SUBSCRIPTION AGREEMENT
----------------------
THIS SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of July 30,
2004, by and among XRG, Inc., a Delaware corporation (the "Company"), and the
subscribers identified on the signature page hereto (each a "Subscriber" and
collectively "Subscribers").
WHEREAS, the Company and the Subscribers are executing and delivering
this Agreement in reliance upon an exemption from securities registration
afforded by the provisions of Section 4(2), Section 4(6) and/or Regulation D
("Regulation D") as promulgated by the United States Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"1933 Act").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the
Subscribers, as provided herein, and the Subscribers shall purchase, in the
aggregate, $1,250,000 (the "Purchase Price") of the Company's common stock,
$.001 par value (the "Common Stock" or "Shares"), and share purchase warrants in
the form attached hereto as Exhibit A (the "Warrants"), to purchase shares of
Common Stock (the "Warrant Shares"). The per Share Purchase Price shall be
$0.10, subject to adjustment as described in this Agreement. The Purchase Price
shall be payable to the Company on the Closing Date. The Common Stock, the
Warrants and the Warrant Shares are collectively referred to herein as the
"Securities"; and
WHEREAS, the aggregate proceeds of the sale of the Common Stock and the
Warrants contemplated hereby may be held in escrow pursuant to the terms of a
Funds Escrow Agreement which may be executed by the parties substantially in the
form attached hereto as Exhibit B (the "Escrow Agreement").
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement, the Company and the Subscribers hereby
agree as follows:
1. Purchase and Sale of Shares and Warrants. Subject to the
satisfaction (or waiver) of the conditions to Closing set forth in this
Agreement and the Escrow Agreement, each Subscriber shall purchase the Shares
and Warrants for the portion of the Purchase Price indicated on the signature
page hereto, and the Company shall sell such Shares and Warrants to the
Subscriber. The Purchase Price for the Shares and Warrants shall be paid in
cash. The entire Purchase Price shall be allocated to the Shares.
2. Escrow Arrangements; Form of Payment. Upon execution hereof
by the parties and pursuant to the terms of the Escrow Agreement, each
Subscriber agrees to make the deliveries required of such Subscriber as set
forth in the Escrow Agreement and the Company agrees to make the deliveries
required of the Company as set forth in the Escrow Agreement.
3. Warrants. On the Closing Date the Company will issue
Warrants to the Subscribers. One (1) Warrant will be issued for each four (4)
Shares issued on the Closing Date. The per Warrant Share exercise price to
acquire a Warrant Share upon exercise of a Warrant shall be $0.40. The Warrants
shall be exercisable until five (5) years after the Closing Date.
4. Subscriber's Representations and Warranties. Each
Subscriber hereby represents and warrants to and agrees with the Company only as
to such Subscriber that:
1
(a) Information on Company. The Subscriber has been
furnished with or has had access at the XXXXX Website of the Commission to the
Company's Form 10-KSB for the year ended March 31, 2004 as filed with the
Commission, together with all subsequently filed Forms 10-QSB, 8-K, and filings
made with the Commission available at the XXXXX website (hereinafter referred to
collectively as the "Reports"). In addition, the Subscriber has received in
writing from the Company such other information concerning its operations,
financial condition and other matters as the Subscriber has requested in writing
(such other information is collectively, the "Other Written Information"), and
considered all factors the Subscriber deems material in deciding on the
advisability of investing in the Securities.
(b) Information on Subscriber. The Subscriber is, and
will be at the time of the issuance of the Common Stock and exercise of any of
the Warrants, an "accredited investor", as such term is defined in Regulation D
promulgated by the Commission under the 1933 Act, is experienced in investments
and business matters, has made investments of a speculative nature and has
purchased securities of United States publicly-owned companies in private
placements in the past and, with its representatives, has such knowledge and
experience in financial, tax and other business matters as to enable the
Subscriber to utilize the information made available by the Company to evaluate
the merits and risks of and to make an informed investment decision with respect
to the proposed purchase, which represents a speculative investment. The
Subscriber has the authority and is duly and legally qualified to purchase and
own the Securities. The Subscriber is able to bear the risk of such investment
for an indefinite period and to afford a complete loss thereof. The information
set forth on the signature page hereto regarding the Subscriber is accurate.
(c) Purchase of Common Stock and Warrants. On the
closing date, the Subscriber
will purchase the Common Stock and Warrants as principal for its own account and
not with a view to any distribution thereof.
(d) Compliance with Securities Act. The Subscriber
understands and agrees that the Securities have not been registered under the
1933 Act or any applicable state securities laws, by reason of their issuance in
a transaction that does not require registration under the 1933 Act (based in
part on the accuracy of the representations and warranties of Subscriber
contained herein), and that such Securities must be held indefinitely unless a
subsequent disposition is registered under the 1933 Act or any applicable state
securities laws or is exempt from such registration.
(e) Shares Legend. The Shares and the Warrant Shares
shall bear the following or
similar legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE
SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO XRG, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED."
(f) Warrants Legend. The Warrants shall bear the
following or similar legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. THIS WARRANT AND THE COMMON SHARES
ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
2
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT OR ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO XRG, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
(g) Communication of Offer. The offer to sell the Securities was directly
communicated to the Subscriber by the Company. At no time was the Subscriber
presented with or solicited by any leaflet, newspaper or magazine article, radio
or television advertisement, or any other form of general advertising or
solicited or invited to attend a promotional meeting otherwise than in
connection and concurrently with such communicated offer.
(h) Authority; Enforceability. This Agreement and other agreements
delivered together with this Agreement or in connection herewith have been duly
authorized, executed and delivered by the Subscriber and are valid and binding
agreements enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights generally and
to general principles of equity; and Subscriber has full corporate power and
authority necessary to enter into this Agreement and such other agreements and
to perform its obligations hereunder and under all other agreements entered into
by the Subscriber relating hereto.
