COMMON STOCK PURCHASE AGREEMENT Date as of November 1st 2006 by and among ARCH MANAGEMENT SERVICES INC. and THE PURCHASERS LISTED ON EXHIBIT A
COMMON
STOCK PURCHASE
AGREEMENT
Date
as of November 1st
2006
by
and among
ARCH
MANAGEMENT SERVICES INC.
and
THE
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
|
Inspection
Rights
|
13
|
|
Section
3.4
|
Compliance
with Laws
|
13
|
|
Section
3.5
|
Keeping
of Records and Books of Account
|
13
|
|
Section
3.6
|
Reporting
Requirements
|
14
|
|
Section
3.7
|
Other
Agreements
|
14
|
|
Section
3.8
|
Subsequent
Financings; Right of First Refusal
|
14
|
|
Section
3.9
|
Use
of Proceeds
|
16
|
|
Section
3.10
|
Reporting
Status
|
16
|
|
Section
3.11
|
Disclosure
of Transaction
|
16
|
|
Section
3.12
|
Disclosure
of Material Information
|
16
|
|
Section
3.13
|
Pledge
of Securities
|
16
|
|
Section
3.14
|
Registration
Statements
|
17
|
|
ARTICLE
IV
|
Conditions
|
16
|
|
Section
4.1
|
Conditions
Precedent to the Obligation of the Company to Close and to Sell the
Securities
|
16
|
|
Section
4.2
|
Conditions
Precedent to the Obligation of the Purchasers to Close and to Purchase
the
Securities
|
17
|
|
ARTICLE
V
|
Certificate
Legend
|
18
|
|
Section
5.1
|
Legend
|
19
|
|
ARTICLE
VI
|
Indemnification
|
20
|
|
Section
6.1
|
General
Indemnity.
|
20
|
|
Section
6.2
|
Indemnification
Procedure
|
20
|
|
ARTICLE
VII
|
Miscellaneous
|
22
|
|
Section
7.1
|
Fees
and Expenses
|
22
|
|
Section
7.2
|
Specific
Performance; Consent to Jurisdiction; Venue.
|
22
|
|
Section
7.3
|
Entire
Agreement; Amendment
|
23
|
|
Section
7.4
|
Notices
|
23
|
|
Section
7.5
|
Waivers
|
24
|
|
Section
7.6
|
Headings
|
24
|
|
Section
7.7
|
Successors
and Assigns
|
24
|
|
Section
7.8
|
No
Third Party Beneficiaries
|
24
|
TABLE
OF
CONTENTS
(continued)
Page
|
Section
7.9
|
Governing
Law
|
24
|
|
Section
7.10
|
Survival
|
24
|
|
Section
7.11
|
Counterparts
|
24
|
|
Section
7.12
|
Publicity
|
25
|
|
Section
7.13
|
Severability
|
25
|
|
Section
7.14
|
Further
Assurances
|
25
|
This
COMMON STOCK PURCHASE AGREEMENT dated as of November 1st,
2006
(this βAgreementβ)
by and
between Arch Management Services 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 Companyβs common stock, par value $0.001
per share (the βCommon
Stockβ)
by the
Purchasers.
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
approximately 750,000 shares of Common Stock (the βSharesβ)
at a
price per share of $2.00 (the βPer
Share Purchase Priceβ)
for an
aggregate purchase price of $1,500,000 (the βPurchase
Priceβ).
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 D ("Regulation D"), and Regulation S (βRegulation Sβ) 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) Series
A
Warrants, in substantially the form attached hereto as Exhibit
B
(the
"Series
A Warrants"),
to
purchase the number of shares of Common Stock equal to fifty percent of the
number of Shares purchased pursuant to the terms hereof, such amount to be
set
forth opposite such Purchaserβs name on Exhibit
A
attached
hereto. The Warrants shall have an exercise price of $2.50 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 βWarrant
Sharesβ.
The
Shares, the Warrants and the Warrant Shares are sometimes collectively referred
to herein as the βSecuritiesβ.
