REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of November 8th, 2005, by and among XL Generation International
Inc., a Nevada corporation (the "Company"), and the purchasers listed on
Schedule I hereto (the "Purchasers").
This Agreement is being entered into pursuant to the Common Stock
Purchase Agreement dated as of the date hereof among the Company and the
Purchasers (the "Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions.
Capitalized terms used and not otherwise defined herein shall have
the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"Advice" shall have meaning set forth in Section 3(m).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Board" shall have meaning set forth in Section 3(n).
"Business Day" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
state of New York generally are authorized or required by law or other
government actions to close.
"Closing Date" means the date of the closing of the purchase and
sale of the Shares pursuant to the Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value $0.001
per share.
"Effectiveness Date" means with respect to the Registration
Statement the earlier of the 90th day following the Filing Date or the date
which is within three (3) calendar days of the date the Commission informs the
Company that the Commission (i) will not review the Registration Statement or
(ii) that the Company may request the acceleration of the effectiveness of the
Registration Statement and the Company makes such request.
"Effectiveness Period" shall have the meaning set forth in Section
2.
"Event" shall have the meaning set forth in Section 7(d).
"Event Date" shall have the meaning set forth in Section 7(d).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means 30 Days after the execution of the present.
"Holder" or "Holders" means the holder or holders, as the case may
be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section
5(c).
"Indemnifying Party" shall have the meaning set forth in Section
5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
"Registrable Securities" means (i) the shares of Common Stock issued
to the Purchasers pursuant to the Purchase Agreement and (ii) the shares of
Common Stock issuable upon exercise of the Warrants.
"Registration Statement" means the registration statements and any
additional registration statements contemplated by Section 2, including (in each
case) the Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference in such registration
statement.
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"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means one special counsel to the Holders, for
which the Holders will be reimbursed by the Company pursuant to Section 4.
2. Resale Registration.
On or prior to the Filing Date the Company shall prepare and file
with the Commission a "resale" Registration Statement covering all Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule
415. The Registration Statement shall be on Form SB-2 (except if the Company is
not then eligible to register for resale the Registrable Securities on Form
SB-2, in which case such registration shall be on another appropriate form in
accordance herewith). The Company shall (i) not permit any securities other than
the Registrable Securities and the securities to be listed on Schedule II hereto
to be included in the Registration Statement and (ii) use its reasonable best
efforts to cause the Registration Statement to be declared effective under the
Securities Act as promptly as possible after the filing thereof, but in any
event prior to the Effectiveness Date, and to keep such Registration Statement
continuously effective under the Securities Act until such date as is the
earlier of (x) the date when all Registrable Securities covered by such
Registration Statement have been sold or (y) the date on which the Registrable
Securities may be sold without any restriction pursuant to Rule 144 as
determined by the counsel to the Company pursuant to a written opinion letter,
addressed to the Company's transfer agent to such effect (the "Effectiveness
Period").
3. Registration Procedures.
In connection with the Company's registration obligations hereunder,
the Company shall:
(a) Prepare and file with the Commission on or prior to the Filing
Date, a Registration Statement on Form SB-2 (or if the Company is not then
eligible to register for resale the Registrable Securities on Form SB-2 such
registration shall be on another appropriate form in accordance herewith) in
accordance with the method or methods of distribution thereof as specified by
the Holders (except if otherwise directed by the Holders), and use its
reasonable best efforts to cause the Registration Statement to become effective
and remain effective as provided
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herein; provided, however, that not less than two (2) Business Days prior to the
filing of the Registration Statement or any related Prospectus or any amendment
or supplement thereto (including any document that would be incorporated therein
by reference), the Company shall (i) furnish to the Special Counsel, copies of
all such documents proposed to be filed, which documents (other than those
incorporated by reference) will be subject to the review of such Special
Counsel, and (ii) cause its officers and directors, counsel and independent
certified public accountants to respond to such inquiries as shall be necessary,
in the reasonable opinion of Special Counsel, to conduct a reasonable
investigation within the meaning of the Securities Act. Unless otherwise advised
by outside counsel to the Company in its reasonable judgment, the Company shall
not file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Special Counsel shall reasonably object in
writing within one (1) Business Day of its receipt thereof; provided, however,
that Special Counsel may only object to the filing of the Registration Statement
if such objection relates specifically to the Holders or may affect the timely
effectiveness of the Registration Statement.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable Securities;
(ii) cause the related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant to
Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; (iii) respond as promptly as possible, but in no event later
than ten (10) Business Days, to any comments received from the Commission with
respect to the Registration Statement or any amendment thereto and as promptly
as possible provide the Holders true and complete copies of all correspondence
from and to the Commission relating to the Registration Statement; and (iv)
comply in all material respects with the provisions of the Securities Act and
the Exchange Act with respect to the disposition of all Registrable Securities
covered by the Registration Statement during the applicable period in accordance
with the intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.
