<PAGE>
As filed with the Securities and Exchange Commission on May 24, 2000
Registration No. 333-___________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
SECURITIES ACT OF 1933
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XML - GLOBAL TECHNOLOGIES, INC.
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(Name of small business issuer in its Charter)
Colorado 0-23391 84-1434313
- ---------------- -------------------- ------------------
(State or other (Primary Standard Industrial (IRS Employer
jurisdiction of Classification Code Number) Identification
incorporation or Number)
organization)
1038 Homer Street, Vancouver, British Columbia Canada V6B 2W9
(800) 201-1848 (tel) (604) 717-1107 (fax)
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(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
Peter Shandro, Chief Executive Officer
1038 Homer Street
Vancouver, B.C. Canada V6B 2W9
(800) 201-1848 (tel) (604) 717-1107 (fax)
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(Name, address, including zip code, and telephone number of agent for service
of process)
Copies to:
Clifford L. Neuman, Esq.
Neuman & Drennen, LLC
1507 Pine Street, Boulder, Colorado 80302
(303) 449-2100 (tel) (303) 449-1045 (fax)
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Approximate date of commencement of proposed sale to public:
As soon as practicable after the effective date of the Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum
Title of Each Class Offering Aggregate Amount of
of Securities to be Amount to Price Per Offering Registration
Registered be Registered Share (1) Price (1) Fee
- -------------------- -------------- --------- --------- ------------
<S> <C> <C> <C> <C>
Common Stock, $.001
par value:
24,335,000(2) $1.50(3) $36,502,500 $9,636.66
---------- --------
TOTAL: $36,502,500 $9,636.66
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) Includes 9,730,000 shares of common stock that may be acquired upon
exercise of warrants and options held by the Selling Securityholders and
14,605,000 shares of common stock which have been issued directly to the
Selling Securityholders.
(3) Calculated in accordance with Rule 457(c) under the Securities Act on the
basis of the aggregate exercise price of the warrants and the market
value of the common stock.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
<PAGE>
XML - GLOBAL TECHNOLOGIES, INC.
Cross-Reference Index
<TABLE>
<CAPTION>
Item No. and Heading
In Form SB-2 Location
Registration Statement In Prospectus
---------------------- -------------
<S> <C>
1. Forepart of the Registration Forepart of Registration
Statement and Outside Front Cover Statement and Outside Front
Page of Prospectus Cover Page of Prospectus
2. Inside Front and Outside Back Cover Inside Front and Outside Back
Pages of Prospectus Cover Pages of Prospectus
3. Summary and Risk Factors Prospectus Summary; Risk Factors
4. Use of Proceeds Use of Proceeds; Risk Factors
5. Determination of Offering Price *
6. Selling Securityholders Selling Securityholders
7. Plan of Distribution Plan of Distribution
8. Legal Proceedings Legal Proceedings
9. Directors, Executive Officers, Management
Promoters and Controlling Persons
10. Security Ownership of Certain Security Ownership of
Beneficial Owners and Management Management and Principal
Stockholders
11. Description of Securities Description of Securities
12. Interest of Named Experts and Counsel Legal Matters; Experts
13. Disclosure of SEC Position on Management - Indemnification
Indemnification for Securities Act Limitation on Liability of
Liabilities Directors
14. Organization Within Last Five Years *
15. Description of Business Prospectus Summary; Risk Factors;
Business
16. Management's Discussion and Management's Discussion and
Analysis or Plan of Operation Analysis of Financial
Condition and Results of
Operations; Financial
Statements; Business
17. Description of Property Business
18. Certain Relationships and Certain Transactions
Related Transactions
19. Market for Common Equity and Market for Common Stock
Related Stockholder Matters
20. Executive Compensation Management - Executive
Compensation
21. Financial Statements Financial Statements
22. Changes in and Disagreements *
with Accountants on Accounting
and Financial Disclosure
</TABLE>
* Omitted from Prospectus because Item is inapplicable or answer is in the
negative
<PAGE>
<PAGE>
PROSPECTUS
XML - GLOBAL TECHNOLOGIES, INC.
24,335,000 Shares Common Stock
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This is an offering of shares of the common stock of XML - Global
Technologies, Inc. by persons who were issued shares of our common stock or
warrants or options to purchase our common stock in private offerings. These
persons are referred to in this Prospectus as "Selling Securityholders."
Selling Securityholders holding warrants or options may sell the common stock
covered by this Prospectus when they have exercised their warrants or options
to purchase common stock.
Prior to this offering, there has been no public trading market for our
common stock.
We will not receive any proceeds from the resale of the common stock. If
the Selling Securityholders exercise their warrants or options, we will
receive the exercise price and use the proceeds for working capital. For
information regarding fees and expenses we may pay in connection with the
registration of the common stock covered by this Prospectus, see the section
entitled "Selling Securityholders."
Investing in our common stock
involves a high degree of risk.
You should read the "Risk Factors"
beginning on Page 4.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this Prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
The Date of This Prospectus is May ___, 2000.
<PAGE>
<PAGE>
Prospectus Summary
About our Company
Please note that throughout this Prospectus the words "we," "our" or "us"
refers to XML - Global Technologies, Inc. and not to any of the Selling
Securityholders.
We, together with our subsidiaries, are positioning ourselves to take
advantage of what we believe is one of the most significant trends in business
today: the adoption of a complete, e-business strategy using XML (eXtensible
Markup Language) by global businesses. XML is a markup language that is able
to add structure, intelligence and content identification to information on
the Internet or Intranets. By being able to attract and retain persons who
are at the forefront of XML technology, we have been able to identify and
develop several commercial products and services that will enable us to
exploit the XML opportunities. Our primary objective is to assist businesses
in their effort to migrate from HTML to XML. There is an emerging market for
XML-based tools such as our search engine and other e-commerce products which
will be targeted and served by our XML specialists.
Our executive offices are located at 1038 Homer Street, Vancouver, British
Columbia V6B 2W9 Canada. Our telephone number is (800) 201-1848. Our
Internet website address is http://www.xmlglobal.com.
About the Offering
This is an offering of shares of our common stock by persons who were issued
shares of our common stock and/or warrants or options to purchase our common
stock.
We refer to these persons as "Selling Securityholders" in this Prospectus.
Selling Securityholders who were issued warrants or options may sell the
shares of common stock covered by this Prospectus when they have exercised
their warrants or options to purchase common stock. We are registering the
common stock covered by this Prospectus in order to fulfill the obligations we
have under agreements with the Selling Securityholders.
<PAGE>
<PAGE>
Summary Financial Data
<TABLE>
<CAPTION>
Statement of Operations Data: Period Ended Nine Months Ended
June 30, 1999(1) March 31, 2000(1)
---------------- --------------------
<S> <C> <C>
Total Revenues $ 2,137 $ 30,989
Operating expenses 122,986 1,171,469
Net loss (120,849) (1,114,229)
Net loss applicable to common
stockholders (120,849) (1,114,229)
Basic and diluted loss per share (0.01) (0.06)
Shares used in computing basic
and diluted loss per share 17,500,000 19,662,764
<CAPTION>
At March 31, 2000
-----------------------
At June 30, 1999 Actual Pro Forma(2)
---------------- -------- ------------
<S> <C> <C> <C>
Balance Sheet Data
Working capital (deficit) $ (173,092) $2,403,629 $ 9,403,629
Total assets 88,052 2,634,037 9,634,037
Shareholders' equity
(deficit) (111,020) 2,559,352 9,559,352
</TABLE>
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(1) Our operations commenced May 18, 1999. Accordingly, there are no
comparative results of operations.
(2) Between April and May 2000, we sold in a series of private transactions a
total of 5,225,000 shares of our common stock for net proceeds of
approximately $7,000,000. The pro forma balance sheet data as of March
31, 2000 gives retroactive effect to that date of those subsequent
financing activities.
<PAGE>
<PAGE>
RISK FACTORS
An investment in our securities is speculative and involves a high degree of
risk. Please carefully consider the following risk factors, as well as the
possibility of the loss of your entire investment, before deciding to invest
in our securities.
We are an early stage company, we have a history of losses, and we expect
future losses
We have never been profitable, we expect to incur net losses for the
foreseeable future and we may never be profitable. We incurred net losses of
$1,114,229 for the nine months ended March 31, 2000, and $120,849 for the
fiscal year ended June 30, 1999. As of March 31, 2000, we had an accumulated
deficit of $1,235,078.
We have only recently introduced our new products and services. As a
result of our limited operating history it is difficult to forecast our future
operating results. We expect to substantially increase our sales and
marketing, product development and general administrative expenses. As a
result, we will need to generate significant revenues to achieve and maintain
profitability in the future. Our future operating results will depend on many
factors, including:
* The overall growth rate for the markets in which we compete
* The level of market acceptance of, and demand for, XML technology in
general and our XML products in particular
* The level of product and price competition
* Our ability to attract, train and retain consulting, technical and
other key personnel
There are limited market applications of XML technology
Duane Nickull, Matthew MacKenzie and Jamie Hoglund, officers of the
Company, and Michael Palethorpe, one of our shareholders, began working with
XML in early 1998, completed the first commercial version of the CartNetwork
(now XML CommercePro) e-commerce software in October 1998, and the alpha
version of the GoXML search engine in February 1999. While the Company
believes XML has demonstrated clear advantages over HTML platforms in defining
the content of a document, the vast majority of e-commerce still uses HTML.
To date, there has not been widespread adoption of XML technology, products or
applications. Moreover, there may exist resistance among users of Internet
and intranet e-commerce to transition from HTML to XML. Conversely, new
entrants into e-commerce may be slow to adopt XML in the absence of widespread
acceptance of standards to insure compatibility. As a result, numerous
factors, many of which are not in our control, may slow the development of
market adoption for XML technology and as a result, our products and services.
If the market's acceptance and adoption of XML technologies does not develop,
our future results may suffer
All of our products are based upon and rely solely upon XML technology,
which has only recently been commercially introduced. We cannot be sure that
XML technology will be adopted as a standard, that XML based products will
achieve broad market acceptance, that our XML products will be accepted or
that other superior technologies will not be developed. The failure of XML
technology to become a standard or the failure of our XML products to achieve
broad acceptance could adversely affect our ability to generate revenues. The
XML technology is one of several competing technologies used in information
exchange and Internet commerce.
Lack of growth or decline in internet usage or the lack of acceptance of
commerce conducted via the internet could be detrimental to our future
operating results
Our products enhance a company's ability to transact business and conduct
operations utilizing the Internet. Therefore, our future sales and any future
profits are substantially dependent upon the widespread acceptance and use of
the Internet as an effective medium of commerce by consumers and businesses.
Rapid growth in the use of the Internet and other online services is a recent
development, and we are unsure whether that acceptance and use will continue
to develop, or that a sufficiently broad base of consumers will adopt and
continue to use the Internet and other online services as a medium of
commerce. To be successful, we must rely on consumers and businesses, which
have historically used traditional means of commerce to purchase products,
accepting and utilizing new ways of conducting business and exchanging
information over the Internet.
In addition, the Internet may not be accepted as a viable commercial
marketplace for a number of reasons, including potentially inadequate
development of the necessary network infrastructure or delayed development of
enabling technologies and web performance improvements. If the Internet
continues to experience significant growth in the number of users, frequency
of use or an increase in bandwidth requirements, the Internet's infrastructure
may not be able to support the demands placed upon it. In addition, the
Internet could lose its viability due to delays in the development or adoption
of new standards and protocols required to handle increased levels of Internet
activity, or due to increased governmental regulation. If Congress, or other
governing bodies within and outside the United States, decide to alter
materially the current approach to, and level of, regulation of the Internet,
we may need to adapt our technology. Any required adaptation could cause us
to spend significant amounts of time and money. If use of the Internet does
not continue to grow or grows more slowly than expected, if the infrastructure
for the Internet does not effectively support growth that may occur, if
government regulations change, or if the Internet does not become a viable
commercial marketplace, our business will likely suffer.
Intense competition and increasing consolidation in our industry could create
stronger competitors and harm our business
The market for our products is intensely competitive, highly fragmented,
characterized by rapid technological change and significantly affected by new
product introductions. Recent acquisitions of several competitors by large
software companies and other market activities of industry participants have
increased the competition in our market. Our competitors consist of a number
of private and public companies, including, among others, Sequoia Software,
which markets an XML search engine called Xdex for intranet use; Inktomi,
which has already established relationships with companies such as America
Online, British Telecommunications, Cnet, Excite@Home, Intel, Microsoft, Sun
Microsystems and Yahoo, each of which uses XML for various purposes;
Ultraseek, a division of Go.com (a Disney company) whose customers include Sun
Microsystems, 3Com, Ericsson and others; and IBM, which has modified an
existing HTML search tool to accommodate XML documents. In addition, we face
competition from in-house software developers who may develop some or all of
the functionality that our products provide. Many of our competitors have
longer operating histories, significantly greater financial, technical,
marketing and other resources, greater name recognition, a broader range of
products to offer and a larger installed base of customers, any of which
factors could provide them with a significant competitive advantage.
If we fail to develop strategic relationships with industry partners, our
efforts to license our product may be unsuccessful
At the present time, we lack an existing installed customer base to which
our innovative products and services can be offered. As a result, we will
need to establish critical strategic relationships with industry partners who
have large installed customer bases to whom we can offer licenses to our
products, which may be combined or bundled, with their own software. If we are
not successful in establishing these relationships, it will be more difficult
for us to be successful in our efforts to achieve a large customer base for
our products.
In order to develop our business, it will be necessary to convince businesses
to adopt a new technology and platform
As we do not have an existing customer base, our success will be
dependent upon our ability to convince business to business e-commerce users
to adopt XML technology. Many business to business e-commerce users already
have long term customer agreements with our e-commerce competitors with whom
we may be unable to establish a strategic partnership. Businesses that have
made substantial up-front payments to our competitors for electronic commerce
solutions may be reluctant to replace their current solution and adopt our
solution. As a result, our efforts to create a larger customer base may be
more difficult than expected even if we are deemed to offer products and
services superior to those of our competitors. In addition, because the
business to business e-commerce market is new and underdeveloped, potential
customers in this market may be confused or uncertain about the relative
merits of each electronic commerce solution or which electronic commerce
solution to adopt, if any. Confusion and uncertainty in the marketplace may
inhibit customers from adopting our solution.
If we fail to develop new products and services in the face of our industry's
rapidly evolving technology, our future results may be adversely affected
Due to the recent emergence of the Internet and the Web as a forum for
conducting business, the market for Web application server systems in which we
participate is subject to rapid technological change, changing customer needs,
frequent new product introductions and evolving industry standards that may
render existing products and services obsolete. Our growth and future
operating results will depend in part upon our ability to enhance existing
applications and develop and introduce new applications or components that:
* meet or exceed technological advances in the marketplace
* meet changing customer requirements
* achieve market acceptance
* integrate successfully with third party software and platforms, and
* respond to competitive products.
Our product development and testing efforts have required, and we are
expected to continue to require, substantial investment. We may not possess
sufficient resources to continue to make the necessary investments in
technology.
We will continue to need significant capital and we are dependent upon the
proceeds of this offering
We have required significant capital to date and will require additional
capital to implement our business plan. We are currently generating only
nominal operating revenues. We are dependent upon the proceeds of this
Offering to fund our continuing business activities. We estimate, based on
our current plans and assumptions, that the proceeds of this Offering in
conjunction with cash on hand, if achieved, will be sufficient to meet our
working capital requirements for approximately 18 months following the
Offering. After that, we will require additional financing. We have no
current arrangements with respect to other sources of additional financing and
there can be no assurance that additional financing will be available to us on
commercially reasonable terms, or at all. The inability to obtain additional
financing, when needed, would have a material adverse affect on us, including
possibly requiring us to curtail or cease our operations. To the extent that
future financing involves the sale of our equity securities, our then existing
stockholders, including investors in this offering, could be substantially
diluted.
We need to manage our growth effectively or we may not succeed
We are a growing company. Our ability to manage our growth will depend
in large part on our ability to generally improve and expand our operational
and sales and marketing capabilities, to develop the management skills that
our managers and supervisors, many of whom have been employed by us for a
relatively short time, and to train, motivate and manage both our existing
employees and the additional employees that may be required. Additionally, we
may not adequately anticipate all the demands that growth may impose on our
systems, procedures and structure. Any failure to adequately anticipate and
respond to these demands or manage our growth effectively would have a
material adverse affect on our future prospects.
Security risks of electronic commerce may deter future use of our products and
services
A fundamental requirement to conduct Internet based, business to business
electronic commerce is the secure transmission of confidential information
over public networks. Failure to prevent security breaches in the
marketplaces, or well-publicized security breaches affecting the Web in
general, could significantly harm our business, operating results and
financial condition. We cannot be certain that advances in computer
capabilities, new discoveries in the field of cryptography, or other
developments will not result in a compromise or breach of the algorithms we
use to protect content and transactions or proprietary information in our
databases. Anyone who is able to circumvent our security measures could
misappropriate proprietary, confidential customer information or cause
interruptions in our operations. We may be required to incur significant
costs to protect against security breaches or to alleviate problems caused by
breaches.
If we lose our key personnel or fail to attract and retain additional
personnel, the success and growth of our business may suffer
A significant portion of our management team has been in place for a
relatively short period of time. We do not have written employment agreements
with any of our key personnel. We only have a limited consulting arrangement
with Mr. David Webber, the chief technology leader of the ExpressXchg product.
Our future success will also depend significantly on our ability to attract,
integrate and retain highly skilled technical personnel who are active and
highly regarded in the XML community. As XML technology is relatively new,
the degree to which it is accepted and absorbed in the marketplace is
dependent, in part, upon assembling technology personnel who have the
credibility and skills to successfully promote acceptance of our products. If
we are unable to attract, integrate and retain such persons, our business
could be adversely affected.
The failure to implement successfully our web software and XML search engine
could result in dissatisfied customers and limited sales
Implementation of our Web software and XML search engine involves a
significant commitment of financial and other resources by our customers. The
customer's implementation cycle can be lengthy due to the size and complexity
of their systems and operations. In addition, our customers will rely heavily
on third party systems integrators to assist them with the installation and
use of our products. Our failure or the failure of our alliance partners, our
customers or our third party integrators to implement successfully our
products could result in dissatisfied customers which could adversely affect
our reputation.
Capacity restrictions could reduce the demand and utility for our products
Concurrency restrictions can limit Internet deployment and use capacity.
The boundaries of our XML capacity, in terms of numbers of concurrent users or
interactions, are unknown because, to date, no customer or testing environment
has reached these boundaries. The XML capacity boundaries may, at some future
time, be reached and, when reached, may be insufficient to enable our
customers to achieve their desired levels of information deployment and
exchange. We may lose customers or fail to gain new customers if either of
these occurs.
