AMENDED AND RESTATED
COMMON STOCK PURCHASE
AGREEMENT
DATE AS OF DECEMBER 27TH 2005
BY AND AMONG
XL GENERATION INTERNATIONAL INC.
AND
THE NON-U.S. PURCHASERS LISTED ON EXHIBIT A
TABLE OF CONTENTS
Page
ARTICLE I PURCHASE AND SALE OF COMMON STOCK AND WARRANTS.......................1
Section 1.1 Purchase and Sale of Common Stock and Warrants...........1
Section 1.2 Purchase Price and Closing...............................1
ARTICLE II REPRESENTATIONS AND WARRANTIES......................................2
Section 2.1 Representations and Warranties of the Company............2
Section 2.2 Representations and Warranties of the Purchasers.........9
ARTICLE III COVENANTS.........................................................13
Section 3.1 Securities Compliance...................................13
Section 3.2 Registration and Listing................................13
Section 3.3 Compliance with Laws....................................13
Section 3.4 Keeping of Records and Books of Account.................13
Section 3.5 Reporting Requirements..................................14
Section 3.6 Other Agreements........................................14
Section 3.7 Subsequent Financings; Right of First Refusal...........14
Section 3.8 Use of Proceeds.........................................15
Section 3.9 Reporting Status........................................15
Section 3.10 Disclosure of Transaction...............................15
Section 3.11 Disclosure of Material Information......................15
Section 3.12 Pledge of Securities....................................15
CONDITIONS 16
Section 3.13 Conditions Precedent to the Obligation of the
Company to Close and to Sell the Securities.............16
Section 3.14 Conditions Precedent to the Obligation of the
Purchasers to Close and to Purchase the Securities......16
ARTICLE IV CERTIFICATE LEGEND.................................................18
Section 4.1 Legend..................................................18
ARTICLE V INDEMNIFICATION.....................................................20
Section 5.1 General Indemnity.......................................20
Section 5.2 Indemnification Procedure...............................20
ARTICLE VI MISCELLANEOUS......................................................21
Section 6.1 Fees and Expenses.......................................21
Section 6.2 Specific Performance; Consent to Jurisdiction; Venue....21
Section 6.3 Entire Agreement; Amendment.............................22
Section 6.4 Notices.................................................22
Section 6.5 Waivers.................................................23
Section 6.6 Headings................................................23
TABLE OF CONTENTS
(Continued)
Page
Section 6.7 Successors and Assigns..................................23
Section 6.8 No Third Party Beneficiaries............................23
Section 6.9 Interpretation..........................................24
Section 6.10 Survival................................................24
Section 6.11 Counterparts............................................24
Section 6.12 Publicity...............................................24
Section 6.13 Severability............................................24
Section 6.14 Further Assurances......................................24
EXHIBIT A LIST OF PURCHASERS.......................ERROR! BOOKMARK NOT DEFINED.
EXHIBIT B FORM OF SERIES B WARRANT..................ERROR! BOOKMARK NOT DEFINED.
ii
AMENDED AND RESTATED COMMON STOCK PURCHASE AGREEMENT
This AMENDED AND RESTATED COMMON STOCK PURCHASE AGREEMENT dated as of
December 27th, 2005 (this "Agreement") by and between XL Generation
International Inc., a Nevada corporation (the "Company"), and the purchasers
listed on Exhibit A attached hereto (each a "Purchaser" and collectively, the
"Purchasers"), for the purchase and sale of shares of the Company's common
stock, par value $0.001 per share (the "Common Stock") by the Purchasers.
Whereas, the parties have previously entered into agreement dated December
13th, 2005 (the "Prior Agreement") regarding the purchase and sale of the Common
Stock and Warrants as defined herein;
Whereas, the parties desire to amend and restate such prior purchase
agreement;
Now, therefore, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF COMMON STOCK AND WARRANTS
Section 1.1 Purchase and Sale of Common Stock and Warrants.
(a) Upon the following terms and conditions, the Company shall issue
and sell to the Purchasers, and the Purchasers shall purchase from the Company,
an aggregate of 300,000 shares of Common Stock (the "Shares") at a price per
share of $1.00 (the "Per Share Purchase Price") for an aggregate purchase price
of $1.00 per share and $300,000.00 in the aggregate (the "Purchase Price"). The
Company and the Purchasers are executing and delivering this Agreement in
accordance with and in reliance upon the exemption from securities registration
afforded by Section 4(2) of the U.S. Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder (the "Securities Act"), including
Regulation S promulgated thereunder and/or upon such other exemption from the
registration requirements of the Securities Act as may be available with respect
to any or all of the investments to be made hereunder.
(b) Upon the following terms and conditions, the Purchasers shall be
issued (i) 600,000 Series B Warrants, in substantially the form attached hereto
as Exhibit B (the "Series B Warrants"), as purchased pursuant to the terms
hereof. The Warrants shall have an exercise price of $1.25 per Warrant (as
defined in the respective Warrant) and shall be exercisable as stated therein.
Any shares of Common Stock issuable upon exercise of the Warrants (and such
shares when issued) are herein referred to as the "Warrant Shares". The Shares,
the Warrants and the Warrant Shares are sometimes collectively referred to
herein as the "Securities".
Section 1.2 Purchase Price and Closing.
Subject to the terms and conditions hereof, the Company agrees to issue and sell
to the Purchasers and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Purchasers, severally but not jointly, agree to purchase the number of
Shares and Warrants, in each case, set forth opposite their respective names on
Exhibit A attached hereto. The closing of the purchase and sale of the Shares
and Warrants to be acquired by the Purchasers from the Company under this
Agreement shall take place at the offices of XL Generation International Inc.,
000 Xx-Xxxxxxx, Xxxxx 00, Xxxxxxxx, xxxxxxxx xx Xxxxxx, Xxxxxx (the "Closing")
at 11:59 p.m., Eastern time (i) on or before January 5th, 2006; provided, that
all of the conditions set forth in Article IV hereof and applicable to the
Closing shall have been fulfilled or waived in accordance herewith, or (ii) at
such other time and place or on such date as the Purchasers and the Company may
agree upon (the "Closing Date"). Subject to the terms and conditions of this
Agreement, at the Closing the Company shall deliver or cause to be delivered to
each Purchaser (i) a certificate registered in the name of such Purchaser
representing the number of Shares that such Purchaser is purchasing pursuant to
the terms hereof and (ii) a Series B Warrant, to purchase such number of shares
of Common Stock as is set forth opposite the name of such Purchaser on Exhibit A
attached hereto. At the Closing, each Purchaser shall deliver its Purchase Price
by wire transfer to an account designated by the Company.
1
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the Company.