(c) Notify any Special Counsel as promptly as possible (and, in the
case of (i)(A) below, not less than two (2) days prior to such filing) (i)(A)
when a Prospectus or any Prospectus supplement or post-effective amendment to
the Registration Statement is filed; (B) when the Commission notifies the
Company whether there will be a "review" of such Registration Statement and
whenever the Commission comments in writing on such Registration Statement and
(C) with respect to the Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the Commission or any
other Federal or state governmental authority for amendments or supplements to
the Registration Statement or Prospectus or for additional information; (iii) of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement covering any or all of the Registrable Securities or
the initiation of any Proceedings for that purpose; (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction, or the initiation
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or threatening of any Proceeding for such purpose; and (v) of the occurrence of
any event that makes any statement made in the Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
(d) Use its reasonable best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of, (i) any order suspending the effectiveness of
the Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) If requested by the Holders of a majority in interest of the
Registrable Securities, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as the
Company reasonably agrees should be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective amendment.
(f) Furnish to each Holder and any Special Counsel, without charge,
at least one conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.
(g) The Company hereby consents to the use of any Prospectus and
each amendment or supplement thereto by each of the selling Holders in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, use its
reasonable best efforts to register or qualify or cooperate with the selling
Holders and any Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
provided, however, that the Company shall not be required to qualify generally
to do business in any jurisdiction where it is not then so qualified or to take
any action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
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(i) Cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold
pursuant to a Registration Statement, which certificates shall be free of all
restrictive legends so long as the Holder has complied with all applicable
securities laws in connection with such sale, including the prospectus delivery
requirements, and to enable such Registrable Securities to be in such
denominations and registered in such names as any Holder may request in writing
at least two (2) Business Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as possible, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
(k) Use its reasonable best efforts to cause all Registrable
Securities relating to the Registration Statement to be listed on the OTC
Bulletin Board or any other securities exchange, quotation system or market, if
any, on which similar securities issued by the Company are then listed as and
when required pursuant to the Purchase Agreement.
(l) Comply in all material respects with all applicable rules and
regulations of the Commission and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement, which statement
shall conform to the requirements of Rule 158.
(m) The Company may require each selling Holder to furnish to the
Company information regarding such Holder and the distribution of such
Registrable Securities as is required by law to be disclosed in the Registration
Statement, and the Company may exclude from such registration the Registrable
Securities of any such Holder who unreasonably fails to furnish such information
within a reasonable time after receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar federal statute then in
force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Company that
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such Registration Statement and any post-effective amendments thereto have
become effective as contemplated by Section 3(c) and (ii) it and its officers,
directors or Affiliates, if any, will comply with the prospectus delivery
requirements of the Securities Act as applicable to them in connection with
sales of Registrable Securities pursuant to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a notice from the Company of the occurrence of any event
of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or
3(c)(vi), such Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(j), or until it is advised in writing (the "Advice")
by the Company that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.
(n) If (i) there is material non-public information regarding the
Company which the Company's Board of Directors (the "Board") reasonably
determines not to be in the Company's best interest to disclose and which the
Company is not otherwise required to disclose, or (ii) there is a significant
business opportunity (including, but not limited to, the acquisition or
disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction) available to
the Company which the Board reasonably determines not to be in the Company's
best interest to disclose, then the Company may (x) postpone or suspend filing
of a registration statement for a period not to exceed 30 consecutive days or
(y) postpone or suspend effectiveness of a registration statement for a period
not to exceed 20 consecutive days; provided that the Company may not postpone or
suspend effectiveness of a registration statement under this Section 3(n) for
more than 45 days in the aggregate during any 12 month period; provided,
however, that no such postponement or suspension shall be permitted for
consecutive 20 day periods arising out of the same set of facts, circumstances
or transactions.