We are vulnerable to general Internet systems failures or interruptions of our
service
Our success depends on the capacity, reliability and security of our
networking hardware, software and telecommunications infrastructure. Despite
precautions taken by us, our system is susceptible to natural and man-made
disasters. Telecommunications failures, computer viruses, electronic break-
ins or other similar disruptive problems could adversely affect the operation
of our systems. Any such technical failure or security problems could harm
our business, financial condition and results of operations. Periodically, we
may experience unscheduled system downtime that may result in our Website
being inaccessible to customers, or we may experience slow response times
which may result in decreased traffic to our Websites. If these problems
arise, they could materially and adversely affect our business, results of
operations and financial condition.
Our limited ability to protect our intellectual property rights could impair
our ability to compete effectively
Our success and ability to compete are substantially dependent on our
internally developed technologies and intellectual property, which we protect
through a combination of patent, copyright, trademark and trade secret laws,
confidentiality procedures and contractual provisions.
Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy aspects of our products or obtain and use
information that we regard as proprietary. Policing unauthorized use of our
products is difficult and, though we are unable to determine the extent to
which piracy of our software products exists, we expect software piracy to be
a problem. In addition, the laws of some foreign countries do not protect
our proprietary rights to the same extent as the laws of the United States and
Canada (where XML Research is located). Furthermore, our competitors may
independently develop technology similar to ours. The number of intellectual
property claims in our industry may increase as the number of computing
products grows and the functionality of products in different industry
segments overlaps. Although we are not aware that any of our products or
other intellectual property infringe upon the proprietary rights of third
parties, there can be no assurance that third parties will not claim
infringement by us with respect to current or future products. Any of these
claims, with or without merit, could be time consuming to address, result in
costly litigation, cause product shipment delays or require us to enter into
royalty or license agreements. These royalty or license agreements might not
be available on terms acceptable to us or at all, which could have a material
adverse affect on our business.
We cannot rely upon patent protection to preserve our competitive advantage
While we have applied for a 51 point patent covering our XML search
engine, we cannot be sure that a patent will issue and, if a patent does
issue, which if any claims will be upheld. Furthermore, the issuance of one
or more patents covering our technology provides no assurance that competitors
will not lawfully develop improvements or alternative approaches which are not
within the scope of our patents' protection. Furthermore, in the event a
competitor does infringe upon one or more of our patents, the prosecution of a
patent infringement claim or the defense of our patent in the same context
will require a substantial expenditure of human and financial resources,
neither of which may be available in sufficient quantity.
We may not be able to adequately protect our trademarks and domain names
We have applied with the U.S. Patent and Trademark Office to register the
following trademarks:
* GoXML
* XOSP
* XHML
* LeCart
* XOP
In addition, we have registered the following domain names:
* www.goxml.com
* www.lecart.com
* www.cartnetwork.com.
* www.cartnetwork.net
* www.convert2xml.com
* www.findxml.com
* www.xslt.com
* www.xosp.com
* www.xosp.net
* www.xosp.org
* www.walkaboutwebs.com
* www.xmldirectory.com
Our trademarks and domain names play an important role in expanding the
awareness of our products on the Internet and developing partnerships between
those who use the internet to retrieve information and many providers of
products and services available on the web. While we have applied for
registration of the foregoing trademarks and registered domain names in an
effort to protect them, our efforts may be inadequate to prevent others from
claiming violations of their marks and may be inadequate to protect our use of
those names as unique. In addition, trademark protection and the uncertainty
surrounding the legal protections of domain names may be unenforceable or
limited in other countries, and the global nature of the Internet makes it
impossible to control the ultimate destination of our communications. The
regulation of web addresses in the United States and in foreign countries is
subject to change. As a result, we may not be able to acquire or maintain our
web addresses in the future. Furthermore, the relationship between
regulations governing such addresses and the laws protecting trademarks is
unsettled.
In fact, we are aware of a German company that has been using the name
"Go-XML" for its Website. We have made a demand that it cease and desist from
such use, but there can be no assurance that we will be able to prevent or
limit this conflicting and competing use. If we are unsuccessful in these
efforts, our use of the trademark "Go-XML" may be limited or restricted, or,
at the very least, may become so diluted as to lose its value, in which case
we may have to consider rebranding the product.
Additional government regulations may adversely affect our business
The laws governing Internet transactions remain largely unsettled. The
adoption or modification of laws or regulations relating to the Internet could
harm our business, operating results and financial condition by increasing our
costs and administrative burdens. It may take years to determine whether and
how existing laws such as those governing intellectual property, privacy,
libel, consumer protection and taxation apply to the Internet. Laws and
regulations directly applicable to communications or commerce over the
Internet are becoming more prevalent. We must comply with new regulations in
Europe, Canada and the United States, as well as any other regulations adopted
by other countries where we may do business. The growth and development of
the market for online commerce may prompt calls for more stringent consumer
protection laws, both in the United States and abroad, as well as new laws
governing the taxation of Internet commerce. Compliance with any newly
adopted laws may prove difficult for us and may harm our business, operating
results and financial condition.
In 1998 the United States Government enacted a three-year moratorium
preventing states and local governments from imposing new taxes on electronic
commerce transactions. Upon expiration of this moratorium, if it is not
extended, states or other governments might levy sales or use taxes on
electronic commerce transactions. An increase in taxation of electronic
commerce transactions might also make the Internet less effective for
consumers and businesses.
We may be subject to future product liability claims and our products'
reputations may suffer
Many of our installations will involve projects that are critical to the
operations of our customers' business and provide benefits that may be
difficult to quantify. Any failure in a customer's system could result in a
claim for substantial damages against us, regardless of our responsibility for
the failure. Although our license agreements with our customers will contain
provisions designed to limit contractually our liability for damages arising
from negligent acts, errors, mistakes or omissions, it is possible that these
provisions will not be enforceable in certain instances or would otherwise not
protect us from liability for damages. Although we maintain general liability
insurance coverage, this coverage may not continue to be available on
reasonable terms or at all, or may be insufficient to cover one or more large
claims. Moreover, such insurance coverage may not provide benefits for
certain product liability claims.
In addition, we plan to enter into agreements with our strategic alliance
partners whereby we license our products for integration with the alliance
partners' products. If an alliance partners' product fails to meet customer
expectations or causes a failure in its customer's systems, the reputation of
our products could be materially and adversely affected, even if our products
performed in accordance with their functional specifications.
There is no assurance that a public market for our common stock will develop
The shares of Preferred Stock underlying the Units being offered hereby
are convertible, under certain circumstances, into shares of our common stock.
There has been no public market for our common stock. We cannot predict the
extent to which investor interest in our common stock will lead to the
development of a trading market or how liquid that market might become,
especially if a large number of shares were introduced into the market upon
conversion of the shares of Preferred Stock. Without an active public trading
market, you may not be able to liquidate your investment without considerable
delay, if at all. If a market does develop, the price for our common stock
may be highly volatile and may bear no relationship to our actual financial
condition or results of operations. Factors we discuss in this Memorandum,
including the many factors associated with an investment in us, may have a
significant impact on the market price of our common stock.
We have applied to be listed on the OTC Electronic Bulletin Board, which can
be a volatile market
We have applied to have our common stock quoted on the OTC Electronic
Bulletin Board, a NASD sponsored and operated quotation system for equity
securities. It is a more limited trading market than the Nasdaq SmallCap
Market, and timely, accurate quotations of the price of our common stock may
not always be available. You may expect trading volume to be low in such a
market. Consequently, the activity of only a few shares may affect the market
and may result in wide swings in price and in volume.
Once our common stock is listed on the OTC Bulletin Board, it will be
subject to the requirements of Rule 15g.9, promulgated under the Securities
Exchange Act as long as the price of our common stock is below $5.00 per
share. Under such rule, broker-dealers who recommend low-priced securities to
persons other than established customers and accredited investors must satisfy
special sales practice requirements, including a requirement that they make an
individualized written suitability determination for the purchaser and receive
the purchaser's consent prior to the transaction. The Securities Enforcement
Remedies and Penny Stock Reform Act of 1990 also requires additional
disclosure in connection with any trades involving a stock defined as a penny
stock. Generally, the Commission defines a penny stock as any equity security
not traded on an exchange or quoted on Nasdaq that has a market price of less
than $5.00 per share. The required penny stock disclosures include the
delivery, prior to any transaction, of a disclosure schedule explaining the
penny stock market and the risks associated with it. Such requirements could
severally limit the market liquidity of the securities and the ability of
purchasers to sell their securities in the secondary market.
The stock market has experienced significant price and volume
fluctuations, and the market prices of technology companies, particularly
Internet-related companies, have been highly volatile. Investors may not be
able to sell their converted shares at or above the then current, OTCBB price.
In addition, our results of operations during future fiscal periods might fail
to meet the expectations of stock market analysts and investors. This failure
could lead the market price of our common stock to decline.
Our public trading market, if and when it develops, will likely be highly
volatile
Prior to this Offering, there has been no public market for our common
stock. If a public trading market does develop, the market price of our
common stock could fluctuate substantially due to:
* quarterly fluctuations in operating results
* announcements of new products or product enhancements by us or our
competitors technological innovations by us or our competitors
* general market conditions or market conditions specific to our or
our customers' industries
* changes in earnings estimates or recommendations by analysts.
Stock prices of Internet related companies have been highly volatile. In
the past, following periods of volatility in the market price of a company's
securities, securities class action litigation has at times been instituted
against that company. If we become subject to securities litigation, we could
incur substantial costs and experience a diversion of management's attention
and resources.
As a result of the limited number of our shares that will be eligible to
trade in the public market, any substantial sales of our common stock may
depress our stock price
We have a total of 26,505,000 shares of our common stock issued and
outstanding. If our common stock becomes listed on the OTCBB, of our
outstanding shares, only approximately 14,605,000 shares will be eligible to
be sold in public market transactions, but initially only in sales made under
this Prospectus. As a result, we expect that the public trading market for
our shares will be highly volatile, illiquid and sporadic. Any substantial
sales of our shares in the marketplace would have a pronounced negative impact
upon the public price of our shares. Such volatility and illiquidity may make
it more difficult for us to sell equity or equity related securities in the
future at a time and at a price that we may deem appropriate.
Future issuances of our common stock could dilute current shareholders and
adversely affect the market if it develops
We have the authority to issue up to 500,000,000 shares of common stock
and to issue options and warrants to purchase shares of our common stock
without stockholder approval. These future issuances could be at values
substantially below the price paid for our common stock by our current
shareholders.
Future sales of our common stock could adversely affect the market
Future sales of our common stock into the market may also depress the
market price of our common stock if one develops in the future. We have
issued common stock, options and warrants to purchase our common stock. Sales
of these shares of our common stock or the market's perception that these
sales could occur may cause the market price of our common stock to fall.
These sales also might make it more difficult for us to sell equity or equity
related securities in the future at a time and price that we deem appropriate
or to use equity as consideration for future acquisitions.
Future sales of preferred stock could also adversely affect the market for our
common stock
We have the authority to issue up to 100,000,000 shares of preferred
stock without shareholder approval. The issuance of preferred stock by our
Board of Directors could adversely affect the rights of the holders of our
common stock. An issuance of preferred stock could result in a class of
outstanding securities that would have preferences with respect to voting
rights and dividends and in liquidation over the common stock and could, upon
conversion or otherwise, have all of the rights of our common stock. Our
Board of Directors' authority to issue preferred stock could discourage
potential takeover attempts or could delay or prevent a change in control
through merger, tender offer, proxy contest or otherwise by making these
attempts more difficult or costly to achieve.
A change of control of the company will result in the vesting of all
outstanding stock options issued under our plan
Under the terms of our Equity Incentive Plan, in the event there occurs a
change of control of the Company, all outstanding and unvested stock options
previously granted to our employees, officers, directors and consultants will
immediately become vested and exercisable in their entirety. This vesting
acceleration could deter parties from pursuing business combinations with us
that might otherwise be beneficial to our shareholders.
We cannot be sure that the Y2K issue has passed
While we believe that the greatest risk of experiencing problems with the
Y2K issue has passed, we cannot be sure that in the near term we will not
experience problems with our suppliers and vendors, although no such problems
have been discovered to date.
CERTAIN MARKET INFORMATION
There currently exists no public trading market for our common stock, and
there can be no assurance that a public trading market will develop or be
sustained in the future. Without an active public trading market, there can
be no assurances that you will be able to liquidate your investment without
considerable delay, if at all. If a market does develop, the price for our
securities may be highly volatile and may bear no relationship to our actual
financial condition or results of operations. Factors we discuss in this
prospectus, including the many risks associated with an investment in us, may
have a significant impact on the market price of our common stock. Also,
because of the relatively low price of our common stock, many brokerage firms
may not effect transactions in the common stock.
In addition, it is likely that the Company's common stock will be subject
to rules adopted by the Commission regulating broker dealer practices in
connection with transactions in "penny stocks." Those disclosure rules
applicable to "penny stocks" require a broker dealer, prior to a transaction
in a "penny stock" not otherwise exempt from the rules, to deliver a
standardized list disclosure document prepared by the Commission. That
disclosure document advises an investor that investment in "penny stocks" can
be very risky and that the investor's salesperson or broker is not an
impartial advisor but rather paid to sell the shares. It contains an
explanation and disclosure of the bid and offer prices of the security, any
retail charges added by the dealer to those prices (called mark up and mark
downs) and the amount of compensation or profit to be paid or received by the
salesperson in connection with the transaction. The disclosure contains
further warnings for the investor to exercise caution in connection with an
investment in "penny stocks," to independently investigate the security, as
well as the salesperson with whom the investor is working and to understand
the risky nature of an investment in this security. Further, the disclosure
includes information regarding the market for "penny stocks," explanations
regarding the influence that market makers may have upon the market for "penny
stocks" and the risk that one or two dealers may exercise domination over the
market for such security and therefore control and set prices for the security
not based upon competitive forces. The broker dealer must also provide the
customer with certain other information and must make a special written
determination that the "penny stock" is a suitable investment for the
purchaser and receive the purchaser's written agreement to the transaction.
Further, the rules require that, following the proposed transaction, the
broker provide the customer with monthly account statements containing market
information about the prices of the securities.
These disclosure requirements may have the effect of reducing the level
of trading activity in the secondary market for our common stock. Many
brokers may be unwilling to engage in transactions in our common stock because
of the added disclosure requirements, thereby making it more difficult for
stockholders to dispose of their shares.
<PAGE>
<PAGE>
FORWARD-LOOKING STATEMENTS
In General
This Prospectus contains statements that plan for or anticipate the
future. Forward-looking statements include statements about the future of the
software development, computer-based project management, consulting and
strategic business consulting industries, statements about our future business
plans and strategies, and most other statements that are not historical in
nature. In this Prospectus, forward-looking statements are generally
identified by the words "anticipate," "plan," "believe," "expect," "estimate,"
and the like. Although we believe that any forward-looking statements we make
in this Prospectus are reasonable, because forward-looking statements involve
future risks and uncertainties, there are factors that could cause actual
results to differ materially from those expressed or implied. For example, a
few of the uncertainties that could affect the accuracy of forward-looking
statements, besides the specific factors identified above in the Risk Factors
section of this Prospectus, include:
* changes in general economic and business conditions affecting the
software development, computer-based project management consulting
and strategic business consulting industries;
* technical developments that make our products or services obsolete;
* changes in our business strategies;
* the level of demand for our products and services; and
* our ability to develop or maintain strategic relationships within
the software development, computer-based project management
consulting and/or strategic business consulting industries.
In light of the significant uncertainties inherent in the forward-looking
statements made in this Prospectus, particularly in view of our early stage of
operations, the inclusion of this information should not be regarded as a
representation by us or any other person that our objectives and plans will be
achieved.
No "Safe Harbor"
The Private Securities Litigation Reform Act of 1995, which provides a
"safe harbor" for similar statements by existing public companies, does not
apply to our offerings.
<PAGE>
<PAGE>
DIVIDEND POLICY
We have not declared or paid cash dividends on our common stock in the
preceding two fiscal years. We currently intend to retain all future
earnings, if any, to fund the operation of our business, and, therefore, do
not anticipate paying dividends in the foreseeable future. Future cash
dividends, if any, will be determined by our Board of Directors.
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 2000 on
an actual basis and on a proforma basis. The proforma table gives retroactive
effect to March 31, 2000 of our sale of an additional 5,225,000 shares of
common stock for net proceeds of approximately $7,000,000 in private
transactions which were completed in April and May 2000. This section should
be read in conjunction with the consolidated financial statements and related
notes contained elsewhere in this prospectus.
<TABLE>
<CAPTION>
As of March 31, 2000
---------------------------------
Actual ProForma
------------- -------------
<S> <C> <C>
Shareholders' Equity
Preferred Stock, $.01 par
value, 100,000,000 shares
authorized; no shares
outstanding $ - $ -
Common Stock, $.0001 par
value; authorized
500,000,000 shares:
21,280,000 issued and
outstanding shares
(actual) and 26,505,000
proforma 2,128 2,651
Additional paid-in capital 3,807,360 10,806,837
Deferred compensation (12,209) (12,209)
Accumulated other
comprehensive income (2,849) (2,849)
Accumulated deficit (1,235,078) (1,235,078)
------------- ---------------
Total shareholders' equity
and capitalization $ 2,559,352 $ 9,559,352
============= ===============
</TABLE>
These amounts do not include 4,000,000 shares of common stock we may
issue upon exercise of options which may be granted under our Equity Incentive
Plan. Currently under the Plan we have issued 1,165,000 options which are
subject to outstanding and unexercised options having an exercise price. Of
the 1,165,000 options, 110,000 options are currently not exercisable by the
holder but will vest in the future, subject to the holder's continuing
employment.
<PAGE>
<PAGE>
SELECTED FINANCIAL DATA
We have set forth below certain selected financial data. This financial
data was derived from the Consolidated Financial Statements and Notes thereto
included elsewhere in this Prospectus and is qualified by reference to such
Consolidated Financial Statements and the Notes thereto. The financial data
for the nine months ended March 31, 2000 are derived from our unaudited
consolidated financial statements. In our opinion, the consolidated financial
statements for these periods include all adjustments necessary to present
fairly the financial information for such periods.
<TABLE>
<CAPTION>
For the Period
May 18, 1999 to Nine Months Ended
June 30, 1999(1) March 31, 2000(1)
-------------------- --------------------
<S> <C> <C>
Statements of Operations Data
Revenues $ 2,137 $ 30,989
Operating Expenses 122,986 1,171,469
Operating Loss (120,849) (1,140,480)
Other Income (Expenses) - 26,251
Net Income (Loss) (120,849) (1,114,229)
Net (Loss) Per Share (0.01) (0.06)
Average Common Shares
Outstanding 17,500,000 19,662,764
<CAPTION>
June 30, 1999 March 31, 2000
------------- ------------------------
Actual Pro Forma(2)
--------- ------------
<S> <C> <C> <C>
Balance Sheet Data
Total Assets $ 88,052 $ 2,634,037 $ 9,634,037
Working Capital
(deficiency) (173,092) 2,403,629 9,403,629
Total Liabilities 199,072 74,685 74,685
Accumulated Deficit (120,849) (1,235,078) (1,235,078)
Stockholders' Equity (111,020) 2,559,352 9,559,352
</TABLE>
- -----------------------
(1) Our operations commenced May 18, 1999. Accordingly, there are no
comparative results of operations.