The Company hereby represents and warrants to the Purchasers, as of the date
hereof and the Closing Date (except as set forth on the Schedule of Exceptions
attached hereto with each numbered Schedule corresponding to the section number
herein), as follows:
(a) Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Nevada and has the requisite corporate power to own, lease
and operate its properties and assets and to conduct its business as it is now
being conducted. The Company does have Subsidiaries (as defined in Section
2.1(g)) and does not own securities of any kind in any other entity except as
set forth on Schedule 2.1(g). The Company and each such Subsidiary (as defined
in Section 2.1(g)) is duly qualified as a foreign corporation to do business and
is in good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary except for
any jurisdiction(s) (alone or in the aggregate) in which the failure to be so
qualified will not have a Material Adverse Effect. For the purposes of this
Agreement, "Material Adverse Effect" means any effect on the business, results
of operations, prospects, assets or condition (financial or otherwise) of the
Company that is material and adverse to the Company and its subsidiaries, taken
as a whole, and/or any condition, circumstance, factor or situation (including,
without limitation, an investigation by the Securities and Exchange Commission
(the "Commission")) that would prohibit or otherwise materially interfere with
the ability of the Company from entering into and performing any of its
obligations under the Transaction Documents (as defined below) in any material
respect.
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement and the
Warrants by and among the Company and the Purchasers, dated as of the date
hereof (this Agreement and the Warrants referred to collectively as, the
"Transaction Documents") and to issue and sell the Securities in accordance with
the terms hereof. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly and validly authorized by all necessary
corporate action, and, except as set forth on Schedule 2.1(b), no further
consent or authorization of the Company, its Board of Directors or stockholders
is required. When executed and delivered by the Company, each of the Transaction
Documents shall constitute a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, reorganization,
moratorium, liquidation, conservatorship, receivership or similar laws relating
to, or affecting generally the enforcement of, creditor's rights and remedies or
by other equitable principles of general application.
2
(c) Capitalization. The authorized capital stock of the Company as
of December 27th, 2005 is set forth on Schedule 2.1(c) hereto. All of the
outstanding shares of the Common Stock and any other outstanding security of the
Company have been duly and validly authorized. Except as set forth in this
Agreement and as set forth on Schedule 2.1(c) hereto, no shares of Common Stock
or any other security of the Company are entitled to preemptive rights or
registration rights and there are no outstanding options, warrants, scrip,
rights to subscribe to, call or commitments of any character whatsoever relating
to, or securities or rights convertible into, any shares of capital stock of the
Company. Furthermore, except as set forth in this Agreement and as set forth on
Schedule 2.1(c) hereto, there are no contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional
shares of the capital stock of the Company or options, securities or rights
convertible into shares of capital stock of the Company. Except for customary
transfer restrictions contained in agreements entered into by the Company in
order to sell restricted securities or as provided on Schedule 2.1(c) hereto,
the Company is not a party to or bound by any agreement or understanding
granting registration or anti-dilution rights to any person with respect to any
of its equity or debt securities. Except as set forth on Schedule 2.1(c), the
Company is not a party to, and it has no knowledge of, any agreement or
understanding restricting the voting or transfer of any shares of the capital
stock of the Company.
(d) Issuance of Securities. The Shares and the Warrants to be issued
at the Closing have been duly authorized by all necessary corporate action and,
when paid for and issued in accordance with the terms hereof and the Warrants,
respectively, the Shares and the Warrant Shares will be validly issued, fully
paid and nonassessable and free and clear of all liens, encumbrances and rights
of refusal of any kind and the holders shall be entitled to all rights accorded
to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby, and the issuance of the Securities
as contemplated hereby, do not and will not (i) violate or conflict with any
provision of the Company's Articles of Incorporation (the "Articles") or Bylaws
(the "Bylaws"), each as amended to date, or any Subsidiary's comparable charter
documents, (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries'
respective properties or assets are bound, or (iii) result in a violation of any
federal, state, local or foreign statute, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations) applicable
to the Company or any of its Subsidiaries or by which any property or asset of
the Company or any of its Subsidiaries are bound or affected, except, in all
cases, other than violations pursuant to clauses (i) or (iii) (with respect to
federal and state securities laws) above, except, for such conflicts, defaults,
terminations, amendments, acceleration, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect. Neither
the Company nor any of its Subsidiaries is required under federal, state,
foreign or local law, rule or regulation to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under the Transaction Documents or issue and sell the Securities in accordance
with the terms hereof (other than any filings, consents and approvals which may
be required to be made by the Company under applicable state and federal
securities laws, rules or regulations or any applicable registration
provisions).
3
(f) Commission Documents, Financial Statements. The Common Stock of
the Company is registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the Company has
timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the Commission pursuant to the reporting
requirements of the Exchange Act (all of the foregoing including filings
incorporated by reference therein being referred to herein as the "Commission
Documents"). At the times of their respective filings, the Form 10-QSB for the
fiscal quarters ended July 31st, 2005, January 31, 2005 and October 31, 2004
(collectively, the "Form 10-QSB") and the Form 10-KSB for the fiscal year ended
April 30th , 2005 (the "Form 10-KSB") complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the Commission
promulgated thereunder and other federal, state and local laws, rules and
regulations applicable to such documents, and the Form 10-QSB and Form 10-KSB
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As of their respective dates, the financial statements of the
Company included in the Commission Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the Commission or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the Notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements), and fairly present in all material respects
the financial position of the Company and its Subsidiaries as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(g) Subsidiaries. Schedule 2.1(g) hereto sets forth each Subsidiary
of the Company, showing the jurisdiction of its incorporation or organization
and showing the percentage of each person's ownership of the outstanding stock
or other interests of such Subsidiary. For the purposes of this Agreement,
"Subsidiary" shall mean any corporation or other entity of which at least a
majority of the securities or other ownership interest having ordinary voting
power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other Subsidiaries. All of the
outstanding shares of capital stock of each Subsidiary have been duly authorized
and validly issued, and are fully paid and nonassessable. There are no
outstanding preemptive, conversion or other rights, options, warrants or
agreements granted or issued by or binding upon any Subsidiary for the purchase
or acquisition of any shares of capital stock of any Subsidiary or any other
securities convertible into, exchangeable for or evidencing the rights to
subscribe for any shares of such capital stock. Neither the Company nor any
Subsidiary is subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of the capital stock of any Subsidiary
or any convertible securities, rights, warrants or options of the type described
in the preceding sentence except as set forth on Schedule 2.1(g) hereto. Neither
the Company nor any Subsidiary is party to, nor has any knowledge of, any
agreement restricting the voting or transfer of any shares of the capital stock
of any Subsidiary.
4
(h) No Material Adverse Change. Since July 31st, 2005, the Company
has not experienced or suffered any Material Adverse Effect, except as disclosed
on Schedule 2.1(h) hereto.
(i) No Undisclosed Liabilities. Except as disclosed on Schedule
2.1(i) hereto, since July 31st, 2005, neither the Company nor any of its
Subsidiaries has incurred any liabilities, obligations, claims or losses
(whether liquidated or unliquidated, secured or unsecured, absolute, accrued,
contingent or otherwise) other than those incurred in the ordinary course of the
Company's or its Subsidiaries respective businesses or which, individually or in
the aggregate, are not reasonably likely to have a Material Adverse Effect.
