Exhibit 2(4)
INVESTMENT AGREEMENT
THIS AGREEMENT is made as of May 19, 1998 between:
WESTGATE INTERNATIONAL, L.P., a Cayman Islands limited
partnership ("Westgate") and THE LIVERPOOL LIMITED
PARTNERSHIP, a Bermuda limited partnership ("Liverpool")
("collectively the "Investors"),
-- and --
XENOTECH INC., a corporation formed under the laws of Alberta
(the "Corporation").
BACKGROUND
The Corporation and the Investors have agreed to complete a series of
transactions which will result in the financing and recapitalization of the
Corporation, including the following:
A. The Corporation has agreed to issue to the Investors and the Investors
have agreed to purchase from the Corporation an aggregate of 25,000,000
units in the capital of the Corporation, in accordance with the terms
of this Agreement.
B. The Investors have agreed to grant options for the benefit of certain
key members of management of the Corporation over certain securities of
the Corporation held by the Investors, in accordance with the terms of
this Agreement.
C. The Investors have agreed to convert notes in the principal amount of
US$1,500,000 and accrued interest thereon into common shares of the
Corporation, in accordance with the terms of this Agreement.
D. The Corporation has agreed to conduct a Normal Course Issuer Bid
through the facilities of The Alberta Stock Exchange, in accordance
with the terms of this Agreement.
THIS AGREEMENT WITNESSES THAT for good and valuable consideration the parties
agree as follows.
ARTICLE 1.
INTERPRETATION
1.1 DEFINITIONS.
Where used in this Agreement, the following terms have the respective
meanings set out below.
"AGREEMENT" means this investment agreement and all schedules and instruments in
amendment or confirmation of this investment agreement as amended, supplemented
or restated from time to time.
"BUSINESS DAY" means any day of the year, other than a Saturday or Sunday, on
which Canadian chartered banks in Calgary, Alberta are open for business.
"CLOSING" means the completion of the transactions contemplated by this
Agreement.
"CLOSING DATE" means May 19, 1998 or such other date as the parties may agree to
in writing.
"COMMON SHARES" means the common shares in the capital stock of the Corporation.
"CORPORATION" means Xenotech Inc., a corporation incorporated under the laws of
the Province of Alberta.
"CONVERTIBLE NOTES" means the secured promissory notes of the Corporation dated
June 30, 1997 and February 10, 1998 in the aggregate principal amount of
US$1,500,000 issued by the Corporation to the Investors.
"DOCUMENTS" means the Agreement and the Warrant Option Agreement, Share Option
Agreement and Voting and Disposition Agreement.
"FINANCIAL STATEMENTS" means the audited financial statements of the Corporation
(consisting of a balance sheet and accompanying statements of income, retained
earnings and changes in financial position together with all notes to such
statements) prepared for the financial periods of the Corporation ending on June
30, 1997 and the interim unaudited financial statements for the six month period
ended December 31, 1997.
"GAAP" means the generally accepted accounting principles from time to time
approved by the Canadian Institute of Chartered Accountants, or any successor
institute, applicable as at the date on which any calculation or statement is
made, or required to be made, under this Agreement.
"INVESTORS" means Westgate International, L.P., a Cayman Islands limited
partnership and The Liverpool Limited Partnership, a Bermuda limited
partnership.
"LIVERPOOL" means The Liverpool Limited Partnership, a Bermuda limited
partnership.
"MATERIAL" means material to the business of the Corporation and its
subsidiaries taken as a whole.
"MATERIAL ADVERSE EFFECT" means any effect on the business, operations,
properties, prospects, or financial condition of the entity with respect to
which such term is used and which is material and adverse to the financial
condition or business operations of such entity or to other entities controlling
or controlled by such entity, and/or any condition or situation which would
prohibit or otherwise interfere with the ability of the entity with respect to
which said term is used to enter into and perform its obligations under the
Documents.
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"MATURITY DATE" means the date occurring five years following the Closing Date.
"OPTION SHARES" means an aggregate of 5,000,000 common shares in the capital of
the Corporation held by the Investors.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business consistent
with past custom and practice (including with respect to quantity and
frequency).
"SHARE OPTION AGREEMENT" means the agreement between the Investors and Red Reef
Limited concerning the Option Shares, to be dated the Closing Date,
substantially in the form set out in schedule 2.6 as amended, supplemented or
restated from time to time.
"SUBSIDIARIES" means the entities in which the Corporation owns the equity and
other ownership interests set out in schedule 3.1(b).
"TAXES" means all taxes, charges, fees, levies or other assessments, including,
without limitation, all income, capital, franchise, withholding, payroll, use,
goods and services, employment, health, education, excise, business, property or
other taxes, customs duties, surtaxes, anti-dumping and countervail duties,
charges or government imposts of any kind whatsoever, together with any fines,
interest or penalties on, in lieu of, for non-collection of or relating to, such
taxes, charges, fees, levies or assessments or additions thereto imposed by any
federal, provincial, local or foreign government authority.
"TIME OF CLOSING" means 2:00 p.m. (Calgary time) on the Closing Date or such
later time as the Closing may occur.
"UNIT" means a unit in the capital stock of the Corporation being comprised of
one Common Share and one-half of one Warrant.
"WARRANT" means a warrant of the Corporation which entitles the holder to
acquire a Common Share at a price of $0.40 for a period of two years from the
date of issue.
"WARRANT OPTION AGREEMENT" means the agreement between the Investors and Red
Reef Limited concerning the Warrants, to be dated the Closing Date,
substantially in the form set out in schedule 2.5 as amended, supplemented or
restated from time to time.