(2) In April and May 2000, we sold in a series of private transactions a
total of 5,225,000 shares of our common stock for net proceeds of
approximately $7,000,000. The pro forma balance sheet data as of March
31, 2000 gives retroactive effect to that date of those subsequent
financing activities.
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF XML - GLOBAL TECHNOLOGIES, INC.
The following discussion and analysis should be read in conjunction with
the Financial Statements and Notes thereto appearing elsewhere in this
Prospectus. Unless otherwise noted, references to "we," "our," and "us" refer
to XML-Global Technologies, Inc. and its subsidiaries.
Operations
Effective August 27, 1999, XML-Technologies, Inc. and International
Capital Funding, Inc. (ICF) entered into an agreement and plan of
reorganization (the Agreement). In accordance with the Agreement, the
shareholders of XML-Technologies, Inc. received 12.5 million shares of ICF
stock in exchange for the 12.5 million outstanding shares of XML-Technologies,
Inc. The shareholders of ICF retained 5 million shares in exchange for no
assets and the assumption of $2,671 of liabilities of ICF by XML-Technologies,
Inc. The transaction was accounted for as a recapitalization of XML-
Technologies, Inc.
The founders of the Company began working with Extensible Markup Language
("XML") in early 1998 and began to develop software as a group in the fall of
1998. The Company was formed in May 1999 to develop commercial applications
using the founders' XML expertise. In July 1999, we commenced sales of
Cartnetwork, our proprietary e-commerce software and in September 1999, we
announced goxml, which we believe is the world's first XML search engine. On
September 29, 1999, we filed an application with the United States Patent
Office in respect of our goxml search engine under the title "Authoring,
altering, indexing, storing and retrieving electronic documents embedded with
contextual markup".
We continue to develop proprietary XML-based solutions for the Internet-
based economy with a focus on e-commerce and the conversion of data from
legacy formats to XML. As an adjunct to our e-commerce business, we develop
web sites for our clients. Our main sources of revenue are currently from the
development of web sites and the licensing of our e-commerce software.
1999 Equity Incentive Plan
On October 19, 1999 the shareholders approved the 1999 Equity Incentive
Plan (the "1999 Plan") which provides for the grant of (1) both incentive and
nonstatutory stock options, (2) stock bonuses, (3) rights to purchase
restricted stock and (4) stock appreciation rights. The 1999 Plan was adopted
by the Board of Directors on September 15, 1999 and provides a means by which
selected officers and employees of and consultants to the Company and its
affiliates may be given an opportunity to purchase stock in the Company, to
assist in attracting and retaining employees holding key positions and to
provide incentives for such persons to exert maximum efforts. The 1999 Plan
is administered by the Board of Directors of the Company, which has exclusive
power over the granting of options and their vesting provisions. The Company
has reserved a total of 4,000,000 shares of Common Stock for issuance under
the 1999 Plan of which 1,165,000 options have been granted to employees,
directors and consultants at an exercise price of $1.00 per share.
Results of Operations
REVENUE. Revenue consists of fees received from the sale of e-commerce
solutions, the design and Web site development, implementation and support.
Revenue was $7,300 for the three months ended March 31, 2000, (down from
$14,400 for the previous fiscal quarter), and $31,000 for the nine-month
period ended March 31, 2000. The decline was due to our emphasis on sales of
our goXML search engine and while we had three installations under way at
March 31, 2000, we had not invoiced these sales.
RESEARCH AND DEVELOPMENT EXPENSES. Product and content development costs
include expenses we incur to develop our technology and our clients' web
sites. These costs consist primarily of salaries and fees paid to employees
and consultants to develop and maintain software and web sites. For the three
and nine months ended March 31, 2000, these costs were $215,900 and $504,000
respectively. The increased expenditures in the quarter just ended, which
compare to $166,700 for the previous quarter, reflect increased staffing
levels.
SALES AND MARKETING EXPENSES. Marketing, sales and client services costs
include expenses we incur to obtain and maintain client relationships. These
costs include fees paid to contractors and consultants, related travel and
incidental costs and occupancy costs for our Seattle sales office. For the
three months ended March 31, 2000, sales and marketing expenses were $71,400
and are largely unchanged from the $69,200 recorded in the previous quarter.
Total sales and marketing expenses for the nine months ended March 31, 2000
were $173,500.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
consist primarily of salaries, contractor fees and related costs for general
corporate functions, including travel, finance, accounting and legal expenses.
For the three and nine months ended March 31, 2000, general and administrative
expenses were $183,400 (up from $143,300 in the three months ended September
30, 1999) and $422,900 respectively. The increase in the last quarter
reflected professional fees associated with licensing our products and
defending our intellectual property and travel costs. In the previous quarter,
we treated $33,700 in professional costs as deferred issue costs associated
with a financing that we were pursuing, however that financing did not
complete and we expensed this amount in the current quarter. We incurred a
further $70,500 in professional costs which we treated as deferred issue costs
and accordingly did not recognize such costs in the statement of operations.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation expense reflects
depreciation of computer hardware, software and equipment over their estimated
useful lives of between two and three years. Depreciation expense was $8,700
and $21,600 respectively for the three and nine months ended March 31, 2000.
The company recorded only nominal amortization expense in regard to trademarks
and patents as these costs largely relate to applications that had not been
granted at March 31, 2000.
FAIR VALUE OF STOCK OPTIONS. The Company reports the financial impact of
stock options issued to employees using APB-25. We record the fair value of
stock options granted to non-employees based on the fair value of the options
at the date the services were performed. During the three months ended March
31, 2000 we granted 275,000 options to non-employees at an exercise price of
$1.00. We estimate that the fair value of each of these options was
approximately $0.22. We have recorded an expense of $49,300 in respect of
options that have vested and a deferred compensation amount of $12,200 in
regard to the remaining options that vest in May and June 2000.
INTEREST INCOME. During the three and nine months ended March 31, 2000,
the company earned interest income of $24,100 and $26,300 respectively on
funds received by way of the issuance of securities. Interest income has
increased over prior periods since funds received from private equity
placements have greatly exceeded operating expenditures with the result that
cash and cash equivalents increased in the period.
Liquidity And Capital Resources
Since inception, we have financed our operations primarily through the
placement of equity securities and advances from our principal stockholder. In
the three months ended March 31, 2000, we received net proceeds of
approximately $1,585,000 from private offerings of equity securities. Issue
costs associated with these offerings, which have been offset against the net
proceeds of the offering, were not material. In aggregate, we have raised net
proceeds of $3,738,000 through the placement of equity securities. As of
March 31, 2000 we had $2,353,800 in cash and cash equivalents.
We have incurred costs to design, develop and implement search engine and
electronic commerce applications and to grow our business. As a result, we
have incurred operating losses and negative cash flows from operations in each
quarter since we commenced operations. As of March 31, 2000, we had an
accumulated deficit of $1,235,000. These losses have been primarily funded
through private placement of equity securities.
To date, we have experienced negative cash flows from operating
activities. For the nine months ended March 31, 2000, the net cash used in
operating activities was primarily attributable to our net operating loss of
$1,114,200. The net loss for the quarter was partially offset by non-cash
depreciation and amortization of $21,700, the fair value of options granted to
employees of $49,300 and a net cash outflow of $28,500 with respect to working
capital changes. For the nine months ended March 31, 2000, net cash used in
operating activities was therefore $1,071,800.
For the nine months ended March 31, 2000, net cash used in investing
activities was $113,100. We spent $80,300 on computer hardware, software and
equipment and $32,800 on patent and trademark applications. The computer
hardware and software purchases related to server upgrades and computers used
by programmers.
For the nine months ended March 31, 2000, net cash provided by financing
activities was $3,532,500 attributable to the private placements of equity
securities, offset by related issue costs, repayment of the note payable and
the deferred issue costs related to a proposed financing.
Changes in exchange rates had a net effect of decreasing our cash balance
by $3,500.
As of March 31, 2000, we had no contractual capital commitments
outstanding, although we expect that our Vancouver office relocation and
expansion will cost about $50,000.
Our ability to generate significant revenue is uncertain. We incurred net
losses of approximately $497,000 for the quarter ended March 31, 2000. We
expect losses from operations and negative cash flow to continue for the
foreseeable future, at least through the year 2000, as a result of our
expansion plans and our expectation that operating expenses will increase
significantly in the next several years. The rate at which these losses will
be incurred are likely to increase from current levels. Although we have
experienced revenue growth, revenues have been substantially less than
expenses and may not increase in the future. If our revenue does not increase
and if our spending levels are not adjusted accordingly, we may not generate
sufficient revenue to achieve profitability, which would have a materially
adverse effect on our business, financial condition and results of operations.
Even if we achieve profitability, we may not sustain or increase profitability
on a quarterly or annual basis in the future.
Our working capital requirements depend on numerous factors. We have
experienced increased expenditures since inception, consistent with growth in
our operations and staffing, and expect that this trend will continue for the
foreseeable future. We anticipate incurring additional expenses to increase
our marketing and sales efforts, for software and infrastructure development.
Additionally, we will continue to evaluate possible investments in businesses,
products and technologies, the expansion of our marketing and sales programs
and brand promotions. If we experience a shortfall in revenue in relation to
expenses, or if our expenses precede increased revenue, our business,
financial condition and results of operations could be materially and
adversely affected.
We currently estimate that available cash resources at March 31, 2000 in
conjunction with funds raised in April 2000 will be sufficient to meet our
anticipated needs for working capital and capital expenditures through June
2001. We may need to raise additional funds, however, in order to fund more
rapid expansion, to develop new or enhance existing services or products, to
respond to competitive pressures or to acquire complementary products,
businesses or technologies. There can be no assurance that any required
additional financing will be available on terms favorable to us, or at all. If
additional funds are raised by the issuance of equity securities, stockholders
may experience dilution of their ownership interest and these securities may
have rights senior to those of the holders of the common stock. If additional
funds are raised by the issuance of debt, we may be subject to certain
limitations on our operations, including limitations on the payment of
dividends. If adequate funds are not available or are not available on
acceptable terms, we may be unable to fund our expansion, successfully promote
our brand name, take advantage of acquisition opportunities, develop or
enhance services or respond to competitive pressures, any of which could have
a materially adverse effect on our business, financial condition and results
of operations.
Some of our revenues and a substantial portion of our payroll is paid
outside the United States in currencies other than US dollars. Because our
financial results are reported in US dollars, they are affected by changes in
the value of the various foreign currencies in which we make payments in
relation to the US dollar. We do not cover known or anticipated currency
fluctuation exposures through foreign currency exchange option or forward
contracts. The primary currency for which we have foreign currency exchange
rate exposure is the Canadian dollar. Our financial instruments, including
cash, accounts receivable, accounts payable and accrued liabilities are
carried at cost which approximates their fair value because of the short-term
maturity of these instruments.
Year 2000
Some computers, software and other equipment include programming code in
which calendar year data is abbreviated to only two digits. As a result of
this design decision, some of these systems could fail to operate or fail to
produce correct results if "00" is interpreted to mean 1900, rather than 2000.
These problems are commonly referred to as the year 2000 problem. We have not
incurred and nor do we expect to suffer any Year 2000 problems.
<PAGE>
<PAGE>
BUSINESS
Overview
We, together with our subsidiaries, are positioning ourselves to take
advantage of what we believe is one of the most significant trends in business
today: the adoption of a complete, e-business strategy using XML (eXtensible
Markup Language) by global businesses. XML is a markup language that is able
to add structure, intelligence and content identification to information on
the Internet or Intranets. By being able to attract and retain persons who
are at the forefront of XML technology, we have been able to identify and
develop several commercial products and services that will enable us to
exploit the XML opportunities. Our primary objective is to assist businesses
in their effort to migrate from HTML to XML. There is an emerging market for
XML-based tools such as our search engine and other e-commerce products which
will be targeted and served by our XML specialists.
About XML
Previously Web pages have been written on HTML (HyperText Mark-up
Language). HTML is essentially a presentation technology, concerned with how
a browser should arrange text and graphics on a page.
HTML was never designed or intended to accommodate the complexity and
quantity of information on the Web. HTML browsers cannot identify or
determine the meaning of a word or presentation on a page. For example, if
you were looking for a book authored by a person named "Gold," you may search
terms such as "gold" and "book." Yet, an HTML browser cannot differentiate
between "books by Gold" and "books about gold" and therefore might present the
searcher with irrelevant information.
In response to this acknowledged difficulty, the World Wide Web
Consortium ("W3C"), the industry association that promotes standards for the
evolution of the Web, defined a new mark-up standard known as XML. XML is a
very simple and flexible text format which, like HTML, is tag based and saves
its information in plain text files. However, while HTML defines a set of
tags used for formatting and displaying text, XML defines a set of tags used
for representing text as pieces of information. XML was originally designed
to meet the challenges of large-scale electronic publishing. However, with
new XML tools, products and services being introduced, we believe that the
greatest potential for XML will be related to business-to-business
applications and, in particular, order processing and order fulfillment.
XML allows individual users to easily customize the presentation of their
data to meet their specific needs. XML overcomes the limitation of HTML in
that it:
* Provides metadata, or data about information, that will help people
find information and help information producers and users find each
other.
* Delivers information to users in a form that allows automatic
processing after receipt.
* Enables media independent international electronic publishing.
* Makes it easy for users to process data using inexpensive software.
* Allows users to display information in any form.
The advantages flow from the fact that XML allows each writer to define
the tags that mark up and identify the type of data contained in a particular
document. Commerce on the Internet is undergoing global changes, including a
shift in mark-up language technology. HTML based e-commerce systems have
severe limitations in terms of portability, data recognition and integration
with back-end systems, and generally fail to provide a streamlined client-
friendly approach to e-commerce. XML addresses these limitations, primarily
through its inherent extensibility and is therefore ideal for creating
industry wide shopping systems.
Business strategy
Our marketing strategy
We intend to pursue the global business-to-business e-commerce market
with our search engine and software tools. Our initial marketing strategy
will focus on forming partnerships and affiliations with leading software and
XML companies.
GoXML.com marketing strategy
* Corporate Partnerships and Affiliations. We are developing
strategic alliances with businesses offering complementary software;
for example, database vendors, and related services and system
integrators.
* License GoXML. We will target companies in industry segments, such
as publishing and education, that need to search for information
from many disparate sources. We believe that these companies are
likely to be early adopters of XML and they will find it more cost
effective to license a search engine than develop one. Direct
sales, telesales and e-support for the marketing campaign form the
basis of our licensing strategy.
* Develop the convert2xml.com Website. This Website will be an
important source of technical information, instructions and
tutorials on how to write XML and will provide free software for
converting simple HTML to XML.
* XSLT.com. We developed this Website to advance XSLT and promote
technical contributions. XSLT is at the recommendation stage of the
W3C and is expected to become the dominant language for template-
based stylizing of XML documents.
XCHG marketing strategy
The end-users for our XML CommercePro software are small and medium e-
commerce businesses seeking an XML-enabled e-commerce solution. In order to
effectively reach such businesses, we market XML CommercePro to e-commerce
hosting businesses, such as ISP's, ASP's and server farms that have multiple
e-commerce clients. By using XML CommercePro, the hosting businesses offer
their clients the ability to XML-enable their e-commerce websites.
Our sales and marketing approach combines direct sales through our
Seattle and Vancouver offices with a web presence at our CartNetwork site.
The basic software for XML CommercePro is available as a free download at the
CartNetwork site allowing both web hosting businesses and end-users to sample
the software before committing to a purchase.
XML CommercePro marketing strategy
By allowing free downloads (averaging 140 per week) of the LeCart
shopping cart program, we believe that we will expose our XML CommercePro to
its intended audience of small to medium e-commerce providers. XML
CommercePro is XML enabled and appeals to individuals and corporations that
want to be able to sell online and utilize our XML e-commerce solution. The
product is currently being re-branded to focus on the XML capability of the
product as well as to use it as a link to the Goxml.com site and to promote
our core XML products.
Our strategic relationships
We have developed (both formal and informal) relationships with many of
the leading XML firms and we are also maintaining an active role in
associations and industry consortiums that are considered leaders in the
development of XML standards.
Corporate relationships
We have agreements or are in negotiation with a number of major software
companies for the exchange and cross-license of XML applications. We consider
the creation and maintenance of these relationships to be important to our
business development and future success.
Standards associations
* XML EDI. This is a consortium of over 1,500 of the world's leading
technology-based companies co-founded and directed by David Webber,
one of our Directors. Its purpose is to promote the exchange of
information and technology among participants in the XML-EDI
industry.
* ebXML. This is an association sponsored by the United Nations and
OASIS whose mandate is to develop standards for businesses to use
the Internet for the exchange of data and e-commerce and business-
to-business transactions using XML. Duane Nickull, our President,
is Editor of the Technical Architectural Committee of ebXML.
* OASIS. OASIS is a non-profit international consortium of users and
vendors dedicated to the promotion of open specifications for the
exchange of structured data. It is focused on the definition and
implementation of XML communication.
Products
We have developed and are using our proprietary technology to
commercialize a suite of applications for e-business to help companies convert
from HTML to XML. We believe that this technology, together with technology
we currently have under development, will allow existing businesses to
successfully adopt XML database structures:
* GoXML.com -- is, we believe, the first context XML search engine,
allowing users to search for terms according to the type of
information they are looking for. Version 1.0 of GoXML was launched
in July 1999 and was designed to handle over 60 million documents.
It is based on our proprietary technology that is patent pending,
and uses a proprietary spidering program that scans the Internet to
find and index XML data. The next release, expected in March 2000,
is designed to handle up to 200 million complex documents. One
application for the search engine product is for corporate intranets
of companies that have already converted databases to XML. The
Internet-based version of the search engine has been showcasing our
technology since July 1999.
* expressXCHG -- is a patented data transformation tool under final
development that allows direct interface between different systems
including EDI, HTML, EDIFACT / X12, SAP BAPIs. We are developing
expressXCHG to be able to effect the conversion between all of these
standards and XML. We believe this to be a key component to the
migration and interchange of business data on the Internet.
* XML CommercePro -- is an XML enabled multi-user shopping cart system
designed for ISPs (Internet Service Providers), CSPs (Commerce
Service Providers) and ASPs (Application Service Providers). It was
first launched in June 1999 but one of its components, LeCart, has
been commercially available since September 1998. Its setup-once,
run-anywhere design means it not only enables hosted clients'
websites for e-commerce, but any website on the Internet as well.
The software has a simple browser-based administration interface
which will allow users to sign up manually or online, thereby
becoming e-commerce enabled immediately.
* XML Data Conversions -- XML Global is developing solutions to enable
Websites to seamlessly integrate an XML-based solution into their
Web presence. One such solution is eXtensible Object Server Pages
(XOSP). XOSP is the XML equivalent to the ASP (Active Server Pages)
standard which was developed by Microsoft. This software allows web
masters and ISPs to mark up HTML documents with XML, thus providing
all of the retrieval benefits of XML to HTML documents. XOSP will
be used along with our other tools to develop other XML-based
business applications.