(j) No Undisclosed Events or Circumstances. Since July 31st, 2005,
except as disclosed on Schedule 2.1(j) hereto, no event or circumstance has
occurred or exists with respect to the Company or its Subsidiaries or their
respective businesses, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
(k) Actions Pending. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against the Company or any
Subsidiary which questions the validity of this Agreement or any of the other
Transaction Documents or any of the transactions contemplated hereby or thereby
or any action taken or to be taken pursuant hereto or thereto. Except as set
forth on Schedule 2.1(k) hereto, there is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against or involving the
Company, any Subsidiary or any of their respective properties or assets, which
individually or in the aggregate, could reasonably be expected, if adversely
determined, to have a Material Adverse Effect. There are no outstanding orders,
judgments, injunctions, awards or decrees of any court, arbitrator or
governmental or regulatory body against the Company or any Subsidiary or any
officers or directors of the Company or Subsidiary in their capacities as such,
which individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
5
(l) Compliance with Law. The business of the Company and the
Subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except as set forth in the Commission Documents or on Schedule
2.1(l) hereto or such that, individually or in the aggregate, the noncompliance
therewith could not reasonably be expected to have a Material Adverse Effect.
The Company and each of its Subsidiaries have all franchises, permits, licenses,
consents and other governmental or regulatory authorizations and approvals
necessary for the conduct of its business as now being conducted by it unless
the failure to possess such franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
(m) Taxes. The Company and each of the Subsidiaries has accurately
prepared and filed all federal, state and other tax returns required by law to
be filed by it, has paid or made provisions for the payment of all taxes shown
to be due and all additional assessments, and adequate provisions have been and
are reflected in the financial statements of the Company and the Subsidiaries
for all current taxes and other charges to which the Company or any Subsidiary
is subject and which are not currently due and payable. Except as disclosed on
Schedule 2.1(m) hereto, none of the federal income tax returns of the Company or
any Subsidiary have been audited by the Internal Revenue Service. The Company
has no knowledge of any additional assessments, adjustments or contingent tax
liability (whether federal or state) of any nature whatsoever, whether pending
or threatened against the Company or any Subsidiary for any period, nor of any
basis for any such assessment, adjustment or contingency.
(n) Certain Fees. Except as set forth on Schedule 2.1(n) hereto, the
Company has not employed any broker or finder or incurred any liability for any
brokerage or investment banking fees, commissions, finders' structuring fees,
financial advisory fees or other similar fees in connection with the Transaction
Documents.
(o) Disclosure. To the best of the Company's knowledge, neither this
Agreement or the Schedules hereto nor any other documents, certificates or
instruments furnished to the Purchasers by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made herein or therein, in the light
of the circumstances under which they were made herein or therein, not
misleading.
(p) Operation of Business. Except as set forth on Schedule 2.1(p)
hereto, the Company and each of the Subsidiaries owns or possesses the rights to
all patents, trademarks, domain names (whether or not registered) and any
patentable improvements or copyrightable derivative works thereof, websites and
intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations which are necessary for the conduct of
its business as now conducted without any conflict with the rights of others.
6
(q) Environmental Compliance. The Company and each of its
Subsidiaries have obtained all material approvals, authorization, certificates,
consents, licenses, orders and permits or other similar authorizations of all
governmental authorities, or from any other person, that are required under any
Environmental Laws. "Environmental Laws" shall mean all applicable laws relating
to the protection of the environment including, without limitation, all
requirements pertaining to reporting, licensing, permitting, controlling,
investigating or remediating emissions, discharges, releases or threatened
releases of hazardous substances, chemical substances, pollutants, contaminants
or toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature, into the air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, material or wastes, whether solid, liquid or
gaseous in nature. To the best of the Company's knowledge, the Company has all
necessary governmental approvals required under all Environmental Laws as
necessary for the Company's business or the business of any of its subsidiaries.
To the best of the Company's knowledge, the Company and each of its subsidiaries
are also in compliance with all other limitations, restrictions, conditions,
standards, requirements, schedules and timetables required or imposed under all
Environmental Laws. Except for such instances as would not individually or in
the aggregate have a Material Adverse Effect, there are no past or present
events, conditions, circumstances, incidents, actions or omissions relating to
or in any way affecting the Company or its subsidiaries that violate or may
violate any Environmental Law after the Closing Date or that may give rise to
any environmental liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including without limitation underground
storage tanks), disposal, transport or handling, or the emission, discharge,
release or threatened release of any hazardous substance.
(r) Books and Records; Internal Accounting Controls. The records and
documents of the Company and its Subsidiaries accurately reflect in all material
respects the information relating to the business of the Company and the
Subsidiaries, the location and collection of their assets, and the nature of all
transactions giving rise to the obligations or accounts receivable of the
Company or any Subsidiary. The Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient, in the judgment of the
Company's board of directors, to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate actions are taken
with respect to any differences.
(s) Material Agreements. Except for the Transaction Documents (with
respect to clause (i) only), as disclosed in the Commission Documents or as set
forth on Schedule 2.1(s) hereto, or as would not be reasonably likely to have a
Material Adverse Effect, (i) the Company and each of its Subsidiaries have
performed all obligations required to be performed by them to date under any
written or oral contract, instrument, agreement, commitment, obligation, plan or
arrangement, filed or required to be filed with the Commission (the "Material
Agreements"), (ii) neither the Company nor any of its Subsidiaries has received
any notice of default under any Material Agreement and, (iii) to the best of the
Company's knowledge, neither the Company nor any of its Subsidiaries is in
default under any Material Agreement now in effect.
7
(t) Transactions with Affiliates. Except as set forth on Schedule
2.1(t) hereto, there are no loans, leases, agreements, contracts, royalty
agreements, management contracts or arrangements or other continuing
transactions between (a) the Company, any Subsidiary or any of their respective
customers or suppliers on the one hand, and (b) on the other hand, any officer,
employee, consultant or director of the Company, or any of its Subsidiaries, or
any person owning any capital stock of the Company or any Subsidiary or any
member of the immediate family of such officer, employee, consultant, director
or stockholder or any corporation or other entity controlled by such officer,
employee, consultant, director or stockholder, or a member of the immediate
family of such officer, employee, consultant, director or stockholder which, in
each case, is required to be disclosed in the Commission Documents or in the
Company's most recently filed definitive proxy statement on Schedule 14A, that
is not so disclosed in the Commission Documents or in such proxy statement.
(u) Securities Act of 1933. Based in material part upon the
representations herein of the Purchasers, the Company has complied and will
comply with all applicable federal and state securities laws in connection with
the offer, issuance and sale of the Securities hereunder. Neither the Company
nor anyone acting on its behalf, directly or indirectly, has or will sell, offer
to sell or solicit offers to buy any of the Securities or similar securities to,
or solicit offers with respect thereto from, or enter into any negotiations
relating thereto with, any person, or has taken or will take any action so as to
bring the issuance and sale of any of the Securities under the registration
provisions of the Securities Act and applicable state securities laws, and
neither the Company nor any of its affiliates, nor any person acting on its or
their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D and Regulation S promulgated
under the Securities Act) in connection with the offer or sale of any of the
Securities.
