ii), could have a material adverse effect on the business,
operations, affairs, financial condition or prospects of the Company, or any
of
its properties or assets, or in any material impairment of the right or ability
of the Company to carry on its business as now conducted or as proposed to
be
conducted, or in any material liability on the part of the Company (a
“Material
Adverse Effect”).
The
execution, delivery, and performance of and compliance with this Agreement
and
the issuance and sale of the Securities pursuant hereto will not result in
any
violation of any term of (i) the Certificate of Incorporation or Bylaws of
the Company, as each is then in effect, (ii) any mortgage, indenture,
contract, agreement, instrument, or (iii) any judgment, decree, order,
statute, rule or regulation, 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;
and
there is no term of the Certificate of Incorporation or Bylaws, or any mortgage,
indenture, contract, agreement, instrument, or any judgment, decree, order,
statute, rule or regulation, which could reasonably be likely to have a Material
Adverse Effect.
5.11 Title
to Properties and Assets; Liens, etc.
The
Company has good and marketable title to its properties and assets, in each
case
subject to no mortgage, pledge, lien, encumbrance, or charge, other than
(a) liens resulting from taxes which have not yet become delinquent, or
(b) minor liens, encumbrances, or defects of title which do not,
individually or in the aggregate, materially detract from the value of the
property subject thereto or have a Material Adverse Effect. With respect to
the
properties and assets it leases, the Company is in compliance with such leases
and it holds a valid leasehold free of any liens, claims or encumbrances that
impair its present use of such leased properties and assets.
5.12 Affiliates.
Except
as set forth in the SEC Documents, the Company (i) has no subsidiaries,
(ii) does not presently own or control, directly or indirectly, any equity
interest in any corporation, association, partnership, limited liability company
or other business entity and (iii) is not, directly or indirectly, a
participant in any joint venture, partnership or similar
arrangement.
5.13 Registration
Rights.
Except
as set forth in the SEC Documents, the Company is not under any obligation
to
register any of its presently outstanding securities or any of its securities
which may hereafter be issued.
5.14 Full
Disclosure.
The
Company has provided the Purchasers with all the information that the Purchasers
have reasonably requested for deciding whether to purchase the Securities.
To
the Company’s knowledge, neither this Agreement, the representations and
warranties by the Company contained herein, the Exhibits hereto, nor any other
written statement or certificate delivered or to be furnished to the Purchasers
in connection herewith, when read together, contains any untrue statement of
a
material fact or knowingly omits to state a material fact necessary in order
to
make the statements contained herein or therein not misleading.
5.15 Changes.
Since
the date of the last SEC Document, there has not been:
(a) any
change in the assets, liabilities, financial condition, or operating results
of
the Company from that reflected in the Company’s balance sheets as at December
31, 2006 and September 30, 2007, each as set forth in the SEC Documents, except
changes in the ordinary course of business that have not been, in the aggregate,
materially adverse; or
(b) to
the
Company’s knowledge, any other event or condition of any character that might
materially and adversely affect the business, properties, prospects, or
financial condition of the Company (as such business is presently conducted
and
as it is proposed to be conducted).
5
5.16 Proprietary
Information.
The
Company has taken all reasonable security measures to protect the secrecy,
confidentiality, and value of all trade secrets, know-how, inventions, designs,
processes, and technical data required to conduct its business.
5.17 Patents,
Trademarks, etc.
Except
as set forth in the SEC Documents, the Company has sufficient title and
ownership of all material patents, patent applications, licenses, trademarks,
service marks, trade names, inventions, processes, formulae, trade secrets,
franchises, copyrights and other proprietary rights necessary for the operation
of its business as now conducted and as proposed to be conducted (“Intellectual
Property”)
with
no known infringement of or conflict with the rights of others. To the Company’s
knowledge, such ownership and title are exclusive and not subject to termination
without the Company’s consent. Except for commercial software and applications
generally available to the public there are no outstanding options, licenses,
or
agreements of any kind relating to the foregoing proprietary rights, nor is
the
Company bound by or a party to any options, licenses or agreements of any kind
with respect to the material patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information, proprietary rights or
processes of any other person or entity. The Company is not aware of any third
party that is infringing or violating any of its patents, licenses, trademarks,
service marks, trade names, inventions, processes, formulae, trade secrets,
franchises, copyrights or other proprietary rights. The Company has not received
any communications alleging that the Company has violated or, by conducting
its
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other proprietary rights
of
any other person or entity.