"WESTGATE" means Westgate International, L.P., a Cayman Island limited
partnership.
1.2 HEADINGS.
Headings shall not affect the interpretation of this Agreement.
1.3 EXTENDED MEANINGS.
Words importing the singular include the plural and vice versa. Words
importing gender shall include the masculine, feminine and neuter genders. Words
importing persons shall include individuals, partnerships, associations, trusts,
unincorporated organizations and corporations.
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1.4 SEVERABILITY.
If any provision of this Agreement is held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not be affected.
1.5 ACCOUNTING TERMS.
All accounting terms not specifically defined in this Agreement shall be
construed in accordance with GAAP.
1.6 AMENDMENT.
No amendment of this Agreement shall be binding unless in writing and
signed by the parties.
1.7 GOVERNING LAW.
This agreement shall be governed by and interpreted in accordance with the laws
of Alberta and the applicable laws of Canada, and the parties hereto attorn to
the jurisdiction of the Courts of the Province of Alberta.
1.8 SCHEDULES.
The following are the schedules attached to and incorporated in this
Agreement:
schedule 2.3 -- Warrant Certificate
schedule 2.4 -- Release and Cancellation Agreement
schedule 2.5 -- Warrant Option Agreement
schedule 2.6 -- Share Option Agreement
schedule 2.7 -- Voting and Disposition Agreement
schedule 2.12 -- Registration Rights Agreement
schedule 3.1(a) -- Constating Documents
schedule 3.1(b) -- Subsidiaries
schedule 3.1(c) -- Foreign Jurisdictions
schedule 3.1(f) -- Options
schedule 3.1(j) -- Intellectual Property
schedule 3.1(m) -- Disclosure Documents
schedule 6.1(g)(vi) -- Opinion of the Corporation's Counsel
schedule 6.1(g)(vii) -- Senior Executive Agreements
1.9 CURRENCY.
All dollar amounts stated herein shall be in Canadian currency, unless
otherwise stated.
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ARTICLE 2.
PRIVATE PLACEMENT AND CONVERSION OF DEBT COMMITMENT
2.1 UNIT PURCHASE AND PURCHASE PRICE.
In accordance with the terms of, and subject to the conditions
contained in, this Agreement, the Investors subscribe for and agree to purchase
from the Corporation, and the Corporation agrees to issue to the Investors,
25,000,000 Units at a price of $0.30 per Unit for an aggregate subscription
price of $7,500,000.
2.2 PAYMENT.
In accordance with the terms of, and subject to the conditions
contained in, this Agreement, the Investors shall pay to the Corporation on the
Closing Date the US dollar equivalent of the subscription price of $7,500,000 by
way of certified cheque, bank draft or wire in favour of the Corporation.
In calculating the US dollar equivalent the parties shall use the
closing exchange rate on the Business Day immediately preceding the Closing
Date, or such other rate as may be mutually agreed by the parties hereto.
2.3 DELIVERY OF UNITS.
On the Closing Date, the Corporation will issue and deliver to the
Investors certificates evidencing a total of 25,000,000 Common Shares and
certificates evidencing a total of 12,500,000 Warrants. The Warrants shall be in
the form attached hereto as Schedule 2.3.
2.4 CONVERSION OF DEBT.
In accordance with the terms of, and subject to the conditions
contained in, this Agreement and the Convertible Notes, on the Closing Date the
Investors shall exercise their right to convert the principal amount outstanding
under the Convertible Notes, and any accrued interest to the Closing Date, to
Common Shares.
In respect thereof, the Investors shall deliver the Conversion Notice
to the Corporation in the prescribed form set out in the Convertible Notes and
the Corporation shall issue certificates evidencing a total of 7,500,000 fully
paid and non-assessable Common Shares to the Investors on the Closing Date in
respect of the conversion of the principal amount of the Convertible Notes, and
shall issue certificates evidencing such additional fully paid and
non-assessable Common Shares in respect of the conversion of the accrued
interest under the Convertible Notes. The number of additional Common Shares
shall be calculated by dividing the total amount of accrued interest to the Date
of Closing by the conversion price of US$0.20 per Common Share.
Upon the issuance and delivery of the said Common Shares, the parties
agree that none of the parties shall have any further rights or obligations in
respect of the conversion of the Convertible Notes.
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On the Closing Date, the parties agree that the Registration Rights
Agreement dated June 30, 1997, as amended and the Pledge Agreement dated June
30, 1997, between the Corporation, Liverpool and Westgate (the "Pledge
Agreement") as amended, shall be deemed to be of no further force and effect and
that all security provided to the Investors pursuant to the terms of the Pledge
Agreement or the Convertible Notes shall be relinquished. On the Closing Date,
the parties shall enter into a Release and Cancellation Agreement substantially
in the form attached hereto as schedule 2.4.
2.5 WARRANT OPTION.
On the Closing Date, the Investors shall execute the Warrant Option
Agreement and thereby grant an option for the benefit of certain key employees
of the Corporation, but not the obligation, to purchase the Warrants at varying
prices in accordance with the terms of the Warrant Option Agreement attached
hereto as schedule 2.5.
2.6 SHARE OPTION.
On the Closing Date, the Investors shall execute the Share Option
Agreement and thereby grant an option for the benefit of certain key employees
of the Corporation, but not the obligation, to purchase the Option Shares in
accordance with the terms of the Share Option Agreement attached hereto as
schedule 2.6.
2.7 VOTING AND DISPOSITION AGREEMENT.
On the Closing Date, the Investors agree to enter into and shall
execute the Voting and Disposition Agreement in the form attached hereto as
schedule 2.7.
