COMMON STOCK PURCHASE
AGREEMENT
Date as of November 8th 2005
by and among
XL GENERATION INTERNATIONAL 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
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT dated as of November 8th, 2005 (this
"Agreement") by and between XL Generation International Inc., a Nevada
corporation (the "Company"), and the purchasers listed on Exhibit A attached
hereto (each a "Purchaser" and collectively, the "Purchasers"), for the purchase
and sale of shares of the Company's common stock, par value $0.001 per share
(the "Common Stock") by the Purchasers.
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 3,333,334 shares of Common Stock (the "Shares") at
a price per share of $0.90 (the "Per Share Purchase Price") for an aggregate
purchase price of $3,000,000 (the "Purchase Price"). The Company and the
Purchasers are executing and delivering this Agreement in accordance with and in
reliance upon the exemption from securities registration afforded by Section
4(2) of the U.S. Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act"), including Regulation
D ("Regulation D"), and Regulation S promulgated thereunder. and/or upon such
other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments to be made hereunder.
(b) Upon the following terms and conditions, the Purchasers shall be
issued (i) 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 one hundred percent of the number of Shares purchased pursuant to
the terms hereof, such amount to be set forth opposite such Purchaser's name on
Exhibit A attached hereto. The Warrants shall have an exercise price of $1.25
per Warrant (as defined in the respective Warrant) and shall be exercisable as
stated therein. Any shares of Common Stock issuable upon exercise of the
Warrants (and such shares when issued) are herein referred to as the "Warrant
Shares". The Shares, the Warrants and the Warrant Shares are sometimes
collectively referred to herein as the "Securities".
Purchase Price and Closing. Subject to the terms and conditions hereof, the
Company agrees to issue and sell to the Purchasers and, in consideration of and
in express reliance upon the representations, warranties, covenants, terms and
conditions of this Agreement, the Purchasers, severally but not jointly, agree
to purchase the number of Shares and Warrants, in each case, set forth opposite
their respective names on Exhibit A attached hereto. The closing of the purchase
and sale of the Shares and Warrants to be acquired by the Purchasers from the
Company under this Agreement shall take place at the offices of XL Generation
International Inc., 000 Xx-
0
Xxxxxxx, Xxxxx 00, Xxxxxxxx, xxxxxxxx xx Xxxxxx, Xxxxxx (the "Closing") at 11:59
p.m., Eastern time (i) on or before November 8th, 2005; 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 "Commission")) that would prohibit or otherwise materially interfere with
the ability of the Company from entering into and performing any of its
obligations under the Transaction Documents (as defined below) in any material
respect.
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Warrants and that certain Registration Rights Agreement by and among the Company
and the Purchasers, dated as of the date hereof, substantially in the form of
Exhibit C attached hereto (the "Registration Rights Agreement" and, together
with 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
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the transactions contemplated thereby have been duly and validly authorized by
all necessary corporate action, and, except as set forth on Schedule 2.1(b), no
further consent or authorization of the Company, its Board of Directors or
stockholders is required. When executed and delivered by the Company, each of
the Transaction Documents shall constitute a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, reorganization,
moratorium, liquidation, conservatorship, receivership or similar laws relating
to, or affecting generally the enforcement of, creditor's rights and remedies or
by other equitable principles of general application.
(c) Capitalization. The authorized capital stock of the Company as
of November 8th, 2005 is set forth on Schedule 2.1(c) hereto. All of the
outstanding shares of the Common Stock and any other outstanding security of the
Company have been duly and validly authorized. Except as set forth in this
Agreement and as set forth on Schedule 2.1(c) hereto, no shares of Common Stock
or any other security of the Company are entitled to preemptive rights or
registration rights and there are no outstanding options, warrants, scrip,
rights to subscribe to, call or commitments of any character whatsoever relating
to, or securities or rights convertible into, any shares of capital stock of the
Company. Furthermore, except as set forth in this Agreement and as set forth on
Schedule 2.1(c) hereto, there are no contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional
shares of the capital stock of the Company or options, securities or rights
convertible into shares of capital stock of the Company. Except for customary
transfer restrictions contained in agreements entered into by the Company in
order to sell restricted securities or as provided on Schedule 2.1(c) hereto,
the Company is not a party to or bound by any agreement or understanding
granting registration or anti-dilution rights to any person with respect to any
of its equity or debt securities. Except as set forth on Schedule 2.1(c), the
Company is not a party to, and it has no knowledge of, any agreement or
understanding restricting the voting or transfer of any shares of the capital
stock of the Company.