(i) Restricted Securities. Subscriber understands that the Securities have
not been registered under the 1933 Act and such Subscriber will not sell, offer
to sell, assign, pledge, hypothecate or otherwise transfer any of the Securities
unless (i) pursuant to an effective registration statement under the 1933 Act,
(ii) such Subscriber provides the Company with an opinion of counsel, in a form
reasonably acceptable to the Company, to the effect that a sale, assignment or
transfer of the Securities may be made without registration under the 1933 Act,
or (iii) Subscriber provides the Company with reasonable assurances (in the form
of seller and broker representation letters) that the Shares or the Warrant
Shares, as the case may be, can be sold pursuant to (A) Rule 144 promulgated
under the 1933 Act, or (B) Rule 144(k) promulgated under the 1933 Act, in each
case following the applicable holding period set forth therein. Notwithstanding
anything to the contrary contained in this Agreement, such Subscriber may
transfer (without restriction and without the need for an opinion of counsel)
the Securities to its Affiliates (as defined below) provided that each such
Affiliate is an "accredited investor" under Regulation D and such Affiliate
agrees to be bound by the terms and conditions of this Agreement.
For the purposes of this Agreement, an "Affiliate" of any specified
Subscriber means any other person or entity directly or indirectly controlling,
controlled by or under direct or indirect common control with such specified
Subscriber. For purposes of this definition, "control" means the power to direct
the management and policies of such person or firm, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise.
(j) No Governmental Review. Each Subscriber understands that no United
States federal or state agency or any other governmental or state agency has
passed on or made recommendations or endorsement of the Securities or the
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.
(k) Correctness of Representations. Each Subscriber represents as to such
Subscriber that the foregoing representations and warranties are true and
3
correct as of the date hereof and, unless a Subscriber otherwise notifies the
Company prior to the Closing Date (as hereinafter defined), shall be true and
correct as of the Closing Date.
(l) Survival. The foregoing representations and warranties shall survive
the Closing Date for a period of two years.
5. Company Representations and Warranties. The Company
represents and warrants to and agrees with each Subscriber that:
(a) Due Incorporation. The Company and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the respective jurisdictions of their incorporation and have the requisite
corporate power to own their properties and to carry on their business as now
being conducted. The Company and each of its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect. For purposes of this
Agreement, a "material adverse effect" shall mean a material adverse effect on
the financial condition, results of operations, properties or business of the
Company taken as a whole.
(b) Outstanding Stock. All issued and outstanding shares of capital stock
of the Company and each of its subsidiaries have been duly authorized and
validly issued and are fully paid and nonassessable.
(c) Authority; Enforceability. This Agreement, the Common Stock, the
Warrants, the Escrow Agreement and any other agreements delivered together with
this Agreement or in connection herewith (collectively "Transaction Documents")
have been duly authorized, executed and delivered by the Company and are valid
and binding agreements enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity. The Company has full corporate
power and authority necessary to enter into and deliver the Transaction
Documents and to perform its obligations thereunder.
(d) Additional Issuances. There are no outstanding agreements or preemptive
or similar rights affecting the Company's common stock or equity and no
outstanding rights, warrants or options to acquire, or instruments convertible
into or exchangeable for, or agreements or understandings with respect to the
sale or issuance of any shares of common stock or equity of the Company or other
equity interest in any of the subsidiaries of the Company except as described in
the Reports.
(e) Consents. No consent, approval, authorization or order of any court,
governmental agency or body or arbitrator having jurisdiction over the Company,
or any of its affiliates, the American Stock Exchange, the National Association
of Securities Dealers, Inc., Nasdaq, SmallCap Market, the OTC Bulletin Board
("Bulletin Board") nor the Company's shareholders is required for the execution
by the Company of the Transaction Documents and compliance and performance by
the Company of its obligations under the Transaction Documents, including,
without limitation, the issuance and sale of the Securities.
(f) No Violation or Conflict. Assuming the representations and warranties
of the Subscribers in Section 4 are true and correct, neither the issuance and
sale of the Securities nor the performance of the Company's obligations under
the Transaction Documents by the Company will:
4
(i) violate, conflict with, result in a breach of, or constitute a default
(or an event which with the giving of notice or the lapse of time or both would
be reasonably likely to constitute a default) under (A) the articles or
certificate of incorporation, charter or bylaws of the Company, (B) to the
Company's knowledge, any decree, judgment, order, law, treaty, rule, regulation
or determination applicable to the Company of any court, governmental agency or
body, or arbitrator having jurisdiction over the Company or any of its
subsidiaries or over the properties or assets of the Company or any of its
affiliates, (C) the terms of any bond, debenture, note or any other evidence of
indebtedness, or any agreement, stock option or other similar plan, indenture,
lease, mortgage, deed of trust or other instrument to which the Company or any
of its affiliates or subsidiaries is a party, by which the Company or any of its
affiliates or subsidiaries is bound, or to which any of the properties of the
Company or any of its affiliates or subsidiaries is subject, or (D) the terms of
any "lock-up" or similar provision of any underwriting or similar agreement to
which the Company, or any of its affiliates or subsidiaries is a party except
the violation, conflict, breach, or default of which would not have a material
adverse effect on the Company; or
(ii) result in the creation or imposition of any lien, charge or
encumbrance upon the Securities or any of the assets of the Company, its
subsidiaries or any of its affiliates; or
(iii) result in the activation of any anti-dilution rights or a reset or
repricing of any debt or security instrument of any other creditor or equity
holder of the Company, nor result in the acceleration of the due date of any
obligation of the Company; or
(iv) result in the activation of any piggy-back registration rights of any
person or entity holding securities of the Company or having the right to
receive securities of the Company.
(g) The Securities. The Securities upon issuance:
(i) are, or will be, free and clear of any security interests, liens,
claims or other encumbrances, subject to restrictions upon transfer under the
1933 Act and any applicable state securities laws;
(ii) have been, or will be, duly and validly authorized and on the date of
issuance of the Shares and upon exercise of the Warrants, the Shares and Warrant
Shares will be duly and validly issued, fully paid and nonassessable (and if
registered pursuant to the 1933 Act, and resold pursuant to an effective
registration statement will be free trading and unrestricted, provided that each
Subscriber complies with the prospectus delivery requirements of the 1933 Act);
(iii) will not have been issued or sold in violation of any preemptive or
other similar rights of the holders of any securities of the Company; and
(iv) will not subject the holders thereof to personal liability by reason
of being such holders.