2.8 DIRECTORS OF THE CORPORATION.
At any time on or after the Closing Date, subject to the provisions of
the Voting and Disposition Agreement, the Investors shall have the right to
nominate two individuals to the Board of Directors of the Corporation, subject
only to regulatory approval, and the Corporation agrees to take all necessary
action to effect the appointment of such individuals to the Board of Directors.
2.9 NORMAL COURSE ISSUER BID.
The Corporation agrees that subsequent to the Date of Closing that it
will file a Notice of Intention to Make a Normal Course Issuer Bid ("Bid") with
The Alberta Stock Exchange and that it will allocate up to $1,900,000 (the "Bid
Funds") of the funds received hereunder from the sale of Units to acquire Common
Shares pursuant to such bid, at an average price not to exceed $0.50 per Common
Share, unless otherwise agreed by the Investors. The Corporation shall use its
best efforts to obtain the approval of The Alberta Stock Exchange for the Bid,
and thereafter, to complete the Bid in accordance with the agreed upon terms.
The Corporation agrees to segregate the Bid Funds in a separate bank
account or brokerage account for use exclusively to fund the Bid. In the event
that all or a portion of the
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funds have not been expended for the purposes of the Bid on or before December
31, 1998, or such later date as the parties may agree, the balance of the Bid
Funds shall be returned to the general treasury of the Corporation to be used
for general working capital purposes.
The Investors agree not to tender any Common Shares to the Bid, and
the Corporation agrees to use its best efforts to ensure that "insiders" of
the Corporation, as defined by the Securities Act (Alberta) do not tender any
Common Shares to the Bid.
2.10 RIGHTS OF FIRST REFUSAL; PRE-EMPTIVE RIGHTS.
Without limiting the scope of the covenants contained in Article 5, in
the event that while the Investors hold fifty (50%) percent or more the Common
Shares of the Corporation which they will acquire as a result of the
transactions contemplated herein, the Corporation or any Subsidiary desires to
enter into any capital raising transaction or series of transactions other than
Permitted Equity Investments, the Investors shall have a right of first refusal
with respect to such transactions and shall have the right to match the terms of
any bona fide offer with respect thereto received from a third party; provided,
in the case of an offer consisting in whole or in part of consideration other
than cash, the Investors shall have the right to offer the cash equivalent of
such offer. To effect the foregoing, the Corporation shall provide written
notice of the terms of such proposed transaction to the Investors promptly
following receipt of such offer. The Investors may then exercise their right to
match by issuing a written counternotice of their intention to do so within 30
days of receipt of the notice from the Corporation and the consummation of such
counteroffer shall occur by the later of (i) the time provided by the original
bona fide third party offer or (ii) 30 days from the receipt of the Investors'
counteroffer.
For the purposes of this Article 2.10, Permitted Equity Investment
shall mean (i) a sale of Common Shares to an individual or group of individuals,
which sale shall not, when aggregated with any other such sales, exceed 9.9% of
the Common Shares outstanding on the date hereof; (ii) a sale of equity of a
newly created subsidiary of the Corporation to an individual or group of
individuals in an amount not to exceed 50% of the equity of such newly created
subsidiary, or 50% of the Corporation's ownership interest in such newly created
subsidiary if it is a joint venture; and/or (iii) a public sale of Common Shares
pursuant to a prospectus document.
2.11 CONSOLIDATION.
Immediately following Closing, subject only to regulatory approval and
any further agreement between the parties, the Corporation shall take all
necessary action and use its best efforts to obtain all necessary approvals,
including the approval of shareholders of the Corporation, to consolidate its
issued and outstanding capital such that shareholders receive one common share
of the Corporation for each five common shares held.
2.12 NASDAQ LISTING; REGISTRATION RIGHTS.
The Corporation agrees to make application at the earliest practicable
date to have the Common Shares listed on either (i) the NASDAQ National Market
("NNM") or (ii) the NASDAQ Small Cap Market ("NASDAQ Small Cap"), and shall take
all actions within its power and use its
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best efforts to have the Common Shares, not later than December 31, 1999: (i)
registered under the U.S. Securities Exchange Act of 1934, as amended and the
rules promulgated thereunder; and (ii) listed and trading on the NNM or the
NASDAQ Small Cap.
On the Closing Date, the parties agree to execute the Registration
Rights Agreement in the form attached hereto as schedule 2.12.
2.13 EMPLOYMENT AGREEMENTS.
On or before the Time of Closing, the Corporation shall enter into
employment contracts with Messrs. Xxxxxxxx and Xxxxx, substantially in the form
attached hereto as schedule 6.1(g)(vii).
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
3.1 REPRESENTATIONS AND WARRANTIES OF THE CORPORATION.
The Corporation represents and warrants to the Investors as set out
below and acknowledges and confirms that the Investors are relying upon such
representations and warranties in connection with the transactions contemplated
herein.
(a) ORGANIZATION; GOOD STANDING. The Corporation is duly organized, validly
existing and in good standing under the laws of the Province of Alberta
and has all requisite corporate power and authority to carry on its
business as now conducted. Attached as Exhibit 3.l(a) hereto are copies
of the constating documents of the Corporation.
(b) SUBSIDIARIES. Each direct or indirect subsidiary of the Corporation
(each a "Subsidiary" and collectively, the "Subsidiaries") is a
corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation. Attached as Schedule
3.1(b) is a list of all Subsidiaries, indicating domiciles and
jurisdictions of organization.