4. Registration Expenses.
All fees and expenses incident to the performance of or compliance
with this Agreement by the Company, except as and to the extent specified in
this Section 4, shall be borne by the Company whether or not the Registration
Statement is filed or becomes effective and whether or not any Registrable
Securities are sold pursuant to the Registration Statement. The fees and
expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses with respect to filings required to be made with the OTC
Bulletin Board and each other securities exchange or market on which Registrable
Securities are required hereunder to be listed), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities), (iii) fees and disbursements of counsel for the Company
and Special Counsel for the Holders, in the case of the Special Counsel, up to a
maximum amount of $15,000.00 (iv) Securities Act liability insurance, if the
Company so desires such insurance, and (v) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement, including, without limitation, the
Company's independent
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public accountants. In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
5. Indemnification.
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees of each of them, each Person who controls any such Holder (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, costs of preparation and attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or relating to any untrue
or alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that (i) such untrue statements or omissions are based
solely upon information regarding such Holder or such other Indemnified Party
furnished in writing to the Company by such Holder expressly for use therein and
(ii) that the foregoing indemnity agreement is subject to the condition that,
insofar as it relates to any untrue statement, allegedly untrue statement,
omission or alleged omission made in any preliminary prospectus but eliminated
or remedied in the final prospectus (filed pursuant to Rule 424 of the
Securities Act), such indemnity agreement shall not inure to the benefit of any
Holder, underwriter, broker or other Person acting on behalf of holders of the
Registrable Securities, from whom the Person asserting any loss, claim, damage,
liability or expense purchased the Registrable Securities which are the subject
thereof, if a copy of such final prospectus had been made available to such
Person and such Holder, underwriter, broker or other Person acting on behalf of
holders of the Registrable Securities and such final prospectus was not
delivered to such Person with or prior to the written confirmation of the sale
of such Registrable Securities to such Person. The Company shall notify the
Holders promptly of the institution, threat or assertion of any Proceeding of
which the Company is aware in connection with the transactions contemplated by
this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents and employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses
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(as determined by a court of competent jurisdiction in a final judgment not
subject to appeal or review), as incurred, arising solely out of or based solely
upon any untrue statement of a material fact contained in the Registration
Statement, any Prospectus, or any form of prospectus, or arising solely out of
or based solely upon any omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, to the extent, but
only to the extent, that such untrue statement or omission is contained in any
information so furnished in writing by such Holder or other Indemnifying Party
to the Company specifically for inclusion in the Registration Statement or such
Prospectus. Notwithstanding anything to the contrary contained herein, each
Holder shall be liable under this Section 5(b) for only that amount as does not
exceed the net proceeds to such Holder as a result of the sale of Registrable
Securities pursuant to such Registration Statement.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall
be brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party) in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel (which shall be reasonably acceptable to the
Indemnifying Party) that a conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying Party (in
which case, if such Indemnified Party notifies the Indemnifying Party in writing
that it elects to employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume the defense
thereof and such counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld or delayed. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such Proceeding.
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All fees and expenses of the Indemnified Party (including reasonable fees
and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten (10)
Business Days of written notice thereof to the Indemnifying Party (regardless of
whether it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a)
or 5(b) is unavailable to an Indemnified Party because of a failure or refusal
of a governmental authority to enforce such indemnification in accordance with
its terms (by reason of public policy or otherwise), then each Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such Losses, in
such proportion as is appropriate to reflect the relative benefits received by
the Indemnifying Party on the one hand and the Indemnified Party on the other
from the offering of the Shares and Warrants. If, but only if, the allocation
provided by the foregoing sentence is not permitted by applicable law, the
allocation of contribution shall be made in such proportion as is appropriate to
reflect not only the relative benefits referred to in the foregoing sentence but
also the relative fault, as applicable, of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties. Notwithstanding anything to the contrary contained herein,
the Holders shall be liable under this Section 5(d) for only that amount as does
not exceed the net proceeds to such Holder as a result of the sale of
Registrable Securities pursuant to such Registration Statement.
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6. Rule 144.
As long as any Holder owns any Shares or Warrant Shares, 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 Section 13(a) or 15(d) of the Exchange
Act. As long as any Holder owns any Shares, if the Company is not required to
file reports pursuant to Section 13(a) or 15(d) of the Exchange Act, it will
prepare and make publicly available in accordance with Rule 144(c) promulgated
under the Securities Act annual and quarterly financial statements, together
with a discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the Exchange Act, as
well as any other information required thereby, in the time period that such
filings would have been required to have been made under the Exchange Act. The
Company further covenants that it will take such further action as any Holder
may reasonably request in writing, all to the extent required from time to time
to enable such Person 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, including providing any legal opinions
relating to such sale pursuant to Rule 144.