(v) ERISA. No liability to the Pension Benefit Guaranty Corporation
has been incurred with respect to any Plan by the Company or any of its
Subsidiaries which is or would be materially adverse to the Company and its
Subsidiaries. The execution and delivery of this Agreement and the issuance and
sale of the Securities will not involve any transaction which is subject to the
prohibitions of Section 406 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") or in connection with which a tax could be imposed
pursuant to Section 4975 of the Internal Revenue Code of 1986, as amended,
provided that, if any of the Purchasers, or any person or entity that owns a
beneficial interest in any of the Purchasers, is an "employee pension benefit
plan" (within the meaning of Section 3(2) of ERISA) with respect to which the
Company is a "party in interest" (within the meaning of Section 3(14) of ERISA),
the requirements of Sections 407(d)(5) and 408(e) of ERISA, if applicable, are
met. As used in this Section 2.1(aa), the term "Plan" shall mean an "employee
pension benefit plan" (as defined in Section 3 of ERISA) which is or has been
established or maintained, or to which contributions are or have been made, by
the Company or any Subsidiary or by any trade or business, whether or not
incorporated, which, together with the Company or any Subsidiary, is under
common control, as described in Section 414(b) or (c) of the Code.
8
(w) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the Securities Act which would prevent the Company
from selling the Securities pursuant to Regulation D and Rule 506 thereof under
the Securities Act, or any applicable exchange-related stockholder approval
provisions, nor will the Company or any of its affiliates or subsidiaries take
any action or steps that would cause the offering of the Securities to be
integrated with other offerings. The Company does not have any registration
statement pending before the Commission or currently under the Commission's
review.
(x) Xxxxxxxx-Xxxxx Act. The Company is in substantial compliance
with the applicable provisions of the Xxxxxxxx-Xxxxx Act of 2002 (the
"Xxxxxxxx-Xxxxx Act"), and the rules and regulations promulgated thereunder,
that are effective and intends to comply substantially with other applicable
provisions of the Xxxxxxxx-Xxxxx Act, and the rules and regulations promulgated
thereunder, upon the effectiveness of such provisions.
Section 2.2 Representations and Warranties of the Purchasers.
Each of the Purchasers hereby represents and warrants to the Company with
respect solely to itself and not with respect to any other Purchaser as follows
as of the date hereof and as of the Closing Date:
(a) Organization and Standing of the Purchasers. If the Purchaser is
an entity, such Purchaser is a corporation, limited liability company or
partnership duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization.
(b) Authorization and Power. Each Purchaser has the requisite power
and authority to enter into and perform the Transaction Documents and to
purchase the Securities being sold to it hereunder. The execution, delivery and
performance of the Transaction Documents by each Purchaser and the consummation
by it of the transactions contemplated hereby have been duly authorized by all
necessary corporate or partnership action, and no further consent or
authorization of such Purchaser or its Board of Directors, stockholders, or
partners, as the case may be, is required. When executed and delivered by the
Purchasers, the other Transaction Documents shall constitute valid and binding
obligations of each Purchaser enforceable against such Purchaser in accordance
with their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor's rights and remedies or by other
equitable principles of general application.
(c) No Conflict. The execution, delivery and performance of the
Transaction Documents by the Purchaser and the consummation by the Purchaser of
the transactions contemplated thereby and hereby do not and will not (i) violate
any provision of the Purchaser's charter or organizational documents, (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
mortgage, deed of trust, indenture, note, bond, license, lease agreement,
instrument or obligation to which the Purchaser is a party or by which the
Purchaser's respective properties or assets are bound, or (iii) result in a
violation of any federal, state, local or foreign statute, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Purchaser or by which any property or asset of
the Purchaser are bound or affected, except, in all cases, other than violations
pursuant to clauses (i) or (iii) (with respect to federal and state securities
laws) above, except, for such conflicts, defaults, terminations, amendments,
acceleration, cancellations and violations as would not, individually or in the
aggregate, materially and adversely affect the Purchaser's ability to perform
its obligations under the Transaction Documents.
9
(d) Acquisition for Investment. We are purchasing the Shares and
Warrants for fully managed accounts for the purpose of investment and not with a
view to or for sale in connection with distribution. We do not have a present
intention to sell any of the Shares or Warrants, provided, however, that by
making the representations herein, such Purchaser does not agree to hold the
Shares or the Warrants for any minimum or other specific term and reserves the
right to dispose of the Shares or the Warrants at any time in accordance with
Federal and state securities laws applicable to such disposition. Each Purchaser
acknowledges that it (i) has such knowledge and experience in financial and
business matters such that Purchaser is capable of evaluating the merits and
risks of Purchaser's investment in the Company, (ii) is able to bear the
financial risks associated with an investment in the Securities and (iii) has
been given full access to such records of the Company and the Subsidiaries and
to the officers of the Company and the Subsidiaries as it has deemed necessary
or appropriate to conduct its due diligence investigation.
(e) Rule 144. Each Purchaser understands that the Securities must be
held indefinitely unless such Securities are registered under the Securities Act
or an exemption from registration is available. Each Purchaser acknowledges that
such person is familiar with Rule 144 of the rules and regulations of the
Commission, as amended, promulgated pursuant to the Securities Act ("Rule 144"),
and that such Purchaser has been advised that Rule 144 permits resales only
under certain circumstances. Each Purchaser understands that to the extent that
Rule 144 is not available, such Purchaser will be unable to sell any Securities
without either registration under the Securities Act or the existence of another
exemption from such registration requirement.
(f) General. Each Purchaser understands that the Securities are
being offered and sold in reliance on a transactional exemption from the
registration requirements of federal and state securities laws and the Company
is relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of such Purchaser set forth
herein in order to determine the applicability of such exemptions and the
suitability of such Purchaser to acquire the Securities. Each Purchaser
understands that no United States federal or state agency or any government or
governmental agency has passed upon or made any recommendation or endorsement of
the Securities.
(g) No General Solicitation. Each Purchaser acknowledges that the
Securities were not offered to such Purchaser by means of any form of general or
public solicitation or general advertising, or publicly disseminated
advertisements or sales literature, including (i) any advertisement, article,
notice or other communication published in any newspaper, magazine, or similar
media, or broadcast over television or radio, or (ii) any seminar or meeting to
which such Purchaser was invited by any of the foregoing means of
communications. Each Purchaser, in making the decision to purchase the
Securities, has relied upon independent investigation made by it and has not
relied on any information or representations made by third parties.
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(h) Qualified Investor and Suitable Investment. Each Purchaser has
experience in business and financial matters that it is capable of evaluating
the merits and risks of an investment in the Securities. Such Purchaser is not
required to be registered as a broker-dealer under Section 15 of the Exchange
Act and such Purchaser is not a broker-dealer. Each Purchaser acknowledges that
an investment in the Securities is speculative and involves a high degree of
risk.
(i) Certain Fees. The Purchasers have not employed any broker or
finder or incurred any liability for any brokerage or investment banking fees,
commissions, finders' structuring fees, financial advisory fees or other similar
fees in connection with the Transaction Documents.
(j) Independent Investment. No Purchaser has agreed to act with any
other Purchaser for the purpose of acquiring, holding, voting or disposing of
the Securities purchased hereunder for purposes of Section 13(d) under the
Exchange Act, and each Purchaser is acting independently with respect to its
investment in the Securities.
(k) Regulation S Representations.
(1) The Purchaser acknowledges and agrees that the Company
shall, and shall instruct its transfer agent to, refuse to register any transfer
of the Common Stock issued hereunder not made in accordance with the provisions
of Regulation S, pursuant to registration under the U.S. Securities Act of 1933,
or pursuant to an available exemption from registration.