(c) FOREIGN QUALIFICATION; OFFICES. The Corporation and each Subsidiary is
duly qualified and in good standing as a foreign corporation authorized
to do business in each jurisdiction (other than its jurisdiction of
organization) in which the nature of its activities or the character of
the properties it owns or leases makes such qualification necessary.
Set forth in Schedule 3.1(c) is a list of all foreign jurisdictions
where business is conducted by the Corporation or any Subsidiary and
where the Corporation or any Subsidiary is qualified as a foreign
corporation. The Corporation has its principal offices at 1600, 000 -
0xx Xxxxxx X.X., Xxxxxxx, Xxxxxxx, Xxxxxx, X0X 0X0. The Corporation and
Investors understand and agree that Xenotech USA, Inc. cannot register
to conduct business in California until it changes its corporate name.
(d) AUTHORIZATION; ENFORCEABILITY. (i) The Corporation and its Subsidiaries
each have the requisite corporate power and authority to enter into and
perform the Documents to which
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it is a party; (ii) the execution, issuance, delivery and performance
of the Documents have been, or shall have been prior to the Closing
Date, duly authorized by all necessary corporate action, and no further
consent or authorization of its or the Subsidiaries' Board of Directors
or shareholders is, or will be, prior to the Closing Date, required;
(iii) the Documents have been duly executed and delivered by it or the
Subsidiaries, as the case may be; (iv) the Documents to which it is a
party are valid and binding obligations enforceable against it in
accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws relating
to, or affecting generally the enforcement of, creditors' rights and
remedies, or by other equitable principles of general application; and
(v) the Documents to which each Subsidiary is a party are such
Subsidiary's valid and binding obligations enforceable against such
Subsidiary in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws relating to, or affecting generally the enforcement of,
creditors' rights and remedies, or by other equitable principles of
general application.
(e) NON-CONTRAVENTION. The execution, delivery and performance of the
Documents by the Corporation and by the Subsidiaries and the
consummation by them of the transactions contemplated hereby and
thereby, do not and will not (i) result in a violation of the articles
of incorporation or certificate of organization, as applicable, or
by-laws or other organizational or constating documents of the
Corporation or the Subsidiaries; (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 Material agreement,
indenture or instrument to which it or any Subsidiary is a party; or
(iii) result in violation of any applicable law, rule, regulation,
order, judgment or decree applicable to it or any Subsidiary or by
which any of its property or assets or the property or assets of any
Subsidiary is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a Material Adverse
Effect).
(f) CAPITALIZATION. The Corporation has an authorized capitalization
consisting of (i) an unlimited number of Common Shares of which
49,392,683 shares are outstanding, (ii) an unlimited number of
non-voting first preferred shares, none of which are outstanding; and
(iii) an unlimited number of non-voting second preferred shares, none
of which are outstanding. All of the issued and outstanding Common
Shares have been duly and validly authorized and issued and are fully
paid and non-assessable. Except as set forth in Schedule 3.1(f), there
are no options, warrants, convertible securities, contracts or other
rights to purchase, exchange or convert into, any shares of capital
stock of the Corporation nor any voting trust or arrangements relating
thereto. Upon conversion of the Convertible Notes for Common Shares,
and upon exercise of the Warrants for Common Shares issuable upon such
exercise ("Warrant Shares"), the Common Shares so issued will be duly
and validly authorized and issued, fully paid and non-assessable. All
outstanding shares of capital stock of the Subsidiaries are owned by
the Corporation, free and clear of any liens, claims, charges, options,
or other encumbrances other than the pledge pursuant to the Pledge
Agreement (as defined in Section 2.4).
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(g) RESERVATION OF SHARES. The Common Shares issuable pursuant to the
purchase and sale of Units, including the Common Shares issuable on
exercise of the Warrants, have been duly reserved by the Corporation.
(h) CONSENTS; FILINGS. Other than the approval of the Alberta Stock
Exchange of the transactions contemplated by the Documents, there are
no other consents, filings, authorizations or orders required under any
applicable law, rule or regulation in the United States or Canada, in
order for the Corporation to execute, deliver and perform any of its
obligations under the Documents, including without limitation, any
filing under the U.S. Hard-Xxxxx-Xxxxxx Antitrusts Improvement Act of
1976, as amended, or any Form 20 filing in the Province of Alberta.
(i) TITLE TO ASSETS. It and each Subsidiary has record or registered title
in fee simple to, or valid and subsisting leasehold interests in, all
of its real property and good title to all of its personal property,
and none of such property is subject to any lien, claim, option, charge
or encumbrance of any nature, with the exception of encumbrances
created pursuant to the Pledge Agreement.
(j) INTELLECTUAL PROPERTY. The Corporation (and/or the Subsidiaries) owns
or has licenses to use certain patents, copyrights and trademarks
("Intellectual Property") associated with its business, which are set
forth on Schedule 3.1(j). The Corporation and the Subsidiaries have no
reason to believe that the Intellectual Property rights which it owns
are invalid or unenforceable or that the use of such Intellectual
Property by the Corporation or its Subsidiaries infringes upon or
conflicts with any right of any third party, and neither the
Corporation nor any Subsidiaries has received notice of any such
infringement or conflict. The Corporation and the Subsidiaries have no
knowledge of any infringement of their Intellectual Property by any
third party. Notwithstanding the above, the Corporation has received
notice that its corporate name, "Xenotech", may not be registerable in
some or all of the states in the United States.
