STOCK PURCHASE AGREEMENT
Dated as of March 7, 2008
between
TOTAL LUXURY GROUP, INC., as Purchaser
and
ACCELERANT PARTNERS LLC, as Seller
TABLE OF CONTENTS
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Page
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ARTICLE I Purchase and Sale
Section 1.1 Purchase and Sale of the Shares 1
Section 1.2 Private Offering Exemption 1
Section 1.3 Intention of the Parties 1
Section 1.4 Purchase Price and Closing 2
Section 1.5 Termination in Absence of Closing
ARTICLE II Representations and Warranties
Section 2.1 Representations and Warranties of the Company 2
Section 2.2 Representations and Warranties of Accelerant 12
ARTICLE III Covenants
Section 3.1 Securities Compliance 14
Section 3.2 Registration and Listing 14
Section 3.3 Inspection Rights 15
Section 3.4 Compliance with Laws 15
Section 3.5 Keeping of Records and Books of Account 15
Section 3.6 Furnishing of Information 15
Section 3.7 Reporting Requirements 15
Section 3.8 Amendments 16
Section 3.9 Other Agreements 16
Section 3.10 Distributions 16
Section 3.11 Reservation of Shares 16
Section 3.12 Transfer Agent Instructions 17
Section 3.13 Disposition of Assets 17
Section 3.14 Reporting Status 17
Section 3.15 Disclosure of Transaction 18
Section 3.16 Disclosure of Material Information 18
Section 3.17 Issuance of Variable Securities 18
Section 3.18 Approval of Acquisitions. 18
Section 3.19 Stockholder Approval 18
Section 3.20 Subsequent Filings 18
Section 3.21 Most Favored Nations 19
Section 3.22 DTC 19
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ARTICLE IV Conditions
Section 4.1 Conditions Precedent to the Obligation 21
of the Company to Purchase the Shares
Section 4.2 Conditions Precedent to the Obligation 21
of Accelerant to Sell the Shares
ARTICLE V Stock Certificate Legend
Section 5.1 Legend 23
ARTICLE VI Indemnification
Section 6.1 General Indemnity 24
Section 6.2 Indemnification Procedure 24
ARTICLE VII Miscellaneous
Section 7.1 Fees and Expenses 25
Section 7.2 Specific Enforcement 25
Section 7.3 Entire Agreement; Amendment 26
Section 7.4 Notices 26
Section 7.5 Waivers 27
Section 7.6 Headings 27
Section 7.7 Successors and Assigns 27
Section 7.8 No Third Party Beneficiaries 27
Section 7.9 Governing Law; Consent to Jurisdiction 28
Section 7.10 Survival 28
Section 7.11 Counterparts 28
Section 7.12 Publicity 28
Section 7.13 Severability 28
Section 7.14 Further Assurances 28
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TABLE OF CONTENTS
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(continued)
EXHIBITS
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Exhibit A Form of Senior Secured 9% Convertible Promissory Note
Exhibit B Series A Warrant
Exhibit C Pledge Agreement
Exhibit D Security Agreement
Exhibit E Registration Rights Agreement
Exhibit F Irrevocable Transfer Agent Instructions
Exhibit G Form of Amended Certificate of Incorporation
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is dated as of March 5,
2008 by and between Total Luxury Group, Inc., an Indiana corporation (the
"Company"), and Accelerant Partners LLC, a Delaware limited liability company
("Accelerant").
Recitals
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A. Accelerant owns of record and beneficially 38,000,000 shares (the
"Shares") of Petals Decorative Accents Inc. ("Petals") common stock, par value
$0.00001 per share.
B. The Company desires to purchase the Shares, and Accelerant desires to
sell such Shares, upon the terms and subject to the conditions set forth herein.
The parties hereto agree as follows:
ARTICLE I
Purchase and Sale
Section 1.1 Purchase and Sale of the Shares. (a) Upon the terms and subject
to the conditions of this Agreement, at the Closing referred to in Section 1.4
hereof, Accelerant shall sell, convey, assign, transfer, and deliver to the
Company, and the Company shall purchase, acquire, and accept delivery of, the
Shares, free and clear of any and all liens, mortgages, adverse claims, charges,
security interests, encumbrances, other restrictions or limitations, or rights
of any third persons whatsoever, in all cases based on the acts or omissions of
Accelerant and other than liens arising from acts of the Company.
(b) To effect the transfers contemplated by Section 1.1(a), at the
Closing, Accelerant shall deliver or cause to be delivered to the Company,
against payment therefor in accordance with Section 1.4 hereof, stock
certificates representing the Shares, accompanied by stock powers duly
executed in blank and otherwise in form acceptable to the Company for
transfer on the books of Petals.
Section 1.2 Private Offering Exemption. Each of the Company and Accelerant
is executing and delivering this Agreement in accordance with and in reliance
upon the exemption from securities registration afforded by Rule 506 of
Regulation D ("Regulation D") as promulgated by the United States Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act") or Section 4(2) of the Securities Act.
Section 1.3 Intention of the Parties. It is the intention of the parties
hereto that this purchase and sale receive installment sale treatment under
Section 453 of the Internal Revenue Code of 1986, as amended (the "Code"). Each
of the parties shall take all lawful actions necessary to insure that this
transaction is accorded such tax treatment under the Code and applicable state
law.
Section 1.4 Purchase Price and Closing. (a) Subject to the terms and
conditions hereof, Accelerant agrees to sell to the Company, and the Company
agrees to purchase the Shares at the Closing for a sum of Nineteen Million
Dollars ($19,000,000), Eighty-Five Million (85,000,000) shares of Common Stock,
and a warrant to purchase 100,000,000 shares of the Company's common stock, par
value $.001 per share (the "Common Stock") (the "Purchase Price").
(b) On the Closing Date, against delivery to the Company of stock
certificates evidencing the Shares, the Company shall:
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(i) pay to Accelerant the sum of Nineteen Million Dollars
($19,000,000), which payment shall be evidenced by the Company's
Senior Secured 9% Convertible Promissory Note (the "Note")
substantially in the form of Exhibit A attached hereto,
(ii) issue to Accelerant 85,000,000 shares of the Common Stock;
and
(iii) issue to Accelerant a warrant to purchase 100,000,000
shares of the Common Stock (the "Series A Warrant") substantially in
the form of Exhibit B attached hereto.
(c) At the Closing, Accelerant shall deliver:
(i) to the Pledgee, certificates representing all of the Shares,
duly endorsed in blank for transfer, or with appropriate stock powers
in blank attached, which certificates shall be held pursuant to the
terms of a Pledge Agreement substantially in the form of Exhibit C
attached hereto;
(ii) to the Company, a certificate executed by an authorized
officer of Accelerant, on behalf of Accelerant, to the effect that the
conditions set forth in Section 4.1 have been satisfied; and
(iii) such other agreements, certificates, and writings as the
Company may reasonably require.
(d) At the Closing, the Company shall deliver:
(i) to Accelerant, the Note;
(ii) the Common Stock
(iii) the Series A Warrant;
(iv) to Accelerant, the Pledge Agreement;
(v) to Accelerant, a security agreement (the "Security
Agreement") substantially in the form of Exhibit D attached hereto;
(vi) to Accelerant, the registration rights agreement (the
"Registration Rights Agreement") substantially in the form of Exhibit
E attached hereto;
(vii) to Accelerant, a certificate executed by an authorized
officer of the Company, on behalf of the Company, to the effect that
the conditions set forth in Section 4.2 have been satisfied; and
(viii) such other agreements, certificates, and writings as the
Company may reasonably require.