(h) Litigation. There is no pending or, to the best knowledge of the
Company, threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its affiliates that would affect the execution by the Company or the
5
performance by the Company of its obligations under the Transaction Documents.
Except as disclosed in the Reports, there is no pending or, to the best
knowledge of the Company, basis for or threatened action, suit, proceeding or
investigation before any court, governmental agency or body, or arbitrator
having jurisdiction over the Company, or any of its affiliates which litigation
if adversely determined would have a material adverse effect on the Company.
(i) Reporting Company. The Company is a publicly-held company subject to
reporting obligations pursuant to Section 13 of the Securities Exchange Act of
1934, as amended (the "1934 Act") and has a class of common shares registered
pursuant to Section 12(g) of the 1934 Act. Pursuant to the provisions of the
1934 Act, the Company has timely filed all reports and other materials required
to be filed thereunder with the Commission during the preceding twelve months.
(j) No Market Manipulation. The Company has not taken, and will not take,
directly or indirectly, any action designed to, or that might reasonably be
expected to, cause or result in stabilization or manipulation of the price of
the common stock of the Company to facilitate the sale or resale of the
Securities or affect the price at which the Securities may be issued or resold.
(k) Information Concerning Company. The Reports contain all material
information relating to the Company and its operations and financial condition
as of their respective dates which information is required to be disclosed
therein. Since the date of the financial statements included in the Reports, and
except as modified in the Other Written Information or in the Schedules hereto,
there has been no material adverse change in the Company's business, financial
condition or affairs not disclosed in the Reports. The Reports do not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances when made.
(l) Stop Transfer. The Securities, when issued, will be restricted
securities. The Company will not issue any stop transfer order or other order
impeding the sale, resale or delivery of any of the Securities, except as may be
required by any applicable federal or state securities laws and unless
contemporaneous notice of such instruction is given to the Subscriber.
(m) Defaults. The Company is not in violation of its articles of
incorporation or bylaws. The Company is (i) not in default under or in violation
of any other material agreement or instrument to which it is a party or by which
it or any of its properties are bound or affected, which default or violation
would have a material adverse effect on the Company, (ii) not in default with
respect to any order of any court, arbitrator or governmental body or subject to
or party to any order of any court or governmental authority arising out of any
action, suit or proceeding under any statute or other law respecting antitrust,
monopoly, restraint of trade, unfair competition or similar matters, or (iii) to
its knowledge not in violation of any statute, rule or regulation of any
governmental authority which violation would have a material adverse effect on
the Company.
(n) 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 offer of the Securities pursuant to
this Agreement to be integrated with prior offerings by the Company for purposes
of the 1933 Act or any applicable stockholder approval provisions, including,
without limitation, under the rules and regulations of the Bulletin Board which
if so integrated would eliminate the exemption for the Offering as described in
the second paragraph of this Agreement. The Company will not conduct any
offering other than the transactions contemplated hereby that will be integrated
with the offer or issuance of the Securities which if so integrated would
eliminate the exemption for the Offering as described in the second paragraph of
this Agreement.
6
(o) No General Solicitation. Neither the Company, nor any of its
affiliates, nor to its knowledge, 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 under the 0000 Xxx) in connection with the offer or sale
of the Securities.
(p) Listing. The Company's common stock is quoted on the Bulletin Board.
The Company has not received any oral or written notice that its common stock is
not eligible nor will become ineligible for quotation on the Bulletin Board nor
that its common stock does not meet all requirements for the continuation of
such quotation and the Company satisfies and as of the Closing Date, the Company
will satisfy all the requirements for the continued quotation of its common
stock on the Bulletin Board.
(q) No Undisclosed Liabilities. The Company has no liabilities or
obligations which are material, individually or in the aggregate, which are not
disclosed in the Reports and Other Written Information, other than those
incurred in the ordinary course of the Company's businesses since March 31, 2004
and which, individually or in the aggregate, would reasonably be expected to
have a material adverse effect on the Company's financial condition.
(r) No Undisclosed Events or Circumstances. Since March 31, 2004, no event
or circumstance has occurred or exists with respect to the Company or its
businesses, properties, operations or financial condition, that, under
applicable law, rule or regulation, requires public disclosure or announcement
prior to the date hereof by the Company but which has not been so publicly
announced or disclosed in the Reports.
(s) Capitalization. The authorized and outstanding capital stock of the
Company as of the date of this Agreement and the Closing Date is set forth in
the Reports and Other Written Information. There are no options, warrants, or
rights to subscribe to, securities, rights or obligations convertible into or
exchangeable for or giving any right to subscribe for any shares of capital
stock of the Company except as set forth in the Reports. All of the outstanding
shares of Common Stock of the Company have been duly and validly authorized and
issued and are fully paid and nonassessable.
(t) Correctness of Representations. The Company represents that the
foregoing representations and warranties are true and correct as of the date
hereof in all material respects, and, unless the Company otherwise notifies the
Subscribers prior to the Closing Date, shall be true and correct in all material
respects as of the Closing Date.
(u) Survival. The foregoing representations and warranties shall survive
the Closing Date for a period of two years.
6. Regulation D Offering. The offer and issuance of the Securities to the
Subscribers is being made pursuant to the exemption from the registration
provisions of the 1933 Act afforded by Section 4(2) or Section 4(6) of the 1933
Act and/or Rule 506 of Regulation D promulgated thereunder. On the Closing Date,
the Company will provide an opinion reasonably acceptable to Subscriber from the
Company's legal counsel opining on the availability of an exemption from
registration under the 1933 Act as it relates to the offer and issuance of the
Securities and other matters reasonably requested by Subscribers. A form of the
legal opinion is annexed hereto as Exhibit C. The Company will provide, at the
Company's expense, such other legal opinions in the future as are reasonably
necessary for the resale of the Common Stock and exercise of the Warrants and
resale of the Warrant Shares.