(k) LEGAL COMPLIANCE; SECURITIES LAW. Its business (and the business of the
Subsidiaries) is not being conducted in violation of any applicable
law, ordinance or regulation of any governmental entity in which it is
incorporated, domiciled, or conducts business, except for possible
violations which either singly or in the aggregate do not and will not
have a Material Adverse Effect. In respect of the sale of the Units
hereunder, there has been no advertisement of the Units and no selling
or promotional expenses have been paid or incurred in connection
therewith. Without limiting the generality of the foregoing, the
Corporation is a reporting issuer not in default of any requirement of
the SECURITIES ACT (Alberta), or of any requirements of the Alberta
Stock Exchange.
(l) NO LITIGATION. There is no litigation, investigation or proceeding of
or before any arbitrator, court or other governmental authority
pending, or to its best knowledge, threatened by or against the
Corporation, any Subsidiaries or against any of their respective
properties or revenues which could have a Material Adverse Effect.
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(m) DISCLOSURE DOCUMENTS; FINANCIAL STATEMENTS. The Common Shares are
listed for trading on the Alberta Stock Exchange and the Corporation
has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the Alberta Stock Exchange, the Alberta
Securities Commission, or pursuant to any applicable law, rule or
regulation. The Corporation has delivered or made available to the
Purchaser true and complete copies of all such documents, together with
all reports distributed to shareholders (collectively "Disclosure
Documents") filed or distributed since December 31, 1994; such
documents are listed on Schedule 3.1(m). As of their respective dates,
the Disclosure Documents complied in all material respects with the
requirements of applicable law, rules and regulations, and none of the
Disclosure Documents contained any untrue statement of a material fact
or omitted 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. The financial
statements of the Corporation included in the Disclosure Documents
comply as to form in all material respects with applicable accounting
requirements and applicable rules and regulations. Such financial
statements have been prepared in accordance with Canadian GAAP applied
on a consistent basis during the periods involved, and fairly present
in all material respects the financial position of the Corporation 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).
(n) NO MATERIAL ADVERSE CHANGE. Since June 30, 1997, the date through which
the most recent annual questionnaire has been prepared and filed with
the Alberta Stock Exchange, a copy of which is included in the
Disclosure Documents, no change which would have a Material Adverse
Effect has occurred or exists with respect to the Corporation or the
Subsidiaries.
(o) NO UNDISCLOSED LIABILITIES. The Corporation and the Subsidiaries have
no liabilities or obligations not disclosed in the Disclosure
Documents, other than those liabilities incurred in the Ordinary Course
of Business since June 30, 1997, which liabilities, individually or in
the aggregate, do not or would not have a Material Adverse Effect on
the Corporation or the Subsidiaries.
(p) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. No event or circumstance has
occurred or exists with respect to the Corporation or the Subsidiaries
or their respective businesses, properties, prospects, operations or
financial conditions, which under applicable law, rule or regulation,
requires public disclosure or announcement by the Corporation but which
has not been so publicly announced or disclosed. The Corporation has
not disclosed to the Investors any material information regarding it or
its Subsidiaries which has not been publically disclosed.
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ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
4.1 REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
The Investors severally and not jointly represent and warrant to the
Corporation as set out below and acknowledge and confirm that the Corporation is
relying upon such representations and warranties in entering into and performing
the Corporation's obligations under the Documents.
(a) DUE ORGANIZATION. The Investors are limited partnerships which have
been duly created and organized and are validly subsisting in good
standing under the laws of the jurisdictions in which they were
organized and have the full power and authority to enter into and
perform their obligations under this Agreement. The term "good
standing" in this section means that (i) the Investors have not been
discontinued or dissolved under the laws of the jurisdiction in which
they were organized, (ii) no steps or proceedings have been taken to
authorize or require such discontinuance or dissolution, and (iii) the
Investors have submitted to each relevant government authority all
notices, or returns of corporate information, and all other filings
required by law to be submitted to each such authority.
(b) AUTHORITY. The execution, delivery and performance by the Investors of
this Agreement (i) have been duly authorized by all necessary action,
(ii) do not and will not contravene, violate or conflict with any
provision of the constating documents of the Investors or any provision
of existing law or regulation or order of any government authority or
of any court having jurisdiction over the Investors, and (iii) do not
and will not conflict with, result in breach of, constitute a default
under, require a consent under, or result in the creation of, any lien,
charge or encumbrance upon the property of the Investors pursuant to
any indenture, contract, bank or credit agreement, mortgage or other
agreement or instrument to which an Investor is a parry.
(c) PURCHASE FOR OWN ACCOUNT. Each Investor hereby represents, warrants,
and agrees that the Units are being acquired for its own account and
for investment and not with a view to resale or distribution.
(d) RESIDENCY. Each Investor represents that it is not a resident of
Canada.
(e) RESTRICTIONS ON RESALE. No Investor will offer to sell or sell the
Common Shares and Warrants prior to the expiration of the period ending
90 days from the date such securities are acquired (the "Restricted
Period"), to a person in Canada or to any other person for the account
or benefit of a person in Canada, except for offers or sales of such
securities on a basis in compliance with or exempt from the
registration requirements, and in compliance with or exempt from the
prospectus preparation and filing requirements, of applicable Canadian
securities laws. Each Investor agrees to require each person who
purchases any such securities from such Investor prior to the
expiration of the Restricted
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Period to agree that by purchasing such securities, such buyer
represents and agrees that it will comply with the restrictions on
offers and sales set forth above and will require of any other
purchaser to whom it sells such securities a notice containing
substantially the same statement. For purposes hereof, the Restricted
Period for the Common Shares and Warrants shall be deemed to have
commenced upon the acquisition of the said Common Shares and Warrants.
Each Investor further agrees not to sell Common Shares or Warrants in
the US or to persons resident in the US except in transactions which
satisfy all applicable US federal and state securities laws and as to
which the Corporation has received an opinion of counsel satisfactory
to it regarding compliance with applicable US federal securities laws.