(e) The consummation of the sale of the Shares, payment of the
Purchase Price comprised of the Note and the Warrant and the other
transactions contemplated by this Agreement shall take place at the offices
of Xxxxxxx Xxxxxx LLP, 000 Xxxxxxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000 (the "Closing") at 10:00 a.m., New York time on such date as
Accelerant and the Company may agree upon; provided, that all of the
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conditions set forth in Article IV hereof and applicable to the Closing
shall have been fulfilled or waived in accordance herewith (the "Closing
Date").
(f) It is the intention of the parties that the closing of the
transactions contemplated by this Agreement take place simultaneously with
the Company's purchase of all the issued and outstanding shares of Petals'
Class C Preferred Stock (the "Series C Preferred Purchase"), the execution
and delivery of a services agreement by and between the Company and Xxxxxx
Xxxxx and the issuance of a Series B Warrant to Xx. Xxxxx pursuant thereto
(the "Xxxxx Transaction"), the issuance of the Company's Common Stock to
Accelerant, and the execution and delivery of a placement agent agreement
by and between the Company and Southridge Investment Group LLC. To this
end, the closing the Series C Preferred Purchase and the closing of the
Xxxxx Transaction and the other referenced transactions are each
preconditions to the closing of the contemplated by this Agreement.
Section 1.5 Termination in Absence of Closing. If the Closing has not
occurred by the close of business on March 31, 2008, then any party hereto may
thereafter terminate this Agreement by written notice to such effect, to the
other party hereto, without liability of or to any party to this Agreement or
any stockholder, director, officer, employee, or representative of such party
unless the reason for Closing having not occurred is (i) such party's willful
breach of the provisions of this Agreement, or (ii) if all of the conditions to
such party's obligations set forth in Article IV have been satisfied or waived
in writing by the date scheduled for the Closing pursuant to Section 1.4, the
failure of such party to perform its obligations under this Article I on such
date; provided, however, that the provisions of Article VI and Article VII shall
survive any such termination; and, provided further, however, that any
termination pursuant to this Section 1.5 shall not relieve any party hereto who
was responsible for Closing having not occurred as described in clauses (i) or
(ii) above of any liability for (x) such party's willful breach of the
provisions of this Agreement, or (y) if all of the conditions to such party's
obligations set forth in Article IV have been satisfied or waived in writing by
the date scheduled for the Closing pursuant to Section 1.4, the failure of such
party to perform its obligations under this Article I on such date.
ARTICLE II
Representations and Warranties
Section 2.1 Representations and Warranties of the Company. The Company
hereby represents and warrants to Accelerant, as of the date hereof and 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 Indiana 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. Except as set forth in Schedule
2.1(g) hereto, the Company does not have any Subsidiaries. Except as set
forth on Schedule 2.1(a), each of the Company and each such Subsidiary 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 (as defined in
Section 2.1(c) hereof) on the Company's financial condition.
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Note, the Warrant, the Registration Rights Agreement, The Security
Agreement, the Pledge Agreement, and the Irrevocable Transfer Agent
Instructions (as defined in Section 3.13) substantially in the form of
Exhibit F attached hereto (collectively, the "Transaction Documents"). The
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execution, delivery and performance of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby
and 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 or its Board of Directors or
stockholders is required. This Agreement has been duly executed and
delivered by the Company. The other Transaction Documents will have been
duly executed and delivered by the Company at the Closing. Each of the
Transaction Documents constitutes, or shall constitute when executed and
delivered, 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, 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) Capitalization. The authorized capital stock of the Company and
the shares thereof currently issued and outstanding as of the date hereof
are set forth on Schedule 2.1(c) hereto. All of the outstanding shares of
the Common Stock have been duly and validly authorized. As of the date
hereof, the Company does not sufficient shares of Common Stock to fulfill
its obligations under this Agreement. By no later than June 1, 2008 (the
"Charter Amendment Filing Date"), the Company will have sufficient shares
to fulfill its obligation hereunder, and all such shares of Common Stock
will be duly and validly authorized for issuance upon conversion of the
Note, upon payment of interest under the Note with shares of Common Stock
(the "PIK Shares"), and exercise of the Series A Warrant. Except as set
forth on Schedule 2.1(c) hereto, no shares of Common Stock 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. 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 as set forth on Schedule 2.1(c) hereto, the Company
is not a party to any agreement granting registration or anti-dilution
rights to any person with respect to any of its equity or debt securities.
The Company is not a party to, and it has no knowledge of, any agreement
restricting the voting or transfer of any shares of the capital stock of
the Company. The offer and sale of all capital stock, convertible
securities, rights, warrants, or options of the Company issued prior to the
Closing complied with all applicable Federal and state securities laws, and
no stockholder has a right of rescission or claim for damages with respect
thereto. The Company has furnished or made available to Accelerant true and
correct copies of the Company's Certificate of Incorporation as in effect
on the date hereof (the "Certificate"), a copy of the Company's proposed
Amended Certificate of Incorporation to be filed upon Stockholder Approval
(as defined in Section 3.19) (the "Amended Certificate" - attached hereto
as Exhibit G), and the Company's Bylaws as in effect on the date hereof
(the "Bylaws"). For the purposes of this Agreement, "Material Adverse
Effect" means any material adverse effect on the business, operations,
properties, prospects, or financial condition of the Company and its
Subsidiaries and/or any condition, circumstance, or situation that would
prohibit or otherwise materially interfere with the ability of the Company
to perform any of its obligations under this Agreement.
(d) Issuance of Securities. The Note and the Warrant to be issued at
the Closing have been duly authorized by all necessary corporate action and
when issued in accordance with the terms hereof, the Note and Warrant shall
be validly issued and outstanding, free and clear of all liens,
encumbrances and rights of refusal of any kind. Upon the adoption and
filing of the Amended Certificate, the additional shares of Common Stock,
when issued in accordance hereof, shall be validly issued and outstanding,
free and clear of all liens, encumbrances and rights of refusal of any
kind. When the shares subject to conversion under the Note (the "Conversion
Shares"), the PIK Shares, and the shares subject to purchase under the
Warrant (the "Warrant Shares") are issued in accordance with the terms of
this Agreement, the Note and the Warrant, such shares will be duly
authorized by all necessary corporate action and validly issued and
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outstanding, fully paid and nonassessable, 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. The Note,, the
Warrant, the Conversion Shares and the Warrant Shares are sometimes
collectively referred to as the "Securities."
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company, the performance by the Company of its
respective obligations thereunder and the consummation by the Company of
the transactions contemplated herein and therein do not and will not (i)
violate any provision of the Company's Certificate, Amended Certificate or
Bylaws, (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 is a party
or by which it or its properties or assets are bound, (iii) create or
impose a lien, mortgage, security interest, charge or encumbrance of any
nature on any property of the Company under any agreement or any commitment
to which the Company is a party or by which the Company is bound or by
which any of its respective properties or assets are bound, or (iv) result
in a violation of any federal, state, local or foreign statute, rule,
regulation, order, judgment or decree (including Federal and state
securities laws and regulations) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries are bound or affected. The business of the Company and its
Subsidiaries is not being conducted in violation of any laws, ordinances or
regulations of any governmental entity, except for possible violations
which singularly or in the aggregate do not and will not have a Material
Adverse Effect. The Company is not required under Federal, state 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 the Note, the Warrant, the Conversion
Shares and the Warrant Shares in accordance with the terms hereof or
thereof (other than (x) any consent, authorization or order that has been
obtained as of the date hereof, (y) any filing or registration that has
been made as of the date hereof or (z) any filings which may be required to
be made by the Company with the Commission or state securities
administrators subsequent to the Closing, any registration statement which
may be filed pursuant hereto or any other Transaction Document, provided,
that for purposes of the representation made in this sentence, the Company
is assuming and relying upon the accuracy of the relevant representations
and agreements of Accelerant herein.