(d) Issuance of Securities. The Shares and the Warrants to be issued
at the Closing have been duly authorized by all necessary corporate action and,
when paid for and issued in accordance with the terms hereof and the Warrants,
respectively, the Shares and the Warrant Shares will be validly issued, fully
paid and nonassessable and free and clear of all liens, encumbrances and rights
of refusal of any kind and the holders shall be entitled to all rights accorded
to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby, and the issuance of the Securities
as contemplated hereby, do not and will not (i) violate or conflict with any
provision of the Company's Articles of Incorporation (the "Articles") or Bylaws
(the "Bylaws"), each as amended to date, or any Subsidiary's comparable charter
documents, (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries'
respective properties or assets are bound, or (iii) result in a violation of any
federal,
3
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
the 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 July 31st, 2005, January 31, 2005 and October 31, 2004
(collectively, the "Form 10-QSB") and the Form 10-KSB for the fiscal year ended
April 30th , 2005 (the "Form 10-KSB") complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the Commission
promulgated thereunder and other federal, state and local laws, rules and
regulations applicable to such documents, and the Form 10-QSB and Form 10-KSB
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As of their respective dates, the financial statements of the
Company included in the Commission Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the Commission or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the Notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements), and fairly present in all material respects
the financial position of the Company and its Subsidiaries as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(g) Subsidiaries. Schedule 2.1(g) hereto sets forth each Subsidiary
of the Company, showing the jurisdiction of its incorporation or organization
and showing the percentage of each person's ownership of the outstanding stock
or other interests of such Subsidiary. For the purposes of this Agreement,
"Subsidiary" shall mean any corporation or other entity of which at least a
majority of the securities or other ownership interest having
4
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 July 31st, 2005, the Company
has not experienced or suffered any Material Adverse Effect, except as disclosed
on Schedule 2.1(h) hereto.
(i) No Undisclosed Liabilities. Except as disclosed on Schedule
2.1(i) hereto, since July 31st, 2005, neither the Company nor any of its
Subsidiaries has incurred any liabilities, obligations, claims or losses
(whether liquidated or unliquidated, secured or unsecured, absolute, accrued,
contingent or otherwise) other than those incurred in the ordinary course of the
Company's or its Subsidiaries respective businesses or which, individually or in
the aggregate, are not reasonably likely to have a Material Adverse Effect.
(j) No Undisclosed Events or Circumstances. Since July 31st, 2005,
except as disclosed on Schedule 2.1(j) hereto, no event or circumstance has
occurred or exists with respect to the Company or its Subsidiaries or their
respective businesses, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
(k) Actions Pending. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against the Company or any
Subsidiary which questions the validity of this Agreement or any of the other
Transaction Documents or any of the transactions contemplated hereby or thereby
or any action taken or to be taken pursuant hereto or thereto. Except as set
forth on Schedule 2.1(k) hereto, there is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against or involving the
Company, any Subsidiary or any of their respective properties or assets, which
individually or in the aggregate, could reasonably be expected, if adversely
determined, to have a Material Adverse Effect. There are no outstanding orders,
judgments, injunctions, awards or decrees of any court, arbitrator or
governmental or regulatory body against the Company or any Subsidiary or any
officers or directors of the Company or Subsidiary in their capacities as such,
which individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
5
(l) Compliance with Law. The business of the Company and the
Subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except as set forth in the Commission Documents or on Schedule
2.1(l) hereto or such that, individually or in the aggregate, the noncompliance
therewith could not reasonably be expected to have a Material Adverse Effect.
The Company and each of its Subsidiaries have all franchises, permits, licenses,
consents and other governmental or regulatory authorizations and approvals
necessary for the conduct of its business as now being conducted by it unless
the failure to possess such franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
(m) Taxes. The Company and each of the Subsidiaries has accurately
prepared and filed all federal, state and other tax returns required by law to
be filed by it, has paid or made provisions for the payment of all taxes shown
to be due and all additional assessments, and adequate provisions have been and
are reflected in the financial statements of the Company and the Subsidiaries
for all current taxes and other charges to which the Company or any Subsidiary
is subject and which are not currently due and payable. Except as disclosed on
Schedule 2.1(m) hereto, none of the federal income tax returns of the Company or
any Subsidiary have been audited by the Internal Revenue Service. The Company
has no knowledge of any additional assessments, adjustments or contingent tax
liability (whether federal or state) of any nature whatsoever, whether pending
or threatened against the Company or any Subsidiary for any period, nor of any
basis for any such assessment, adjustment or contingency.