Competition in general
Competition with GoXML search engine
Our competition comes from a variety of companies who have adopted XML
and are using various XML based products for commercial purposes:
Private search engines
* Sequoia Software has what we believe to be the only other pure XML
search engine which is called "Xdex." This is for use in intranet
applications with very small businesses. To our knowledge, the
product has not yet been commercially launched.
* Inktomi has an HTML search engine created at the University of
California at Berkeley. It develops and markets software design for
Internet infrastructure and media companies. It works with leading
companies including America On Line, British Telecommunications,
Cnet, Excite@Home, Intel, Microsoft, Real Networks, Sun Microsystems
and Yahoo. The Inktomi search engine is licensed to both public
search portals and private corporations for their intranets. There
is no public portal for a direct query of the Inktomi index
directly. We believe that Inktomi is the industry leader in search
engine licensing. Based on published reports, it reported 1999
revenues of $71,000,000 and handled 2.9 billion queries in the
fourth quarter alone.
* Ultraseek, as a division of Go.com (a Disney company), launched its
Ultraseek server in 1997 and now claims customers such as Sun
Microsystems, 3Com and Ericsson. Ultraseek's 3.0 version provides
support for indexing and search of XML documents. They have
modified their HTML search engine to recognize XML documents.
Ultraseek is not actively marketed and, to our knowledge, is not a
context-based search engine.
* IBM, like Ultraseek, has modified an existing HTML search tool to
accommodate XML documents. This product has not been commercially
launched to date.
Commercial search engines
We believe that our GoXML.com search engine will compete with the large
Web-based search portals. To date, there are not a sufficient number of XML
documents to make a commercial Internet XML portal competitive with HTML
search portals. However, we believe that we ultimately may compete with the
larger HTML based search portals such as Alta Vista, Ask Geeves, Excite,
Go.com, Goto.com, Google, HotBot, Look Smart, Snap and Yahoo.
Competition with expressXCHG
Several companies have developed XML/EDI translation systems that compete
with our expressXCHG transformation software:
* XML Solutions offers its XEDI translator which can convert EDI
documents to XML documents for transmission over the public Internet
or private networks.
* EComXML offers secure EDI/Backoffice integration. Its EComTalk
Server is a secure e-commerce gateway for the exchange of
transaction documents.
* IBM has recently moved into a beta testing stage for its new EDI to
XML translator. When fully deployed, IBM has estimated substantial
savings for its internal systems resulting from a broad
implementation of this translator.
Competition with XML CommercePro
There are many e-commerce shopping cart programs available for sale, and
a growing number available for free on the Internet. Although certain of
these programs directly compete with our bolt-on capability, none of these
programs, we believe, compete with us in being able to input and output XML
product data. We intend to continue to sell and license our product to be
sublicensed, in many cases at very competitive prices. If the use of XML
increases and e-commerce applications begin utilizing XML, we would expect to
experience increased competition.
Intellectual property
Patents and licenses
We have filed a 51 point patent with the United States Patent and
Trademark Office on our XML search engine and are in the process of preparing
two other patents relating to our proprietary technologies. We also have a
perpetual worldwide exclusive license to use and sublicense and make, use and
sell products based on the expressXCHG technology, including, without
limitation, the patented "expressXCHG" software. No assurance can be given
that any patent will be issued or that the scope of any patent protection will
exclude competitors or that any patent, if issued, will be held valid if
subsequently challenged.
Other intellectual property
As we discussed under the section "Risk Factors," we have applied with
the United States Patent and Trademark Office to register the following
trademarks:
* GoXML
* XOSP
* XHML
* LeCart
* XOP
In addition we have registered the following domain names:
* www.goxml.com
* www.lecart.com
* www.cartnetwork.com.
* www.cartnetwork.net
* www.convert2xml.com
* www.findxml.com
* www.xslt.com
* www.xosp.com
* www.xosp.net
* www.xosp.org
* www.walkaboutwebs.com
* www.xmldirectory.com
While we have applied for registration of the foregoing trademarks and
registered domain names in an effort to protect them, we cannot be sure of the
nature or extent of the protection afforded, since trademark registration does
not assure any enforceable rights under many circumstances and there exists
significant uncertainty surrounding legal protections of domain names.
In addition, we try to protect our software, to the extent not
patentable, by registering copyrights of the source code. However, there can
be no assurance that any steps that we take in this regard will be adequate to
deter misappropriation of our proprietary rights or independent third parties
developing functionally equivalent products. Despite our precautions,
unauthorized parties may attempt to engineer, reverse engineer, copy, or
obtain and use our products or other information.
Although we believe that our products do not infringe on the intellectual
property rights of others, there can be no assurance that an infringement
claim will not be asserted against us in the future. The prosecution or
defense of any intellectual property litigation can be extremely expensive and
would place a material burden upon our working capital.
Research and development
We have one full time employee devoted to software research and
development and website development. This person is a software engineer and
architect. In the period ended June 30, 1999, and the nine months ended March
31, 2000, we expended approximately $49,800 and $504,000, respectively, for
research and development costs related to our products.
Employees
We have 21 full time employees who are located at our principal office in
Vancouver, British Columbia. In addition, we also have an additional labor
pool consisting of contract professionals that are hired on a part-time basis.
Facilities
Our principal executive offices are located in Vancouver, British
Columbia. This office consists of approximately 4,800 square feet which we
hold on an 18 month lease including renewal options expiring 2001. Our
monthly rent is $5,500, with triple net adjustments. We have agreed to move
into new premises consisting of 6,800 square feet which we will hold on a
five-year lease starting on June 1, 2000 with a monthly rent beginning at
$4,700 and increasing to $5,500 after two years with triple net adjustments
and a total commitment, including deposits and excluding operating costs, of
$268,500.
Our Seattle, Washington office consists of 500 square feet which we
occupy on a month-to-month basis. The monthly rent at that location is $350,
including common area costs.
Legal proceedings
A German company, Software AG has a website using the title "Go-XML"
which we believe violates our pending "GoXML" trademark. We have exchanged
correspondence with Software AG but have not initiated legal proceedings. At
the date of this report, there are no pending legal proceedings in which we
are a party and, with the exception of the Software AG matter, we are not
aware of any threatened legal proceedings.
<PAGE>
<PAGE>
CORPORATE ORGANIZATION
Our Company is comprised of a series of corporations organized in a
multi-tiered arrangement depicted in the following schematic:
XML - Global Technologies, Inc.
(Colorado)
-------------------------------
100% | 40% |
| |
XML Technologies, Inc. DataXchg, Inc. ----- David Webber
(Nevada) | (Delaware) 60%
|
100% |
|
XML Global Research, Inc.
(British Columbia, Canada)
|
100% |
|
Walkabout Website Designs, Ltd.
(British Columbia, Canada)
The functions and relationships of these entities to one another can be
summarized as follows:
* XML - Global Technologies, Inc., a Colorado corporation, ("XML
Global") is the parent corporation whose shares of common stock are
registered under the Exchange Act. XML Global is primarily involved
in capital formation and marketing and sales efforts for the
Company's products. In addition, it holds intellectual property
rights, including trademark registration applications, our pending
patent applications and an exclusive license from DataXchg, Inc. to
market the Xchg product to end users. In addition, upon completion
of the merger of XML Nevada with and into XML Global (described
below), XML Global will hold all intellectual property and other
technology rights previously held by XML Nevada, including, without
limitation, the pending patents and patent applications in
preparation. XML Global has a professional services agreement with
XML Research (described below) pursuant to which XML Global has been
assigned the right to all technology and intellectual property
rights owned by XML Research.
* XML Technologies, Inc., a Nevada corporation, ("XML Nevada") is a
wholly owned subsidiary of XML Global. Founded in 1999, XML Nevada
holds the assignment of all of the past and future intellectual
property rights developed by our technology founders, Duane Nickull,
Matthew MacKenzie, Jamie Hoglund and Michael Palethorpe, including
the pending patent and agreement with XML Research described above.
XML Nevada was acquired by XML Global in a reorganization in August
1999. In that transaction, the shareholders of XML Nevada were
issued 12,500,000 shares of our common stock in exchange for 100% of
the outstanding common stock of XML Nevada. As a result of this
share exchange, the shareholders of XML Nevada acquired 63% of our
total outstanding shares.
* XML Global Research, Inc., a British Columbia corporation, ("XML
Research") is a wholly-owned British Columbian subsidiary of XML
Nevada. XML Research performs the technology research and
development under contract with XML Nevada. XML Research operates
out of its Vancouver, British Columbia offices and was created to
ensure that the intellectual property developed by the Company's
Canadian-based technology employees is made available to and owned
by XML Nevada.
* Walkabout Website Designs, Ltd., a British Columbia corporation,
("Walkabout") was acquired by XML Research in May 1999 in order to
obtain a client base to be used for beta testing of its technology.
At the present time, Walkabout has no separate employees, offices or
corporate functions.
* DataXchg, Inc., a Delaware corporation, ("DataXchg") was formed by
XML Global and David Webber, a director of the Company in October
1999. DataXchg is 40% owned by XML Global and 60% owned by David
Webber. In exchange for 60% of the outstanding shares of DataXchg,
David Webber assigned to DataXchg all of his right, title and
interest in and to the intellectual property rights and underlying
technology owned, developed or conceived of by them pertaining to
business-to-business solutions and EDI and XML-EDI solutions,
including, without limitation, the e-business solutions known as
"BizTokens" and the software product known as "Xchg", which offers
the ability to convert standard EDI documents into XML format.
DataXchg has also granted to XML Global an exclusive perpetual
worldwide license to use and sublicense and make, use and sell
products based on the technology and associated intellectual
property rights owned by DataXchg, in consideration for which XML
Global will pay DataXchg a variable royalty depending upon the
product and configuration of the technology sold. For sales
comprised solely of the sale or license of products based on
technology owned by DataXchg or jointly developed by XML Global and
DataXchg, DataXchg will receive a royalty equal to 80% of the net
sales price. On other product sales derived in whole or in part
from technology acquired or licensed from third parties, DataXchg
will only receive a 20% royalty payment. We have entered into an
agreement to purchase the remaining 60% of DataXchg, Inc. in
exchange for 1,000,000 shares of common stock.
We plan to simplify our corporate organization by completing two
statutory mergers: the merger of XML Nevada with and into XML Global, with
XML Global to be the surviving entity; and the merger of Walkabout with and
into XML Research, with XML Research to be the surviving corporation. The
effect of these mergers will be to consolidate all of our intellectual
property and other technology rights, and marketing and sales activity, in XML
Global. XML Research will continue to perform technology research and
development functions under its agreement with XML Nevada which XML Global
will succeed to as a result of the merger.
<PAGE>
<PAGE>
MANAGEMENT
Directors, executive officers and key employees
Our executive officers, key employees and outside Directors and their
respective ages and positions are set forth below:
<TABLE>
<CAPTION>
Name Age Position
- -------------------- ---- -------------------------------
<S> <C> <C>
Peter Shandro 56 Chairman of the Board, Chief Executive
Office and Director
Duane Nickull 36 President and Director
Simon Anderson 39 Chief Financial Officer and Director
Matt MacKenzie 22 Vice President Research and Development
Jamie Hoglund 29 Vice President E-Commerce
David Webber 46 Director
</TABLE>
Peter Shandro has been our CEO and a Director since June 1999. He was an
initial founder of XML Technologies, Inc., the Nevada corporation, and
supervised its reorganization with the Company in August 1999. From 1970 to
1982, he was a Partner and Vice President of Marketing with FMH Canada, Ltd.,
a leisure products distribution company. Since 1992, through his privately
owned companies, Noram Capital Partners and Wes-Sport Holdings, Ltd., he has
arranged private debt and equity as well as bank financing for both public and
private companies. He is currently the owner, President and Director of
Spectrum BioTech, Inc., a private company that holds the patents to a unique
self-destructing safety syringe. This company is not currently active. He is
also a partner in Production Finance, Inc., a merchant trade finance company
specializing in financing companies in the leisure and lifestyle products
industry. From 1982 to 1991, he provided management and marketing services for
Noram Recreation, Ltd., a company engaged in the development, financing and
operation of eight aquatic recreation businesses.
Duane Nickull has been our President and Director since August 1999. He
has worked with computers for 19 years and is a certified level 2 HTML
Designer with application skills in Javascript and DHTML. Prior to helping
form and organize XML, from 1986 to 1999 he was President of Nickull-Dowdall
Sales, Ltd., a cosmetics manufacturer.
Simon Anderson has been Chief Financial Officer and Director since June
1999. Mr. Anderson is also a 50% owner and Vice President of MCSI Consulting
Services Inc. from 1996 to present, to which he devotes about half of his time
and attention. Mr. Anderson is both a Chartered Accountant and a Chartered
Business Valuator and was a partner with BDO Dunwoody, an international
accounting and consulting firm, where he specialized in mergers, acquisitions
and valuations. From 1999 to the present, he has been a director of mv Video,
a Vancouver-based post production facility. From 1999 to 2000 he was
Treasurer of MC2 Learning Systems, Inc. He was also a director of Tradewind
Communications, Ltd. from March 1997 to June 1999 and a director of
Flexemessaging.com, Inc. from March 1999 to June 1999. Mr. Anderson received
a Bachelor of Commerce in Accounting and Management Information Systems from
the University of British Columbia in May 1983 and became a chartered
accountant upon graduation from the Institute of Chartered Accountants in
British Columbia in 1986. He is also a graduate and lecturer at the Canadian
Institute of Charter Business Valuators and a lecturer with the American
Society of Appraisers.
Matthew MacKenzie has been our Vice President of Research and Development
since August 1999. Mr. MacKenzie attended the University of New Brunswick
from September 1996 to April 1999, majoring in Sociology.
Jamie Hoglund has been our Vice President of E-Commerce since August 1999
and a Director of XML Nevada since August 1999. Mr. Hoglund developed his
software programming skills through independent study and work.
David R. R. Webber has been a Vice President of DataXchg and Director of
the Company since October 1999. Mr. Webber is co-founder of the XML/EDI
Group, a consortium which provides technical support to the advancement of
XML/EDI technologies as an emerging worldwide standard. In January 1999, he
founded Gnosis, Inc., a computer consulting firm which he continues to serve
as President. From January 1997 to January 1999, he was a Senior Engineer
with Elumen Solutions, a health care management information systems firm.
From September 1994 to January 1997, he was Project Manager for LNK
Corporation, an information technology research firm. From March 1994 to
September 1994, he was an EDI specialist with DynCorpViar. Mr. Webber has a
degree in Physics with Computing from the University of Kent at Canterbury
which was received in 1976.
No family relationship exists between any of our directors and/or
executive officers.
Our directors each serve for a term of one year and are elected at each
annual meeting of our shareholders.
Currently, we do not have standing Audit, Compensation or Nominating
Committees of the Board of Directors. During this fiscal 2000, we do plan to
form an Audit Committee. No member of the Audit Committee will receive any
additional compensation for his service as a member of that Committee and
members of this committee will be primarily comprised of non-officer
directors. The Audit Committee will be responsible for providing assurance
that financial disclosures made by management reasonably portray our financial
condition, results of operations, plan and long-term commitments. To
accomplish this, the Audit Committee will oversee the external audit coverage,
including the annual nomination of the independent public accountants, review
accounting policies and policy decisions, review the financial statements,
including interim financial statements and annual financial statements,
together with auditor's opinions, inquire about the existence and substance of
any significant accounting accruals, reserves or estimates made by management,
review with management the Management's Discussion and Analysis section of the
Annual Report, review the letter of management representations given to the
independent public accountants, meet privately with the independent public
accountants to discuss all pertinent matters, and report regularly to the
Board of Directors regarding its activities.
We also plan to form a Compensation Committee during fiscal 2000. No
member of the Compensation Committee will receive any additional compensation
for his service as a member of that Committee. The Compensation Committee
will be responsible for reviewing pertinent data and making recommendations
with respect to compensation standards for our executive officers, including
the President and Chief Executive Officer, establishing guidelines and making
recommendations for the implementation of management incentive compensation
plans, reviewing the performance of the President and CEO, establishing
guidelines and standards for the grant of incentive stock options to key
employees under our Equity Incentive Plan, and reporting regularly to our
Board of Directors with respect to its recommendations.
Advisory Board
In February 2000, our Board of Directors authorized the establishment of
an Advisory Board whose members consist of persons who possess particular
expertise in one or more disciplines that we believe are relevant to our
strategic plan, business development and core technologies. To date, two
persons have agreed to serve as members of the Advisory Board: Scott Briggs
and Mark Van der Griend. The members of the Advisory Board do not exercise or
possess any of the authority of members of our Board of Directors, but are
merely advisors to our board.
1999 Equity Incentive Plan
On September 15, 1999, the Board of Directors authorized, and on October
19, 1999, our stockholders approved, the 1999 Equity Incentive Plan for our
executive and other employees, plus a limited number of outside consultants
and advisors. Under the Equity Incentive Plan, our employees, outside
consultants and advisors may receive awards of non-qualified options and
incentive options, stock appreciation rights or restricted stock. A maximum
of 4,000,000 shares of our common stock are subject to the Equity Incentive
Plan. As of the date of this Memorandum, no stock appreciation rights or
restricted stock has been granted under the Equity Incentive Plan, and options
to purchase 1,165,000 shares of our common stock have been granted, including
options to purchase 125,000 shares which have been granted to our non-employee
director and 60,000 options granted to members of our Advisory Board. To
date, no restricted shares have been issued pursuant to the Plan. The purpose
of the Equity Incentive Plan is to provide employees, including our officers
and employee Directors, and non-employee consultants and advisors, with an
increased incentive to make significant and extraordinary contributions to our
long-term performance and growth, to join their interests with the interests
of our shareholders, and to facilitate attracting and retaining employees of
exceptional ability.
The Equity Incentive Plan may be administered by the Board, or in the
Board's sole discretion by the Compensation Committee of the Board or such
other committee as may be specified by the Board to perform the functions and
duties of the Committee under the Equity Incentive Plan. Subject to the
provisions of the Equity Incentive Plan, the Committee and the Board shall
determine, from those eligible to be participants in the Plan, the persons to
be granted stock options, stock appreciation rights and restricted stock, the
amount of stock or rights to be optioned or granted to each such person, and
the terms and conditions of any stock option, stock appreciation rights and
restricted stock.
Under the Equity Incentive Plan, in the event there occurs a change of
control of the company, all outstanding and unexercised options granted to our
key employees, officers, directors and consultants will at once become
immediately vested and exercisable. This provision of the Plan could deter
suitors from seeking business combinations with us that might otherwise be
beneficial to our shareholders.
Director compensation
Under our Equity Incentive Plan, upon their election to our Board of
Directors, non-employee directors are entitled to receive a grant of non-
qualified stock options exercisable to purchase 125,000 shares of our common
stock at an exercise price equal to the market value of our common stock on
the date of grant.
Executive compensation
The following table and discussions summarizes all compensation earned by
or paid to our Chief Executive Officer ("CEO") and the other most highly
compensated executive officers for all services rendered in all capacities to
us and our subsidiaries for each of our last three fiscal years. However, no
disclosure has been made for any executive officer, other than the CEO, whose
total annual salary and bonus is less than $100,000.