(f) Commission Documents, Financial Statements. Except as set forth in
Schedule 2.1(f), 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 Securities
Exchange Act of 1934, as amended the ("Exchange Act"), including material
filed pursuant to Section 13(a) or 15(d) of the Exchange Act (all of the
foregoing including filings incorporated by reference therein being
referred to herein as the "Commission Documents"). The Company has
delivered or made available to Accelerant true and complete copies of the
Commission Documents. The Company has not provided to Accelerant any
material non-public information or other information which, according to
applicable law, rule or regulation, was required to have been disclosed
publicly by the Company but which has not been so disclosed, other than
with respect to the transactions contemplated by this Agreement. At the
times of their respective filings, the Commission Documents 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, as of their respective dates, none of the Commission 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 Company provided to Accelerant and/or
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included in the Commission Documents comply 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 U. S. 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. Each Subsidiary is a
corporation duly incorporated, validly existing and in good standing under
the laws of its state of incorporation 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. For the purposes of this
Agreement, "Subsidiary" shall mean any corporation or other entity of which
at least a majority of the securities or other ownership interest having
ordinary voting power (absolutely or contingently) for the election of
directors or other persons performing similar functions are at the time
owned directly or indirectly by the Company and/or any of its other
Subsidiaries. All of the outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued, and are fully paid
and nonassessable. There are no outstanding preemptive, conversion or other
rights, options, warrants or agreements granted or issued by or binding
upon any Subsidiary for the purchase or acquisition of any shares of
capital stock of any Subsidiary or any other securities convertible into,
exchangeable for or evidencing the rights to subscribe for any shares of
such capital stock. Neither the Company nor any Subsidiary is subject to
any obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any shares of the capital stock of any Subsidiary or any
convertible securities, rights, warrants or options of the type described
in the preceding sentence. 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. Other than as disclosed in the
Company's Commission Documents, since January 1, 2007, the Company has not
experienced or suffered any Material Adverse Effect.
(i) No Undisclosed Liabilities. Except as set forth on Schedule
2.1(i), since January 1, 2007 neither the Company nor any of its
Subsidiaries has 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 and which,
individually or in the aggregate, do not or would not have a Material
Adverse Effect on the Company or its Subsidiaries, as the case may be.
(j) Off Balance Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Company and an
unconsolidated or other off balance sheet entity that is required to be
disclosed by the Company in its Commission Documents and is not so
disclosed or, to the extent that such Commission Documents have not been
timely filed, has been separately disclosed to Accelerant that otherwise
would be reasonably likely to have a Material Adverse Effect.
(k) No Undisclosed Events or Circumstances. 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
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publicly announced or disclosed.
(l) Indebtedness. Schedule 2.1(l) hereto sets forth as of the date
hereof all outstanding secured and unsecured Indebtedness of the Company or
any Subsidiary, or for which the Company or any Subsidiary has commitments.
For the purposes of this Agreement, "Indebtedness" shall mean (a) any
liabilities for borrowed money or amounts owed, whether individually or in
aggregate, in excess of $100,000 (other than trade accounts payable
incurred in the ordinary course of business), (b) all guaranties,
endorsements and other contingent obligations in respect of Indebtedness of
others, whether or not the same are or should be reflected in the Company's
balance sheet (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in
the ordinary course of business; and (c) the present value of any lease
payments in excess of $25,000 due under leases required to be capitalized
in accordance with GAAP. Except as set forth on Schedule 2.1(l), neither
the Company nor any Subsidiary is in default with respect to any
Indebtedness.
(m) Title to Assets. Except as set forth on Schedule 2.1(m), each of
the Company and the Subsidiaries has good and marketable title to all of
its real and personal property, free and clear of any mortgages, pledges,
charges, liens, security interests or other encumbrances. Except as set
forth on Schedule 2.1(m), all leases of the Company and each of its
Subsidiaries are valid and subsisting and in full force and effect.
(n) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses
and location in which the Company and the Subsidiaries are engaged. Neither
the Company nor any Subsidiary has any knowledge that it will be unable to
renew its existing insurance coverage for the Company and the Subsidiaries
as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without a
significant increase in cost.
(o) Actions Pending. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or any 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 the transactions
contemplated hereby or thereby or any action taken or to be taken pursuant
hereto or thereto. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or any 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. 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.
(p) 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 for such noncompliance that,
individually or in the aggregate, would not cause 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, would not
have a Material Adverse Effect.
(q) 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
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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. 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.
(r) Certain Fees. Except for the fees payable pursuant to that certain
placement agent agreement dated March 7, 2008 by and between Southridge
Investment Group LLC and the Company, no brokers, finders or financial
advisory fees or commissions will be payable by the Company or any
Subsidiary or Accelerant with respect to the transactions contemplated by
this Agreement.
(s) Disclosure. Neither this Agreement or the Schedules hereto nor any
other documents, certificates or instruments furnished to Accelerant 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.
(t) Operation of Business. Except as set forth in Schedule 2.1(t), the
Company and each of the Subsidiaries owns or possesses 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, and all rights with respect to the
foregoing, which are necessary for the conduct of its business as now
conducted without any conflict with the rights of others.
(u) 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. Except as set forth on Schedule 2.1(u), the
Commission Documents describe all material permits, licenses and other
authorizations issued under any Environmental Laws to the Company or its
Subsidiaries. "Environmental Laws" shall mean all applicable laws relating
to the protection of the environment including, without limitation, all
requirements pertaining to reporting, licensing, permitting, controlling,
investigating or remediating emissions, discharges, releases or threatened
releases of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, materials or wastes, whether solid,
liquid or gaseous in nature, into the air, surface water, groundwater or
land, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic
substances, material or wastes, whether solid, liquid or gaseous in nature.
The Company has all necessary governmental approvals required under all
Environmental Laws and used in its business or in the business of any of
its Subsidiaries. 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
8
release of any hazardous substance.
(v) Books and Record Internal Accounting Controls. The books and
records 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, 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 GAAP 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 action is taken with respect to any
differences.
(w) Material Agreements. Except for the Transaction Documents (with
respect to clause (i) only), or as set forth on Schedule 2.1(w) 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.
(x) Transactions with Affiliates. Except as set forth on Schedule
2.1(x), there are no loans, leases, agreements, contracts, royalty
agreements, management contracts or arrangements or other continuing
transactions between (i) the Company or any Subsidiary on the one hand, and
(ii) 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.
(y) [reserved].
(z) Securities Act of 1933. Based in material part upon the
representations herein of Accelerant, the Company has complied and will
comply with all applicable federal and state securities laws in connection
with the offer and issuance 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 preliminary conversations or 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 issuance of any of the Securities.
(aa) Governmental Approvals. Except for the filing of any notice prior
or subsequent to the Closing Date that may be required under applicable
state and/or Federal securities laws (which if required, shall be filed on
a timely basis), including the filing of a Form D and a registration
statement or statements pursuant to the Registration Rights Agreement, and
the filing of the Amended Certificate with the Secretary of State for the
State of Indiana, no authorization, consent, approval, license, exemption
9
of, filing or registration with any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
is or will be necessary for, or in connection with, the execution or
delivery of the Note and the Warrant, or for the performance by the Company
of its obligations under the other Transaction Documents.