(2) The Purchaser understands and acknowledges that the Shares
have not been registered under the Securities Act of 1933 as amended (the "Act")
and are being offered in reliance upon the exemptions provided in Regulation S
of the Act and the Rules and Regulations adopted thereunder. Accordingly, the
Shares may not be offered or sold in the U.S. or to U.S. persons (as such term
is used in Regulation S) unless the securities are registered under the Act, or
an exemption for the regulation requirements is available. Furthermore, hedging
transactions involving the Shares may not be conducted unless in compliance with
the Act. The Purchaser makes the following representations and warranties to the
Company with the intent that the same may be relied upon in determining the
suitability of the Purchaser as a purchaser of securities:
(3) The Purchaser did not receive the offer for the Company
for the Shares (the "Offer"), nor was he, she or it solicited to purchase the
Shares, in the United States; that this Agreement has not been executed or
delivered by the Purchaser in the United States, and neither the Purchaser nor
any person acting on behalf of the Purchaser has engaged, directly or
indirectly, in any negotiations with respect to the Offer or this Agreement in
the United States;
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(4) The Purchaser is not a U.S. person (i.e., (i) not an
individual resident in the U.S.; (ii) a partnership or corporation organized or
incorporated in the United States; (iii) an estate of which any executor or
administrator is a U.S. person; (iv) a trust of which any trustee is a U.S.
person; (v) a dealer holding an account for a customer; (vi) an agency or branch
of a foreign entity located in the U.S.; or (vii) a partnership or corporation
(A) organized or incorporated under the laws of any foreign jurisdiction and (B)
formed by a U.S. person principally for the purpose of investing in securities
not registered under the U.S. Securities Act and is not acquiring the Shares for
the account or benefit of a U.S. person;
(5) The Purchaser is not purchasing the Shares as a result of
or subsequent to (i) any advertisement, article, notice or other communication
published in any newspaper, magazine or other publication or broadcast over
television or radio in the U.S.; (ii) any promotional seminar or meeting in the
U.S., or (iii) any solicitation by a person not previously known to him or it in
connection with investments in securities generally; and
(6) The Shares have not been registered under the Act or under
any state securities laws and that the Purchaser agrees to transfer his, her or
its Shares in the U.S. or to, or for the account or benefit of, U.S. persons
only if (i) the Shares are duly registered under the Act and all applicable
state securities laws; or (ii) there is an exemption from registration under the
Act, including any exemption from the registration requirements of the Act which
may be available pursuant to Rule 903 or Rule 904 under Regulation S, and all
applicable state securities laws; that prior to any such transfer the Company
may require, as a condition affecting a transfer of the Shares, an opinion of
counsel in form and substance satisfactory to the Company as to the registration
or exemption therefrom under the Act and applicable state securities laws; that
the Company is under no obligation to register the Shares under the U.S.
Securities Act or any applicable state securities laws on its or his or her
behalf or to assist it or him or her in complying with any exemption from such
registration;
(7) Except as distributed by Purchaser in accordance with the
requirements and provisions of Rule 903 of Regulation S (i.e., the Shares may be
allocated and distributed to Purchaser's managed accounts so long as such
distribution is made by Purchaser in the manner specified by Rule 903), the
Shares will be acquired solely for the account of the Purchaser, for investment
purposes only, and not with a view to, or for sale in connection with, any
distribution thereof and with no present intention of distributing or reselling
any part of the Shares.
(8) The Purchaser agrees not to sell, pledge, transfer,
dispose of, or otherwise deal with or engage in hedging transactions involving,
his or her Shares or any portion thereof except as otherwise permitted herein,
unless and until counsel for the Company shall have determined that the intended
disposition or action is permissible and does not violate the Securities Act or
any applicable state securities laws, or the rules and regulations thereunder.
(l) Jurisdiction of Residence. The Purchasers jurisdiction of
residence as set forth on the signature page hereto is true and correct.
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(m) Section 13(d) Compliance. The Purchaser hereby states that
he/she is acquainted with the requirements of Section 13(d) of the Securities
Exchange Act of 1934 and the rules and regulations issued thereunder. The
Purchaser understands that, as a result of its acquisition of Shares, and in
order to comply with Section 13(d) and the rules and regulations issued
thereunder, Purchaser may be required to file a Schedule 13D and hereby agrees
to make such filing if so required and any such filing shall also be subject to
Swiss law.
ARTICLE III
COVENANTS
The Company covenants with each Purchaser as follows, which covenants are
for the benefit of each Purchaser and their respective permitted assignees.
Section 3.1 Securities Compliance.
The Company shall notify the Commission in accordance with its rules and
regulations, of the transactions contemplated by any of the Transaction
Documents and shall take all other necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation, for the legal and
valid issuance of the Securities to the Purchasers, or their respective
subsequent holders.
Section 3.2 Registration and Listing.
The Company shall use its reasonable best efforts to cause its Common Stock to
continue to be registered under Sections 12(b) or 12(g) of the Exchange Act, to
comply in all respects with its reporting and filing obligations under the
Exchange Act, to comply with all requirements related to any registration
statement filed pursuant to this Agreement, and to not take any action or file
any document (whether or not permitted by the Securities Act or the rules
promulgated thereunder) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under the Exchange Act
or Securities Act, except as permitted herein. The Company shall use its
reasonable best efforts to continue the listing or trading of its Common Stock
on the OTC Bulletin Board or any successor market. The Company will promptly
file any required "Listing Application" for, or in connection with, the issuance
and delivery of the Shares and the Warrant Shares.
Section 3.3 Compliance with Laws.
The Company shall comply, and cause each Subsidiary to comply, with all
applicable laws, rules, regulations and orders, noncompliance with which would
be reasonably likely to have a Material Adverse Effect.
Section 3.4 Keeping of Records and Books of Account.
The Company shall keep and cause each Subsidiary to keep adequate records and
books of account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company and
its Subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
13
Section 3.5 Reporting Requirements.
If the Company ceases to file its periodic reports with the Commission, or if
the Commission ceases making these periodic reports available via the Internet
without charge, then the Company shall furnish the following to each Purchaser
so long as such Purchaser shall be obligated hereunder to purchase the
Securities or shall beneficially own Shares or Warrant Shares:
(a) Quarterly Reports filed with the Commission on Form 10-QSB as
soon as available, and in any event within forty-five (45) days after the end of
each of the first three fiscal quarters of the Company;
(b) Annual Reports filed with the Commission on Form 10-KSB as soon
as available, and in any event within ninety (90) days after the end of each
fiscal year of the Company; and
(c) Copies of all notices, information and proxy statements in
connection with any meetings, that are, in each case, provided to holders of
shares of Common Stock, contemporaneously with the delivery of such notices or
information to such holders of Common Stock.
Section 3.6 Other Agreements.
The Company shall not enter into any agreement in which the terms of such
agreement would restrict or impair the right or ability to perform of the
Company or any Subsidiary under any Transaction Document.
Section 3.7 Subsequent Financings; Right of First Refusal.