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 Arch Management Services Inc., 0000 Xxxxx-Xxxxxx, Xxxxx
000, Xxxxxx-Xxxxxx, Xxxxxx, X0X 0X0 (the βClosingβ)
at
11:59 p.m., Montreal time (i) on or before November 1st
, 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 A 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.
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 βCommissionβ))
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, 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 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.
(c) Capitalization.
The
authorized capital stock of the Company as of November 1st,
2006 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 βArticlesβ)
or
Bylaws (the βBylawsβ),
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 registration provisions provided
in
a Registration Rights Agreement).
(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 August 31st,
2006,
and (the "Form
10-QSB")
and
the Form 10-KSB for the fiscal year ended November 30th
, 2005
(the βForm
10-KSBβ)
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.
(h) No
Material Adverse Change.
Since
August 31st,
2006,
the Company has not experienced or suffered any Material Adverse
Effect.
(i) No
Undisclosed Liabilities.
Since
August 31st,
2006,
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
August 31st
2006, 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. 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.
(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 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.
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.
The
Company and each of the Subsidiaries owns or possesses the rights to all
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.
(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. βEnvironmental Lawsβ
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 Companyβs knowledge, the Company has all necessary governmental approvals
required under all Environmental Laws as necessary for the Companyβs business or
the business of any of its subsidiaries. To the best of the Companyβs 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 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.
(t) Transactions
with Affiliates.
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 Companyβs 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 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 (βERISAβ) 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 βemployee pension benefit planβ (within the meaning of
Section 3(2) of ERISA) with respect to which the Company is a βparty in
interestβ (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 βPlanβ shall mean an βemployee pension benefit planβ
(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.
(w) No
Integrated Offering.
N/A
(x) Xxxxxxxx-Xxxxx
Act.
The Company is in substantial compliance with the applicable provisions of
the
Xxxxxxxx-Xxxxx Act of 2002 (the βXxxxxxxx-Xxxxx Actβ), 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
Purchaserβs 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 Purchaserβs 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 Purchaserβs ability to perform its obligations under the
Transaction Documents.
(d) Acquisition
for Investment.
Each
Purchaser is purchasing the Shares and Warrants solely for its own account
for
the purpose of investment and not with a view to or for sale in connection
with
distribution. Each Purchaser does not have a present intention to sell any
of
the Shares or Warrants, nor a present arrangement (whether or not legally
binding) or intention to effect any distribution of any of the Shares or
Warrants to or through any person or entity; 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.
(h) Accredited
Investor.
Each
Purchaser is an βaccredited investorβ (as defined in Rule 501 of Regulation D),
and such Purchaser has such 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
βOfferβ), 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;
(4) The
Purchaser is not a U.S. person (i.e., (i) 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, unless it is organized or incorporated, and owned, by
accredited investors (as defined in Rule 501 under the U.S. Securities Act)
who
are not individuals, estates or trusts), 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
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 except as provided in the Registration Rights
Agreement;
(7) 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.
(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.
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 Intentionally
Omitted.
Section
3.4 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
3.5 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.
Section
3.6 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
3.7 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
3.8 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 βEffectiveness
Dateβ),
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 Companyβs 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 Companyβs issuance of Common Stock or the issuance or grants
of options to purchase Common Stock pursuant to the Companyβs 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.
Section
3.9 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
3.10 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
3.11 Disclosure
of Transaction.
The
Company shall issue a press release describing the material terms of the
transactions contemplated hereby (the βPress
Releaseβ)
on the
day of the Closing; provided,
however,
that if
Closing occurs after 4:00 P.M. Eastern Time on any Trading Day but in no event
later than one hour after the Closing, the Company shall issue the Press Release
no later than 9:00 A.M. Eastern Time on the first Trading Day following the
Closing Date. The Company shall also file with the Commission a Current Report
on Form 8-K (the βForm
8-Kβ)
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 but in no event more than two (2) Trading Days following the date
of
execution of this Agreement, which Press Release and Form 8-K shall be subject
to prior review and comment by the Purchasers. "Trading Day" means any day
during which the principal exchange on which the Common Stock is traded shall
be
open for trading.
Section
3.12 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
3.13 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.
Section
3.14 Registration
Statements.