5.18 Offering.
Assuming the accuracy of the representations and warranties of the Purchasers
contained in Article 6 hereof, the offer, issue, and sale of the Securities:
(a) are and will be exempt from the registration and prospectus delivery
requirements of the Securities Act of 1933, as amended (the “1933
Act”),
and
neither the Company nor any authorized agent acting on its behalf will take
any
action hereafter that would cause the loss of such exemption; and (b) have
been registered or qualified (or are exempt from registration and qualification)
under the registration, permit, or qualification requirements of all applicable
state securities laws.
ARTICLE
6
PURCHASER’S
REPRESENTATIONS AND WARRANTIES
6.1 Due
Authorization.
The
Purchaser has full power and authority and has taken all action necessary to
authorize the Purchaser to execute, deliver and perform the Purchaser’s
obligations under this Agreement. This Agreement is the legal, valid and binding
obligation of the Purchaser in accordance with its terms.
6.2 Accredited
Investor.
The
Purchaser is an “accredited investor” as that term is defined in Regulation D
promulgated under the 0000 Xxx.
6.3 Investment
Experience.
The
Purchaser has not authorized any person to act as such Purchaser’s Purchaser
Representative (as that term is defined in Regulation D of the General Rules
and
Regulations under the 0000 Xxx) in connection with this transaction. The
Purchaser has such knowledge and experience in financial, investment and
business matters that the Purchaser is capable of evaluating the merits and
risks of the prospective investment in the securities of the Company. The
Purchaser has consulted with such independent legal counsel or other advisers
as
the Purchaser has deemed appropriate to assist the Purchaser in evaluating
the
proposed investment in the Company. If other than an individual, the Purchaser
also represents that it has not been organized for the purpose of acquiring
the
Securities.
6
6.4 Adequate
Means.
The
Purchaser (i) has adequate means of providing for the Purchaser’s current
financial needs and possible contingencies; and (ii) can afford (a) to hold
unregistered securities for an indefinite period of time as required; and (b)
sustain a complete loss of the entire amount of the subscription.
6.5 Access
to Information.
The
Purchaser has been afforded the opportunity to ask questions of, and receive
answers from the officers and/or directors of the Company acting on its behalf
concerning the terms and conditions of this transaction and to obtain any
additional information, to the extent that the Company possesses such
information or can acquire it without unreasonable effort or expense, necessary
to verify the accuracy of the information furnished; and has had such
opportunity to the extent the Purchaser considers it appropriate in order to
permit the Purchaser to evaluate the merits and risks of an investment in the
Company. It is understood that all documents, records and books pertaining
to
this investment have been made available for inspection, and that the books
and
records of the Company will be available upon reasonable notice for inspection
by investors during reasonable business hours at its principal place of
business. The foregoing shall in no way be deemed to limit the ability of the
Purchaser to rely on the representations and warranties set forth herein or
incorporated herein by reference.
6.6 No
Resale.
The
Securities being purchased hereunder are being acquired solely for the account
of the Purchaser, for the Purchaser’s investment and not with a view to, or for
resale in connection with, any distribution in any jurisdiction where such
sale
or distribution would be precluded.
6.7 Restricted
Securities.
The
Purchaser understands that the Securities are characterized as “restricted
securities” under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering
and
that under such laws and applicable regulations such securities may be resold
without registration under the 1933 Act only in certain limited circumstances.
In this connection, the Purchaser represents that it is familiar with Rule
144
under the 1933 Act, and understands the resale limitations imposed thereby
and
by the 1933 Act.
6.8 Further
Limitations on Disposition.
Without
in any way limiting the representations set forth above, the Purchaser further
agrees not to make any disposition of all or any portion of the Securities
other
than the Note unless and until the transferee has agreed in writing for the
benefit of the Company to the representations contained in this Section 6.8;
provided,
that
this Section 6.8 shall not apply to the disposition of all or any portion of
the
Securities if:
(a) there
is
then in effect a registration statement under the 1933 Act covering such
proposed disposition and such disposition is made in accordance with such
registration statement; and
(b) (i)
the
Purchaser shall have notified the Company of the proposed disposition and shall
have furnished the Company with a reasonably detailed statement of the
circumstances surrounding the proposed disposition and shall furnish transferor
representations as may reasonably be requested by the Company, and (ii) if
reasonably requested by the Company, the Purchaser shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company,
that
such disposition will not require registration of such shares under the 1933
Act.