(n) Certain Fees. Except as set forth on Schedule 2.1(n) hereto, the
Company has not employed any broker or finder or incurred any liability for any
brokerage or investment banking fees, commissions, finders' structuring fees,
financial advisory fees or other similar fees in connection with the Transaction
Documents.
(o) Disclosure. To the best of the Company's knowledge, neither this
Agreement or the Schedules hereto nor any other documents, certificates or
instruments furnished to the Purchasers by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made herein or therein, in the light
of the circumstances under which they were made herein or therein, not
misleading.
(p) Operation of Business. Except as set forth on Schedule 2.1(p)
hereto, the Company and each of the Subsidiaries owns or possesses the rights to
all patents, trademarks, domain names (whether or not registered) and any
patentable improvements or copyrightable derivative works thereof, websites and
intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations which are necessary for the conduct of
its business as now conducted without any conflict with the rights of others.
(q) Environmental Compliance. The Company and each of its
Subsidiaries have obtained all material approvals, authorization, certificates,
consents, licenses, orders and permits or other similar authorizations of all
governmental authorities, or from any other person, that are required under any
Environmental Laws. "Environmental Laws" shall mean all
6
applicable laws relating to the protection of the environment including, without
limitation, all requirements pertaining to reporting, licensing, permitting,
controlling, investigating or remediating emissions, discharges, releases or
threatened releases of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature, into the air, surface water, groundwater or land, or relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, material or wastes, whether solid, liquid or
gaseous in nature. To the best of the Company's knowledge, the Company has all
necessary governmental approvals required under all Environmental Laws as
necessary for the Company's business or the business of any of its subsidiaries.
To the best of the Company's knowledge, the Company and each of its subsidiaries
are also in compliance with all other limitations, restrictions, conditions,
standards, requirements, schedules and timetables required or imposed under all
Environmental Laws. Except for such instances as would not individually or in
the aggregate have a Material Adverse Effect, there are no past or present
events, conditions, circumstances, incidents, actions or omissions relating to
or in any way affecting the Company or its subsidiaries that violate or may
violate any Environmental Law after the Closing Date or that may give rise to
any environmental liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including without limitation underground
storage tanks), disposal, transport or handling, or the emission, discharge,
release or threatened release of any hazardous substance.
(r) Books and Records; Internal Accounting Controls. The records and
documents of the Company and its Subsidiaries accurately reflect in all material
respects the information relating to the business of the Company and the
Subsidiaries, the location and collection of their assets, and the nature of all
transactions giving rise to the obligations or accounts receivable of the
Company or any Subsidiary. The Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient, in the judgment of the
Company's board of directors, to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate actions are taken
with respect to any differences.
(s) Material Agreements. Except for the Transaction Documents (with
respect to clause (i) only), as disclosed in the Commission Documents or as set
forth on Schedule 2.1(s) hereto, or as would not be reasonably likely to have a
Material Adverse Effect, (i) the Company and each of its Subsidiaries have
performed all obligations required to be performed by them to date under any
written or oral contract, instrument, agreement, commitment, obligation, plan or
arrangement, filed or required to be filed with the Commission (the "Material
Agreements"), (ii) neither the Company nor any of its Subsidiaries has received
any notice of default under any Material Agreement and, (iii) to the best of the
Company's knowledge, neither the Company nor any of its Subsidiaries is in
default under any Material Agreement now in effect.
7
(t) Transactions with Affiliates. Except as set forth on Schedule
2.1(t) hereto, there are no loans, leases, agreements, contracts, royalty
agreements, management contracts or arrangements or other continuing
transactions between (a) the Company, any Subsidiary or any of their respective
customers or suppliers on the one hand, and (b) on the other hand, any officer,
employee, consultant or director of the Company, or any of its Subsidiaries, or
any person owning any capital stock of the Company or any Subsidiary or any
member of the immediate family of such officer, employee, consultant, director
or stockholder or any corporation or other entity controlled by such officer,
employee, consultant, director or stockholder, or a member of the immediate
family of such officer, employee, consultant, director or stockholder which, in
each case, is required to be disclosed in the Commission Documents or in the
Company's most recently filed definitive proxy statement on Schedule 14A, that
is not so disclosed in the Commission Documents or in such proxy statement.