7
7. Finder/Legal Fees.
(a) Finder's Fee. The Company on the one hand, and each Subscriber (for
himself only) on the other hand, agree to indemnify the other against and hold
the other harmless from any and all liabilities to any persons claiming
brokerage commissions or finder's fees other than the parties identified on
Schedule 7 (each a "Finder" and collectively "Finders") on account of services
purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby and
arising out of such party's actions. Anything to the contrary in this Agreement
notwithstanding, each Subscriber is providing indemnification only for such
Subscriber's own actions and not for any action of any other Subscriber. Each
Subscriber's liability hereunder is several and not joint. The Company agrees
that it will pay the Finder a cash finder's fee of nine percent (9%) of the
Purchase Price ("Finder's Fees") directly out of the funds held pursuant to the
Escrow Agreement. The Company represents that there are no other parties
entitled to receive fees, commissions, or similar payments in connection with
the Offering except the Finder.
(b) Finder's Warrants. On the Closing Date, the Company will issue to the
Finder Warrants identical to and carrying the same rights as the Warrants
issuable to the Subscribers ("Finder's Warrants"). The Finder will receive one
(1) Warrant for each Share issued on the Closing Date. Each such Warrant shall
be exercisable at $0.10 per Warrant Share. The Finder will also receive one (1)
Warrant for each ten (10) Warrants issued on the Closing Date. Such Warrants
shall be exercisable at $0.40 per Warrant Share. All the representations,
covenants, warranties, undertakings, remedies, liquidated damages,
indemnification, and other rights including but not limited to registration
rights made or granted to or for the benefit of the Subscribers are hereby also
made by and granted to the Finder in respect of the Finder's Warrants.
(c) Legal Fees. The Company shall pay to Grushko & Xxxxxxx, P.C., a fee of
$5,000 ("Legal Fees") as reimbursement for services rendered to the Subscribers
in connection with this Agreement and the purchase and sale of the Shares and
Warrants (the "Offering") and acting as Escrow Agent for the Offering. The Legal
Fees will be payable on the Closing Date out of funds held pursuant to the
Escrow Agreement.
8. Covenants of the Company. The Company covenants and agrees with the
Subscribers as follows:
(a) Stop Orders. The Company will advise the Subscribers, promptly after it
receives notice of issuance by the Commission, any state securities commission
or any other regulatory authority of any stop order or of any order preventing
or suspending any offering of any securities of the Company, or of the
suspension of the qualification of the Common Stock of the Company for offering
or sale in any jurisdiction, or the initiation of any proceeding for any such
purpose.
(b) Listing. The Company will maintain the listing of its Common Stock on
the American Stock Exchange, Nasdaq SmallCap Market, Nasdaq National Market
System, Bulletin Board, or New York Stock Exchange (whichever of the foregoing
is at the time the principal trading exchange or market for the Common Stock
(the "Principal Market")), and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
Principal Market, as applicable.
(c) Market Regulations. The Company shall notify the Commission, the
Principal Market and applicable state authorities, in accordance with their
requirements, of the transactions contemplated by this Agreement, 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 Subscribers and promptly provide copies thereof to Subscriber.
8
(d) Reporting Requirements. From the date of this Agreement and until the
sooner of (i) two (2) years after the Closing Date, or (ii) until all the Shares
and Warrant Shares have been resold or transferred by all the Subscribers
pursuant to the Registration Statement or pursuant to Rule 144, without regard
to volume limitation, the Company will (v) cause its Common Stock to continue to
be registered under Section 12(b) or 12(g) of the 1934 Act, (x) comply in all
respects with its reporting and filing obligations under the 1934 Act, (y)
comply with all reporting requirements that are applicable to an issuer with a
class of shares registered pursuant to Section 12(b) or 12(g) of the 1934 Act,
as applicable, and (z) comply with all requirements related to any registration
statement filed pursuant to this Agreement. The Company will use its best
efforts not to take any action or file any document (whether or not permitted by
the 1933 Act or the 1934 Act or the rules thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under said acts until two (2) years after the Closing Date. Until
the earlier of the resale of the Common Stock and the Warrant Shares by each
Subscriber or at least two (2) years after the Warrants have been exercised, the
Company will use its best efforts to continue the listing or quotation of the
Common Stock on the Principal Market or other market with the reasonable consent
of Subscribers holding a majority of the Shares and Warrant Shares, and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market. The Company
agrees to timely file a Form D with respect to the Securities if required under
Regulation D and to provide a copy thereof to each Subscriber promptly after
such filing.
(e) Reservation. Prior to the Closing Date, the Company undertakes to
reserve, pro rata, on behalf of each Subscriber and holder of a Warrant, from
its authorized but unissued common stock, a number of common shares equal to the
amount of Warrant Shares issuable upon exercise of the Warrants.
(f) Non-Public Information. The Company covenants and agrees that neither
it nor any other Person acting on its behalf will provide any Subscriber or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Subscriber shall have
agreed in writing to receive such information. The Company understands and
confirms that each Subscriber shall be relying on the foregoing representations
in effecting transactions in securities of the Company.
9. Covenants of the Company and Subscriber Regarding Indemnification.
(a) The Company agrees to indemnify, hold harmless, reimburse and defend
the Subscribers, the Subscribers' officers, directors, agents, affiliates,
control persons, and principal shareholders, against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of any
nature, incurred by or imposed upon the Subscriber or any such person which
results, arises out of or is based upon (i) any material misrepresentation by
Company or breach of any warranty by Company in any of the Transaction
Documents; or (ii) after any applicable notice and/or cure periods, any breach
or default in performance by the Company of any covenant or undertaking to be
performed by the Company under any Transaction Documents other than its
obligations under Section 11 of this Agreement.
(b) Each Subscriber agrees to indemnify, hold harmless, reimburse and
defend the Company and each of the Company's officers, directors, agents,
affiliates, control persons against any claim, cost, expense, liability,
obligation, loss or damage (including reasonable legal fees) of any nature,
incurred by or imposed upon the Company or any such person which results, arises
out of or is based upon (i) any material misrepresentation by such Subscriber in
this Agreement or in any Exhibits or Schedules attached hereto, or other
agreement delivered pursuant hereto; or (ii) after any applicable notice and/or
cure periods, any breach or default in performance by such Subscriber of any
covenant or undertaking to be performed by such Subscriber hereunder, or any
other agreement entered into by the Company and Subscribers, relating hereto.