7. Miscellaneous.
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has, as of the date hereof entered into and currently in effect,
nor shall the Company or any of its subsidiaries, on or after the date of this
Agreement, enter into any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. Except as disclosed in Schedule
2.1(c) of the Purchase Agreement, neither the Company nor any of its
subsidiaries has previously entered into any agreement currently in effect
granting any registration rights with respect to any of its securities to any
Person. Without limiting the generality of the foregoing, without the written
consent of the Holders of a majority of the then outstanding Registrable
Securities, the Company shall not grant to any Person the right to request the
Company to register any securities of the Company, under the Securities Act
unless the rights so granted are subject in all respects to the prior rights in
full of the Holders set forth herein, and are not otherwise in conflict with the
provisions of this Agreement.
(c) No Piggyback on Registrations. Neither the Company nor any of
its security holders (other than the Holders in such capacity pursuant hereto or
as disclosed on
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Schedule 2.1(c) of the Purchase Agreement) may include securities of the Company
in the Registration Statement, and the Company shall not after the date hereof
enter into any agreement providing such right to any of its securityholders,
unless the right so granted is subject in all respects to the prior rights in
full of the Holders set forth herein, and is not otherwise in conflict with the
provisions of this Agreement.
(d) Failure to File Registration Statement and Other Events. The
Company and the Purchasers agree that the Holders will suffer damages if the
Registration Statement is not filed on or prior to the Filing Date and not
declared effective by the Commission on or prior to the Effectiveness Date and
maintained in the manner contemplated herein during the Effectiveness Time or if
certain other events occur. The Company and the Holders further agree that it
would not be feasible to ascertain the extent of such damages with precision.
Accordingly, if (A) the Registration Statement is not filed on or prior to the
Filing Date, or (B) the Registration Statement is not declared effective by the
Commission on or prior to the Effectiveness Date, or (C) the Company fails to
file with the Commission a request for acceleration in accordance with Rule 461
promulgated under the Securities Act within five (5) Business Days of the date
that the Company is notified (orally or in writing, whichever is earlier) by the
Commission that a Registration Statement will not be "reviewed," or not subject
to further review, or (D) the Registration Statement is filed with and declared
effective by the Commission but thereafter ceases to be effective as to all
Registrable Securities at any time prior to the expiration of the Effectiveness
Period, without being succeeded promptly by a subsequent Registration Statement
filed with and declared effective by the Commission, or (E) the Company has
breached Section 3(n), or (F) trading in the Common Stock shall be suspended or
if the Common Stock is delisted from the OTC Bulletin Board for any reason for
more than three Business Days in the aggregate (any such failure or breach being
referred to as an "Event," and for purposes of clauses (A) and (B) the date on
which such Event occurs, or for purposes of clause (C) the date on which such
five Business Day period is exceeded, or for purposes of clause (D) after more
than fifteen Business Days, or for purposes of clause (F) the date on which such
three Business Day period is exceeded, being referred to as "Event Date"), the
Company shall pay an amount as liquidated damages to each Holder, payable in
cash or shares of Common Stock at the Company's option, equal to (i) one percent
(1%) for each calendar month or portion thereof of the Holder's initial
investment in the Shares from the Event Date if the Company elects to pay such
liquidated damages in cash or (ii) one percent (1%) for each calendar month or
portion thereof of the Holder's initial investment in the Shares from the Event
Date if the Company elects to pay such liquidated damages in shares of Common
Stock. Notwithstanding anything to the contrary in this Section 7(d), if (I) any
of the Events described in clauses (A), (B) or (C) shall have occurred, (II) on
or prior to the applicable Event Date, the Company shall have exercised its
rights under Section 3(n) hereof and (III) the postponement or suspension
permitted pursuant to such Section 3(n) shall remain effective as of such
applicable Event Date, then the applicable Event Date shall be deemed instead to
occur on the second Business Day following the termination of such postponement
or suspension. If the Company elects to pay liquidated damages in shares of
Common Stock, the number of such shares of Common Stock to be issued to the
Holders pursuant to this Section 7(d) shall be based on the liquidated damage
amount divided by the closing bid price of the Common Stock on the date that
such liquidated damages are due and payable, and shall be issuable promptly upon
receipt by the Company of a written demand from a Holder made on or after the
Event Date. If the Company elects to pay liquidated damages in
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cash, in no event shall such amount exceed ten percent (10%) of the Holder's
initial investment in the Shares. If the Company elects to pay liquidated
damages in shares of Common Stock, in no event shall such amount exceed twenty
percent (20%) of the Holder's initial investment in the Shares.