(a) For a period of ninety (90) days following the effective date of a
registration statement providing for the resale of the Shares and the Warrant
Shares (the "Effectiveness Date"), the Company covenants and agrees that it will
not, without the prior written consent of the holders of a majority of the
Shares outstanding at the time consent is required, enter into any subsequent
offer or sale to, or exchange with (or other type of distribution to), any third
party (a "Subsequent Financing"), of Common Stock or any securities convertible,
exercisable or exchangeable into Common Stock, including convertible debt
securities (collectively, the "Financing Securities"), except for a Permitted
Financing. A "Permitted Financing" shall mean (i) the Company's issuance of
Common Stock and warrants therefore in connection with a merger and/or
acquisition or consolidation, (ii) the issuance of shares of Common Stock or
warrants therefore in connection with strategic license agreements so long as
such issuances are not for the purpose of raising capital, (iii) the Company's
issuance of Common Stock or the issuance or grants of options to purchase Common
Stock pursuant to the Company's stock option plans and employee stock purchase
plans as they now exist, and (iv) the issuance of Common Stock upon the exercise
or conversion of any securities outstanding on the date hereof.
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Section 3.8 Use of Proceeds.
The proceeds from the sale of the Shares will be used by the Company for working
capital and general corporate purposes.
Section 3.9 Reporting Status.
So long as a Purchaser beneficially owns any of the Securities, the Company
shall timely file all reports required to be filed with the Commission pursuant
to the Exchange Act, and the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would permit such termination.
Section 3.10 Disclosure of Transaction.
The Company may issue a press release describing the material terms of the
transactions contemplated hereby (the "Press Release") and file such press
release or similar announcement with the Commission on a Current Report on Form
8-K (the "Form 8-K") describing the material terms of the transactions
contemplated hereby (and attaching as exhibits thereto this Agreement and the
form of each series of Warrant) as soon as practicable following the date of
execution of this Agreement.
Section 3.11 Disclosure of Material Information.
The Company covenants and agrees that neither it nor any other person acting on
its behalf has provided or will provide any Purchaser or its agents or counsel
with any information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that each Purchaser shall be relying on the foregoing
representations in effecting transactions in securities of the Company.
Section 3.12 Pledge of Securities.
The Company acknowledges and agrees that the Securities may be pledged by a
Purchaser in connection with a bona fide margin agreement or other loan or
financing arrangement that is secured by the Common Stock. The pledge of Common
Stock shall not be deemed to be a transfer, sale or assignment of the Common
Stock hereunder, and no Purchaser effecting a pledge of Common Stock shall be
required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement or any other Transaction
Document; provided that a Purchaser and its pledgee shall be required to comply
with the provisions of Article V hereof in order to effect a sale, transfer or
assignment of Common Stock to such pledgee. At the Purchasers' expense, the
Company hereby agrees to execute and deliver such documentation as a pledgee of
the Common Stock may reasonably request in connection with a pledge of the
Common Stock to such pledgee by a Purchaser.
(continued on following page)
15
CONDITIONS
Section 3.13 Conditions Precedent to the Obligation of the Company
to Close and to Sell the Securities.
The obligation hereunder of the Company to close and issue and sell the
Securities to the Purchasers at the Closing is subject to the satisfaction or
waiver, at or before the Closing of the conditions set forth below. These
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion.
(a) Accuracy of the Purchasers' Representations and Warranties. The
representations and warranties of each Purchaser shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.
(b) Performance by the Purchasers. Each Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Purchasers at or prior to the Closing Date.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(d) Delivery of Purchase Price. The Purchase Price for the Shares
shall have been delivered to the Company on the Closing Date.
(e) Delivery of Transaction Documents. The Transaction Documents
shall have been duly executed and delivered by the Purchasers to the Company.
Section 3.14 Conditions Precedent to the Obligation of the
Purchasers to Close and to Purchase the Securities.
The obligation hereunder of the Purchasers to purchase the Securities and
consummate the transactions contemplated by this Agreement is subject to the
satisfaction or waiver, at or before the Closing, of each of the conditions set
forth below. These conditions are for the Purchasers' sole benefit and may be
waived by the Purchasers at any time in their sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each
of the representations and warranties of the Company in this Agreement shall be
true and correct in all material respects as of the Closing Date, except for
representations and warranties that speak as of a particular date, which shall
be true and correct in all material respects as of such date.
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date.
16
(c) No Suspension, Etc. Trading in the Common Stock shall not have
been suspended by the Commission or the OTC Bulletin Board (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the Closing), and, at any time prior to
the Closing Date, trading in securities generally as reported by Bloomberg
Financial Markets ("Bloomberg") shall not have been suspended or limited, or
minimum prices shall not have been established on securities whose trades are
reported by Bloomberg, or on the New York Stock Exchange, nor shall a banking
moratorium have been declared either by the United States or New York State
authorities.
(d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(e) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company or any Subsidiary, or any of the officers, directors or
affiliates of the Company or any Subsidiary seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.
(f) Shares and Warrants. At or prior to the Closing, the Company
shall have delivered to the Purchasers certificates representing the Shares (in
such denominations as each Purchaser may request) and the Warrants.
(g) Secretary's Certificate. The Company shall have delivered to the
Purchasers a secretary's certificate, dated as of the Closing Date, as to (i)
the resolutions adopted by the Board of Directors approving the transactions
contemplated hereby, (ii) the Articles, (iii) the Bylaws, each as in effect at
the Closing, and (iv) the authority and incumbency of the officers of the
Company executing the Transaction Documents and any other documents required to
be executed or delivered in connection therewith.
(h) Officer's Certificate. On the Closing Date, the Company shall
have delivered to the Purchasers a certificate signed by an executive officer on
behalf of the Company, dated as of the Closing Date, confirming the accuracy of
the Company's representations, warranties and covenants as of the Closing Date
and confirming the compliance by the Company with the conditions precedent set
forth in paragraphs (b)-(e) of this Section 4.2 as of the Closing Date (provided
that, with respect to the matters in paragraphs (d) and (e) of this Section 4.2,
such confirmation shall be based on the knowledge of the executive officer after
due inquiry).
(i) Material Adverse Effect. No Material Adverse Effect shall have
occurred at or before the Closing Date.
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ARTICLE IV
CERTIFICATE LEGEND
Section 4.1 Legend.
Each certificate representing the Securities shall be stamped or otherwise
imprinted with legends substantially in the following form (in addition to any
legend required by applicable state securities or "blue sky" laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "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, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED
UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS
OR XL GENERATION INTERNATIONAL INC. SHALL HAVE RECEIVED AN OPINION
OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES
ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS
NOT REQUIRED.
THE SECURITY OR SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE
OFFERED OR SOLD TO ANY PERSON EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. THE HOLDER HEREOF AGREES THAT: (1) IT WILL NOT RESELL OR
OTHERWISE TRANSFER THE SHARES EVIDENCED HEREBY EXCEPT (A) IN AN
OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF
REGULATION S OR (B) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR
ANOTHER THEN AVAILABLE EXEMPTION UNDER THE SECURITIES ACT AND STATE
SECURITIES LAWS OR, (C) IN A TRANSACTION THAT DOES NOT REQUIRE
REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE LAWS,
OR (D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE
EFFECTIVE AT THE TIME OF SUCH TRANSFER); (2) PRIOR TO ANY SUCH
TRANSFER, IT WILL FURNISH TO XL GENERATION INTERNATIONAL INC. AND
THE TRANSFER AGENT FOR THE COMMON STOCK SUCH CERTIFICATIONS, LEGAL
OPINIONS, OR OTHER INFORMATION AS XL GENERATION INTERNATIONAL INC.