(bb) Employees. Neither the Company nor any Subsidiary has any
collective bargaining arrangements or agreements covering any of its
employees. Except as set forth on Schedule 2.1(bb), neither the Company nor
any Subsidiary has any employment contract, agreement, regarding
proprietary information, non-competition agreement, non-solicitation
agreement, confidentiality agreement, or any other similar contract or
restrictive covenant, relating to the right of any officer, employee or
consultant to be employed or engaged by the Company or such Subsidiary. No
officer, consultant or key employee of the Company or any Subsidiary whose
termination, either individually or in the aggregate, could have a Material
Adverse Effect, has terminated or, to the knowledge of the Company, has any
present intention of terminating his or her employment or engagement with
the Company or any Subsidiary.
(cc) Absence of Certain Developments. Except as set forth on Schedule
2.1(cc), since January 1, 2007, neither the Company nor any Subsidiary has:
(i) issued any stock, bonds or other corporate securities or any
rights, options or warrants with respect thereto;
(ii) borrowed any amount or incurred or become subject to any
liabilities (absolute or contingent) except current liabilities
incurred in the ordinary course of business which are comparable in
nature and amount to the current liabilities incurred in the ordinary
course of business during the comparable portion of its prior fiscal
year;
(iii) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent), other than current
liabilities paid in the ordinary course of business;
(iv) declared or made any payment or distribution of cash or
other property to stockholders with respect to its stock, or purchased
or redeemed, or made any agreements so to purchase or redeem, any
shares of its capital stock;
(v) sold, assigned or transferred any other tangible assets, or
canceled any debts or claims, except in the ordinary course of
business;
(vi) sold, assigned or transferred any patent rights, trademarks,
trade names, copyrights, trade secrets or other intangible assets or
intellectual property rights, or disclosed any proprietary
confidential information to any person except to customers in the
ordinary course of business;
(vii) suffered any substantial losses or waived any rights of
material value, whether or not in the ordinary course of business, or
suffered the loss of any material amount of prospective business;
(viii) made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor that
aggregate in excess of $100,000;
10
(x) entered into any other transaction other than in the ordinary
course of business, or entered into any other material transaction,
whether or not in the ordinary course of business;
(xi) made charitable contributions or pledges in excess of
$25,000;
(xii) suffered any material damage, destruction or casualty loss,
whether or not covered by insurance;
(xiii) experienced any material problems with labor or management
in connection with the terms and conditions of their employment;
(xiv) effected any two or more events of the foregoing kind which
in the aggregate would be material to the Company or its Subsidiaries;
or
(xv) entered into an agreement, written or otherwise, to take any
of the foregoing actions.
(dd) [reserved].
(ee) [reserved].
(ff) Dilutive Effect. The Company understands and acknowledges that
its obligation to (i) issue the Conversion Shares upon conversion of the
Note and (ii) its obligations to issue the Warrant Shares upon the exercise
of the Warrant is, in each case, absolute and unconditional regardless of
the dilutive effect that such issuance may have on the ownership interest
of other stockholders of the Company.
(gg) 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 issuance of
the Securities pursuant to this Agreement to be integrated with prior
offerings by the Company for purposes of the Securities Act which would
prevent the Company from issuing the Securities pursuant to Rule 506 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 issuance of the Securitie 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 and since January 1, 2007, the Company has not offered
or sold any of its equity securities or debt securities convertible into
shares of Common Stock.
(hh) [reserved].
(jj) Application of Takeover Protections. The Company and its board of
directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company's charter documents or the laws
of its state of incorporation that is or could reasonably be expected to
become applicable to Accelerant as a result of Accelerant and the Company
fulfilling their obligations or exercising their rights under the
Transaction Documents, including, without limitation, the Company's
issuance of the Securities and Accelerant's ownership of the Securities.
11
(kk) Transfer Agent. The name, address, telephone number, fax number,
contact person and email address of the Company's current transfer agent is
set forth on Schedule 2.1(kk) hereto.
Section 2.2 Representations and Warranties of Accelerant. Accelerant hereby
makes the following representations and warranties to the Company:
(a) Organization and Standing of Accelerant. Accelerant is a limited
partnership duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its organization.
(b) Authorization and Power. Accelerant has the requisite power and
authority to enter into and perform this Agreement and to sell the Shares
being purchased by the Company hereunder. The execution, delivery, and
performance of this Agreement, the Pledge Agreement, and the Registration
Rights Agreement by Accelerant and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by
all necessary partnership action, and no further consent or authorization
of Accelerant or its partners is required. Each of this Agreement, the
Pledge Agreement, and the Registration Rights Agreement has been duly
authorized, executed, and delivered by Accelerant and constitutes, or shall
constitute when executed and delivered, a valid, and binding obligation of
Accelerant enforceable against Accelerant in accordance with the terms
thereof, 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 Conflicts. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement and the consummation by
Accelerant of the transactions contemplated hereby and thereby or relating
hereto do not and will not (i) result in a violation of Accelerant's
organizational documents or (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, indenture or instrument or obligation to
which Accelerant is a party or by which its properties or assets are bound,
or result in a violation of any law, rule, or regulation, or any order,
judgment or decree of any court or governmental agency applicable to
Accelerant or its properties (except for such conflicts, defaults and
violations as would not, individually or in the aggregate, have a material
adverse effect on Accelerant). Accelerant is not required 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 this Agreement or the Registration
Rights Agreement or to sell the Shares in accordance with the terms hereof;
provided that for purposes of the representation made in this sentence,
Accelerant is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.
(d) Acquisition for Investment. Accelerant is acquiring the Securities
solely for its own account for the purpose of investment and not with a
view to or for sale in connection with distribution. Accelerant does not
have a present intention to sell the Securities, nor a present arrangement
(whether or not legally binding) or intention to effect any distribution of
the Securities to or through any person or entity; provided, however, that
by making the representations herein, Accelerant does not agree to hold the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with Federal and state
securities laws applicable to such disposition.
(e) Status of Accelerants. Accelerant is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act. Accelerant is
12
not required to be registered as a broker-dealer under Section 15 of the
Exchange Act and Accelerant is not a broker-dealer.
(f) No General Solicitation. Accelerant acknowledges that the
Securities were not offered to Accelerant 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 Accelerant was invited by any of the
foregoing means of communications.
(g) Rule 144. Accelerant understands that the Securities must be held
indefinitely unless such Securities are registered under the Securities Act
or an exemption from registration is available. Accelerant acknowledges
that Accelerant 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 Accelerant has been advised that Rule 144 permits
resales only under certain circumstances. Accelerant understands that to
the extent that Rule 144 is not available, Accelerant will be unable to
sell any Securities without either registration under the Securities Act or
the existence of another exemption from such registration requirement.
(h) General. Accelerant understands that the Securities are being
offered and sold in reliance on a transactional exemption from the
registration requirement 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 Accelerant
set forth herein in order to determine the applicability of such exemptions
and the suitability of Accelerant to acquire the Securities.
(i) No Liens. Against payment of the Purchase Price, the Company shall
purchase, acquire, and accept delivery of, the Shares, free and clear of
any and all liens, mortgages, adverse claims, charges, security interests,
encumbrances, other restrictions or limitations, or rights of any third
persons whatsoever, in all cases based on the acts or omissions of
Accelerant and other than liens arising from acts of the Company.
13
ARTICLE III
Covenants
The Company covenants with Accelerant as follows, which covenants are for
the benefit of Accelerant and its permitted assignees (as defined herein):
Section 3.1 Securities Compliance. The Company shall notify the Commission
in accordance with their rules and regulations, of the transactions contemplated
by any of the Transaction Documents, including filing a Form D with respect to
the Note, the Warrant, Conversion Shares and the Warrant Shares as required
under Regulation D and applicable "blue sky" laws, 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 Note, the
Warrant, the Conversion Shares and the Warrant Shares to Accelerant or
subsequent holders.