<PAGE>
<TABLE>
TABLE 1
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
----------------------------------
Annual Compensation(1) Awards Payouts
-------------------------- ------------------- ---------
Other All
Annual Restricted Other
Name and Compen- Stock LTIP Compen-
Principal Year Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($)(2) ($) SARs ($) ($)
- --------------- ------- -------- ----- --------- ---------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Peter Shandro, CEO 1999 $96,000 -0- -0- -0- 125,000 -0- -0-
</TABLE>
<PAGE>
<PAGE>
Employment agreements
To date, we do not have any written employment agreements with any of our
key personnel. It is our intent to enter into such agreements with our key
employees: Messrs. Shandro, Nickull, MacKenzie and Hoglund, as soon as
possible.
We have entered into lock-up and vesting agreements with certain key
personnel pursuant to which their shares of common stock are subject to vesting
over a two year period ending August 2001. It is our intent that these
agreements will provide additional incentive to those employees to continue
devoting their efforts and resources to our success until such time as their
shares of our common stock have become fully vested.
Indemnification and limitation on liability of directors
Our Articles of Incorporation provide that we shall indemnify, to the
fullest extent permitted by Colorado law, any of our directors, officers,
employees or agents who are made, or threatened to be made, a party to a
proceeding by reason of the former or present official position of the person,
which indemnity extends to any judgments, penalties, fines, settlements and
reasonable expenses incurred by the person in connection with the proceeding if
certain standards are met. At present, there is no pending litigation or
proceeding involving any of our directors, officers, employees or agents where
indemnification will be required or permitted. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to our
directors, officers and controlling persons pursuant to the foregoing
provisions, or otherwise, we have been advised that, in the opinion of the
Securities and Exchange Commission (the "Commission"), such indemnification
is against public policy as expressed in the Securities Act and is,
therefore, unenforceable.
Our Articles of Incorporation limit the liability of our directors to the
fullest extent permitted by the Colorado Business Corporation Act. Specifically,
our directors will not be personally liable for monetary damages for breach of
fiduciary duty as directors, except for (i) any breach of the duty of loyalty to
us or our stockholders, (ii) acts or omissions not in good faith or that
involved intentional misconduct or a knowing violation of law, (iii)
dividends or other distributions of corporate assets that are in
contravention of certain statutory or contractual restrictions, (iv)
violations of certain laws, or (v) any transaction from which the director
derives an improper personal benefit.
Liability under federal securities law is not limited by the Articles.
<PAGE>
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Founders - XML - Global
When we were first organized in 1991, we issued a total of 500,000 shares
of our common stock to a total of 11 investors in consideration of a purchase
price of $.0003 per share. The following sets forth the names and the number of
shares received by persons who would be considered promoters:
<TABLE>
<CAPTION>
Name Number of Shares(1)
------------------- ------------------
<S> <C>
Matthew J. Kavanaugh 2,550,000
Terry Whiteside 500,000
Marshal Griffin 500,000
Equitas Corp. 900,000
</TABLE>
- ------------------
(1) Giving retroactive effect to a 10-for-1 forward split which occurred in
August 1999.
Founders - XML Nevada; the reorganization
In May 1999, XML Nevada was organized through the issuance of 12,500,000
shares of common stock and the simultaneous acquisition of certain intellectual
property and other assets. XML Nevada also formed a wholly owned subsidiary,
XML Research, which in turn acquired 100% of the outstanding stock of Walkabout
Websites. The purpose of these transactions was to consolidate all of the
intellectual property and other assets contributed by Messrs. Nickull,
MacKenzie, Hoglund and Palethorpe into one entity, XML Nevada. The persons who
would be deemed founders of XML Nevada, and the number of shares of common stock
received by each, is set forth below:
<TABLE>
<CAPTION>
Name Number of Shares
--------------------- ----------------
<S> <C>
Duane Nickull 2,000,000 *
Matt MacKenzie 1,500,000 *
Jamie Hoglund 1,500,000 *
Peter Shandro 735,000
Simon Anderson 200,000
Michael Palethorpe 200,000 **
</TABLE>
- ------------------------
* Subject to vesting agreements over a two year period ending August 2001.
** Mr. Palethorpe left the Company in February 2000 and surrendered 600,000 of
his shares for cancellation.
In August 1999, XML Global (then known as International Capital Funding,
Inc.) acquired 100% of the issued and outstanding shares of common stock of XML
Nevada. In that transaction, all 12,500,000 shares of XML Nevada were exchanged
on a one-for-one basis for 12,500,000 shares of XML Global, which then
represented approximately 63% of the total issued and outstanding shares of
common stock of XML Global.
DataXchg, Inc.
In 1999, we formed and organized a new company called DataXchg, Inc.
40% of the equity securities of DataXchg, Inc. is held by us and 60% is held by
David Webber. At that time, David Webber also became a member of our Board of
Directors and a consultant.
Upon its organization, David Webber assigned to DataXchg, Inc. all of the
patents, patent rights and other intellectual property owned by them related to
the Xchg product, an e-business to e-business interchange solution that permits
the conversion of standard EDI documents into an XML format. As part of the
arrangement, DataXchg, Inc. granted to XML Global an exclusive worldwide license
to market, sell and sublicense the Xchg product to end users, for which
DataXchg, Inc. is entitled to a variable royalty depending upon the nature and
configuration of the product marketed and sold.
We have entered into an agreement to purchase the remaining 60% of
DataXchg, Inc. in exchange for the issuance of 1,000,000 shares of our common
stock.
XML Fund
In January 2000, we sold to XML Fund a total of 500,000 Units of our
securities at a price of $2.00 per Unit, for a total cash consideration of
$1,000,000. Each Unit consisted of two shares of our common stock, one Warrant
exercisable for three years to purchase an additional share of common stock at
an exercise price of $2.00 per share, and a second Warrant exercisable for 60
days to purchase an additional share of our common stock at an exercise price
of $.07 per share. In March 2000, XML Fund exercised warrants to purchase
500,000 shares of our common stock at an exercise price of $.07 per share.
The managing partner of XMLFund, David Pool agreed to become a member of our
Board of Directors subject to our obtaining directors and officers liability
insurance. In addition, XML Fund was granted a limited preemptive right on
certain future financings that we may undertake. By virtue of this limited
preemptive right, XML Fund purchased in April 2000 100,000 units at a price of
$1.00 per unit, each unit consisting of one share of our common stock and one
warrant exercisable until December 31, 2000 to purchase an additional share of
common stock at an exercise price of $4.00 per share. Further, pursuant to the
preemptive right, in April 2000 XML Fund purchased 8.5 units at a price of
$75,000 per unit, each unit consisting of 50,000 shares of our common stock
and warrants exercisable to purchase an additional 50,000 shares of our
common stock for 18 months at an initial exercise price of $4.00 per share.
This preemptive right will terminate upon our completion of an initial public
offering.
<PAGE>
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to beneficial
ownership of our common stock by each person who beneficially owns more than 5%
of the common stock; by each of our executive officers named in the Management
section; by each of our Directors; and by all executive officers and
Directors as a group. The table shows the number of shares owned as of April
1, 2000 and the percentage of outstanding common stock owned as of April 1,
2000, and after the closing of this Offering. Unless otherwise indicated, we
believe all persons in the table have sole voting and investment power for all
shares beneficially owned by them. (1)
<TABLE>
<CAPTION>
Percentage of Outstanding
Shares Owned(2)
-------------------------
Number of Shares
of Common Stock
Name and Address Beneficially Current
of Beneficial Owner Owned (as of 4/1/00)
- ------------------- ----------------- -------------------------
<S> <C> <C>
Duane Nickull (4) 2,125,000 7.8%
Peter Shandro (4) 860,000 3.1%
Simon Anderson (4) 325,000 1.2%
Matt MacKenzie (4) 1,625,000 5.9%
Jamie Hoglund (4) 1,600,000 5.9%
Matthew J. Kavanaugh 1,950,000 7.2%
XML Fund, LLC (5)
777 108th Avenue, N.E.
Suite 1800
Bellevue, WA 98004 3,050,000 11.0%
All Officers and Directors
as a Group(5 persons)(6) 6,535,000 23.9%
</TABLE>
- -------------------
(1) Beneficial ownership is based on information provided to us, and the
beneficial owner has no obligation to inform us of or otherwise report any
changes in beneficial ownership. Except as indicated, and subject to
community property laws when applicable, the persons named in the table
above have sole voting and investment power with respect to all shares of
common stock shown as beneficially owned by them.
(2) The percentages shown are calculated based upon 26,505,000 shares of common
stock outstanding on May 15, 2000. In calculating the percentage of
ownership, unless as otherwise indicated, all shares of common stock that
the identified person or group had the right to acquire within 60 days
of April 1, 2000 upon the exercise of options and warrants are deemed to be
outstanding for the purpose of computing the percentage of shares of common
stock owned by such person or group, but are not deemed to be
outstanding for the purpose of computing the percentage of the shares of
common stock owned by any other person.
(3) Unless otherwise stated, the beneficial owner's address is 1038 Homer
Street, Vancouver, British Columbia V6B 2W9 Canada.
(4) We have granted options to purchase shares of our common stock to our
executive officers. Mr. Nickull was granted options to purchase 125,000
shares, Mr. Shandro was granted options to purchase 125,000, Mr.
Anderson was granted options to purchase 125,000 shares, Mr. MacKenzie was
granted options to purchase 125,000 shares and Mr. Hoglund was granted
options to purchase 100,000 shares. The number of shares of common stock
shown on the foregoing table as being beneficially owned by each of these
persons includes the shares of common stock underlying these options.
(5) Includes Warrants to purchase 500,000 shares of common stock at an exercise
price of $2.00 per share, Warrants to purchase an additional 100,000 of
common stock at an exercise price of $4.00 per share and Warrants
exercisable to purchase an additional 425,000 shares of common stock at
an initial exercise price of $4.00 per share until October 6, 2000 and
thereafter at an exercise price of $6.00 per share.
(6) Does not give effect to David Pool, the Manager of XML Fund, becoming a
director subject to our obtaining directors' and officers' liability
insurance. Upon his election and including the securities owned by XML
Fund, the directors and officers of the company as a group, consisting
of six persons, would be the beneficial owners of 9,585,000 shares,
representing 33.7% of the total issued and outstanding shares of our
common stock after the Offering.
Lock-up and Vesting Agreements
Messrs. Nickull, Shandro, MacKenzie and Hoglund have each entered into a
Lock-up and Vesting Agreement pursuant to which all of the shares of our common
stock which they own are subject to being returned and forfeited if their
employment terminates. Under the vesting schedule, their shares will vest on
August 29, 2001. Until the shares are vested, they may not be sold. If the
person's employment with the company is terminated before the vesting date, all
unvested shares will be forfeited and revert to our authorized but unissued
shares of common stock.
<PAGE>
<PAGE>
ADDITIONAL INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Commission. You may read and copy any document we file at
the Commission's Public Reference Rooms in Washington, D.C., New York, New York,
and Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for further
information on the Public Reference Rooms. You can also obtain copies of our
Commission filings by going to the Commission's website at http://www.sec.gov.
We have filed with the Commission a Registration Statement on Form SB-2 to
register the shares of our common stock and common stock warrants to be sold by
the Selling Securityholders and issued pursuant to the exercise of the
warrants. This Prospectus is part of that Registration Statement and, as
permitted by the Commission's rules, does not contain all of the information
set forth in the Registration Statement. For further information about us or
our common stock, you may refer to the Registration Statement and to the
exhibits filed as part of the Registration Statement. You can review a copy of
the Registration Statement and its exhibits at the public reference rooms
maintained by the Commission and on the Commission's website as described above.
<PAGE>
<PAGE>
SELLING SECURITYHOLDERS
The Selling Securityholders are offering to sell 24,335,000 shares of our
common stock. None of the Selling Securityholders has, or within the past three
years has had, any position, office or other material relationship with us or
any of our predecessors or affiliates, except as noted.
Of the securities being offered, (i) 5,000,000 shares of common stock are
being offered by Selling Securityholders who were the original shareholders of
ICF prior to the reverse merger and reorganization, and their assignees, (ii)
2,330,000 shares of common stock and warrants to purchase an additional
2,330,000 shares of common stock were sold in a private offering which closed
in August 1999, (iii) warrants to purchase 200,000 shares of common stock were
issued to a consultant, (iv) 1,600,000 shares of common stock and warrants to
purchase an additional 600,000 shares of common stock were issued to the XML
Fund, LLC, an institutional investor, (v) 1,050,000 shares of our common stock
and warrants to purchase an additional 1,050,000 shares of our common stock
were issued in a private transaction to a private trust and an individual
investor, and (vi) 4,625,000 shares of our common stock and warrants to
purchase an additional 4,625,000 shares of our common stock were sold to 50
accredited investors in a private offering which was completed in April 2000.
In addition, the securities being offered include 462,500 shares of common
stock and an additional 462,500 shares of common stock issuable upon exercise
of warrants included in 9.25 units of our securities which may be purchased
by Westminster Securities Corp. upon exercise of its unit purchase option
granted in connection with a private offering which we completed in April 2000.
The following table lists the Selling Securityholders eligible to sell
shares of common stock under this Prospectus, the number of shares beneficially
owned by each Selling Securityholder prior to this offering, and the maximum
number of shares each Selling Securityholder may sell under this Prospectus.
We will not receive any of the proceeds from the sale of our common stock by
the Selling Securityholders. The number of shares owned by each Selling
Securityholder after the offering will depend upon the number of shares
actually sold by each Selling Securityholder.
<TABLE>
<CAPTION>
Number of Maximum Number of
Shares Number of Shares
Beneficially Shares to be Beneficially
Owned Prior Sold in Owned After
to Offering (1) Offering Offering Percent
--------------- ------------- ------------- -------
<S> <C> <C> <C> <C>
Amherst Group 500 500 -0- 0%
AMRO
International,
SA(7) 1,300,000 1,300,000 -0- 0%
Antilles Partners,
LP(7) 200,000 200,000 -0- 0%
Aspen Gold Group,
Inc.(7) 50,000 50,000 -0- 0%
Austost Anstalt
Schaan(7) 500,000 500,000 -0- 0%
Glenn Bailey(4) 50,000 50,000 -0- 0%
Balmore, SA(7) 500,000 500,000 -0- 0%
Bank Von Ernst(4) 260,000 260,000 -0- 0%
Banqe Ippa & Associes, 70,000 70,000 -0- 0%
Luxemberg(4)
Banque Julius Baer
& Co.Ltd., Zurich(4) 80,000 80,000 -0- 0%
Bruce Barr(4) 200,000 200,000 -0- 0%
John Barsoli(7) 50,000 50,000 -0- 0%
Chris Battensbury 500 500 -0- 0%
Bayonet Capital,
LLC(7) 1,000,000 1,000,000 -0- 0%
Aleta M. and Layton M.
Bennett, JTRS(7) 50,000 50,000 -0- 0%
John Bradley 500 500 -0- 0%
Carolyn Brewer 500 500 -0- 0%
Mark Brewer 500 500 -0- 0%
Brewin Nominees
Ltd.(4) 40,000 40,000 -0- 0%
Whitney Briscoe 500 500 -0- 0%
Steve Calandrella 500 500 -0- 0%
Darryl S. Caplan(7) 200,000 200,000 -0- 0%
Vincent Capodanno(7) 100,000 100,000 -0- 0%
Ronald Carlile 500 500 -0- 0%
Susan Carlile 500 500 -0- 0%
Stuart Carmichael 500 500 -0- 0%
Shannon Carthy 1,000 1,000 -0- 0%
Patrick Churchill(4) 120,000 120,000 -0- 0%
Cita Trust Company,
Ltd.(7) 50,000 50,000 -0- 0%
Richard Cober 500 500 -0- 0%
Jonathan Cohen 200,000 200,000 -0- 0%
Credit Suisse
(Guernsey) Ltd.(4) 160,000 160,000 -0- 0%
Crypto Corporation(7) 100,000 100,000 -0- 0%
CSPS, Inc.(7) 100,000 100,000 -0- 0%
Cycad Limited(7) 200,000 200,000 -0- 0%
Mark DeGeorge(7) 50,000 50,000 -0- 0%
Mark DeStefano(7) 50,000 50,000 -0- 0%
Jim Dixon 500 500 -0- 0%
Randy Doherty 500 500 -0- 0%
Thomas Donino(7) 100,000 100,000 -0- 0%
Don Elving 500 500 -0- 0%
Jennifer Enslein
Trust(7) 50,000 50,000 -0- 0%
Equitas Corp. 900,000 900,000 -0- 0%
Karen Ewenson 500 500 -0- 0%
Harry Faircloth 500 500 -0- 0%
Charles Fowler(4) 50,000 50,000 -0- 0%
Scott Bradley Frisoli
(7) 100,000 100,000 -0- 0%
Golden Securities(4) 400,000 400,000 -0- 0%
Norman Goldstein &
James Jorasch, JTEN
(7) 50,000 50,000 -0- 0%
Anthony Griffin 10,000 10,000 -0- 0%
Dan Griffin 500 500 -0- 0%
Gayle Griffin 500 500 -0- 0%
Marshal Griffin 500,000 500,000 -0- 0%
George E. Groehsl (7) 50,000 50,000 -0- 0%
Ms. H.R. Griffiths 1,000 1,000 -0- 0%
Rick Griffiths 500 500 -0- 0%
Egbert Hardenbol(4) 70,000 70,000 -0- 0%
Paul Hazlett 500 500 -0- 0%
HB Trading, Inc.(7) 100,000 100,000 -0- 0%
Scott Hean 2,000 2,000 -0- 0%
Alex Herman 250,000 250,000 -0- 0%
Justin Hilbert(4) 50,000 50,000 -0- 0%
Sheila Hirsch 500 500 -0- 0%
Steven Hirsch(7) 100,000 100,000 -0- 0%
Richard Ilich(7) 50,000 50,000 -0- 0%
International
Distribution Corp.(4) 100,000 100,000 -0- 0%
Mike James 500 500 -0- 0%
Debra Jeske 500 500 -0- 0%
T. J. Jesky (7) 50,000 50,000 -0- 0%
Keith Johnson 10,000 10,000 -0- 0%
Matthew J. Kavanaugh 1,950,000 1,950,000 -0- 0%
Brent King 500 500 -0- 0%
Frank L. Kramer (7) 50,000 50,000 -0- 0%
Ross Kramer 500 500 -0- 0%
John Kubiak 500 500 -0- 0%
Laiy, Ltd. 600,000 600,000 -0- 0%
Ken Lee(4) 20,000 20,000 -0- 0%
Jon Lerner (7) 100,000 100,000 -0- 0%
Lloyds Bank PL1(4) 50,000 50,000 -0- 0%
Jim Locke(4) 10,000 10,000 -0- 0%
Daniel Luskind (7) 50,000 50,000 -0- 0%
Eugene & Eileen
Lynch (7) 50,000 50,000 -0- 0%
Mabcrown, Inc.(7) 600,000 600,000 -0- 0%
Magellan International,
Ltd.(7) 200,000 200,000 -0- 0%
John B. Marsala (7) 50,000 50,000 -0- 0%
William Marshall, Jr.