Notwithstanding
the provisions of paragraphs (a) and (b) above, no such registration statement
or opinion of counsel shall be necessary for a transfer if the Purchaser is
a
partnership, limited liability company or corporation to a partner, member
or
shareholder of such partnership, limited liability company or corporation as
the
case may be or a retired partner or member of such partnership or limited
liability company who retires after the date hereof, or to the estate of any
such partner or member or retired partner or member or the transfer by gift,
will or intestate succession of any partner to his spouse or to the siblings,
lineal descendants or ancestors of such partner or his spouse, if the transferee
agrees in writing to be subject to the terms hereof to the same extent as if
he,
she or it were an original Purchaser hereunder.
7
6.9 Legend.
The
Purchaser hereby acknowledges and agrees that the Company may insert the
following or similar legend on the face of the certificates evidencing the
Note,
the Warrants, the Warrant Shares or the Conversion Shares purchased by the
Purchaser if required in compliance with the 1933 Act or state securities
laws:
“These
securities have not been registered under the Securities Act of 1933, as amended
(the “Securities Act”), or any state securities laws and may not be sold or
otherwise transferred or disposed of except pursuant to an effective
registration statement under the Securities Act and any applicable state
securities laws, or an opinion of counsel satisfactory to counsel to the issuer
that an exemption from registration under the Securities Act and any applicable
state securities laws is available.”
6.10 General
Solicitation.
The
Purchaser is not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities published in
any
newspaper, magazine or similar media or broadcast over television or radio
or
presented at any seminar or any other general solicitation or general
advertisement.
ARTICLE
7
COVENANTS
7.1 Registration
Rights.
(a) If
the
Company prepares and files a Registration Statement under the 1933 Act or
otherwise registers securities under the 1933 Act as to any of its securities
(other than under a Registration Statement pursuant to Form S-8 or Form S-4)
(each such filing, a "Registration
Statement"),
it
will give written notice by registered mail, at least 20 days prior to the
filing of such Registration Statement to the Purchaser of its intention to
do
so. The Company shall include all Warrant Shares (the “Registrable
Securities”)
in
such Registration Statement with respect to which the Company has received
written requests for inclusion therein within 15 days of actual receipt of
the
Company's notice.
(b) In
the
event of an underwritten registered offering, if the managing underwriter(s)
advise the Company in writing that in their opinion the number of Registrable
Securities exceeds the number of Registrable Securities which can be sold
therein without adversely affecting the marketability of the offering, the
Company will include in such registration the number of Registrable Securities
requested to be included which in the opinion of such underwriter(s) can be
sold
without adversely affecting the marketability of the offering, pro rata among
the respective holders thereof on the basis of the amount of Registrable
Securities owned by each such holder.
7.2 Restriction
on Debt Issuances.
So long
as any amounts remain outstanding under the Notes, the Company shall not,
without the prior consent of the Purchasers, issue or sell more than $3,000,000
of debt in the aggregate (including the Note and the senior secured promissory
notes issued pursuant to those certain Note and Warrant Purchase Agreements
dated as of July 2, 2007 and August 24, 2007), except for Permitted
Indebtedness, so long as any of the principal amount or interest on the Note
remains unpaid unless (a) the proceeds of the issuance or sale of the Company’s
debt, directly from the gross proceeds of the issuance or sale, will be used
to
repay all outstanding principal and accrued interest owed under the Note or
(b)
the debt issued and sold by the Company is a subordinated convertible debenture
which will mature no earlier than six months after the Maturity Date.
“Permitted
Indebtedness”
means
indebtedness to trade creditors incurred in the ordinary course of business,
and
extensions, refinancings and renewals of any items of any existing
indebtedness.
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7.3 Restriction
on Payments.
So long
as any amounts remain outstanding under the Note, the Company shall not, without
the prior consent of the Purchasers, make any payments to its officers,
directors, stockholders or related parties, whether for accrued and unpaid
salaries or otherwise, in excess of $200,000 in the aggregate.
7.4 Observation
Rights.
So long
as any amounts remain outstanding under the Note, and subject to the limitations
set forth in this Section 7.4, the Company shall permit a representative of
the
Purchaser to be present in a nonvoting observer capacity at all meetings of
the
Company’s board of directors (the “Board”)
or any
committee thereof, including any telephonic meetings, and the Company will
give
the Purchaser’s designated representative notice of such meetings, by telecopy
or by such other means as such notices are delivered to the members of the
Board
at the same time notice is provided or delivered to the Board; provided,
however,
that
(a) such representative shall agree to hold in confidence and trust and to
act
in a fiduciary manner with respect to all information so provided, and (b)
the
Company reserves the right to withhold any information and to exclude such
representative from any meeting or portion thereof if, in the reasonable good
faith judgment of the Board, access to such information or attendance at such
meeting is reasonably likely to (i) adversely affect the attorney-client
privilege between the Company and its counsel with respect to any matter, (ii)
result in a conflict of interest between the Company and the Purchaser, or
(iii)
result in a violation of a confidentiality agreement between the Company and
a
third party. The Purchaser, on behalf of itself and its representative, agrees
that it shall not use any information obtained by it pursuant to its rights
under this Section 7.4 except relative to its interests in the Company hereunder
and otherwise only as expressly authorized in writing by the Company. The
Purchaser, and its representative, shall use the same degree of care to protect
the Company’s confidential information as the Purchaser uses to protect its own
confidential information of like nature, but in no circumstances with less
than
reasonable care.