OR SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OR STATE SECURITIES LAWS; AND (3) IT WILL DELIVER TO
EACH PERSON TO WHOM THE COMMON STOCK EVIDENCED HEREBY IS TRANSFERRED
A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. FURTHERMORE,
HEDGING TRANSACTIONS INVOLVING THE SECURITIES EVIDENCED HEREBY MAY
NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.
18
The Company agrees to reissue certificates representing any of the Shares
and the Warrant Shares, without the legend set forth above if at such time,
prior to making any transfer of any such Shares or Warrant Shares, such holder
thereof shall give written notice to the Company describing the manner and terms
of such transfer and removal as the Company may reasonably request. Such
proposed transfer and removal will not be effected until: (a) either (i) the
Company has received an opinion of counsel reasonably satisfactory to the
Company, to the effect that the registration of the Shares or Warrant Shares
under the Securities Act is not required in connection with such proposed
transfer, (ii) a registration statement under the Securities Act covering such
proposed disposition has been filed by the Company with the Commission and has
become effective under the Securities Act, (iii) the Company has received other
evidence reasonably satisfactory to the Company that such registration and
qualification under the Securities Act and state securities laws are not
required, or (iv) the holder provides the Company with reasonable assurances
that such security can be sold pursuant to Rule 144 under the Securities Act;
and (b) either (i) the Company has received an opinion of counsel reasonably
satisfactory to the Company, to the effect that registration or qualification
under the securities or "blue sky" laws of any state is not required in
connection with such proposed disposition, or (ii) compliance with applicable
state securities or "blue sky" laws has been effected or a valid exemption
exists with respect thereto. The Company will respond to any such notice from a
holder within five (5) business days. In the case of any proposed transfer under
this Section 5.1, the Company will use reasonable efforts to comply with any
such applicable state securities or "blue sky" laws, but shall in no event be
required, (x) to qualify to do business in any state where it is not then
qualified, (y) to take any action that would subject it to tax or to the general
service of process in any state where it is not then subject, or (z) to comply
with state securities or "blue sky" laws of any state for which registration by
coordination is unavailable to the Company. The restrictions on transfer
contained in this Section 5.1 shall be in addition to, and not by way of
limitation of, any other restrictions on transfer contained in any other section
of this Agreement. Whenever a certificate representing the Shares or Warrant
Shares is required to be issued to a Purchaser without a legend, in lieu of
delivering physical certificates representing the Shares or Warrant Shares,
provided the Company's transfer agent is participating in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer program, the Company shall
use its reasonable best efforts to cause its transfer agent to electronically
transmit the Shares or Warrant Shares to a Purchaser by crediting the account of
such Purchaser's Prime Broker with DTC through its Deposit Withdrawal Agent
Commission ("DWAC") system (to the extent not inconsistent with any provisions
of this Agreement).
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ARTICLE V
INDEMNIFICATION
Section 5.1 General Indemnity.
The Company agrees to indemnify and hold harmless the Purchasers (and their
respective directors, officers, affiliates, agents, successors and assigns) from
and against any and all losses, liabilities, deficiencies, costs, damages and
expenses (including, without limitation, reasonable attorneys' fees, charges and
disbursements) incurred by the Purchasers as a result of any inaccuracy in or
breach of the representations, warranties or covenants made by the Company
herein. Each Purchaser severally but not jointly agrees to indemnify and hold
harmless the Company and its directors, officers, affiliates, agents, successors
and assigns from and against any and all losses, liabilities, deficiencies,
costs, damages and expenses (including, without limitation, reasonable
attorneys' fees, charges and disbursements) incurred by the Company as result of
any inaccuracy in or breach of the representations, warranties or covenants made
by such Purchaser herein. The maximum aggregate liability of each Purchaser
pursuant to its indemnification obligations under this Article VI shall not
exceed the portion of the Purchase Price paid by such Purchaser hereunder.
Section 5.2 Indemnification Procedure.
Any party entitled to indemnification under this Article VI (an "indemnified
party") will give written notice to the indemnifying party of any matters giving
rise to a claim for indemnification; provided, that the failure of any party
entitled to indemnification hereunder to give notice as provided herein shall
not relieve the indemnifying party of its obligations under this Article VI
except to the extent that the indemnifying party is actually prejudiced by such
failure to give notice. In case any such action, proceeding or claim is brought
against an indemnified party in respect of which indemnification is sought
hereunder, the indemnifying party shall be entitled to participate in and,
unless in the reasonable judgment of the indemnifying party a conflict of
interest between it and the indemnified party exists with respect to such
action, proceeding or claim (in which case the indemnifying party shall be
responsible for the reasonable fees and expenses of one separate counsel for the
indemnified parties), to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. In the event that the indemnifying party
advises an indemnified party that it will not contest such a claim for
indemnification hereunder, or fails, within thirty (30) days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise, at its sole cost and expense, any action,
proceeding or claim (or discontinues its defense at any time after it commences
such defense), then the indemnified party may, at its option, defend, settle or
otherwise compromise or pay such action or claim. In any event, unless and until
the indemnifying party elects in writing to assume and does so assume the
defense of any such claim, proceeding or action, the indemnified party's costs
and expenses arising out of the defense, settlement or compromise of any such
action, claim or proceeding shall be losses subject to indemnification
hereunder. The indemnified party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or claim
by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the indemnified party which relates to such
action or claim. The indemnifying party shall keep the indemnified party fully
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. The indemnifying party shall not be liable for any settlement of any
action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article VI to the contrary, the indemnifying
party shall not, without the indemnified party's prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the indemnified party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the indemnified party of a release from all liability in respect of
such claim. The indemnification required by this Article VI shall be made by
periodic payments of the amount thereof during the course of investigation or
defense, as and when bills are received or expense, loss, damage or liability is
incurred, so long as the indemnified party irrevocably agrees to refund such
moneys if it is ultimately determined by a court of competent jurisdiction that
such party was not entitled to indemnification. The indemnity agreements
contained herein shall be in addition to (a) any cause of action or similar
rights of the indemnified party against the indemnifying party or others, and
(b) any liabilities the indemnifying party may be subject to pursuant to the
law.
20
ARTICLE VI
MISCELLANEOUS
Section 6.1 Fees and Expenses.
Each party shall pay the fees and expenses of its advisors, counsel, accountants
and other experts, if any, and all other expenses, incurred by such party
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement; provided, however, that the Company shall pay all actual
attorneys' fees and expenses (including disbursements and out-of-pocket
expenses) incurred by the Purchasers in connection with (i) the preparation,
negotiation, execution and delivery of this Agreement and the transactions
contemplated thereunder, which payment shall be made at Closing and shall not
exceed $15,000 (plus disbursements in an amount not to exceed $5,000), (ii) the
filing and declaration of effectiveness by the Commission of the registration
statement and (iii) any amendments, modifications or waivers of this Agreement
or any of the other Transaction Documents. In addition, the Company shall pay
all reasonable fees and expenses incurred by the Purchasers in connection with
the enforcement of this Agreement or any of the other Transaction Documents,
including, without limitation, all reasonable attorneys' fees and expenses.