Each Investor agrees to require each person who purchases any such
securities from such Investor prior to the expiration of the Restricted
Period to agree that by purchasing such securities, such buyer
represents and agrees that it will comply with the restrictions on
offers and sales set forth above and will require of any other
purchaser to whom it sells such securities a notice containing
substantially the same statement.
(f) ENFORCEABILITY OF AGREEMENT. This Agreement constitutes a valid
and binding obligation of each of the Investors enforceable against
it in accordance with the Agreement's terms, except, as such
enforcement may be limited by applicable bankruptcy, insolvency, or
similar laws relating to, or affecting generally the enforcement of,
creditors rights and remedies, or by other equitable principles of
general application.
ARTICLE 5
COVENANTS OF THE CORPORATION
5.1 AFFIRMATIVE COVENANTS.
The Corporation covenants that from the date hereof until the date that
the Common Shares are listed and trading on the NNM or the NASDAQ Small Cap, it
will (and will cause each of the Subsidiaries to) observe or perform the
following:
(a) CORPORATE EXISTENCE. It will maintain its corporate existence in good
standing and remain qualified to do business as a foreign corporation
in each jurisdiction in which the nature of its activities or the
character of the properties it owns or leases makes such qualification
necessary.
(b) CONTINUATION OF BUSINESS. It will continue to conduct its business of
commercializing and developing 3D television and video technology in
compliance with all applicable rules and regulations of applicable
governmental authorities.
(c) DISCLOSURE DOCUMENTS. It will furnish to Investors a copy of each
Disclosure Document filed or distributed hereinafter, not later than
the date such document is filed with regulatory authorities or
distributed to shareholders.
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(d) PRESERVATION OF BUSINESS. It will keep its business and properties
substantially intact, including present operations, physical
facilities, working conditions, and relationships with lessors,
licensors, suppliers, customers, and employees and will maintain its
existing insurance policies.
(e) FULL ACCESS. Upon written request, the Corporation will permit
representatives of the Investors to have full access at all reasonable
times, and in a manner so as not to interfere with the normal business
operations of the Corporation, to all premises, properties, personnel,
books, records, contracts, and documents of or pertaining to the
Corporation. Notwithstanding the foregoing, the Corporation shall not
provide the Investors any information which, according to applicable
law, rule or regulation, should have been disclosed publicly by the
Corporation prior to the date provided to the Investors, but which has
not been disclosed.
(f) RESERVATION OF WARRANT SHARES. The Corporation shall at all times
reserve and keep available out of its authorized but unissued Common
Shares, such number of Common Shares as shall be from time to time
sufficient to effect the exercise of the Warrants.
(g) NASDAQ LISTING. The Corporation shall apply to have the Common Shares
listed on either (i) the NASDAQ National Market ("NNM") or (ii) the
NASDAQ Small Cap Market ("NASDAQ Small Cap"), and shall take all
actions within its power and use its best efforts to have the Common
Shares, not later than December 31, 1999: (i) registered under the U.S.
Securities Exchange Act of 1934, as amended and the rules promulgated
thereunder; and (ii) listed and trading on the NNM or the NASDAQ Small
Cap.
(h) ALBERTA STOCK EXCHANGE LISTING AND REPORTING ISSUER STATUS. The
Corporation will maintain the listing of its Common Shares on the
Alberta Stock Exchange and will maintain its status as a "reporting
issuer not in default" under the Securities Act (Alberta).
5.2 NEGATIVE COVENANTS.
The Corporation covenants that from the date hereof until the date that
the Common Shares are listed and trading on the NNM or the NASDAQ Small Cap it
will not (and will cause the Subsidiaries not to), without the prior written
approval of the Investors:
(a) Enter into any merger or consolidation or acquire assets of any other
person, or sell, lease or otherwise dispose of its assets, or lease,
license or permit the use of any Intellectual Property or other
property, except in the Ordinary Course of Business where such
transaction is at arm's length and in exchange for fair market value
consideration. (Notwithstanding the foregoing, the Corporation or the
Subsidiaries may: (i) transfer assets to a Subsidiary or joint venture
which is jointly (at least 50%) owned by either (a) the Corporation, or
(b) a Subsidiary provided that such transfers shall be on terms as
favorable as would be reached in an arm's length transaction and shall
be for fair market value; and (ii) permit the use of its Intellectual
Property pursuant to a license agreement on arm's length terms and for
fair market value consideration).
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(b) Sell or otherwise dispose of any shares of its capital stock or issue
any additional shares of its capital stock or securities convertible,
exchangeable or exercisable into shares of its capital stock other than
pursuant to (i) exercise of issued and outstanding convertible
securities of the Corporation; (ii) exercise of the Warrants; (iii)
pursuant to permitted financings, subject to the conditions set forth
in Article 2.10 herein; or (iv) the issuance of incentive stock options
to employees and directors, not to be exercisable for more than the
aggregate of (a) the number of Common Shares issuable pursuant to such
options on the date hereof, and (b) 10% of the Common Shares
outstanding on the date hereof; provided that such options shall be
issued with an exercise price no lower than the closing market price
for the Common Shares on the principal trading market for such shares
at the time of issuance.
(c) Except for the purpose of effecting the Normal Course Issuer Bid
provided for pursuant to Article 2.9 herein, declare any dividends on
any shares of any class of its capital stock, or apply any of its
property or assets to the purchase, redemption or other retirement of,
or set apart any sum for the payment of any dividends on, or for the
purchase, redemption or other retirement of, or make any other
distribution by reduction of capital or otherwise in respect of, any
shares of any class of its capital stock.