(4) 200,000 200,000 -0- 0%
Dan McCracken 500 500 -0- 0%
Ian McDougall 500 500 -0- 0%
Rob McKay 500 500 -0- 0%
Joseph P. McKenna 500 500 -0- 0%
Jeffrey McLaughlin
(7) 50,000 50,000 -0- 0%
Melborne Investment
Ltd.(4) 300,000 300,000 -0- 0%
Stephan Moses(4) 70,000 70,000 -0- 0%
Dale B. Newburg (7) 100,000 100,000 -0- 0%
Arthur J. Niebauer
(7) 50,000 50,000 -0- 0%
Rick Nilsson 500 500 -0- 0%
Nottinghill Resources,
Ltd.(4) 1,000,000 1,000,000 -0- 0%
John P. O'Shea (7) 250,000 250,000 -0- 0%
Gene Paul Percudani
(7) 50,000 50,000 -0- 0%
Duane Peterson 250,000 250,000 -0- 0%
Christine Platt 1,000 1,000 -0- 0%
Providence Securities
(Bahamas) Ltd.(4) 470,000 470,000 -0- 0%
M. Psarompa(4) 200,000 200,000 -0- 0%
Thomas Relling 500 500 -0- 0%
David J. Ritchie (7) 100,000 100,000 -0- 0%
Mark Robertson (7) 100,000 100,000 -0- 0%
Ropart Investments,
LLC (7) 200,000 200,000 -0- 0%
Mark C. Ross(4) 200,000 200,000 -0- 0%
Christian
Russenberger 100,000 100,000 -0- 0%
Phil Sancken 500 500 -0- 0%
August B. Schwarz (7) 50,000 50,000 -0- 0%
Ralf P. Schwarz (7) 200,000 200,000 -0- 0%
Adam Shandro 1,000 1,000 -0- 0%
Andrew Shandro 500 500 -0- 0%
Matthew Shandro 500 500 -0- 0%
Robert E. Smith 1,000 1,000 -0- 0%
Smithson Ventures (7) 100,000 100,000 -0- 0%
Troy Straith 500 500 -0- 0%
Gary Sukovaty 500 500 -0- 0%
Craig Taubman 500 500 -0- 0%
Gene Taubman 500 500 -0- 0%
Tech-Trade Capital,
LLC (7) 50,000 50,000 -0- 0%
Jay Teitelbaum (7) 100,000 100,000 -0- 0%
Genell Thorn 500 500 -0- 0%
Tomasovich Family
Trust(6) 2,000,000 2,000,000 -0- 0%
Gary Triesman 500 500 -0- 0%
Union Bancaire(4) 170,000 170,000 -0- 0%
Hans van der Griend 500 500 -0- 0%
Mark van der Griend
(7) 100,000 100,000 -0- 0%
Vestcom, Ltd.(7) 50,000 50,000 -0- 0%
Willi Vogl 500 500 -0- 0%
Cameron Watt (4) 50,000 50,000 -0- 0%
Willie West, for and
on behalf of
Toucan International
Investments (4) 20,000 20,000 -0- 0%
West Capital &
Associates (7) 100,000 100,000 -0- 0%
Westminster Securities
Corp.(8) 925,000 925,000 -0- 0%
Lane Whiteside 500 500 -0- 0%
Terry Whiteside 500,000 500,000 -0- 0%
E. Evelyn Williamson
(4) 200,000 200,000 -0- 0%
Ashley Wills 500 500 -0- 0%
John Wills 500 500 -0- 0%
Albert Wouters(4) 50,000 50,000 -0- 0%
XML Fund, LLC(5) 3,050,000 3,050,000 -0- 0%
Louis Zauderer(7) 400,000 400,000 -0- 0%
Scott Ziegler(7) 100,000 100,000 -0- 0%
</TABLE>
- ----------------
(1) The number of shares indicated includes shares acquired directly from us by
the Selling Securityholders as well as shares which are issuable upon the
exercise of warrants held by the Selling Securityholders.
(2) Beneficial ownership is based on information provided to us, and the
beneficial owner has no obligation to inform us of or otherwise report any
changes in beneficial ownership. Except as indicated, and subject to
community property laws when applicable, the persons named in the table
above have sole voting and investment power with respect to all shares of
common stock shown as beneficially owned by them.
(3) The percentages shown are calculated based upon 26,505,000 shares of common
stock outstanding on May 15, 2000. In calculating the percentage of
ownership, unless as otherwise indicated, all shares of common stock that
the identified person or group had the right to acquire within 60 days of
May 15, 2000 upon the exercise of options and warrants are deemed to be
outstanding for the purpose of computing the percentage of shares of
common stock owned by such person or group, but are not deemed to be
outstanding for the purpose of computing the percentage of the shares of
common stock owned by any other person.
(4) The selling shareholder was an investor in the Company's private offering
which closed in August 1999. In the offering, the selling shareholder
purchased for $1.00 a unit consisting of one share of common stock and one
warrant exercisable to purchase an additional share of common stock at an
exercise price of $4.00 per share.
(5) XML Fund, LLC is a private investment fund whose manager is David Pool. In
December 1999, the XML Fund purchased 500,000 units at a price of $2.00 per
unit. Mr. Pool has agreed to join our board of directors subject to our
obtaining directors and officers liability insurance. As part of its
agreement, XML Fund has a preemptive right to subscribe for and purchase
its proportionate share of future offerings in order to maintain its
percentage equity interest in the Company.
(6) Includes warrants exercisable until December 31, 2000 to purchase 1,000,000
shares of common stock at an exercise price of $4.00 per share.
(7) The selling shareholder was an investor in the Company's private offering
which closed in April 2000. In the offering, the selling shareholder
purchased for $75,000 units, each unit consisting of 50,000 shares of
common stock and 50,000 warrants. The warrants are exercisable until
October 2001 to purchase an additional share of common stock, initially
at an exercise price of $4.00 per share and beginning October 2000 and
thereafter at an exercise price of $6.00 per share. As an investor in the
April 2000 private offering, the selling shareholder agreed to the
following restriction on resales of securities: Until the earlier of
three months following the date of this Prospectus or September 6, 2000,
the selling shareholder agreed not to make any sales of our securities.
Thereafter, the selling shareholder agreed to limit sales of our
securities to 25% of shares of common stock purchased by the selling
shareholder in our April 2000 offering during each 90 day period. With
respect to shares of common stock which may be acquired by the selling
shareholder upon exercise of warrants, the selling shareholder has
agreed not to sell those shares of common stock until 30 days after the
date of this Prospectus and thereafter limit resales of such shares of
common stock to 25% of such shares owned by the selling shareholder
during each 90 day period. The selling shareholder agreed not to sell
any of our shares of common stock or other securities for a 30 day period
beginning the date of this Prospectus; and thereafter the selling
shareholder has agreed to limit resales of our securities to 25% of such
securities owned by the selling shareholder during each 90 day period.
(8) Consists of shares of common stock issuable upon exercise of an option
to buy up to 9.25 of the units sold in our April 2000 offering at a price
of $75,000 per unit. Westminster was granted the option as partial
consideration of its services as our placement agent in the offering.
Does not include 175,000 shares of common stock and 175,000 warrants
owned by John P. O'Shea, a principal of Westminster, which he purchased
as an investor in our April 2000 private offering.
We will pay all expenses to register the shares, except that the Selling
Securityholders will pay any underwriting and brokerage discounts, fees and
commissions, specified attorneys' fees and other expenses to the extent
applicable to them.
We have agreed to indemnify the Selling Securityholders and certain
affiliated parties against specified liabilities, including liabilities under
the Securities Act, as amended, in connection with this offering. The Selling
Securityholders have agreed to indemnify us and our directors and officers, as
well as any persons controlling our Company, against certain liabilities,
including liabilities under the Securities Act. Insofar as indemnification for
liabilities under the Securities Act may be permitted to our directors or
officers, or persons controlling our Company, we have been advised that in the
opinion of the SEC this kind of indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
USE OF PROCEEDS
We will not receive any proceeds when Selling Securityholders sell shares
of common stock under this Prospectus. We have previously received proceeds
from the sale of the common stock and warrants and may receive proceeds from
the exercise of the warrants.
If we receive proceeds from the exercise of warrants, it will be used for
general working capital purposes.
<PAGE>
<PAGE>
PLAN OF DISTRIBUTION
This Prospectus covers the sale of shares of common stock pursuant to the
exercise of outstanding warrants held by the Selling Securityholders as well as
the resale by those Selling Securityholders of additional shares of our common
stock which they have already purchased from us. We are not registering the
resale of the warrants by the Selling Securityholders.
Selling Securityholders may sell their shares of common stock either
directly or through a broker-dealer or other agent at prices related to
prevailing market prices or negotiated prices, in one or more of the
following kinds of transactions:
* Transactions in the over-the-counter market;
* Transactions on a stock exchange that lists our common stock, or
transactions negotiated between Selling Securityholders and
purchasers, or otherwise.
Broker-dealers or agents may purchase shares directly from a Selling
Securityholder or sell shares to someone else on behalf of a Selling
Securityholder. Broker-dealers may charge commissions to both Selling
Securityholders selling common stock, and purchasers buying shares sold by a
Selling Securityholder. If a broker buys shares directly from a Selling
Securityholder, the broker may resell the shares through another broker, and the
other broker may receive compensation from the Selling Securityholder for the
resale.
To the extent required by laws, regulations or agreements we have made, we
will use our best efforts to file a Prospectus supplement during the time the
Selling Securityholders are offering or selling shares covered by this
Prospectus in order to add or correct important information about the plan of
distribution for the shares.
In addition to any other applicable laws or regulations, Selling Security-
holders must comply with regulations relating to distributions by Selling
Securityholders, including Regulation M under the Securities Exchange Act of
1934, as amended.
Some states may require that registration, exemption from registration or
notification requirements be met before Selling Shareholders may sell their
common stock. Some states may also require Selling Securityholders to sell
their common stock only through broker-dealers.
<PAGE>
<PAGE>
DESCRIPTION OF SECURITIES
Common stock
We are authorized to issue 500,000,000 shares of common stock, par value
$.0001 per share. Except as otherwise expressly provided by law, and subject to
the voting rights provided to the holders of preferred stock by our Articles of
Incorporation, as amended, the common stock shall have voting rights on all
matters requiring a vote of stockholders, voting together with the holders of
preferred stock, as one class. Each share of common stock issued and
outstanding shall be identical in all respects one with the other, and no
dividends shall be paid on any shares of common stock unless the same is paid
on all shares of common stock outstanding at the time of such payment. Except
for and subject to those rights expressly granted to the holders of the
preferred stock, or except as may be provided by the laws of the State of
Colorado, the holders of common stock shall have exclusively all other rights
of stockholders. There is no cumulative voting with respect to the election of
Directors, with the result that the holders of more than 50% of the shares
voting for the election of Directors can elect all of the Directors. The
holders of common stock are entitled to receive dividends if declared by the
Board of Directors out of funds legally available for them. In the event of
liquidation, dissolution or winding up of the Company, the holders of common
stock are entitled to share ratably in all assets remaining which are
available for distribution to them after payment of liabilities and after
provision has been made for each class of stock, if any, having preference
over the common stock. Holders of shares of common stock, as such, have no
conversion, preemptive or other subscription rights, and there are no
redemption provisions applicable to the common stock.
Preferred stock
We are authorized to issue 100,000,000 shares of preferred stock, par value
$.01 per share. Our preferred stock can be issued in one or more series as may
be determined from time-to-time by our Board of Directors. In establishing a
series our Board of Directors shall give to it a distinctive designation so as
to distinguish it from the shares of all other series and classes, shall fix
the umber of shares in such series, and the preferences, rights and
restrictions thereof. All shares of any one series shall be alike in every
particular. Our Board of Directors has the authority, without stockholder
approval, to fix the rights, preferences, privileges and restrictions of any
series of preferred stock including, without limitation:
* The rate of distribution
* The price at and the terms and conditions on which shares shall be
redeemed
* The amount payable upon shares for distributions of any kind
* Sinking fund provisions for the redemption of shares
* The terms and conditions on which shares may be converted if the
shares of any series are issued with the privilege of conversion
* Voting rights except as limited by law
Although we currently do not have any plans to issue shares of preferred
stock or to designate any series of preferred stock, there can be no assurance
that we will not do so in the future. As a result, we could authorize the
issuance of a series of preferred stock which would grant to holders preferred
rights to our assets upon liquidation, the right to receive dividend coupons
before dividends would be declared to common stockholders, and the right to the
redemption of such shares, together with a premium, prior to the redemption to
common stock. Our common stockholders have no redemption rights. In addition,
our Board could issue large blocks of voting stock to fend off unwanted tender
offers or hostile takeovers without further stockholder approval.
Warrant
We have outstanding warrants exercisable to purchase up to 8,905,000 shares
of our common stock at prices ranging from $2.00 to $5.00 per share. Holders of
the Warrants do not possess any rights as stockholders of the Company. Holders
of the Warrants have no voting, preemptive, liquidation or other rights of
shareholders, and no dividends will be paid on the Warrants or the shares
underlying the Warrants. In the event of our liquidation, dissolution or
winding up, the holders of the Warrants will not be entitled to participate in
the distribution of our assets.
Transfer agent
Our transfer agent is Corporate Stock Transfer, Inc., 3200 Cherry Creek
Drive South, Suite 430, Denver, Colorado 80209. Their telephone number is
(303) 282-5800.
Reports to shareholders
We intend to furnish annual reports to shareholders which will include
audited financial statements reported on by our certified public accountants.
In addition, we may issue unaudited quarterly or other interim reports to
shareholders as we deem appropriate. We will comply with the periodic reporting
requirements imposed by the Securities Exchange Act of 1934.
LEGAL MATTERS
The validity of the issuance of the common stock offered hereby will be
passed upon for us by Neuman & Drennen, LLC of Boulder, Colorado.
EXPERTS
Our consolidated financial statements as of June 30, 1999 and for the
period from May 18, 1999 to June 30, 1999 have been included herein in reliance
on the report of Moss Adams, LLP, independent certified public accountants,
appearing elsewhere herein, given upon the authority of that firm as experts
in auditing and accounting.
<PAGE>
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
This index relates to the consolidated financial statements set forth in
this Prospectus of XML - Global Technologies, Inc.
Consolidated Financial Statements as of June 30, 1999 and for the Period
May 18, 1999 (date of inception) to June 30, 1999
Independent Auditors' Report of Moss Adams, LLP F-2
Consolidated Balance Sheet F-3
Consolidated Statement of Operations F-4
Consolidated Statement of Stockholders' Equity F-5
Consolidated Statement of Cash Flows F-6
Notes to Consolidated Financial Statements F-7
Condensed Consolidated Unaudited Financial Statements as of and for the
Three and Nine Month Periods Ended March 31, 2000
Consolidated Balance Sheets F-17
Consolidated Statements of Operations F-18
Consolidated Statements of Cash Flows F-19
Notes to Consolidated Financial Statements F-20
<PAGE>
<PAGE>
Moss-Adams LLP
Certified Public Accountants
114 West Magnolia Street, Suite 301
Bellingham, WA 98225-4318
(360) 676-1920 (tel) (360) 671-5411 (fax)
Independent Auditor's Report
To the Board of Directors and Stockholders
XML - Global Technologies, Inc.
We have audited the accompanying consolidated balance sheet of XML - Global
Technologies, Inc. and Subsidiaries (a development stage company) as of June 30,
1999, and the related consolidated statements of operations, stockholders'
deficit, and cash flows for the period May 18, 1999 (date of inception) to June
30, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of XML -
Global Technologies, Inc. and Subsidiaries as of June 30, 1999, and the
results of its operations and its cash flows for the period May 18, 1999 (date
of inception) to June 30, 1999 in conformity with generally accepted accounting
principles.
MOSS ADAMS LLP
Bellingham, Washington
October 6, 1999, except for Note 1, as to
which the date is November 8, 1999
<PAGE>
<PAGE>
XML - Global Technologies, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Balance Sheet
June 30, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS
------
Current Assets
Cash $ 9,581
Trade accounts receivable 8,232
Other receivable 3,509
Prepaid expenses 4,658
----------
Total current assets 25,980
----------
Property and Equipment, net 54,938
Trademarks and Patents 7,134
----------
Total Assets $ 88,052
==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current Liabilities
Trade accounts payable and accrued
liabilities $ 55,182
Advances due to directors 8,755
Note payable 135,135
----------
Total liabilities 199,072
----------
Stockholders' Deficit
Common stock ($.0001 par value, 500,000,000
shares authorized, 17,500,000 shares issued
and outstanding) 1,750
Additional paid-in capital 8,079
Deficit accumulated during the development stage (120,849)
----------
Total stockholders' deficit (111,020)
----------
Total Liabilities and Stockholders' Deficit $ 88,052
==========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<PAGE>
XML - Global Technologies, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statement of Operations
For the Period May 18, 1999 (Date of Inception) to June 30, 1999
<TABLE>
<CAPTION>
<S> <C>
Revenue $ 2,137
Operating Expenses
Research and development 49,809
General and administrative 70,091
Depreciation 3,086
-----------
Total operating expenses 122,986
-----------
Net Loss Before Provision for Income Taxes (120,849)
Provision For Income Taxes -
-----------
Net Loss $ (120,849)
===========
Earnings (Loss) Per Share
Basic $ (0.01)
===========
Diluted $ (0.01)
===========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<PAGE>
XML - Global Technologies, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statement of Stockholders' Deficit
For the Period May 18, 1999 (Date of Inception) to June 30, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage Total
------------- ----------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C
>
BALANCE, May 18,
1999 (date of
inception) - $ - $ - $ - $ -
Share issuances 12,500,000 1,250 11,250 - 12,500
Net loss - - - (120,849) (120,849)
Assumption of
liabilities of
International
Capital Funding,
Inc. 5,000,000 500 (3,171) - (2,671)
---------- ----------- --------- ------- ----------
BALANCE,
June 30, 1999 17,500,000 $ 1,750 $ 8,079 $(120,849) $(111,020)
========== =========== ========= ======== ==========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<PAGE>
XML - Global Technologies, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statement of Cash Flows
For the Period May 18, 1999 (Date of Inception) to June 30, 1999
<TABLE>
<CAPTION>
<S> <C>
Increase (Decrease) in Cash
Cash Flows From Operating Activities
Net loss $ (120,849)
Adjustments to reconcile net loss to net cash used
in operating activities
Stock issued in exchange for intellectual property
rights and for services 12,500
Depreciation 3,086
Changes in operating assets and liabilities
Trade accounts receivable (1,661)
Other receivable (3,509)
Prepaid expenses (4,658)
Trade accounts payable and accrued liabilities 50,389
Advances due to directors 1,223
---------
Net cash used in operating activities (63,479)
---------
Cash Flows From Investing Activities
Purchases of property and equipment (55,552)
Acquisition of trademarks and patents (7,134)
Acquisition of subsidiary, net of cash acquired 611
---------
Net cash used in investing activities (62,075)
---------
Cash Flows From Financing Activities
Proceeds from issuance of note payable 135,135
---------
Net Change In Cash 9,581
Cash, beginning of period -
---------
Cash, end of period $ 9,581
=========
Supplemental Disclosure of Cash Flow Information
Interest paid $ -
=========
Income taxes paid $ -
=========
Supplemental Schedule of Noncash Transaction
Assumption of liabilities of International
Capital Funding, Inc. $ 2,671
=========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<PAGE>
XML - Global Technologies, Inc. and Subsidiaries
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 1999
Note 1. Organization, Reverse Acquisition and Subsequent Financing, and
Operations
Organization and Development Stage Operations
---------------------------------------------
Effective August 27, 1999, XML-Technologies, Inc. (XML-Technologies) and
International Capital Funding, Inc. (ICF) entered into an Agreement and Plan
of Reorganization (the Agreement). In accordance with the Agreement, the
shareholders of XML-Technologies received 12.5 million shares of ICF stock in
exchange for the 12.5 million outstanding shares of XML-Technologies. The
shareholders of ICF retained 5 million shares in exchange for no assets and
the assumption of $2,671 of liabilities of ICF by XML-Technologies. The
transaction was accounted for as a recapitalization of XML-Technologies and
the accompanying consolidated financial statements present the financial
position, results of operations, and cash flows of XML-Technologies.