9
(c) In no event shall the liability of any Subscriber or permitted
successor hereunder or under any other agreement delivered in connection
herewith be greater in amount than the dollar amount of the net proceeds
actually received by such Subscriber upon the sale of Registrable Securities (as
defined herein).
(d) The procedures set forth in Section 10.6 shall apply to the
indemnifications set forth in Sections 9(a) and 9(b) above.
10.1. Registration Rights. The Company shall file with the Commission not
later than September 30, 2004 (the "Filing Date"), and cause to be declared
effective within the sooner of sixty (60) days after the actual filing of the
registration statement or December 31, 2004 (the "Effective Date"), a Form SB-2
registration statement (the "Registration Statement") (or such other form that
it is eligible to use) in order to register the Registrable Securities for
resale and distribution under the 1933 Act. The Company will register not less
than a number of shares of common stock in the aforedescribed registration
statement that is equal to all of the Shares and Warrant Shares issuable
pursuant to this Agreement. The Registrable Securities shall be reserved and set
aside exclusively for the benefit of each Subscriber and Warrant holder, pro
rata, and not issued, employed or reserved for anyone other than each such
Subscriber and Warrant holder. The Registration Statement will immediately be
amended or additional registration statements will be immediately filed by the
Company as necessary to register additional shares of Common Stock to allow the
public resale of all Common Stock included in and issuable by virtue of the
Registrable Securities. Without the written consent of the Subscriber, no
securities of the Company other than the Registrable Securities will be included
in the Registration Statement except as described on Schedule 10.1.
10.2. Registration Procedures. If and whenever the Company is required by
the provisions of Section 10.1 to effect the registration of any Registrable
Securities under the 1933 Act, the Company will, as expeditiously as possible:
(a) subject to the timelines provided in this Agreement, prepare and file
with the Commission a registration statement required by Section 10, with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective for the period of the distribution
contemplated thereby (as herein provided), and promptly provide to the holders
of the Registrable Securities copies of all filings and Commission letters of
comment and notify Subscribers and Grushko & Xxxxxxx, P.C. (by telecopier and by
email to Xxxxxxxxx@xxx.xxx) within two (2) hours of (i) notice that the
Commission has no comments or no further comments on the Registration Statement,
(ii) request by the Company of acceleration of effectiveness of any registration
statement which includes Registrable Securities, and (iii) the declaration of
effectiveness of the registration statement;
(b) prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective until such
registration statement has been effective for a period of two (2) years, and
comply with the provisions of the 1933 Act with respect to the disposition of
all of the Registrable Securities covered by such registration statement in
accordance with the Sellers' intended method of disposition set forth in such
registration statement for such period;
(c) furnish to the Sellers, at the Company's expense, such number of copies
of the registration statement and the prospectus included therein (including
10
each preliminary prospectus) as such persons reasonably may request in order to
facilitate the public sale or their disposition of the securities covered by
such registration statement;
(d) use its best efforts to register or qualify the Sellers' Registrable
Securities covered by such registration statement under the securities or "blue
sky" laws of such jurisdictions as the Sellers shall request in writing,
provided, however, that the Company shall not for any such purpose be required
to qualify generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction;
(e) if applicable, list the Registrable Securities covered by such
registration statement with any securities exchange on which the Common Stock of
the Company is then listed;
(f) immediately notify the Sellers when a prospectus relating thereto is
required to be delivered under the 1933 Act, of the happening of any event of
which the Company has knowledge as a result of which the prospectus contained in
such registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing; and
(g) provided same would not be in violation of the provision of Regulation
FD under the 1934 Act, make available for inspection by the Sellers, and any
attorney, accountant or other agent retained by the Seller or underwriter, all
publicly available, non-confidential financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all publicly available,
non-confidential information reasonably requested by the seller, attorney,
accountant or agent in connection with such registration statement.
10.3. Provision of Documents. In connection with each registration
described in this Section 10, each Subscriber will furnish to the Company in
writing such information and representation letters with respect to itself and
the proposed distribution by it as reasonably shall be necessary in order to
assure compliance with federal and applicable state securities laws.
10.4. Non-Registration Events. The Company and the Subscribers agree that
the Sellers will suffer damages if the Registration Statement is not filed by
the Filing Date and not declared effective by the Commission by the Effective
Date, and maintained in the manner and within the time periods contemplated by
Section 10 hereof, and it would not be feasible to ascertain the extent of such
damages with precision. Accordingly, if (i) the Registration Statement is not
filed on or before the Filing Date, (ii) the Registration Statement is not
declared effective on or before the Effective Date, or (iii) the Registration
Statement is not declared effective within three (3) business days after receipt
by the Company of a written or oral communication from the Commission that the
Registration Statement will not be reviewed or that the Commission has no
further comments, or (iv) the Registration Statement is filed and declared
effective but shall thereafter cease to be effective (without being succeeded
within ten (10) business days by an effective replacement or amended
registration statement) for a period of time which shall exceed 30 days in the
aggregate per year (defined as a period of 365 days commencing on the date the
Registration Statement is declared effective) or more than 20 consecutive days
(each such event referred to in clauses (i), (ii), (iii) and (iv) of this
Section 10.4 is referred to herein as a "Non-Registration Event"), then for each
thirty (30) days of the pendency of such Non-Registration Event, the Company
shall deliver to the holder of Registrable Securities, as Liquidated Damages, an
amount equal to one percent (1%) of the Purchase Price of the Shares and Warrant
Shares owned of record by such holder as of and during the pendency of such
Non-Registration Event which are subject to such Non-Registration Event.
Liquidated Damages payable in connection with an Effective Date related
Non-Registration Event described in Section 10.4(ii) above will be waived if the
11
actual effective date of the Registration Statement occurs within thirty (30)
days after the Effective Date and may not exceed ten percent (10%) in the
aggregate. The Company must pay the Liquidated Damages in cash within ten (10)
days after the end of each thirty (30) day period or shorter part thereof for
which Liquidated Damages are payable. In the event a Registration Statement is
filed by the Filing Date but is withdrawn prior to being declared effective by
the Commission, then such Registration Statement will be deemed to have not been
filed.