(d) Purchase or otherwise acquire any assets, in excess of US$200,000 in
the aggregate, after the date hereof, other than assets used in the
Ordinary Course of Business.
(e) Relocate the principal offices of the Corporation.
(f) Amend its articles, by-laws or other organizational documents, except
as may be required to consolidate the issued and outstanding capital of
the Corporation and to change its name as contemplated herein, or to
register Common Shares with the U.S. Securities and Exchange Commission
or to list the Common Shares on the NNM or NASDAQ Small Cap.
(g) Engage in any transaction with any affiliate, except: (i) as set forth
in subparagraph (a) above or (ii) except on arm's length terms, for
fair market value consideration and in the Ordinary Course of Business.
(h) Increase, by more than 10% annually, the compensation of any director
or officer.
(i) Otherwise engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business.
ARTICLE 6.
CONDITIONS OF CLOSING
6.1 CONDITIONS OF CLOSING.
The obligations of the parties under this Agreement are subject to the
conditions stated below.
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(a) TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Corporation contained in the Documents shall be true
and correct in all material respects as of the Closing Date with the
same force and effect as if such representations and warranties had
been made on and as of such date. The Corporation shall have delivered
to the Investors evidence satisfactory to the Investors to the
foregoing effect dated the Closing Date.
(b) PERFORMANCE OF COVENANTS. The Corporation shall have performed and
complied with all of its covenants hereunder in all material respects.
(c) NO ADVERSE PROCEEDINGS. No action or proceeding shall be pending or
threatened which could reasonably be expected to impair or prohibit the
completion of the transactions contemplated by this Agreement.
(d) SATISFACTORY DUE DILIGENCE. The Investors, acting reasonably, are
satisfied with their review of the business of the Corporation and all
material agreements of the Corporation.
(e) NO MATERIAL ADVERSE CHANGE. No change shall have occurred in the
operation, affairs or prospects of the Corporation (including changes
in applicable laws and regulations), other than changes in the Ordinary
Course of Business which, in the judgment of the Investors, are not
expected to be materially adverse to the operation, affairs or
prospects of the Corporation.
(f) APPROVALS AND CONSENTS. Any approval, consent, ruling, exemption or
authorization (including those related to the Alberta Stock Exchange)
that may be necessary or appropriate in respect of the transaction
contemplated by this Agreement shall have been received and shall be
absolute or on terms reasonably acceptable to the Investors, without
adversely affecting, or resulting in the violation or a breach of, or a
default under or any termination, cancellation, amendment or
acceleration of any obligation under any material license, permit,
lease or contract in connection with the property or the business of
the Corporation.
(g) DELIVERIES. The Corporation shall have delivered or caused to be
delivered to the Investors the following documents in form and
substance satisfactory to the Investors and its counsel:
(i) certificates representing the Common Shares and the Warrants;
(ii) certified copies of:
A. the charter documents and extracts from the by-laws
of the Corporation relating to the execution of
documents;
B. all resolutions of the shareholders, the board of
directors or any duly authorized committee thereof,
of the Corporation approving the entering into of
this Agreement and the issuing of the Common Shares
and
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Warrants and the completion of all transactions
contemplated under this Agreement; and
C. all other instruments evidencing necessary corporate
action of the Corporation with respect to such
matters;
(iii) a certificate of an officer of the Corporation certifying the
names and true signatures of the Corporation's officers
authorized to sign the Documents and the other instruments to
be delivered under the Documents;
(iv) a certificate of an officer of the Corporation certifying that
the representation and warranties of the Corporation, set
forth in Article 3.1, are true and correct as of the Closing
Date;
(v) a certificate of status, compliance, good standing or similar
certificate with respect to the Corporation issued by
appropriate government officials of Alberta;
(vi) the opinion of counsel for the Corporation, substantially in
the form set out in schedule 6.1(g)(vi);
(vii) agreements with Messrs. Xxxxxxxx and Xxxxx, duly executed in
substantially the form set out in schedule 6.1(g)(vii);
(viii) executed Voting and Disposition Agreement;
(ix) executed Registration Rights Agreement; and
(x) all necessary assurances, transfers, assignments and consents,
and any other instruments necessary or reasonably required to
carry out effectively the intent of this Agreement and to
issue the Common Shares and Warrants to the Investors, free
and clear of all encumbrances.
(H) DELIVERIES OF THE INVESTORS. The Investors shall have delivered or
caused to be delivered to the Corporation the following documents in
form and substance satisfactory to the Corporation and its counsel:
(i) certified funds in payment of the purchase price of the Units;
(ii) executed Warrant Option Agreement;
(iii) executed Share Option Agreement;
(iv) executed Voting and Disposition Agreement;
(v) executed Registration Rights Agreement; and
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(vi) any and all documents which may be reasonably requested in
relation to the conversion of the Convertible Notes, including
the Release and Cancellation Agreement.
ARTICLE 7.
INDEMNITIES AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES
7.1 GENERAL INDEMNITY.
The Corporation shall fully indemnify the Investors and their
respective partners, members, employees, agents and professional advisers
(collectively, the "Indemnified Parties") against all loss, liability and
expense arising out of any misrepresentation or breach of warranty or obligation
by the Corporation under the Documents or any document delivered under the
Documents. This indemnity includes, without limitation, reasonable expenses of
investigation and legal fees and expenses in connection with any action or
proceeding against the Corporation or any of the Indemnified Parties. If the
amount required to satisfy any claim so disclosed or provided for shall exceed
the amount so disclosed or provided for, the excess shall be considered to be a
separate liability in respect of which no disclosure or provision has been made.