ICF was organized in 1991 for the purpose of consummating a merger or
acquisition with a private entity. Prior to entering into the Agreement, it
had no material amount of assets or liabilities and no operations. Subsequent
to completing the Agreement, ICF changed its name to XML-Global Technologies,
Inc. (XML-Global Technologies or the Company) and changed its year-end to June
30.
The capital structure in the accompanying consolidated financial
statements reflects a ten for one forward stock split of ICF shares authorized
on August 3, 1999 in anticipation of entering into the Agreement. The
activity of ICF for the period July 1, 1999 and August 27, 1999 (date of the
Agreement) was not significant and will be included in the Company's
consolidated financial statements for the three months ended September 30,
1999.
XML-Technologies is a Nevada corporation organized May 18, 1999 to hold
either directly or indirectly all outstanding shares of XML-Global Research,
Inc. and Walkabout Website Designs, Ltd., both of which are British Columbia
corporations. The Company and its subsidiaries engage in the business of
developing internet-based software applications using XML (Extensible Markup
Language). XML is an abbreviated version of SGML (Standard General Markup
Language), the international standard for defining descriptions of the
structure and content of electronic documents.
For the period May 18, 1999 through June 30, 1999, the Company and its
subsidiaries' efforts have been devoted to legal formation; financial
planning; recruiting directors, advisors and employees; and raising additional
financing. Development stage operations during this period have been financed
with a loan from a director of the Company.
Subsequent Financing
--------------------
Concurrent with completing the Agreement, the Company issued 2,330,000
units to investors at $1 per unit for total proceeds of $2,330,000. Costs
associated with issuance were not material. Units issued consist of one
common share and a purchase warrant entitling the holder to acquire one common
share at an exercise price of $4 within the first six months following the
issue date, or $6 within the second six months following the issue date. The
shares issued are exempt from registration in reliance on Rule 506 of
Regulation D of the Securities Act 1933. Net proceeds from the issuance will
be used to help fund the Company's working capital needs until such time as
development stage operations cease and profitable operations are achieved.
Note 2. Summary of Significant Accounting Policies
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of XML-Global
Technologies, Inc. and its wholly-owned U. S. and Canadian subsidiaries. All
material intercompany accounts and transactions have been eliminated in
consolidation.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements. Actual results could differ from those estimates.
Allowance for Doubtful Accounts
-------------------------------
The Company considers all trade accounts receivable to be fully
collectible. Accordingly, no allowance for doubtful accounts has been
recorded.
Property and Equipment
----------------------
Property and equipment is recorded at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Intangible Assets
-----------------
Legal costs associated with obtaining and protecting trademarks and
patents are capitalized. Once a trademark or patent is perfected, the related
costs are amortized over five years using the straight-line method.
Valuation of Long-Lived Assets
------------------------------
The Company periodically reviews long-lived assets, including
identifiable intangible assets, whenever events or changes in circumstances
indicate that the carrying amount of an asset may be impaired and not
recoverable. Adjustments are made if the sum of the expected future
undiscounted operating cash flows is less than the carrying amount.
Research and Development Costs
------------------------------
Research and development costs are expensed as incurred. Statement of
Financial Accounting Standards No. 86, Accounting for the Costs of Computer
Software to Be Sold, Leased, or Otherwise Marketed, does not materially affect
the Company.
Income Taxes
------------
The Company accounts for income taxes using the liability method.
Deferred taxes are recognized for temporary differences between the basis of
assets and liabilities for financial and income tax purposes at enacted tax
rates. Deferred tax amounts represent the future tax consequences of those
differences, which will be either deductible or taxable when the assets and
liabilities are recovered or settled. Valuation allowances are established
when necessary to reduce deferred tax assets to the amounts expected to be
realized. The Company files a consolidated tax return in the United States. It
files separate tax returns for each of its Canadian subsidiaries in Canada.
Additionally, the Canadian subsidiaries are subject to provincial income taxes
in Canada.
Foreign Currency Translation
----------------------------
All asset and liability accounts of Canadian operations are translated
into U.S. dollars at current exchange rates. Revenues and expenses are
translated using the average exchange rate prevailing during the period.
Foreign currency translation adjustments were not material during the period
May 18, 1999 (date of inception) to June 30, 1999.
Earnings Per Share
------------------
The Company reports earnings per share in accordance with Statement of
Financial Accounting Standards (SFAS) No. 128, Earnings Per Share.
Segment Information
-------------------
The Company reports segment information in accordance with SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information. SFAS No.
131 requires that reportable segments be designated using a management
approach, which relies on the internal organization used by management for
making operational decisions and assessing performance. SFAS No. 131 also
requires certain disclosures about products and services, geographic areas,
and major customers.
New Accounting Standard
-----------------------
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. Among other
provisions, SFAS No. 133 requires that entities recognize all derivatives as
either assets or liabilities in the balance sheet and measure those financial
instruments at fair value. Accounting for changes in fair value is dependent
on the use of the derivatives and whether such use qualifies as hedging
activity. The new standard, as amended, becomes effective for the Company in
fiscal 2001, and management is currently assessing the impact, if any, it may
have on financial position and results of operations.
Note 3. Mergers and Acquisitions
XML-Global Research, Inc.
-------------------------
Effective May 20, 1999, XML-Technologies, Inc. completed the acquisition
of XML-Global Research, Inc. (Global) by purchasing all outstanding shares of
common stock of Global for a nominal amount. Global is a British Columbia
corporation organized February 4, 1999 for the purpose of engaging in software
development. The acquisition has been accounted for using the purchase method
of accounting for business combinations. Prior to the acquisition, Global had
no significant operations, and no goodwill was recorded in connection with the
combination.
Walkabout Website Designs, Ltd.
-------------------------------
Effective May 27, 1999, XML-Global Research, Inc. completed the
acquisition of Walkabout Website Designs, Ltd. (Walkabout) by purchasing all
outstanding shares of common stock of Walkabout for a nominal amount.
Walkabout is a British Columbia corporation organized September 1, 1998 for
the purpose of engaging in software development. The acquisition has been
accounted for using the purchase method of accounting for business
combinations; and, accordingly, the operating results of Walkabout have been
included in the Company's financial statements from the date of acquisition.
No goodwill was recorded in connection with the combination.
Note 4. Property and Equipment
Property and equipment consist of the following:
<TABLE>
<CAPTION>
<S> <C>
Computer hardware $50,685
Office equipment 7,339
--------
58,024
Accumulated depreciation (3,086)
--------
$54,938
========
</TABLE>
Note 5. Note Payable
XML-Technologies, Inc. has a $135,000 unsecured note payable to a
director of the Company. The note is denominated in Canadian dollars, bears
interest at 9.25%, and is due on the earlier of demand or September 30, 1999.
Note 6. Income Taxes
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
<S> <C>
Deferred Canadian federal and provincial
tax benefit $ 48,300
Increase in valuation allowance (48,300)
-------------
$ -
=============
</TABLE>
The total provision differs from the amount computed using U.S. federal
statutory income tax rates as follows:
<TABLE>
<CAPTION>
<S> <C>
Net loss before provision for income taxes $(120,849)
U.S. statutory rate 34%
Tax benefit at statutory rate (41,100)
Excess income tax benefit in Canada (7,200)
Increase in valuation allowance 48,300
-----------
$ -
===========
</TABLE>
Tax effects of temporary differences that give rise to deferred tax
assets, based on a 40% Canadian tax rate, consist solely of a $48,300 net
operating loss carryforward, which expires in 2006. Management currently
believes uncertainty exists surrounding realization of the deferred tax asset
and has recorded a $48,300 valuation allowance to offset completely the value
of the asset.
Note 7. Earnings per Share
The numerators and denominators of basic and diluted earnings per share
are as follows:
<TABLE>
<CAPTION>
<S> <C>
Numerator - net loss $ (120,849)
=============
Denominator - weighted average number of shares
outstanding 17,500,000
=============
</TABLE>
At June 30, 1999, the Company had no potential common shares that would
have had a dilutive effect.
Note 8. Stockholders' Equity
Preferred Stock
---------------
The Company has 100,000,000 authorized shares of $0.01 par value
preferred stock. The Board of Directors may authorize issuance of any number
of shares in series and assign specific rights and preferences to each series
without limitation. As of June 30, 1999, no shares have been issued.
Common Stock and Stock Warrants
-------------------------------
The Company has a single class of $0.0001 par value common stock.
Authorized shares total 500 million. After giving effect to the reverse
acquisition discussed in Note 1 and a ten for one stock split authorized on
August 3, 1999, the Company has 17.5 million shares outstanding.
Subsequent to June 30, 1999, and concurrently with the reverse
acquisition discussed in Note 1, the Company issued 2,330,000 units to
investors at $1.00 per unit for total proceeds of $2,330,000. Costs
associated with issuance were not material. Units issued consist of one
common share and a purchase warrant entitled the holder to acquire one common
share at an exercise price of $4.00 within the first six months following the
issue date or $6.00 within the second six months following the issue date.
The shares issued are exempt from registration in reliance on Rule 506 of
Regulation D of the Securities Act of 1933.
Note 9. Related Party Transactions
During the period May 18, 1999 (date of inception) to June 30, 1999, the
Company paid $6,100 of management fees to directors and to companies
controlled by directors.
Note 10. Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash and trade accounts
receivable. The Company places its temporary cash investments with major
Canadian financial institutions. The Company extends credit to customers
based on evaluation of customers' financial condition and credit history.
Collateral is generally not required. Customers include Canadian and U.S.
entities engaged in electronic commerce and software development.
Note 11. Segment and Geographic Information
The Company's primary operations consist of the development and sale of
internet-based software applications and software engineering contracts.
Management assesses the operations of its software sales and engineering
activities as separate segments. However, through June 30, 1999, the
Company's efforts were focused primarily on development stage operations, and
no material activities occurred within these segments. Currently, the Company
also has no major customers. At June 30, 1999, essentially all of the
Company's long lived assets were located in British Columbia, Canada.
Note 12. Fair Value of Financial Instruments
The fair values of cash, trade accounts receivable and payable, accrued
liabilities, advances due to directors, and note payable all approximate their
fair value due to the short-term nature of the instruments.
Note 13. Year 2000 Issue
Currently, management is reviewing the Company's software programs and
hardware components to determine whether or not modifications will be required
to prevent problems related to the Year 2000 Issue. In connection with this
process, management is currently making an assessment of potential expense, if
any, to be incurred to ensure all of the Company's computer systems and
various other subsystems, are Year 2000 compliant.
Because of the unprecedented nature of the Year 2000 Issue, its effects
and the success of related remediation efforts, if any are required, will not
be fully determinable until the year 2000 and thereafter. Management cannot
assure that the Company is or will be Year 2000 ready, that the Company's
remediation efforts will be successful in whole or in part, or that parties
with whom the Company does business will be Year 2000 ready.
Note 14. Events Subsequent to the Date of the Independent Auditor's Report
(Unaudited)
Formation of DataXchg, Inc. and Draft Licensing Agreement
---------------------------------------------------------
In October 1999, the Company and one of its non-employee directors, David
Webber, co-founded DataXchg, Inc. ("DataXchg"), a Delaware corporation. The
Company holds 40% of common shares and David Webber holds the other 60%. In
exchange for the shares, the parties agreed to transfer all rights to certain
technology and other intellectual property related to certain B2B (Business-
to-Business) and XML-EDI (Electronic Data Interchange) solutions. Neither
party has an historical cost basis in the assets that were transferred to
DataXchg.
Under the terms of a licensing agreement, DataXchg granted the Company
the exclusive right to use, develop, and sublicense the technology and
associated intellectual property owned by DataXchg. Pursuant to the license
agreement, the Company will pay royalties to DataXchg equal to 80% of net
revenues derived from the sale and licensing of products that are either based
on the technology owned by DataXchg or jointly developed by the Company and
DataXchg. The Company will pay royalties equal to 20% of net revenues derived
from third party use of the technology and intellectual rights.
In April 2000, the Company and David Webber agreed in principle that the
Company will acquire Mr. Webber's 60% interest in DataXchg in exchange for the
issuance of 1,000,000 shares of the Company's common stock.
Adoption of 1999 Equity Incentive Plan
--------------------------------------
Effective October 19, 1999, stockholders approved adoption of the 1999
Equity Incentive Plan (the "Plan"). Under the Plan, the Board of Directors or
its designated committee may make grants to employees, officers, directors,
and consultants of the Company and its subsidiaries of (1) incentive stock
options, (2) non-qualified stock options, (3) stock bonuses, (4) rights to
purchase restricted stock, and (5) stock appreciation rights. The Company has
reserved a total of 4 million shares for stock awards to be issued under the
Plan.
The exercise price of incentive stock options can be no less than the
fair value of the Company's common stock on the date of grant. In instances
where an employee owns 10% or more of common shares, the exercise price can be
no less than 110% of fair value. The exercise price of non-statutory options
can be no less than 85% of fair value. The maximum term of options is 10
years; vesting periods are determined by the Board or its designated committee
on the date of grant.
Through April 27, 2000, the Company had issued 1,165,000 stock options to
employees and non-employees. All the options have an exercise price of $1.00.
The weighted- average remaining contractual life of the options is 4.7 years.
Through April 27, 2000, a total of 1,055,000 of the options had vested. The
remaining 110,000 options vest on May 31 and June 30, 2000.
The Company applies the provisions of Accounting Principles Board (APB)
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations to account for options and other stock awards issued to
employees. Accordingly, costs for employee stock options or other stock
awards are measured as the excess, if any, of the fair value of the Company's
common stock at the measurement date over the amount the employee must pay to
acquire the stock. The Company applies the provisions of Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for Stock- Based
Compensation, and related interpretations to account for options and other
stock awards issued to independent contractors and other service providers who
are not employees of the Company. SFAS No. 123 requires that the Company
apply the fair value method to account for stock awards issued to non-
employees. SFAS No. 123 also requires disclosure of the pro forma effect of
applying the fair value method of accounting for stock options issued to
employees. The Company uses the Black-Scholes option-pricing model to compute
estimated fair value of options and similar awards, based on applicable
assumptions about the weighted average expected life of options, the
volatility of its stock price, its dividend yield rate, and a risk-free
interest rate.
In March 2000, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 44, Accounting for Certain Transactions Involving Stock
Compensation. FASB Interpretation No. 44 clarifies that non-employee members
of an entity's Board of Directors do not meet the definition of an employee,
in which case the requirements of SFAS No. 123 must be applied. However, an
exception is made to require the application of APB Opinion No. 25 to stock
compensation granted to a non-employee director for services provided as a
director if the director was (a) elected by stockholders or (b) appointed to a
board position that will be filled by stockholder election when the existing
term expires.
Through March 31, 2000, the Company had recognized $49,300 of
compensation for options granted to non- employees. The pro forma effect of
applying the fair value method of accounting for options issued to employees
results in a $129,100 increase in net loss and no increase in net loss per
share for the nine months ended March 31, 2000.
Stock Issuances and Redemption
------------------------------
Subsequent to the merger of XML-Technologies and ICF on August 27, 1999
and the issuance of the units described in Notes 1 and 8 on that same date,
the Company issued additional common shares and stock purchase warrants, as
described below. With the exception of the costs associated with the units
placed by Westminster Securities Corporation, any costs associated with the
issuances were not material. All issuances are exempt from registration in
reliance on Rule 506 of Regulation D or Section 4(2) of the Securities Act of
1933.
* Effective September 1, 1999, the Company issued a warrant that
entitles the holder to purchase 200,000 shares of common stock for
$5.00 per share. The term of the warrant is five years.
* Effective January 13, 2000, the Company entered into a Securities
Purchase Agreement (the Agreement) with XML Fund LLC ("XML FUND").
Under the Agreement, XML FUND agreed to purchase 500,000 units at a
price of $2.00 per unit for total proceeds of $1 million. Each unit
consists of two shares of common stock, one Class A warrant and one
Class A-1 warrant. Each Class A warrant entitles XML Fund to
purchase one additional share of common stock at a price of $2.00
per share, and each Class A-1 warrant entitles XML Fund to purchase
one additional share of common stock at a price of $0.07 per share.
The term of the Class A warrants is three years and the term of the
Class A-1 warrants is 60 days. The Class A-1 warrants were
exercised in March 2000, from which the Company received gross
proceeds of $35,000. If within one year of the sale of the units
(or once all warrants are exercised, if earlier) the Company
proposes to register any of its common stock under the Securities
Act of 1993 in connection with a public offering, the Company agrees
to use its best efforts to register also the shares held by XML
Fund. In the event the Company proposes to offer for sale any new
common shares or securities convertible into common shares, or any
other class of capital stock, the Company has granted XML Fund the
preemptive right to purchase additional shares necessary to maintain
its percentage interest in the Company.
* Effective February 22, February 29, and April 7, 2000, the Company
entered into agreements to issue a total of 1,050,000 units at a
price of $1.00 per unit for total proceeds of $1,050,000. Each unit
consists of one share of common stock and one warrant. Each warrant
entitles holders to purchase one additional share of common stock at
a price of $4.00 per share. The warrants expire on December 31,
2000. If within one year of the sale of the units the Company
proposes to register any of its common stock under the Securities
Act of 1933 in connection with a public offering, the Company
agrees to use its best efforts to register also the shares issued in
these private placements.
* On February 24, 2000, one of the Company's founding stockholders
left the employee of the Company. The employee and the Company
agreed that he would return 600,000 of the 800,000 shares originally
issued to him, at no cost to the Company.
* Effective March 3, 2000, the Company engaged Westminster Securities
Corporation (Westminster) to serve as its placement agent for the
purpose of offering 105 units at a price of $75,000 per unit for
total proceeds of $7,875,000. The Company will pay Westminster 7%
of the gross sales price of all units sold, and Westminster will
have the right to purchase up to 10% of the units sold.