10.5. Expenses. All expenses incurred by the Company in complying with
Section 10, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including reasonable counsel
fees) incurred in connection with complying with state securities or "blue sky"
laws, fees of the National Association of Securities Dealers, Inc., transfer
taxes, fees of transfer agents and registrars, costs of insurance are called
"Registration Expenses." All underwriting discounts and selling commissions
applicable to the sale of Registrable Securities, including any fees and
disbursements of any additional counsel to the Seller, are called "Selling
Expenses." The Company will pay all Registration Expenses in connection with the
registration statement under Section 10. Selling Expenses in connection with
each registration statement under Section 10 shall be borne by the Seller and
may be apportioned among the Sellers in proportion to the number of shares sold
by the Seller relative to the number of shares sold under such registration
statement or as all Sellers thereunder may agree. Additionally, the parties
agree that each will be responsible for their respective legal fees in
connection with this transaction.
10.6. Indemnification and Contribution.
(a) In the event of a registration of any Registrable Securities under the
1933 Act pursuant to Section 10, the Company will, to the extent permitted by
law, indemnify and hold harmless the Seller, each officer of the Seller, each
director of the Seller, each underwriter of such Registrable Securities
thereunder and each other person, if any, who controls such Seller or
underwriter within the meaning of the 1933 Act, against any losses, claims,
damages or liabilities, joint or several, to which the Seller, or such
underwriter or controlling person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Registrable Securities was registered under the 1933 Act
pursuant to Section 10, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances when made, and will subject to the provisions of
Section 10.6(c) reimburse the Seller, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable to
the Seller to the extent that any such damages arise out of or are based upon an
untrue statement or omission made in any preliminary prospectus if (i) the
Seller failed to send or deliver a copy of the final prospectus delivered by the
Company to the Seller with or prior to the delivery of written confirmation of
the sale by the Seller to the person asserting the claim from which such damages
arise, (ii) the final prospectus would have corrected such untrue statement or
alleged untrue statement or such omission or alleged omission, or (iii) to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by any such Seller, or
any such controlling person in writing specifically for use in such registration
statement or prospectus.
12
(b) In the event of a registration of any of the Registrable Securities
under the 1933 Act pursuant to Section 10, each Seller severally but not jointly
will, to the extent permitted by law, indemnify and hold harmless the Company,
and each person, if any, who controls the Company within the meaning of the 1933
Act, each officer of the Company who signs the registration statement, each
director of the Company, each underwriter and each person who controls any
underwriter within the meaning of the 1933 Act, against all losses, claims,
damages or liabilities, joint or several, to which the Company or such officer,
director, underwriter or controlling person may become subject under the 1933
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the registration
statement under which such Registrable Securities were registered under the 1933
Act pursuant to Section 10, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and each such officer, director,
underwriter and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action, provided, however, that the Seller will be
liable hereunder in any such case if and only to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with information pertaining to such Seller, as such, furnished
in writing to the Company by such Seller specifically for use in such
registration statement or prospectus, and provided, further, however, that the
liability of the Seller hereunder shall be limited to the net proceeds actually
received by the Seller from the sale of Registrable Securities covered by such
registration statement.
(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 10.6(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 10.6(c), except and only if and to the extent the indemnifying
party is prejudiced by such omission. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this Section 10.6(c) for any legal expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected, provided, however, that, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified parties, as a group, shall have the right to select one
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the reasonable expenses and fees of such
separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution in the event of
joint liability under the 1933 Act in any case in which either (i) a Seller, or
any controlling person of a Seller, makes a claim for indemnification pursuant
to this Section 10.6 but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 10.6 provides for indemnification in such case, or (ii)
contribution under the 1933 Act may be required on the part of the Seller or
controlling person of the Seller in circumstances for which indemnification is
not provided under this Section 10.6; then, and in each such case, the Company
and the Seller will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
13
such proportion so that the Seller is responsible only for the portion
represented by the percentage that the public offering price of its securities
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement, provided, however, that, in
any such case, (y) the Seller will not be required to contribute any amount in
excess of the public offering price of all such securities offered by it
pursuant to such registration statement; and (z) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 0000
Xxx) will be entitled to contribution from any person or entity who was not
guilty of such fraudulent misrepresentation.
10.7. Delivery of Unlegended Shares.
(a) Within five (5) business days (such fifth (5th) business day, the
"Unlegended Shares Delivery Date") after the business day on which the Company
has received (i) a notice that Registrable Securities have been sold either
pursuant to the Registration Statement or Rule 144 under the 1933 Act, (ii) a
representation that the prospectus delivery requirements, or the requirements of
Rule 144, as applicable, have been satisfied, and (iii) the original share
certificates representing the shares of Common Stock that have been sold, and
(iv) in the case of sales under Rule 144, customary representation letters of
the Subscriber and/or Subscriber's broker regarding compliance with the
requirements of Rule 144, the Company at its expense, (y) shall deliver, and
shall cause legal counsel selected by the Company to deliver, to its transfer
agent (with copies to Subscriber) an appropriate instruction and opinion of such
counsel, directing the delivery of shares of Common Stock without any legends
including the legends set forth in Sections 4(e) and 4(f) above, issuable
pursuant to any effective and current Registration Statement described in
Section 10 of this Agreement or pursuant to Rule 144 under the 1933 Act (the
"Unlegended Shares"); and (z) cause the transmission of the certificates
representing the Unlegended Shares together with a legended certificate
representing the balance of the unsold shares of Common Stock, if any, to the
Subscriber at the address specified in the notice of sale, via express courier,
by electronic transfer or otherwise on or before the Unlegended Shares Delivery
Date. Transfer fees shall be the responsibility of the Seller.
(b) In lieu of delivering physical certificates representing the Unlegended
Shares, if the Company's transfer agent is participating in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer program, upon request of a
Subscriber, so long as the certificates therefor do not bear a legend and the
Subscriber is not obligated to return such certificate for the placement of a
legend thereon, the Company shall cause its transfer agent to electronically
transmit the Unlegended Shares by crediting the account of Subscriber's prime
Broker with DTC through its Deposit Withdrawal Agent Commission system. Such
delivery must be made on or before the Unlegended Shares Delivery Date.