7.2 NOTICE AND PARTICIPATION.
The Indemnified Parties shall give the Corporation prompt notice of any
loss, liability or expense for which the Corporation may be liable under section
6.1. The Corporation may, at its expense, and subject to the prior approval of
the Investors, which approval shall not be unreasonably withheld, participate in
any negotiations, assume the defence of any action or proceeding and settle for
monetary damages any claim in respect of which indemnification is sought under
section 6.1, provided that any such settlement shall absolve the Indemnified
Parties in full.
7.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, GENERAL INDEMNITY.
The representations and warranties of the Corporation contained in the
Documents or in any document delivered under the Documents shall survive the
Closing and shall continue in full force and effect for the benefit of the
Investors for a period of two years from the date hereof, and the General
Indemnity granted under Article 7.1 shall continue in full force and effect for
the benefit of the Investors for a period of four years from the date hereof.
ARTICLE 8.
CLOSING
8.1 DATE, TIME AND PLACE OF CLOSING.
The Closing shall take place at the offices of Xxxxxxx and Company, at
the Time of Closing on the Closing Date.
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ARTICLE 9.
MISCELLANEOUS
9.1 COSTS.
In the event that the Closing as contemplated herein does not occur,
each of the parties hereto shall be responsible for all of its own costs
incurred in relation to the negotiation and execution of the Documents. In the
event that Closing does occur the Corporation agrees to pay all reasonable costs
of the Investors incurred in relation to the negotiation and execution of the
Documents.
9.2 FURTHER ASSURANCES.
The parties shall, from time to time, take such action and execute and
deliver such documents as may be reasonably necessary or appropriate to give
effect to the terms and intent of the Documents.
9.3 NOTICES.
Any notice or other communication required or permitted to be given
under the Documents shall be in writing and may be delivered personally or sent
by fax, addressed:
If to Liverpool:
The Liverpool Limited Partnership
c\o A.S. & K. Services Ltd.
P.O. Box HM 1179
Xxxxxxxx, Bermuda HM EX
Attn: Xx. Xxxxxxx Xxxxxxxxxxx
Fax: 000-000-000-0000
If to Westgate:
Westgate International, L.P.
c\o Midland Bank Trust Corporation (Cayman) Limited
X.X. Xxx 0000
Xxxx Xxxxxx, Xxxxx Xxxxxx
Xxxxxx Xxxxxxx, BWI
Attn: Mr. Xxxx Xxxxxx
Fax: (000) 000-0000
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Copy to:
Xxxxxxx Xxxxxxxx
Stonington Management Corp.
000 - 0xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
If to the Corporation:
Xenotech Inc.
c\x Xxxxxxx and Company
0000 Xxxxxx Xxxxx
000 0xx Xxxxxx XX
Xxxxxxx, Xxxxxxx X0X 0X0
Attn: Xx. Xxxx-Xxxx Xxxxx
Fax: (000) 000-0000
Any such notice or other communication given as aforesaid shall be deemed to
have been effectively given, if sent by fax or other similar form of
telecommunications, on the next Business Day following such transmission or, if
delivered, to have been received on the date of such delivery. Any party may
change its address for service from time to time by notice given in accordance
with the foregoing and any subsequent notice shall be sent to the party at its
changed address.
9.4 CONFIDENTIALITY.
If the transaction contemplated by this Agreement is not completed for
any reason, the Investors shall hold in strict confidence, and shall not
disclose to any person or use any confidential information obtained by the
Investors with respect to the Corporation and its affairs, for a period of two
years from the date hereof.
9.5 PUBLICITY.
Unless required by law, regulation or by any stock exchange, neither
the Corporation nor the Investors shall issue any press release or make any
other public statement or announcement relating to or connected with or arising
out of the Documents or the matters contained in the Documents, without
obtaining the prior written approval of the other party to the contents and the
manner of presentation and publication of such press release, public statement
or announcement. Such approval may not be unreasonably withheld or delayed. If
disclosure is required by law, regulation or by any stock exchange, the
disclosing party shall consult in advance with the other party and attempt in
good faith to reflect such other party's concern in the required disclosure.
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9.6 ENTIRE AGREEMENT.
The Documents constitute the entire agreement between the parties with
respect to the subject matter of such instruments and such instruments supersede
all prior negotiations and understandings.
9.7 WAIVER.
No waiver by a party of any breach of the Documents by the other party
(i) shall take effect or be binding upon the party unless in writing and signed
by the party, or (ii) shall limit or affect the rights of the party with respect
to any other breach.
9.8 TIME OF ESSENCE.
Time shall be of the essence of this Agreement.
9.9 ASSIGNMENT.
None of the Documents may be assigned by either party without the
written consent of the other, which consent may not be unreasonably withheld or
delayed. The Documents shall enure to the benefit of and be binding upon the
parties and their respective successors and permitted assigns.
9.10 COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
different parties in separate counterparts, each of which when so executed shall
be deemed to be an original and all of which taken together shall constitute one
and the same agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement.
WESTGATE INTERNATIONAL, X.X.
Xxxxxxx International, Inc.
Attorney-in-fact
By:
--------------------------------------
Xxxx Xxxxxx, President
THE LIVERPOOL LIMITED PARTNERSHIP
Liverpool Associates, Ltd.
General Partner
By:
--------------------------------------
Xxxx Xxxxxx, President
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XENOTECH INC.
By:
--------------------------------------
Xxxxxx Xxxxx
President and Chief Executive Officer
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