The
Company may file a registration statement under the Securities Act registering
shares of its equity securities issued in connection with a Permitted Financing
at any time.
ARTICLE
IV
CONDITIONS
Section
4.1 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 Purchasersβ 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
4.2 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 Purchasersβ 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 and the
Registration Rights 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.
(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) Registration
Rights Agreement.
N/A
(j) Material
Adverse Effect.
No
Material Adverse Effect shall have occurred at or before the Closing
Date.
ARTICLE
V
CERTIFICATE
LEGEND
Section
5.1 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 ARCH MANAGEMENT SERVICES 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 ARCH MANAGEMENT
SERVICES 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.
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 βblue skyβ 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).
ARTICLE
VI
INDEMNIFICATION
Section
6.1 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 attorneysβ 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
attorneysβ 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
6.2 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.
ARTICLE
VII
MISCELLANEOUS
Section
7.1 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 (as defined in the Registration Rights
Agreement) 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.
(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.
(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. 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 or this Agreement shall be entitled to
reimbursement for reasonable legal fees from the non-prevailing
party.
Section
7.3 Entire
Agreement; Amendment.
This
Agreement and the Transaction Documents contain the entire understanding and
agreement of the parties with respect to the matters covered hereby and, except
as specifically set forth herein or in the other Transaction Documents, neither
the Company nor any Purchaser make any representation, warranty, covenant or
undertaking with respect to such matters, and they 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
7.4 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:
|
ARCH
MANAGEMENT SERVICES INC.
|
|
|
0000
Xxxxx-Xxxxxx, xxxxx 000
|
||
|
Xxxxxx-Xxxxxx,
Xxxxxx, Xxxxxx
|
||
|
X0X
0X0
|
||
|
Attention:
Xxxxx Xxxxx, President and CEO
|
||
|
Tel.
No.: 000-000-0000
|
||
|
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.: (000) 000-0000
|
||
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
7.5 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
7.6 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
7.7 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
7.8 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.
Section
7.9 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of New York, without giving effect to any of the conflicts
of
law principles which would result in the application of the substantive law
of
another jurisdiction. This
Agreement shall not be interpreted or construed with any presumption against
the
party causing this Agreement to be drafted.
Section
7.10 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
7.11 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
7.12 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
7.13 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
7.14 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]
| ARCH MANAGEMENT SERVICES INC. | ||
| |
|
|
| By: | ||
|
Name: Xxxxx Xxxxx
|
||
| Title: President and CEO | ||
|
Purchaser:
|
||
| By: | ||
|
Name:
|
||
| Title: | ||
EXHIBIT
A
LIST
OF PURCHASERS
|
Names
and Addresses
|
|
Investment
Amount, Number of Shares
|
|
of
Purchaser
|
& Warrants
Purchased
|
|
|
Portu
Finance Inc.
|
Investment
Amount: $500,000
|
|
|
Calle
50
|
Shares:
250 000
|
|
|
No.
102 Edificio Universal
|
Series
A Warrant: 125,000
|
|
|
Panama
City, Republic of Panama
|
||
|
No
Tax ID:
|
||
|
Investment
Amount: $500,000
|
||
|
Shares:
250,000
|
||
|
|
Series
A Warrant: 125,000
|
|
|
No
Tax ID:
|
||
|
Investment
Amount: $500,000
|
||
|
Shares:
250,000
|
||
|
|
Series
A Warrant: 125,000
|
|
|
No
Tax ID:
|
i
EXHIBIT
B
FORM
OF SERIES A WARRANT
EXHIBIT
C
(N\A)
SCHEDULE
2.1 (c)
Authorized
Capital Stock of the Company: 100,000,000 shares
SCHEDULE
2.1 (g)
Joint
Venture:
Hami
Guangdong Industry Processing Zone
Registered
Capital: RMB10,000,000
Investors:
Xinjiang
Wangye Distillery Co., Ltd.
Capital
:
RMB500,000
Guangdong
Kecheng Trade Co., Ltd.
Capital
:
RMB500,000
Arch
Management Services Inc.
Capital:
RMB9,000,000