11. (a) Favored Nations Provision. Other than in connection with (i)
employee stock options or compensation plans, (ii) as full or partial
consideration in connection with any merger, consolidation or purchase of
substantially all of the securities or assets of any corporation or other
entity, or (iii) as has been described in the Reports or Other Written
Information filed with the Commission or delivered to the Subscribers prior to
the Closing Date (collectively "Excepted Issuances"), if at any time until four
(4) years after the actual effective date of the Registration Statement that a
Subscriber is still holding Shares or Warrant Shares and during the entire
warrant exercise period, if the Company shall offer, issue or agree to issue any
common stock or securities convertible into or exercisable for shares of common
stock (or modify any of the foregoing which may be outstanding at any time prior
to the Closing Date) to any person or entity at a price per share or conversion
14
or exercise price per share which shall be less than the Per Share Purchase
Price, without the consent of each Subscriber holding Shares, then the Company
shall issue, for each such occasion, additional shares of Common Stock to each
Subscriber so that the average Per Share Purchase Price of the shares of Common
Stock issued to the Subscriber (of only the Common Stock or Warrant Shares still
owned by the Subscriber) is equal to such other lower price per share. The
delivery to the Subscriber of the additional shares of Common Stock shall be not
later than the closing date of the transaction giving rise to the requirement to
issue additional shares of Common Stock. The Subscriber is granted the
registration rights described in Section 10 hereof in relation to such
additional shares of Common Stock except that the Filing Date and Effective Date
vis-a-vis such additional common shares shall be, respectively, the sixtieth
(60th) and one hundred and twentieth (120th) date after the closing date giving
rise to the requirement to issue the additional shares of Common Stock. For
purposes of the issuance and adjustment described in this paragraph, the
issuance of any security of the Company carrying the right to convert such
security into shares of Common Stock or of any warrant, right or option to
purchase Common Stock shall result in the issuance of the additional shares of
Common Stock upon the issuance of such convertible security, warrant, right or
option. The rights of the Subscriber set forth in this Section 11 are in
addition to any other rights the Subscriber has pursuant to this Agreement and
any other agreement referred to or entered into in connection herewith.
(d) Maximum Exercise of Rights. In the event the exercise of the rights
described in Section 11(a) would result in the issuance of an amount of common
stock of the Company that would exceed the maximum amount that may be issued to
a Subscriber calculated in the manner described in Section 10 of the Warrant,
then the issuance of such additional shares of common stock of the Company to
such Subscriber will be deferred in whole or in part until such time as such
Subscriber is able to beneficially own such common stock without exceeding the
maximum amount set forth calculated in the manner described in Section 10 of the
Warrant. The determination of when such common stock may be issued shall be made
by each Subscriber as to only such Subscriber.
12. Miscellaneous.
(a) Notices. All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing and, unless
otherwise specified herein, shall be (i) personally served, (ii) deposited in
the mail, registered or certified, return receipt requested, postage prepaid,
(iii) delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, 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: (i) if to the Company, to: XRG Inc., 0000 Xxxxxxx
Xxxxxx, Xxxxx 000, Xxxxx, XX 00000, Attn: Xxxxx X. Xxxxxxx, CEO, telecopier:
(000) 000-0000, with a copy by telecopier only to: Johnson, Pope, Xxxxx, Xxxxxx
& Xxxxx, LLP, 000 Xxxxxxxx Xxxxxx, X.X. Xxx 0000, Xxxxxxxxxx, XX 00000, Attn:
Xxxxxxx Xxxxxx, Esq., telecopier: (000) 000-0000, (ii) if to the Subscribers,
to: the one or more addresses and telecopier numbers indicated on the signature
pages hereto, with an additional copy by telecopier only to: Grushko & Xxxxxxx,
P.C., 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, telecopier number:
(000) 000-0000, and (iii) if to the Finder, to: the one or more addresses and
telecopier numbers indicated on Schedule 7 hereto.
(b) Closing. The consummation of the transactions contemplated herein shall
take place at the offices of Grushko & Xxxxxxx, P.C., 000 Xxxxx Xxxxxx, Xxxxx
0000, Xxx Xxxx, Xxx Xxxx 00000, upon the satisfaction of all conditions to
Closing set forth in this Agreement. The "Closing Date" shall be July 30, 2004
provided all conditions to closing hereunder are satisfied and such deliveries
15
occur on or before August 4, 2004. In the event such requirements and deliveries
are not accomplished on or before August 4, 2004, then any party hereto may void
its obligations under this Agreement and receive back from the Escrow Agent any
deliveries made by it to the Escrow Agent.
(c) Entire Agreement; Assignment. This Agreement and other documents
delivered in connection herewith represent the entire agreement between the
parties hereto with respect to the subject matter hereof and may be amended only
by a writing executed by both parties. Neither the Company nor the Subscribers
have relied on any representations not contained or referred to in this
Agreement and the documents delivered herewith. No right or obligation of either
party shall be assigned by that party without prior notice to and the written
consent of the other party.
(d) Counterparts/Execution. This Agreement may be executed in any number of
counterparts and by the different signatories hereto on separate counterparts,
each of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument. This Agreement
may be executed by facsimile signature and delivered by facsimile transmission.
(e) Law Governing this Agreement. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
principles of conflicts of laws. Any action brought by either party against the
other concerning the transactions contemplated by this Agreement shall be
brought only in the state courts of New York or in the federal courts located in
the state of New York. The parties and the individuals executing this Agreement
and other agreements referred to herein or delivered in connection herewith on
behalf of the Company agree to submit to the jurisdiction of such courts and
waive trial by jury. The prevailing party shall be entitled to recover from the
other party its reasonable attorney's fees and costs. In the event that any
provision of this Agreement or any other agreement delivered in connection
herewith is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
of any agreement.
(f) Specific Enforcement, Consent to Jurisdiction. The Company and
Subscriber acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement 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 and
to enforce specifically the terms and provisions hereof, this being in addition
to any other remedy to which any of them may be entitled by law or equity.