(u) Securities Act of 1933. Based in material part upon the
representations herein of the Purchasers, the Company has complied and will
comply with all applicable federal and state securities laws in connection with
the offer, issuance and sale of the Securities hereunder. Neither the Company
nor anyone acting on its behalf, directly or indirectly, has or will sell, offer
to sell or solicit offers to buy any of the Securities or similar securities to,
or solicit offers with respect thereto from, or enter into any negotiations
relating thereto with, any person, or has taken or will take any action so as to
bring the issuance and sale of any of the Securities under the registration
provisions of the Securities Act and applicable state securities laws, and
neither the Company nor any of its affiliates, nor any person acting on its or
their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act) in
connection with the offer or sale of any of the Securities.
(v) ERISA. No liability to the Pension Benefit Guaranty Corporation
has been incurred with respect to any Plan by the Company or any of its
Subsidiaries which is or would be materially adverse to the Company and its
Subsidiaries. The execution and delivery of this Agreement and the issuance and
sale of the Securities will not involve any transaction which is subject to the
prohibitions of Section 406 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") or in connection with which a tax could be imposed
pursuant to Section 4975 of the Internal Revenue Code of 1986, as amended,
provided that, if any of the Purchasers, or any person or entity that owns a
beneficial interest in any of the Purchasers, is an "employee pension benefit
plan" (within the meaning of Section 3(2) of ERISA) with respect to which the
Company is a "party in interest" (within the meaning of Section 3(14) of ERISA),
the requirements of Sections 407(d)(5) and 408(e) of ERISA, if applicable, are
met. As used in this Section 2.1(aa), the term "Plan" shall mean an "employee
pension benefit plan" (as defined in Section 3 of ERISA) which is or has been
established or maintained, or to which contributions are or have been made, by
the Company or any Subsidiary or by any trade or business, whether or not
incorporated, which, together with the Company or any Subsidiary, is under
common control, as described in Section 414(b) or (c) of the Code.
(w) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the
8
Company for purposes of the Securities Act which would prevent the Company from
selling the Securities pursuant to Regulation D and Rule 506 thereof under the
Securities Act, or any applicable exchange-related stockholder approval
provisions, nor will the Company or any of its affiliates or subsidiaries take
any action or steps that would cause the offering of the Securities to be
integrated with other offerings. The Company does not have any registration
statement pending before the Commission or currently under the Commission's
review.
(x) Xxxxxxxx-Xxxxx Act. The Company is in substantial compliance
with the applicable provisions of the Xxxxxxxx-Xxxxx Act of 2002 (the
"Xxxxxxxx-Xxxxx Act"), and the rules and regulations promulgated thereunder,
that are effective and intends to comply substantially with other applicable
provisions of the Xxxxxxxx-Xxxxx Act, and the rules and regulations promulgated
thereunder, upon the effectiveness of such provisions.
Section 2.2 Representations and Warranties of the Purchasers.
Each of the Purchasers hereby represents and warrants to the Company
with respect solely to itself and not with respect to any other
Purchaser as follows as of the date hereof and as of the Closing
Date:
(a) Organization and Standing of the Purchasers. If the Purchaser is
an entity, such Purchaser is a corporation, limited liability company or
partnership duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization.
(b) Authorization and Power. Each Purchaser has the requisite power
and authority to enter into and perform the Transaction Documents and to
purchase the Securities being sold to it hereunder. The execution, delivery and
performance of the Transaction Documents by each Purchaser and the consummation
by it of the transactions contemplated hereby have been duly authorized by all
necessary corporate or partnership action, and no further consent or
authorization of such Purchaser or its Board of Directors, stockholders, or
partners, as the case may be, is required. When executed and delivered by the
Purchasers, the other Transaction Documents shall constitute valid and binding
obligations of each Purchaser enforceable against such Purchaser in accordance
with their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor's rights and remedies or by other
equitable principles of general application.
(c) No Conflict. The execution, delivery and performance of the
Transaction Documents by the Purchaser and the consummation by the Purchaser of
the transactions contemplated thereby and hereby do not and will not (i) violate
any provision of the Purchaser's charter or organizational documents, (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
mortgage, deed of trust, indenture, note, bond, license, lease agreement,
instrument or obligation to which the Purchaser is a party or by which the
Purchaser's respective properties or assets are bound, or (iii) result in a
violation of any federal, state, local or foreign statute, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Purchaser or by which any property or asset of
the Purchaser are bound or affected, except, in all cases,
9
other than violations pursuant to clauses (i) or (iii) (with respect to federal
and state securities laws) above, except, for such conflicts, defaults,
terminations, amendments, acceleration, cancellations and violations as would
not, individually or in the aggregate, materially and adversely affect the
Purchaser's ability to perform its obligations under the Transaction Documents.