Section 6.2 Specific Performance; Consent to Jurisdiction; Venue.
(a) The Company and the Purchasers acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement or the other Transaction Documents were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement or the other Transaction
Documents and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
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(b) The parties agree that venue for any dispute arising under this
Agreement will lie exclusively in the state or federal courts located in New
York, New York, and the parties irrevocably waive any right to raise forum non
conveniens or any other argument that New York is not the proper venue. The
parties irrevocably consent to personal jurisdiction in the state and federal
courts of the state of New York and the laws of such state shall govern hereof
without giving effect to any of the conflicts of law principles which would
result in the application of the substantive law of another jurisdiction. The
Company and each Purchaser consent to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing in
this Section 7.2 shall affect or limit any right to serve process in any other
manner permitted by law. The Company and the Purchasers hereby agree that the
prevailing party in any suit, action or proceeding arising out of or relating to
the Securities, this Agreement, shall be entitled to reimbursement for
reasonable legal fees from the non-prevailing party.
Section 6.3 Entire Agreement; Amendment.
This Agreement and the Transaction Documents supersede the Prior Agreement and
This Agreement and the Transaction Documents hereby contain the entire
understanding and agreement of the parties with respect to the matters covered
hereby and neither the Company nor any Purchaser make any representation,
warranty, covenant or undertaking with respect to such matters, and they
terminate and supersede all prior understandings and agreements with respect to
said subject matter, all of which are merged herein. No provision of this
Agreement may be waived or amended other than by a written instrument signed by
the Company and the Purchasers holding at least a majority of all Shares then
held by the Purchasers. Any amendment or waiver effected in accordance with this
Section 7.3 shall be binding upon each Purchaser (and their permitted assigns)
and the Company.
Section 6.4 Notices.
Any notice, demand, request, waiver or other communication required or permitted
to be given hereunder shall be in writing and shall be effective (a) upon hand
delivery by telecopy or facsimile at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company: XL Generation International Inc.
000 Xxxxx-Xxxxxxx
Xxxxx 00
Xxxxxxxx, Xxxxxx, Xxxxxx, X0X 0X0
Attention: Xxxxx Xxxxxxx, President and CEO
Tel. No.: 0-000-000-0000
Fax No.: 0-000-000-0000
22
with copies (which copies
shall not constitute notice
to the Company) to: Xx. Xxxxxx Xxxxxx, Esq.
WUERSCH & XXXXXX, LLP
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Tel. No.: (000) 000-0000 Fax No.: (212)
509-9559
If to any Purchaser: At the address of such Purchaser set forth on
Exhibit A to this Agreement.
Any party hereto may from time to time change its address for notices by
giving written notice of such changed address to the other party hereto.
Section 6.5 Waivers.
No waiver by either party of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise any
right hereunder in any manner impair the exercise of any such right accruing to
it thereafter.
Section 6.6 Headings.
The article, section and subsection headings in this Agreement are for
convenience only and shall not constitute a part of this Agreement for any other
purpose and shall not be deemed to limit or affect any of the provisions hereof.
Section 6.7 Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns. After the Closing, the assignment by a party to
this Agreement of any rights hereunder shall not affect the obligations of such
party under this Agreement. Subject to Section 5.1 hereof, the Purchasers may
assign the Securities and its rights under this Agreement and the other
Transaction Documents and any other rights hereto and thereto without the
consent of the Company.
Section 6.8 No Third Party Beneficiaries.
This Agreement is intended for the benefit of the parties hereto and their
respective permitted successors and assigns and is not for the benefit of, nor
may any provision hereof be enforced by, any other person, provided, however,
nothing herein shall be construed to prohibit transfers of ownership of the
Shares or Warrants to the extent made in compliance with Rule 903 of Regulation
S or any other applicable Securities Act exemption from registration of the
Shares.
23
Section 6.9 Interpretation.
This Agreement shall not be interpreted or construed with any presumption
against the party causing this Agreement to be drafted.
Section 6.10 Survival.
The representations and warranties of the Company and the Purchasers shall
survive the execution and delivery hereof and the Closing until the second
anniversary of the Closing Date, except the agreements and covenants set forth
in Articles I, III, V, VI and VII of this Agreement shall survive the execution
and delivery hereof and the Closing hereunder.
Section 6.11 Counterparts.
This Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument and shall become effective
when counterparts have been signed by each party and delivered to the other
parties hereto, it being understood that all parties need not sign the same
counterpart.
Section 6.12 Publicity.
The Company agrees that it will not disclose, and will not include in any public
announcement, the names of the Purchasers without the consent of the Purchasers,
which consent shall not be unreasonably withheld or delayed, or unless and until
such disclosure is required by law, rule or applicable regulation, and then only
to the extent of such requirement.
Section 6.13 Severability.
The provisions of this Agreement are severable and, in the event that any court
of competent jurisdiction shall determine that any one or more of the provisions
or part of the provisions contained in this Agreement shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision or part of a
provision of this Agreement and this Agreement shall be reformed and construed
as if such invalid or illegal or unenforceable provision, or part of such
provision, had never been contained herein, so that such provisions would be
valid, legal and enforceable to the maximum extent possible.
Section 6.14 Further Assurances.
From and after the date of this Agreement, upon the request of the Purchasers or
the Company, the Company and each Purchaser shall execute and deliver such
instruments, documents and other writings as may be reasonably necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement and the Warrants.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
24
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date first above
written.
XL GENERATION INTERNATIONAL
By: /s/ Xxxxx Xxxxxxx
---------------------------------------
Name: Xxxxx Xxxxxxx
Title: President
BANK XXX. XXXXXXXXX JR. & CIE.
(SWITZERLAND) LIMITED
By: /s/ Xxxxxxxxxxx X.. Xxxxxx , X. Xxxxxxx
---------------------------------------
Name: X. Xxxxxx, X. Xxxxxxx
Title: Vice Presidents
EXHIBIT A
LIST OF PURCHASERS
NAMES AND ADDRESSES INVESTMENT AMOUNT, NUMBER OF SHARES
OF PURCHASER & WARRANTS PURCHASED
------------ --------------------
1. Bank Xxx. Xxxxxxxxx jr. & Cie. Investment Amount:
(Switzerland) Limited Shares: 300,000
Xxxxxxxxxxxxx 00, Series B Warrant: 600,000
XX-0000
Xxxxxx
Switzerland
Tel: 0 00 00 00 000 0000
Fax: 0 00 00 00 000 0000
Tax ID# Foreign investor
Attention: Xxxxxxxxxxx X. Xxxxxx
2
EXHIBIT B
FORM OF SERIES B WARRANT
3
SCHEDULE 2.1 (c)
Authorized Capital Stock of the Company: 100,000,000 shares
4
SCHEDULE 2.1 (g)
List of subsidiaries:
XL Generation AG
Address : Xxxxxxxxxxxx 00, Xxxxxxxx 0000, XX-0000, Xxx, Xxxxxxxxxxx
5