Subject to Section 12(e) hereof, each of the Company, Subscriber and any
signator hereto in his personal capacity hereby waives, and agrees not to assert
in any such suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction in New York of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. Nothing in this Section shall affect or limit
any right to serve process in any other manner permitted by law.
(g) Independent Nature of Subscribers. The Company acknowledges that the
obligations of each Subscriber under the Transaction Documents are several and
not joint with the obligations of any other Subscriber, and no Subscriber shall
be responsible in any way for the performance of the obligations of any other
Subscriber under the Transaction Documents. The Company acknowledges that the
decision of each Subscriber to purchase Securities has been made by such
Subscriber independently of any other Subscriber and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company which may have been made or
given by any other Subscriber or by any agent or employee of any other
Subscriber, and no Subscriber or any of its agents or employees shall have any
liability to any Subscriber (or any other person) relating to or arising from
any such information, materials, statements or opinions. The Company
16
acknowledges that nothing contained in any Transaction Document, and no action
taken by any Subscriber pursuant hereto or thereto (including, but not limited
to, the (i) inclusion of a Subscriber in the SB-2 Registration Statement and
(ii) review by, and consent to, such Registration Statement by a Subscriber)
shall be deemed to constitute the Subscribers as a partnership, an association,
a joint venture or any other kind of entity, or create a presumption that the
Subscribers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. The
Company acknowledges that each Subscriber shall be entitled to independently
protect and enforce its rights, including without limitation, the rights arising
out of the Transaction Documents, and it shall not be necessary for any other
Subscriber to be joined as an additional party in any proceeding for such
purpose. The Company acknowledges that it has elected to provide all Subscribers
with the same terms and Transaction Documents for the convenience of the Company
and not because Company was required or requested to do so by the Subscribers.
The Company acknowledges that such procedure with respect to the Transaction
Documents in no way creates a presumption that the Subscribers are in any way
acting in concert or as a group with respect to the Transaction Documents or the
transactions contemplated thereby.
(h) Equitable Adjustment. The Securities and the purchase prices of
Securities shall be equitably adjusted to offset the effect of stock splits,
stock dividends, and distributions of property or equity interests of the
Company to its shareholders.
[THIS SPACE INTENTIONALLY LEFT BLANK]
17
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (A)
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
XRG, INC.
a Delaware corporation
By:_________________________________
Name:
Title:
Dated: as of July 30, 2004
------------------------------------------------------- --------------------------- --------------------- ------------------------
SUBSCRIBER PURCHASE PRICE SHARES WARRANTS
------------------------------------------------------- --------------------------- --------------------- ------------------------
ALPHA CAPITAL AKTIENGESELLSCHAFT $500,000.00 5,000,000 1,250,000
Xxxxxxxxx 0
0000 Xxxxxxxxxxx
Xxxxx, Lichtenstein
Fax: 000-00-00000000
-------------------------------------
(Signature)
-------------------------------------
Print Name and Title
------------------------------------------------------- --------------------------- --------------------- ------------------------
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (B)
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
XRG, INC.
a Delaware corporation
By:_________________________________
Name:
Title:
Dated: as of July 30, 2004
------------------------------------------------------- --------------------------- --------------------- ------------------------
SUBSCRIBER PURCHASE PRICE SHARES WARRANTS
------------------------------------------------------- --------------------------- --------------------- ------------------------
XXXXXXXXXXX LIMITED PARTNERSHIP $400,000.00 4,000,000 1,000,000
000 Xxxx Xxxxxx Xxxxxxxxx
Xxxxxxx, Xxxxxxx 00X 0X0, Xxxxxx
Fax: (000) 000-0000
-------------------------------------
(Signature)
-------------------------------------
Print Name and Title
------------------------------------------------------- --------------------------- --------------------- ------------------------
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (C)
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
XRG, INC.
a Delaware corporation
By:_________________________________
Name:
Title:
Dated: as of July 30, 2004
------------------------------------------------------- --------------------------- --------------------- ------------------------
SUBSCRIBER PURCHASE PRICE SHARES WARRANTS
------------------------------------------------------- --------------------------- --------------------- ------------------------
WHALEHAVEN CAPITAL, LP $100,000.00 1,000,000 250,000
0xx Xxxxx, 00 Xxx-Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxx XX00
Fax: (000) 000-0000
-------------------------------------
(Signature)
-------------------------------------
Print Name and Title
------------------------------------------------------- --------------------------- --------------------- ------------------------
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (D)
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
XRG, INC.
a Delaware corporation
By:_________________________________
Name:
Title:
Dated: as of July 30, 2004
------------------------------------------------------- --------------------------- --------------------- ------------------------
SUBSCRIBER PURCHASE PRICE SHARES WARRANTS
------------------------------------------------------- --------------------------- --------------------- ------------------------
WHALEHAVEN FUND LIMITED $150,000.00 1,500,000 375,000
0xx Xxxxx, 00 Xxx-Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxx XX00
Fax: (000) 000-0000
-------------------------------------
(Signature)
-------------------------------------
Print Name and Title
------------------------------------------------------- --------------------------- --------------------- ------------------------
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (E)
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
XRG, INC.
a Delaware corporation
By:_________________________________
Name:
Title:
Dated: as of July 30, 2004
------------------------------------------------------- --------------------------- --------------------- ------------------------
SUBSCRIBER PURCHASE PRICE SHARES WARRANTS
------------------------------------------------------- --------------------------- --------------------- ------------------------
GREENWICH GROWTH FUND LIMITED $100,000.00 1,000,000 250,000
0xx Xxxxx, 00 Xxx-Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxx XX00
Fax: (000) 000-0000
-------------------------------------
(Signature)
-------------------------------------
Print Name and Title
------------------------------------------------------- --------------------------- --------------------- ------------------------
LIST OF EXHIBITS AND SCHEDULES
Exhibit A Form of Warrant
Exhibit B Escrow Agreement
Exhibit C Form of Legal Opinion
Schedule 7 Finder
Schedule 10.1 Other Securities to be Registered
SCHEDULE 7
FINDER
JG Capital, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