(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
10
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 "accredited investor"
(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 "Offer"), nor was he, she or it solicited to purchase the
Shares, in the United States; that this Agreement has not been executed or
delivered by the Purchaser in the United States, and neither the Purchaser nor
any person acting on behalf of the Purchaser has engaged, directly or
indirectly, in any negotiations with respect to the Offer or this Agreement in
the United States;
(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
11
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
12
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.
13
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 "Effectiveness Date"), the Company covenants
and agrees that it will not, without the prior written consent of
the holders of a majority of the Shares outstanding at the time
consent is required, enter into any subsequent offer or sale to, or
exchange with (or other type of distribution to), any third party (a
"Subsequent Financing"), of Common Stock or any securities
convertible, exercisable or exchangeable into Common Stock,
including convertible debt securities (collectively, the "Financing
Securities"), except for a Permitted Financing. A "Permitted
Financing" shall mean (i) the Company's issuance of Common Stock and
warrants therefore in connection with a merger and/or acquisition or
consolidation, (ii) the issuance of shares of Common Stock or
warrants therefore in connection with strategic license agreements
so long as such issuances are not for the purpose of raising
capital, (iii) the Company's issuance of Common Stock or the
issuance or grants of options to purchase Common Stock pursuant to
the Company's stock option plans and employee stock purchase plans
as they now exist, and (iv) the issuance of Common Stock upon the
exercise or conversion of any securities outstanding on the date
hereof.
14
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 "Press Release") 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 "Form 8-K") describing the material
terms of the transactions contemplated hereby (and attaching as
exhibits thereto this Agreement, the Registration Rights 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
15
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 shall not
file any registration statement under the Securities Act registering
shares of its equity securities until the date that is at least
ninety (90) days following the Effectiveness Date; provided,
however, that 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
following the Effectiveness Date.
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 Purchasers' Representations and Warranties. The
representations and warranties of each Purchaser shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.
(b) Performance by the Purchasers. Each Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Purchasers at or prior to the Closing Date.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(d) Delivery of Purchase Price. The Purchase Price for the Shares
shall have been delivered to the Company on the Closing Date.
(e) Delivery of Transaction Documents. The Transaction Documents
shall have been duly executed and delivered by the Purchasers to the Company.
16
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
Purchasers' sole benefit and may be waived by the Purchasers at any
time in their sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each
of the representations and warranties of the Company in this Agreement 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)
17
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. As of the Closing Date, the
parties shall have entered into the Registration Rights Agreement.
(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 XL GENERATION
INTERNATIONAL INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
THE SECURITY OR SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD TO ANY
PERSON EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. THE HOLDER HEREOF
AGREES THAT: (1) IT WILL NOT RESELL OR OTHERWISE TRANSFER THE SHARES
EVIDENCED HEREBY EXCEPT (A) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE
903 OR
18
RULE 904 OF REGULATION S OR (B) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE)
OR ANOTHER THEN AVAILABLE EXEMPTION UNDER THE SECURITIES ACT AND STATE
SECURITIES LAWS OR, (C) IN A TRANSACTION THAT DOES NOT REQUIRE
REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE LAWS, OR (D)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME
OF SUCH TRANSFER); (2) PRIOR TO ANY SUCH TRANSFER, IT WILL FURNISH TO XL
GENERATION INTERNATIONAL INC. AND THE TRANSFER AGENT FOR THE COMMON STOCK
SUCH CERTIFICATIONS, LEGAL OPINIONS, OR OTHER INFORMATION AS XL GENERATION
INTERNATIONAL INC. OR SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR
IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OR STATE SECURITIES LAWS; AND (3) IT WILL DELIVER TO EACH
PERSON TO WHOM THE COMMON STOCK EVIDENCED HEREBY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. FURTHERMORE, HEDGING
TRANSACTIONS INVOLVING THE SECURITIES EVIDENCED HEREBY MAY NOT BE
CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.