ARTICLE
8
MISCELLANEOUS
8.1 Successors
and Assigns.
Subject
to the exceptions specifically set forth in this Agreement, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective executors, administrators, heirs, successors and assigns of
the
parties. This Agreement may be assigned solely by the Purchaser.
8.2 Titles
and Subtitles.
The
titles and subtitles of the Sections of this Agreement are used for convenience
only and shall not be considered in construing or interpreting this
agreement.
8.3 Notices.
Any
notice, request or other communication required or permitted hereunder shall
be
in writing and shall be delivered personally or by facsimile (receipt confirmed
electronically) or shall be sent by a reputable express delivery service or
by
certified mail, postage prepaid with return receipt requested, addressed as
follows:
if
to the
Company, to:
Xxxxxx
Science, Inc
8th
Floor, LG Palace Building
000-0
Xxxxxxx-Xxxx, Xxxx-Xx
Xxxxx,
Xxxxx
Attn: Chief
Executive Officer
Fax: 00-0-000-0000
if
to the
Purchaser, to
the
addresses set forth in the signature page.
9
Any
party
hereto may change the above specified recipient or mailing address by notice
to
the other parties given in the manner herein prescribed. All notices shall
be
deemed given on the day when actually delivered as provided above (if delivered
personally or by facsimile, provided that any such facsimile is received during
regular business hours at the recipient's location) or on the day shown on
the
return receipt (if delivered by mail or delivery service).
8.4 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the domestic
laws of the State of California without giving effect to any choice of law
or
conflict of law provision or rule (whether of the State of California or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of California. The parties hereto hereby
agree
that any suit or proceeding arising under this Agreement, or in connection
with
the consummation of the transactions contemplated hereby, shall be brought
solely in a federal or state court located in the County of Orange, State of
California. The prevailing party in any suit or proceeding shall be entitled
to
its reasonable attorneys’ fees and costs.
8.5 Waiver
and Amendment.
Any
term of this Agreement may be amended, waived or modified with the written
consent of the Company and the Purchasers.
8.6 Remedies.
The
rights and remedies of the Purchaser described herein shall be cumulative and
not restrictive of any other rights or remedies available under any other
instrument, at law or in equity.
8.7 Counterparts.
This
Agreement may be executed in one or more identical counterparts each of which
when taken together shall constitute one and the same Agreement.
[Remainder
of Page Intentionally Left Blank; Signature Page Follows]
10
IN
WITNESS WHEREOF, the undersigned have caused this Note and Warrant Purchase
Agreement to be signed in their names on the date first set forth
above.
|
The
Warrants are to be issued in:
|
Print
Name of Investor
|
|
____
individual name
|
Principal
Amount of Note: $ .00
|
|
____
tenants in the entirety
|
Purchaser
price paid:
$ .00
|
|
____
corporation (an officer must sign)
|
Signature
of Authorized Person
|
|
____
partnership (all general partners must sign)
|
Name
of Authorized Signatory
|
|
____
trust
|
|
|
____
limited liability company
|
Address
of Investor:
Facsimile
No.:
|
XXXXXX
SCIENCE, INC.
Name: Xxxxx
Xxxx Noh
Title: Chief
Executive Officer
EXHIBIT
A
10%
SENIOR NOTE
See
attached.
EXHIBIT
A
EXHIBIT
B
COMMON
STOCK PURCHASE WARRANT
See
attached.
EXHIBIT
B
EXHIBIT
C
SECURITY
AGREEMENT
See
attached.
EXHIBIT
C
EXHIBIT
D
WIRE
TRANSFER INSTRUCTIONS
Wiring
instructions for incoming wires:
Bank
routing # ________________
Bank
Name: WOORI
BANK HAPCHONG DONG BR
Bank
Address: ______________
Beneficiary:
Xxxxxx
Science, Inc.
ACCOUNT
#
0000-000-000000
Swift
Code: XXXXXXXX
EXHIBIT
D