Section 3.2 Registration and Listing. The Company shall (a) comply in all
respects with its reporting and filing obligations under the Exchange Act, (b)
comply with all requirements related to any registration statement filed
pursuant to this Agreement and the Registration Rights Agreement, and (c) 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 will take all action necessary to cause the relisting of its Common
Stock and thereafter continue the listing or trading of its Common Stock on the
OTC Bulletin Board or other exchange or market on which the Common Stock is
trading or may be traded in the future. Subject to the terms of the Transaction
Documents, the Company further covenants that it will take such further action
as Accelerant may reasonably request, all to the extent required from time to
time to enable Accelerant to sell the Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act. Upon the request of Accelerant, the
Company shall deliver to Accelerant a written certification of a duly authorized
officer as to whether it has complied with such requirements.
Section 3.3 Inspection Rights. The Company shall permit, during normal
business hours and upon reasonable request and reasonable notice, Accelerant or
any employees, agents or representatives thereof, so long as Accelerant shall
beneficially own the Note or shall own Conversion Shares and/or Warrant Shares,
which, in the aggregate (on an as converted basis), represent more than two
percent (2%) of the total combined voting power of all voting securities then
outstanding, for purposes reasonably related to Accelerant's interests as a
stockholder, to examine and make reasonable copies of and extracts from the
records and books of account of, and visit and inspect the properties, assets,
operations and business of the Company and any Subsidiary, and to discuss the
affairs, finances and accounts of the Company and any Subsidiary with any of its
officers, consultants, directors, and key employees.
Section 3.4 Compliance with Laws. The Company shall comply, and cause each
Subsidiary, whether such Subsidiary is in existence as of the date of this
agreement or formed or acquired subsequent to the date of this agreement, to
comply, with all applicable laws, rules, regulations and orders, noncompliance
with which could 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
14
purposes in connection with its business shall be made.
Section 3.6 Furnishing of Information. Until all of the Securities are
eligible for sale without restriction under Rule 144 promulgated under the
Securities Act, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. Until all of the Securities are eligible for sale without
restriction under Rule 144 promulgated under the Securities Act, if the Company
is not required to file reports pursuant to such laws, it will prepare and
furnish to Accelerant and make publicly available in accordance with Rule 144(c)
such information as is required for Accelerant to sell the Securities under Rule
144. The Company further covenants that it will take such further action as any
holder of Securities may reasonably request, all to the extent required from
time to time to enable such Person to sell the Securities without registration
under the Securities Act within the limitation of the exemptions provided by
Rule 144.
Section 3.7 Reporting Requirements. Whenever the Company's periodic reports
to be filed under the Exchange Act are not available via the Internet, then at
Accelerant's request the Company shall furnish the following to Accelerant so
long as Accelerant shall beneficially own any Securities:
(a) quarterly Reports filed with the Commission on Form 10-Q as soon
as practical after the document is filed with the Commission, and in any
event within five (5) days after the document is filed with the Commission;
(b) annual Reports filed with the Commission on Form 10-K as soon as
practical after the document is filed with the Commission, and in any event
within five (5) days after the document is filed with the Commission; and
(c) copies of all notices and information, including without
limitation notices and proxy statements in connection with any meetings,
that are provided to holders of shares of Common Stock, contemporaneously
with the delivery of such notices or information to such holders of Common
Stock.
Section 3.8 Amendments. Other than the filing of the Amended Certificate,
the Company shall not amend or waive any provision of the Certificate or Bylaws
of the Company in any way that would adversely affect the rights of Accelerant
under any of the Transaction Documents.
Section 3.9 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 3.10 Distributions. So long as the Note remains outstanding, the
Company agrees that it shall not (i) declare or pay any dividends or make any
distributions to any holder(s) of Common Stock or (ii) purchase or otherwise
acquire for value, directly or indirectly, any Common Stock or other equity
security of the Company.
Section 3.11 Reservation of Shares. The Company undertakes to use its best
efforts under applicable state and federal law to increase the number of
authorized shares of Common Stock to enable Accelerant to exercise its
conversion rights provided in the Note and its purchase rights provided in the
Warrant. In all events, the adoption and filing of Accelerant's Amended
15
Certificate shall be accomplished by no later than June 1, 2008. Subject to
foregoing sentence, so long as any of the Note or Warrant remain outstanding,
the Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance, no less than two hundred percent (200%) of
the aggregate number of shares of Common Stock needed to provide for the
issuance of the Conversion Shares and the Warrant Shares.
Section 3.12 Transfer Agent Instructions. The Company shall issue
irrevocable instructions to its transfer agent, and any subsequent transfer
agent, to issue certificates, registered in the name of Accelerant or its
respective nominee(s), for the Conversion Shares and the Warrant Shares in such
amounts as specified from time to time by Accelerant to the Company upon
conversion of the Note or exercise of the Warrant in the form of Exhibit F
attached hereto (the "Irrevocable Transfer Agent Instructions"). Prior to
registration of the Conversion Shares and the Warrant Shares under the
Securities Act, all such certificates shall bear the restrictive legend
specified in Section 5.1 of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 3.12 will be given by the Company to its transfer agent and that
the Shares shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the Registration
Rights Agreement. If Accelerant provides the Company with an opinion of counsel,
in a generally acceptable form, to the effect that a public sale, assignment or
transfer of the Shares may be made without registration under the Securities Act
or Accelerant provides the Company with reasonable assurances that such Shares
can be sold pursuant to Rule 144 without any restriction as to the number of
securities acquired as of a particular date that can then be immediately sold,
the Company shall permit the transfer, and, in the case of the Common,
Conversion Shares and the Warrant Shares, promptly instruct its transfer agent
to issue one or more certificates in such name and in such denominations as
specified by Accelerant and without any restrictive legend. The Company
acknowledges that a breach by it of its obligations under this Section 3.12 will
cause irreparable harm to Accelerant by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 3.12 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 3.12, that Accelerant shall be
entitled, in addition to all other available remedies, to an order and/or
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
Section 3.13 Disposition of Assets. So long as the Note and/or Warrant
remain outstanding, neither the Company nor any Subsidiary shall sell, transfer
or otherwise dispose of any of its properties, assets and rights including,
without limitation, its software and intellectual property, to any person except
for sales to customers in the ordinary course of business or with the prior
written consent of the holder of the Note.
Section 3.14 Reporting Status. The Company undertakes to use its best
efforts to become reporting under the federal securities laws and seek to be
re-listed for quotation on the OTC Bulletin Board as soon as practical, and in
all events by no later than June 1, 2008. Subject to the foregoing, so long as
Accelerant 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 cease filing reports under the Exchange
Act even if the Exchange Act or the rules and regulations thereunder would
permit such termination.
Section 3.15 Disclosure of Transaction. At the request of Accelerant, the
Company shall issue a press release describing the material terms of the
transactions contemplated hereby (the "Press Release") as soon as practicable
after the Closing but in no event later than 9:00 A.M. Eastern Time on the first
Trading Day following the Closing. The Company shall also file with the
16
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, the Security Agreement, the
Pledge Agreement, the form of the Series A Warrant and the Press Release) as
soon as practicable following the Closing Date but in no event more than four
(4) Trading Days following the Closing Date, which Press Release and Form 8-K
shall be subject to prior review and comment by counsel for Accelerant. "Trading
Day" means any day during which the OTC Bulletin Board (or other quotation venue
or principal exchange on which the Common Stock is traded) shall be open for
trading.
Section 3.16 Disclosure of Material Information. The Company represents,
covenants and agrees that neither it nor any other person acting on its behalf
has provided or will provide Accelerant or its agents or counsel with any
information that the Company believes constitutes material non-public
information (other than with respect to the transactions contemplated by this
Agreement), unless prior thereto Accelerant shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that Accelerant shall be relying on the foregoing
representations in effecting transactions in securities of the Company.