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
19
it is not then qualified, (y) to take any action that would subject it to tax or
to the general service of process in any state where it is not then subject, or
(z) to comply with state securities or "blue sky" laws of any state for which
registration by coordination is unavailable to the Company. The restrictions on
transfer contained in this Section 5.1 shall be in addition to, and not by way
of limitation of, any other restrictions on transfer contained in any other
section of this Agreement. Whenever a certificate representing the Shares or
Warrant Shares is required to be issued to a Purchaser without a legend, in lieu
of delivering physical certificates representing the Shares or Warrant Shares,
provided the Company's transfer agent is participating in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer program, the Company shall
use its reasonable best efforts to cause its transfer agent to electronically
transmit the Shares or Warrant Shares to a Purchaser by crediting the account of
such Purchaser's Prime Broker with DTC through its Deposit Withdrawal Agent
Commission ("DWAC") system (to the extent not inconsistent with any provisions
of this Agreement).
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
attorneys' fees, charges and disbursements) incurred by the
Purchasers as a result of any inaccuracy in or breach of the
representations, warranties or covenants made by the Company herein.
Each Purchaser severally but not jointly agrees to indemnify and
hold harmless the Company and its directors, officers, affiliates,
agents, successors and assigns from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including,
without limitation, reasonable attorneys' fees, charges and
disbursements) incurred by the Company as result of any inaccuracy
in or breach of the representations, warranties or covenants made by
such Purchaser herein. The maximum aggregate liability of each
Purchaser pursuant to its indemnification obligations under this
Article VI shall not exceed the portion of the Purchase Price paid
by such Purchaser hereunder.
Section 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
20
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.
21
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, the Registration Rights 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.
Section 7.2 Specific Performance; Consent to Jurisdiction;
Venue.
(a) The Company and the Purchasers acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement or the other Transaction Documents were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement or the other Transaction
Documents and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
(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, this
Agreement or the Registration Rights Agreement, shall be entitled to
reimbursement for reasonable legal fees from the non-prevailing party.
22
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: XL Generation International Inc.
000 XXXXX-XXXXXXX
Xxxxx 00
Xxxxxxxx, Xxxxxx, Xxxxxx, X0X 0X0
Attention: Xxxxx Xxxxxxx, President and CEO
Tel. No.: 0-000-000-0000
Fax No.: 0-000-000-0000
with copies (which copies
shall not constitute notice
to the Company) to: Xx. Xxxxxx Xxxxxx, Esq.
WUERSCH & XXXXXX, LLP
000, Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Tel. No.: (000) 000-0000 Fax No.: (212)
509-9559
If to any Purchaser: At the address of such Purchaser set forth
on Exhibit A to this Agreement.
Any party hereto may from time to time change its address for notices by
giving written notice of such changed address to the other party hereto.
23
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.
24
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, the Warrants and
the Registration Rights Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
25
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date first above
written.
XL GENERATION INTERNATIONAL
By: /s/ Xxxxxx Xxxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Vice-President
Asset Protection Fund Limited
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title: Director
26
EXHIBIT A
LIST OF PURCHASERS
Names and Addresses Investment Amount, Number of
of Purchasers Shares & Warrants Purchased
1. Capex Investments Limited Investment Amount: $1,000,000
Suite 000, Xx-Xxxxx Xxxxx Shares: 1,111,111
St-Denis Street, Port Louis Series A Warrant: 1,111,111
Republic of Mauritius
No Tax ID: Off Shore Fund
2. Aton Select Fund Limited Investment Amount: $1,000,000
Aeulestrasse 5 Shares: 1,111,111
Postfach 83 Series A Warrant: 1,111,111
FL-9490 Vaduz
Liechtenstein
Tel: 000-000-0000
Fax: 000-000-0000
Tax ID# N/A foreign investor
Attention: Xx. Xxxxxx Xxxxxxx or Xx. Xxxxx
3. Asset Protection Fund Limited Investment Amount: $1,000,000
Aeulestrasse 5 Shares: 1,111,111
Postfach 83 Series A Warrant: 1,111,111
FL-9490 Vaduz
Liechtenstein
Tel: 000-000-0000
Fax: 000-000-0000
Tax ID# N/A foreign investor
Attention: Xx. Xxxxxx Xxxxxxx or Mr. David
EXHIBIT B
FORM OF SERIES A WARRANT
EXHIBIT C
FORM OF REGISTRATION RIGHTS AGREEMENT
SCHEDULE 2.1 (c)
Authorized Capital Stock of the Company: 100,000,000 shares
Securities Allowed to be Included on Registration Statement
DT Crystal Holdings 500,000 shares