(e) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of a majority of the Registrable Securities outstanding.
(f) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earlier of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice prior to 5:00 p.m., Montreal
time, on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice later than 5:00 p.m., Montreal time, on
any date and earlier than 11:59 p.m., New York City time, on such date, (iii)
the Business Day following the date of mailing, if sent by nationally recognized
overnight courier service or (iv) actual receipt by the party to whom such
notice is required to be given. The addresses for such communications shall be
with respect to each Holder at its address set forth under its name on Schedule
I attached hereto, or with respect to the Company, addressed to:
XL Generation International Inc.
▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, President and CEO
Tel. No.: ▇-▇▇▇-▇▇▇-▇▇▇▇
Fax No.: ▇-▇▇▇-▇▇▇-▇▇▇▇
with copies (which copies
shall not constitute notice
to the Company) to: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq
WUERSCH & ▇▇▇▇▇▇, LLP
▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel. No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to any Holder shall be sent to the address of
each Holder as indicated in Schedule1.
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(g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns
and shall inure to the benefit of each Holder and its successors and assigns.
The Company may not assign this Agreement or any of its rights or obligations
hereunder without the prior written consent of each Holder. Each Purchaser may
assign its rights hereunder in the manner and to the Persons as permitted under
the Purchase Agreement.
(h) Assignment of Registration Rights. The rights of each Holder
hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any Affiliate of such Holder or any
other Holder or Affiliate of any other Holder of all or a portion of the
Registrable Securities if: (i) the Holder agrees in writing with the transferee
or assignee to assign such rights, and a copy of such agreement is furnished to
the Company within a reasonable time after such assignment, (ii) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or assignee, and
(b) the securities with respect to which such registration rights are being
transferred or assigned, (iii) following such transfer or assignment the further
disposition of such securities by the transferee or assignees is restricted
under the Securities Act and applicable state securities laws, (iv) at or before
the time the Company receives the written notice contemplated by clause (ii) of
this Section, the transferee or assignee agrees in writing with the Company to
be bound by all of the provisions of this Agreement, and (v) such transfer shall
have been made in compliance with all applicable securities laws and in
accordance with the applicable requirements of the Purchase Agreement. In
addition, each Holder shall have the right to assign its rights hereunder to any
other Person with the prior written consent of the Company, which consent shall
not be unreasonably withheld. The rights to assignment shall apply to the
Holders (and to subsequent) successors and assigns.
(i) 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. In
the event that any signature is delivered by facsimile 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.
(j) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York, without giving
effect to any of the conflicts of law principles which would result in the
application of the substantive law of another jurisdiction. This Agreement shall
not be interpreted or construed with any presumption against the party causing
this Agreement to be drafted.
(k) Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, illegal, void or unenforceable in any
respect, the remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and
-14-
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(m) Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
(n) Shares Held by the Company and its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
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IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
XL GENERATION INTERNATIONAL INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice-President
ASSET PROTECTION FUND LIMITED
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Director
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Schedule I
List of Purchasers
Names and Addresses
of Purchasers
1. Capex Investments Limited 1,111,111 shares
▇▇▇▇▇ ▇▇▇, ▇▇-▇▇▇▇▇ ▇▇▇▇▇ 1,111,111 warrants
St-Denis Street, Port Louis
Republic of Mauritius
No Tax ID: Off Shore Fund
2. Aton Select Fund Limited 1,111,111 shares
▇▇▇▇▇▇▇▇▇▇▇▇ ▇ 1,111,111 warrants
▇▇▇▇▇▇▇▇ ▇▇
▇▇-▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇
Tel: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Tax ID# Foreign investor
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or ▇▇. ▇▇▇▇▇
3. Asset Protection Fund Limited 1,111,111 shares
▇▇▇▇▇▇▇▇▇▇▇▇ ▇ 1,111,111 warrants
▇▇▇▇▇▇▇▇ ▇▇
▇▇-▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇
Tel: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Tax ID# Foreign Investor
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or Mr. David
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Schedule 2.1 (c)
Securities Allowed to be Included on Registration Statement
DT Crystal Holdings 500,000 shares
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