Section 3.17 Issuance of Variable Securities. So long as the Note remains
outstanding, the Company agrees that it shall not issue any security with a
variable conversion price or variable exercise price.
Section 3.18 Approval of Acquisitions. So long as the Note remains
outstanding, the Company shall not effect, or agree to effect, an acquisition or
buy out of or with any entity (including without limitation the acquisition of a
substantial portion of the outstanding securities or assets of another entity
other than in the ordinary course of business), or a consolidation or merger of
the Company with or into any other corporation or corporations (or other entity
or entities), or a sale of all or substantially all of the assets of the
Company, or the effectuation by the Company of a transaction or series of
related transactions in which more than 50% of the voting shares of the Company
is disposed of or conveyed, without the affirmative vote or consent of the
holder of the Note.
Section 3.19 Stockholder Approval. The Company shall no later than June_1,
2008 obtain stockholder approval ("Stockholder Approval") for the filing of the
Amended Certificate; in accordance with this Agreement.
Section 3.20 Subsequent Filings. The Company shall no later than two (2)
calendar days from the date in which they receive Stockholder Approval, file the
Amended Certificate with the Secretary of State of Indiana (the date of such
filing, the "Amended Certificate Filing Date") and inform Accelerants of such
filing no later than two (2) business days thereafter.
Section 3.21 Most Favored Nations. If the Company has, on or prior to the
date of this Agreement, entered into, or shall in the future enter into, any
agreement with any holder of capital stock of the Company, by providing such
holder with any terms that are more favorable than the rights made available to
Accelerant pursuant any terms set out in the Transaction Documents in issue as
of the date hereof, the Company shall promptly notify Accelerant of such terms
in writing and, without any further action on the part of any party, such more
favorable terms shall be deemed to be incorporated into the applicable
Transaction Documents.
Section 3.22 DTC. Not later than the effective date of the Registration
Statement (as defined in the Registration Rights Agreement), the Company shall
cause its Common Stock to be eligible for transfer with its transfer agent
pursuant to the Depository Trust Company Automated Securities Transfer Program.
17
ARTICLE IV
Conditions
Section 4.1 Conditions Precedent to the Obligation of the Company to
Purchase the Shares. The obligation hereunder of the Company to purchase the
Shares from Accelerant 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 Company's sole benefit and may be waived by the Company at any time in its
sole discretion.
(a) Accuracy of Accelerant's Representations and Warranties. The
representations and warranties of Accelerant 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 Accelerant. Accelerant shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or
complied with by Accelerant at or prior to the Closing.
(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) Simultaneous Closing. The closing the Series C Preferred Purchase
and the closing of the Xxxxx Transaction have taken place.
(e) Delivery of Transaction Documents. The Transaction Documents have
been duly executed and delivered by Accelerant to the Company.
Section 4.2 Conditions Precedent to the Obligation of Accelerant to Sell
the Shares. The obligation hereunder of Accelerant to sell and deliver the
Shares is subject to the satisfaction or waiver, at or before the Closing, of
each of the conditions set forth below. These conditions are for Accelerant's
sole benefit and may be waived by Accelerant at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each of
the representations and warranties of the Company in the Transaction
Documents shall be true and correct in all 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 respects as of such date.
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied
or complied with by the Company at or prior to the Closing.
(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) No Proceedings or Litigation. No action, suit or proceeding before
18
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.
(e) Simultaneous Closing. The closing the Series C Preferred Purchase,
the closing of the Xxxxx Transaction, the issuance of the Company's Common
Stock to Accelerant, and the execution and delivery of a placement agent
agreement by and between the Company and Southridge Investment Group LLC
have taken place.
(f) Delivery of Transaction Documents. The Transaction Documents have
been duly executed and delivered by Accelerant to the Company.
(g) Resolutions. The Board of Directors of the Company shall have
adopted resolutions consistent with Section 2.1(b) hereof in a form
reasonably acceptable to Accelerant (the "Resolutions").
(h) Reservation of Shares. So long as any of the Note or Warrant
remain outstanding, the Company shall take all action necessary to at all
times have authorized, and reserved for the purpose of issuance, no less
than (i) a number of shares of Common Stock equal to two hundred percent
(200%) of the number of shares of Common Stock as shall from time to time
be sufficient to effect the conversion of the Note and (ii) as of the date
hereof, such number of shares of Common Stock equal to two hundred percent
(200%) of the number of shares of Common Stock as shall from time to time
be sufficient to effect the exercise of the Warrant.
(i) Transfer Agent Instructions. As of the Closing Date, the
Irrevocable Transfer Agent Instructions, in the form of Exhibit F attached
hereto, shall have been delivered to and acknowledged in writing by the
Company's transfer agent.
(j) Secretary's Certificate. The Company shall have delivered to
Accelerant a secretary's certificate, dated as of the Closing Date, as to
(i) the Resolutions, (ii) the Certificate, (iii) the Bylaws; each as of 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.
(k) Officer's Certificate. The Company shall have delivered to
Accelerant a certificate of an executive officer 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 this Section 4.2 as of the Closing Date.
(l) Material Adverse Effect. No Material Adverse Effect shall have
occurred at or before the Closing Date.
(m) Institutional Lender. The Transaction Documents and the agreements
contemplated thereby have been approved by Accelerant's lender.
(n) Due Diligence. The results of Accelerant's due diligence with
respect to the transactions contemplated by the Transaction Documents are
satisfactory in Accelerant's sole judgment.
19
ARTICLE V
Stock Certificate Legend
Section 5.1 Legend. Each certificate representing the Note and the Warrant,
and, if appropriate, securities issued upon conversion or exercise thereof (or
securities issued in connection with Section 1.4, shall be stamped or otherwise
imprinted with a legend 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 THE
CORPORATION 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 Company agrees to reissue the certificates representing any of the
Conversion Shares and the Warrant Shares, without the legend set forth above if
at such time, prior to making any transfer of any such securities, 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 Conversion Shares, or the
Warrant Shares under the Securities Act is not required in connection with such
proposed transfer, (ii) a registration statement under the Securities Act
covering such proposed disposition has been filed by the Company with the
Commission and has become effective under the Securities Act, (iii) the Company
has received other evidence reasonably satisfactory to the Company that such
registration and qualification under the Securities Act and state securities
laws are not required, or (iv) the holder provides the Company with reasonable
assurances that such security can be sold pursuant to Rule 144 under the
Securities Act; and (b) either (i) the Company has received an opinion of
counsel reasonably satisfactory to the Company, to the effect that registration
or qualification under the securities or "blue sky" laws of any state is not
required in connection with such proposed disposition, or (ii) compliance with
applicable state securities or "blue sky" laws has been effected or a valid
exemption exists with respect thereto. The Company will respond to any such
notice from a holder within five (5) business days. In the case of any proposed
transfer under this Section 5.1, the Company will use reasonable efforts to
comply with any such applicable state securities or "blue sky" laws, but shall
in no event be required, (x) to qualify to do business in any state where it is
not then qualified, (y) to take any action that would subject it to tax or to
the general service of process in any state where it is not then subject, or (z)
to comply with state securities or "blue sky" laws of any state for which
registration by coordination is unavailable to the Company. The restrictions on
transfer contained in this Section 5.1 shall be in addition to, and not by way
of limitation of, any other restrictions on transfer contained in any other
section of this Agreement. Whenever a certificate representing the Conversion
Shares or Warrant Shares is required to be issued to Accelerant without a
legend, in lieu of delivering physical certificates representing the Conversion
Shares or Warrant Shares (provided that a registration statement under the
Securities Act providing for the resale of the Warrant Shares and Conversion
Shares is then in effect), the Company shall cause its transfer agent to
electronically transmit the Conversion Shares or Warrant Shares to Accelerant by
crediting the account of Accelerant or Accelerant's Prime Broker with the
Depository Trust Company ("DTC") through its Deposit Withdrawal Agent Commission
("DWAC") system (to the extent not inconsistent with any provisions of this
Agreement).
20
ARTICLE VI
Indemnification
Section 6.1 General Indemnity. The Company agrees to indemnify and hold
harmless Accelerant (and its directors, officers, managers, partners, members,
shareholders, affiliates, agents, successors and assigns, as applicable) from
and against any and all losses, liabilities, deficiencies, costs, damages and
expenses (including, without limitation, reasonable attorneys' fees, charges and
disbursements) incurred by Accelerant as a result of any inaccuracy in or breach
of the representations, warranties or covenants made by the Company herein.
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 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 indemnified party a conflict of interest between it
and the indemnifying party may exist with respect of such action, proceeding or
claim, 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 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. Except as otherwise set forth in this
Agreement and the other Transaction Documents, 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.
Notwithstanding the foregoing sentence, the Company shall pay all reasonable
attorneys' fees and expenses (including disbursements and out-of-pocket
expenses) incurred by Accelerant in connection with (i) the preparation,
negotiation, execution and delivery of this Agreement and the other Transaction
Documents and the transactions contemplated thereunder, which payment shall be
made at the Closing, (ii) the filing and declaration of effectiveness by the
Commission of the Registration Statement and (iii) any amendments, modifications
or waivers of this Agreement or any of the other Transaction Documents. The
Company shall pay all reasonable fees and expenses incurred by Accelerant in
connection with the enforcement of this Agreement or any of the other
Transaction Documents, including, without limitation, all reasonable attorneys'
fees and expenses but only if Accelerant is successful in any litigation or
arbitration relating to such enforcement.
Section 7.2 Specific Enforcement. The Company and Accelerant 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, the
Registration Rights Agreement, or any of 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.
Section 7.3 Entire Agreement; Amendment. This Agreement and the Transaction
Documents contains 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 Transaction Documents, neither the Company nor Accelerant makes
any representations, 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 instrument signed by the
Company and the holder of the Note, and no provision hereof may be waived other
than by an a instrument signed by the party against whom enforcement of any such
amendment or waiver is sought.
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 telex (with correct answer back
received), 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 Accelerant:
00 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxx 00000
Attn: Xxxxx Xxxxxxx
22
If to the Company:
00000 Xxxxxxxx Xxxx. #000
Xxxxx, Xxxxxxx 00000
Any party hereto may from time to time change its address for notices by
giving at least ten (10) days written notice of such changed address to the
other parties hereto.
Section 7.5 Waivers. No waiver by either party of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any other provisions,
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.
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; Consent to Jurisdiction. The parties acknowledge
and agree that any claim, controversy, dispute or action relating in any way to
this Agreement or the subject matter of this Agreement shall be governed solely
by the laws of the State of Delaware, without regard to any conflict of laws
doctrines. The parties irrevocably consent to being served with legal process
issued from the state and federal courts located in New York and irrevocably
consent to the exclusive personal jurisdiction of the federal and state courts
situated in the State of New York. The parties irrevocably waive any objections
to the personal jurisdiction of these courts. Said courts shall have sole and
exclusive jurisdiction over any and all claims, controversies, disputes and
actions which in any way relate to this agreement or the subject matter of this
agreement. The parties also irrevocably waive any objections that these courts
constitute an oppressive, unfair, or inconvenient forum and agree not to seek to
change venue on these grounds or any other grounds.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES
HERETO WAIVES TRIAL BY JURY WITH RESPECT TO ANY CLAIM, CONTROVERSY, DISPUTE OR
ACTION RELATING IN ANY WAY TO THIS AGREEMENT OR THE SUBJECT MATTER OF THIS
AGREEMENT.
Section 7.10 Survival. The representations and warranties of the Company
and Accelerant 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, 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, 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
23
not sign the same counterpart. In the event that any signature is delivered by
facsimile or electronic mail transmission, such signature shall create a valid
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
Section 7.12 Publicity. The Company agrees that it will not disclose, and
will not include in any public announcement, the name of Accelerant without the
consent of Accelerant unless and until such disclosure is required by law or
applicable regulation, and then only to the extent of such requirement.
Section 7.13 Severability. The provisions of this Agreement and the
Transaction Documents 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 or the Transaction Documents
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 or the Transaction
Documents and such provision 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 Accelerant or the Company, each of the Company and
Accelerant shall execute and deliver such instrument, documents, and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement and the
transactions contemplated hereby.
[remainder of page intentionally left blank]
24
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officer as of the date first above
written.
TOTAL LUXURY GROUP, INC.
By: ___________________________
Name:
Title:
ACCELERANT PARTNERS LLC
By: ___________________________
Name:
Title:
25
EXHIBIT A
---------
to the
STOCK PURCHASE AGREEMENT FOR
TOTAL LUXURY GROUP, INC.
FORM OF SENIOR SECURED 9% CONVERTIBLE PROMISSORY NOTE
i
EXHIBIT B
---------
to the
STOCK PURCHASE AGREEMENT FOR
TOTAL LUXURY GROUP, INC.
SERIES A WARRANT
ii
EXHIBIT C
---------
to the
STOCK PURCHASE AGREEMENT FOR
TOTAL LUXURY GROUP, INC.
PLEDGE AGREEMENT
iii
EXHIBIT D
---------
to the
STOCK PURCHASE AGREEMENT FOR
TOTAL LUXURY GROUP, INC.
SECURITY AGREEMENT
iv
EXHIBIT E
---------
to the
STOCK PURCHASE AGREEMENT FOR
TOTAL LUXURY GROUP, INC.
FORM OF REGISTRATION RIGHTS AGREEMENT
v
EXHIBIT F
---------
to the
STOCK PURCHASE AGREEMENT FOR
TOTAL LUXURY GROUP, INC.
FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
[NAME AND ADDRESS OF TRANSFER AGENT]
Attn: ____________________________
Re: Total Luxury Group, Inc.
Ladies and Gentlemen:
Reference is made to that certain Stock Purchase Agreement (the "Purchase
Agreement"), dated as of March 7, 2008, by and between Total Luxury Group,
Inc.., an Indiana corporation (the "Company"), and Accelerant ("Accelerant")
pursuant to which the Company is issuing to Accelerant Senior Secured 9%
Convertible Note (the "Note") and warrants (the "Warrant") to purchase shares of
the Company's common stock, par value $0.001 per share (the "Common Stock").
This letter shall serve as our irrevocable authorization and direction to you
provided that you are the transfer agent of the Company at such time) to issue
shares of Common Stock upon conversion of the Note (the "Conversion Shares") and
exercise of the Warrant (the "Warrant Shares") to or upon the order of
Accelerant from time to time upon (i) surrender to you of a properly completed
and duly executed Conversion Notice or Exercise Notice, as the case may be, in
the form attached hereto as Exhibit I and Exhibit II, respectively, (ii) in the
case of the conversion of Note, a copy of the Note, or, in the case of Warrant
being exercised, a copy of the Warrant (with the original Warrant delivered to
the Company) being exercised (or, in each case, an indemnification undertaking
with respect to such share certificates or the warrants in the case of their
loss, theft or destruction), and (iii) delivery of a treasury order or other
appropriate order duly executed by a duly authorized officer of the Company. So
long as you have previously received (x) written confirmation from counsel to
the Company that a registration statement covering resales of the Conversion
Shares or Warrant Shares, as applicable, has been declared effective by the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act"), and no subsequent notice by the Company or its
counsel of the suspension or termination of its effectiveness and (y) a copy of
such registration statement, and if Accelerant represents in writing that the
Conversion Shares or the Warrant Shares, as the case may be, were sold pursuant
to the Registration Statement, then certificates representing the Conversion
Shares and the Warrant Shares, as the case may be, shall not bear any legend
restricting transfer of the Conversion Shares and the Warrant Shares, as the
case may be, thereby and should not be subject to any stop-transfer restriction.
Provided, however, that if you have not previously received those items and
representations listed above, then the certificates for the Conversion Shares
and the Warrant Shares shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE 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 OR APPLICABLE STATE SECURITIES LAWS, OR
MARKETING WORLDWIDE CORPORATION SHALL HAVE RECEIVED AN OPINION OF
ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE
SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED."
vi
and, provided further, that the Company may from time to time notify you to
place stop-transfer restrictions on the certificates for the Conversion Shares
and the Warrant Shares in the event a registration statement covering the
Conversion Shares and the Warrant Shares is subject to amendment for events then
current.
A form of written confirmation from counsel to the Company that a
registration statement covering resales of the Conversion Shares and the Warrant
Shares has been declared effective by the SEC under the 1933 Act is attached
hereto as Exhibit III.
Please be advised that Accelerant is relying upon this letter as an
inducement to enter into the Purchase Agreement and, accordingly, Accelerant is
a third party beneficiary to these instructions.
Please execute this letter in the space indicated to acknowledge your
agreement to act in accordance with these instructions. Should you have any
questions concerning this matter, please contact me at ___________.
Very truly yours,
TOTAL LUXURY GROUP, INC.
By: ______________________
Name:
Title:
ACKNOWLEDGED AND AGREED:
[TRANSFER AGENT]
By: ________________________
Name:
Title:
Date:
vii
EXHIBIT I
---------
CONVERSION NOTICE
TOTAL LUXURY GROUP, INC.
(To be Executed by the Registered Holder in order to Convert the Note)
In accordance with and pursuant to the Note, the undersigned hereby elects
to convert the Note into such number of shares of Common stock, of Total Luxury
Group, Inc.., an Indiana corporation (the "Company"), indicated below:
Date of Conversion: ___________________________________________
Applicable Conversion Price:___________________________________
Number of shares of Common Stock beneficially owned or deemed
beneficially owned by the Holder on the date of Conversion
Dated:________________ Signature:___________________________
Address:_____________________________
_____________________________
viii
EXHIBIT II
----------
FORM OF EXERCISE NOTICE
TOTAL LUXURY GROUP, INC.
The undersigned_______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase ______ shares of Common Stock of Total Luxury
Group, Inc. covered by the within Warrant.
Dated:________________ Signature:___________________________
Address:_____________________________
_____________________________
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the date of Exercise:
ASSIGNMENT
FOR VALUE RECEIVED, ______________________ hereby sells, assigns and
transfers unto _____________________ the within Warrant and all rights evidenced
thereby and does irrevocably constitute and appoint __________________________,
attorney, to transfer the said Warrant on the books of the within named
corporation.
Dated:________________ Signature:___________________________
Address:_____________________________
_____________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, ______________________ hereby sells, assigns and
transfers unto _____________________ the right to purchase ___________________
shares of Warrant Stock evidenced by the within Warrant together with all rights
therein, and does irrevocably constitute and appoint __________________________,
attorney, to transfer that part of the said Warrant on the books of the within
named corporation.
Dated:________________ Signature:___________________________
Address:_____________________________
_____________________________
FOR USE BY THE ISSUER ONLY:
This Warrant No. W-__________ canceled (or transferred or exchanged) this
_______ day of ______________, _______, shares of Common Stock issued therefor
in the name of __________________________, Warrant No. W-_________ issued for
______________ shares of Common Stock in the name of ______________________.
ix
EXHIBIT III
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[NAME AND ADDRESS OF TRANSFER AGENT]
Attn: ____________________________
Re: Total Luxury Group, Inc.
Ladies and Gentlemen:
We are counsel to Total Luxury Group, Inc.., an Indiana corporation (the
"Company"), and have represented the Company in connection with that certain
Stock Purchase Agreement (the "Purchase Agreement"), dated as of March 7, 2008,
by and between the Company and Accelerant named therein (collectively, the
"Accelerants") pursuant to which the Company issued to Accelerant Senior Secured
9% convertible promissory notes (the "Note") and warrants (the "Warrant") to
purchase shares of the Company's common stock, par value $0.001 per share (the
"Common Stock"). Pursuant to the Purchase Agreement, the Company has also
entered into a Registration Rights Agreement with Accelerant (the "Registration
Rights Agreement"), dated as of March 7, 2008, pursuant to which the Company
agreed, among other things, to register the Registrable Securities (as defined
in the Registration Rights Agreement), including the shares of Common Stock
issuable upon conversion of the Note, the Common Stock and the shares of Common
Stock issuable upon exercise of the Warrant, under the Securities Act of 1933,
as amended (the "1933 Act"). In connection with the Company's obligations under
the Registration Rights Agreement, on ________________, 2008, the Company filed
a Registration Statement on Form SB-2 (File No. 333-________) (the "Registration
Statement") with the Securities and Exchange Commission (the "SEC") relating to
the resale of the Registrable Securities which names each of the present
Accelerants as a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective under the 1933 Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and accordingly, the
Registrable Securities are available for resale under the 1933 Act pursuant to
the Registration Statement.
Very truly yours,
[COMPANY COUNSEL]
By:__________________________
cc: ACCELERANT
x
EXHIBIT G
---------
to the
STOCK PURCHASE AGREEMENT FOR
TOTAL LUXURY GROUP, INC.
AMENDED CERTIFICATE OF INCORPORATION
xi
STOCK PURCHASE AGREEMENT SCHEDULES
Schedule 2.1(a) Organization; Good Standing
Schedule 2.1(b) Authorization
Schedule 2.1(c) Capitalization
Schedule 2.1(f) Commission Documents
Schedule 2.1(g) Subsidiaries
Schedule 2.1(i) Liabilities
Schedule 2.1(l) Indebtedness
Schedule 2.1(m) Title to Assets
Schedule 2.1(t) Operation of Business
Schedule 2.1(u) Environmental Compliance
Schedule 2.1(w) Material Agreements
Schedule 2.1(x) Transactions with Affiliates
Schedule 2.1(bb) Employees
Schedule 2.1(cc) Absence of Certain Developments
Schedule 2.1(kk) Transfer Agent
xii
Schedule 2.1(a)
---------------
Organization and Good Standing
xiii
Schedule 2.1(b)
---------------
Authorization
xiv
Schedule 2.1(c)
---------------
Capitalization
xv
Schedule 2.1(f)
---------------
Commission Documents
xvi
Schedule 2.1(g)
---------------
Subsidiaries
xvii
Schedule 2.1(i)
---------------
Liabilities
xviii
Schedule 2.1(l)
---------------
Indebtedness
xix
Schedule 2.1(m)
---------------
Title to Assets
xx
Schedule 2.1(t)
---------------
Operation of Business
xxi
Schedule 2.1(u)
---------------
Environmental Compliance
xxii
Schedule 2.1(w)
---------------
Material Agreements
xxiii
Schedule 2.1(x)
---------------
Transactions with Affiliates
xxiv
Schedule 2.1(bb)
----------------
Employees
xxv
Schedule 2.1(cc)
----------------
Absence of Certain Developments
xxvi
Schedule 2.1(kk)
----------------
Transfer Agent
xxvii