Each unit consists of 50,000 shares of common stock and 50,000
redeemable warrants. During the first six months of the 18 month
term of the warrants, each warrant entitles holders to purchase one
additional share of common stock at a price of $4.00 per share.
During the following 12 months, holders are entitled to purchase
additional common shares at a price of $6.00 per share. The
warrants are redeemable by the Company at $0.01 per warrant in the
event that (i) the Company registers the shares to honor the
warrants, (ii) the shares are listed on a national exchange, Nasdaq,
or the Over-the-Counter Bulletin Board, (iii) the closing bid price
of such shares for the 20 trading days prior to redemption is 200%
of the exercise price of the warrants, and (iv) no lockup provisions
restrict the resale of the shares. In connection with the offering,
the Company intends to register up to 5.25 million common shares and
5.25 million warrants in various states where such securities may be
sold.
Through May 3, 2000, the Company had received paid subscriptions for
9.25 units for gross proceeds of $6,937,500. Related issue costs
were approximately $600,000.
* Effective April 5, 2000, the Company entered into a second
Securities Purchase Agreement (the "Agreement") with XML Fund.
Under this Agreement, XML Fund agreed to purchase 100,000 units at a
price of $1.00 per unit for total proceeds of $100,000. Each unit
consists of one share of common stock and one warrant. Each warrant
entitles XML Fund to purchase one additional share of common stock
at a price of $4.00 per share. The warrants expire on December 31,
2000. If, within one year of the sale of the units, the Company
proposes to register any of its common stock under the Securities
Act of 1993 in connection with a public offering, the Company agrees
to use its best efforts to register also the shares held by XML
Fund.
New Facility Lease
------------------
In March 2000, the Company entered into a lease agreement for a new
operating facility in Vancouver, British Columbia. Prior to entering into this
agreement, the Company had been renting its existing facility on a short-term
basis. The lease commences on June 1, 2000 and runs for five years. During
the first two years, monthly lease payments are $4,700. However, the facility
is provided at no charge for the first five months of each of the first two
years. During the following three years, monthly lease payments are $5,500.
The lease agreement also requires that the Company pay its proportional share
of operating costs and property taxes.
Future minimum lease payments required under the lease, excluding the
Company's share of operating costs and property taxes, are as follows:
<TABLE>
<CAPTION>
Year Ending June 30,
--------------------
<S> <C>
2000 $ 16,800
2001 28,000
2002 38,200
2003 65,500
2004 65,500
2005 54,500
----------
$ 268,500
</TABLE>
The effect of the scheduled rent increase and "rent holidays" will be
recognized on a straight-line basis over the five-year term of the lease.
<PAGE>
<PAGE>
XML-Global Technologies, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheet
At March 31, 2000 and June 30, 1999
<TABLE>
<CAPTION>
March 31 2000 June 30, 1999
------------- -------------
<S> <C> <C>
Assets
------
Current Assets
Cash and cash equivalents $ 2,353,812 $ 9,581
Trade accounts receivable 8,982 8,232
Other receivable 21,529 3,509
Deposits 22,005 4,658
Deferred income taxes 1,467 -
Deferred issue costs 70,519 -
------------- -------------
2,478,314 25,980
Fixed assets
Computer hardware and software 121,955 50,685
Equipment 18,389 7,339
------------- -------------
140,344 58,024
Accumulated depreciation 25,001 3,086
------------- -------------
115,343 54,938
------------- -------------
Trademarks and patents 40,380 7,134
------------- -------------
Total Assets $ 2,634,037 $ 88,052
============= =============
Liabilities and Stockholders' Equity (Deficit)
----------------------------------------------
Liabilities
Current liabilities
Accounts payable and accrued
liabilities $ 74,685 $ 55,182
Due to directors - 8,755
Note payable - 135,135
------------- -------------
74,685 199,072
------------- -------------
Total Liabilities 74,685 199,072
------------- -------------
Stockholders' Equity (Deficit)
Common stock 2,128 1,750
Additional paid-in capital 3,807,360 8,079
Deferred compensation (12,209) -
Accumulated other comprehensive income (2,849) -
Accumulated deficit (1,235,078) (120,849)
------------- -------------
Total Stockholders' Equity (Deficit) 2,559,352 (111,020)
------------- -------------
Total Liabilities and Stockholders'
Equity (Deficit) $ 2,634,037 $ 88,052
============= =============
</TABLE>
See accompanying notes
<PAGE>
<PAGE>
XML-Global Technologies, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statement of Operations
For the Three Months and for the Nine months Ended March 31, 2000
<TABLE>
<CAPTION>
Three Months Nine months
March 31, 2000 March 31, 2000
------------- -------------
<S> <C> <C>
Revenue $ 7,330 $ 30,989
------------- -------------
Operating expenses
Research and development 215,914 504,003
Marketing and selling 71,360 173,542
General and administrative 183,444 422,928
Fair value of options granted to
consultants 49,279 49,279
Depreciation and amortization 8,900 21,717
------------- -------------
Total operating expenses 528,897 1,171,469
------------- -------------
Operating loss (521,567) (1,140,480)
Interest Income 24,051 26,251
------------- -------------
Net loss (497,516) (1,114,229)
Accumulated deficit, beginning of
period (737,562) (120,849)
------------- -------------
Accumulated deficit, end of period $(1,235,078) $ (1,235,078)
============= =============
Net loss per share - basic and diluted $ (0.02) $ (0.06)
Weighted average number of shares 20,809,670 19,662,764
</TABLE>
See accompanying notes
<PAGE>
<PAGE>
XML-Global Technologies, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statement of Cash Flow
For the Nine Months Ended March 31, 2000
<TABLE>
<CAPTION>
Nine months
March 31, 2000
------------
<S> <C>
Cash flows from operating activities
Net loss $ (1,114,229)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation of fixed assets 21,717
Fair value of options granted to consultants 49,279
Changes in assets and liabilities
Accounts receivable (620)
Other receivable (16,824)
Deposits (17,016)
Accounts payable and accrued liabilities 14,725
Due to directors (8,815)
------------
Net cash used in operating activities (1,071,783)
------------
Cash flows from investing activities
Fixed assets purchases (80,264)
Trademarks and patents (32,811)
------------
Net cash used in investing activities (113,075)
------------
Deferred issue costs (70,487)
Issuance of capital stock, net of issue costs 3,738,171
Repayment of note payable (135,135)
------------
Net cash provided by financing activities 3,532,549
------------
Effect of changes in exchange rates (3,460)
------------
Increase (decrease) in cash 2,344,231
Cash, beginning of period 9,581
------------
Cash and cash equivalents, end of period $ 2,353,812
============
</TABLE>
See accompanying notes
<PAGE>
Page>
XML-Global Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. ORGANIZATION AND CESSATION OF DEVELOPMENT STAGE OPERATIONS
Effective August 27, 1999, XML-Technologies, Inc. (XML-Technologies) and
International Capital Funding, Inc. (ICF) entered into an agreement and
plan of reorganization (the Agreement). In accordance with the
Agreement, the shareholders of XML-Technologies received 12.5 million
shares of ICF stock in exchange for the 12.5 million outstanding shares
of XML-Technologies. The shareholders of ICF retained 5 million shares in
exchange for no assets and the assumption of $2,671 of liabilities of ICF
by XML-Technologies. The transaction was accounted for as a
recapitalization of XML-Technologies and the accompanying consolidated
financial statements present the financial position, results of
operations, and cash flows of XML-Technologies.
ICF was organized in 1991 for the purpose of consummating a merger or
acquisition with a private entity. Prior to entering into the Agreement,
it had no material amount of assets or liabilities and no operations.
Subsequent to completing the Agreement, ICF changed its name to XML-
Global Technologies, Inc. (XML-Global Technologies or the Company) and
changed its year-end to June 30.
The capital structure in the accompanying consolidated financial
statements reflects a ten for one stock split of ICF shares authorized on
August 3, 1999 in anticipation of entering into the Agreement. The
activity of ICF for the period July 1, 1999 and August 27, 1999 (date of
the Agreement) was not significant and is included in the Company's
consolidated financial statements for the nine months ended March 31,
2000.
XML-Technologies is a Nevada corporation organized May 18, 1999 to hold
either directly or indirectly all outstanding shares of XML-Global
Research, Inc. and Walkabout Website Designs, Ltd., both of which are
British Columbia corporations. The Company and its subsidiaries engage in
the business of developing Internet-based software applications using XML
(Extensible Markup Language). XML is an abbreviated version of SGML
(Standard General Markup Language), the international standard for
defining descriptions of the structure and content of electronic
documents.
For the period May 18, 1999 through June 30, 1999, the Company and its
subsidiaries' efforts were devoted to legal formation; financial
planning; recruiting directors, advisors and employees; and raising
additional financing. Development stage operations during this period
were financed with a loan from a director of the Company. In July 1999,
the Company commenced selling its e-commerce software and accordingly is
no longer a development stage company.
2. BASIS OF PRESENTATION
These condensed consolidated financial statements are unaudited and
reflect all adjustments that, in the Company's opinion, are necessary for
a fair presentation of the results for the interim period. The results of
operations for the current interim period are not necessarily indicative
of results to be expected for the current year or any other period.
These consolidated financial statements should be read in conjunction
with the consolidated financial statements for the period May 18, 1999
(date of inception) to June 30, 1999 and notes thereto included in our 8-
K/A as filed with the Securities and Exchange Commission on November 10,
1999. Comparative statements of operations and cash flows are not
available, as operations did not commence until May 18, 1999.
3. STOCK ISSUANCES AND REDEMPTION
Subsequent to the merger of XML-Technologies and ICF on August 27, 1999
described in Note 1 and the issuance of the units described in Note 5 on
that same date, the Company issued additional common shares and stock
purchase warrants, as described below. With the exception of costs
associated with the subsequent Westminster Securities offering described
in Note 8, costs associated with the issuances were not material. All
issuances are exempt from registration in reliance on Rule 506 of
Regulation D or Section 4(2) of the Securities Act of 1933.
Effective January 13, 2000, the Company entered into a Securities
Purchase Agreement (the Agreement) with XMLFund LLC (XMLFund). Under the
Agreement, XMLFund agreed to purchase 500,000 units at a price of $2.00
per unit for total proceeds of $1 million. Each unit consists of two
shares of common stock, one Class A warrant and one Class A-1 warrant.
Each Class A warrant entitles XMLFund to purchase one additional share of
common stock at a price of $2.00 per share, and each Class A-1 warrant
entitles XMLFund to purchase one additional share of common stock at a
price of $0.07 per share. The term of the $2.00 warrants is three years
and the term of the $0.07 warrants is 60 days. The $0.07 warrants were
exercised in March 2000 and the Company received gross proceeds of
$35,000. If within one year of the sale of the units (or once all
warrants are exercised, if earlier) the Company proposes to register any
of its common stock under the Securities Act of 1993 in connection with a
public offering, the Company agrees to use its best efforts to register
also the shares held by XMLFund. In the event the Company proposes to
offer for sale any new common shares or securities convertible into
common shares, or any other class of capital stock, the Company has
granted XMLFund the preemptive right to purchase additional shares
necessary to maintain its percentage interest in the Company.
On February 24, 2000, one of the Company's founding stockholders left the
employee of the Company. The employee and the Company agreed that he
would return 600,000 of the 800,000 shares originally issued to him, at
no cost to the Company.
Effective February 22, February 29, and April 7, 2000, the Company
entered into agreements to issue a total of 1,050,000 units at a price of
$1.00 per unit for total proceeds of $1,050,000. Each unit consists of
one share of common stock and one warrant. Each warrant entitles holders
to purchase one additional share of common stock at a price of $4.00 per
share. The warrants expire on December 31, 2000. If within one year of
the sale of the units the Company proposes to register any of its common
stock under the Securities Act of 1933 in connection with a public
offering, the Company agrees to use its best efforts to register also the
shares issued in these private placements. The company placed 550,000 of
these units prior to March 31, 2000 for gross proceeds of $550,000.
4. RELATED PARTY TRANSACTIONS
During the nine months ended March 31, 2000, we repaid the note payable
due to a director of $135,135. We paid $32,500 and $130,000 in the three
and nine months ended March 31, 2000 respectively in management fees to
directors of XML-Global and its subsidiaries and companies controlled by
directors.
5. SHARE PURCHASE WARRANTS
Concurrent with the Agreement discussed in Note 1, the Company issued
2,330,000 units to investors at $1.00 per unit for total proceeds of
$2,330,000. Units issued consist of one share of common stock and a
purchase warrant entitling the holder to acquire one share of common
stock at an exercise price of $4.00 within the first six months following
the issue date, or $6.00 within the second six months following the issue
date. The terms of the warrant were subsequently amended to extend the
$4.00 exercise price until December 31, 2000. Approximately $175,000 in
costs were incurred in association with the issuance of these units and
have been offset against the gross proceeds received.
In October 1999 the Company issued a share purchase warrant to purchase
up to 200,000 shares of common stock at a price of $5.00 per share. The
share purchase warrant was issued in exchange for corporate finance and
business development assistance. The warrant is exercisable up to August
31, 2004.
In connection with the $1,050,000 financing discussed in Note 3, we
issued share purchase warrants each entitling the holder to acquire one
share of common stock at an exercise price of $4.00 until December 31,
2000.
As part of the XMLFund financing the Company issued a share purchase
warrant to purchase up to 1,000,000 shares of common stock. The Company
issued 500,000 Class A warrants and 500,000 Class A-1 warrants. Each
Class A warrant entitles XMLFund to purchase one additional share of
common stock at a price of $2.00 per share, and each Class A-1 warrant in
each unit entitles XMLFund to purchase one additional share of common
stock at a price of $0.07 per share. The term of the $2.00 warrants is
three years and the term of the $0.07 warrants is 60 days. The $0.07
warrants were exercised in March 2000 and the Company received gross
proceeds of $35,000.
6. 1999 EQUITY INCENTIVE PLAN
On October 19, 1999, the Company adopted the 1999 Equity Incentive Plan
(the "1999 Plan") to provide incentives to employees, directors and
consultants. Under the 1999 Plan, the Company has reserved a total of
4,000,000 shares of Common Stock for issuance with the maximum term of
options being ten years. The Board of Directors has the exclusive power
over the granting of options and their vesting provisions. During the
three months ended March 31, 2000, the Company granted 1,165,000 options
to employees, directors and consultants at an exercise price of $1.00 per
share. The options have a seven year term.
A summary of the status of the 1999 Plan during fiscal 2000 is as
follows:
<TABLE>
<CAPTION>
Number Weighted Average
of Options Exercise Price
------------ ------------
<S> <C> <C>
Options outstanding at
June 30, 1999 - $ -
Granted 1,165,000 1.00
Exercised - -
Forfeited - 1.00
------------ ------------
Options outstanding at
March 31, 2000 1,165,000 $ 1.00
------------ ------------
Options exercisable at
March 31, 2000 1,055,000 $ 1.00
------------ ------------
</TABLE>
A summary of stock options outstanding at September 30, 1999 is as
follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------- -------------------------
Weighted
Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise Out- Contractual Exercise Exer- Exercise
Prices standing Life Price cisable Price
- -------- -------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$1.00 1,165,000 4.7 years $1.00 1,055,000 $1.00
</TABLE>
The Company applies the provision of APB Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations to account for its
stock-based awards. Accordingly, costs for employee stock options or
issuance of shares is measured as the excess, if any, of the fair value
of the Company's common stock at the measurement date over the amount the
employee must pay to acquire the stock. The cost for the issuance of
options to non-employees is based on the fair value of the options
granted at the date the services were performed using the Black-Scholes
option pricing model. Compensation expense for the three and nine months
ended March 31, 2000 was $49,279.
SFAS No. 123, Accounting for Stock-Based Compensation, requires
disclosure of the pro forma effect of applying the fair value method of
accounting for stock options. For disclosure purposes, the Company uses
the Black-Scholes option-pricing model to compute estimated fair value,
based on the following assumptions:
<TABLE>
<CAPTION>
2000
----
<S> <C>
Risk-free interest rate 6.0%
Dividend yield rate 0%
Price volatility 20%
Weighted average expected life of options 3 years
</TABLE>
In March 2000, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 44, Accounting for Certain Transactions Involving
Stock Compensation. FASB Interpretation No. 44 clarifies that non-
employee members of an entity's Board of Directors do not meet the
definition of an employee, in which case the requirements of SFAS No. 123
must be applied. However, an exception is made to require the
application of APB Opinion No. 25 to stock compensation granted to a non-
employee director for services provided as a director if the director was
(a) elected by stockholders or (b) appointed to a board position that
will be filled by stockholder election when the existing term expires.
Through March 31, 2000, the Company had recognized $49,279 of
compensation for options granted to non-employees. The pro forma effect
of applying the fair value method of accounting for options issued to
employees results in a $129,100 increase in net loss and no increase in
net loss per share for the nine months ended March 31, 2000.
7. COMMITMENTS
In March 2000, the Company entered into a lease agreement for a new
operating facility in Vancouver, British Columbia. Prior to entering
into this agreement, the Company had been renting its existing facility
on a short-term basis. The lease commences on June 1, 2000 and runs for
five years. During the first two years, monthly lease payments are
$4,700. However, the facility is provided at no charge for the first
five months of each of the first two years. During the following three
years, monthly lease payments are $5,500. The lease agreement also
requires that the Company pay its proportional share of operating costs
and property taxes.
Future minimum lease payments required under the lease, excluding the
Company's share of operating costs and property taxes, are as follows:
<TABLE>
<CAPTION>
Year Ending
June 30
-----------
<S> <C>
2001 $ 28,000
2002 38,200
2003 65,500
2004 65,500
2005 54,500
--------
$251,700
========
</TABLE>
The effect of the scheduled rent increase and "rent holidays" will be
recognized on a straight-line basis over the five-year term of the lease.
8. SUBSEQUENT EVENTS
Effective April 7, 2000, the Company entered into agreements to issue
500,000 units at a price of $1.00 per unit for total proceeds of
$500,000. Each unit consists of one share of common stock and one
warrant. Each warrant entitles holders to purchase one additional share
of common stock at a price of $4.00 per share. The warrants expire on
December 31, 2000. If within one year of the sale of the units the
Company proposes to register any of its common stock under the Securities
Act of 1933 in connection with a public offering, the Company agrees to
use its best efforts to register also the shares issued in these private
placements.
Effective April 5, 2000, the Company entered into a second Securities
Purchase Agreement (the Agreement) with XMLFund. Under this Agreement,
XMLFund agreed to purchase 100,000 units at a price of $1.00 per unit for
total proceeds of $100,000. Each unit consists of one share of common
stock and one warrant. Each warrant entitles XMLFund to purchase one
additional share of common stock at a price of $4.00 per share. The
warrants expire on December 31, 2000. If, within one year of the sale of
the units, the Company proposes to register any of its common stock under
the Securities Act of 1933 in connection with a public offering, the
Company agrees to use its best efforts to register also the shares held
by XMLFund.
Effective March 3, 2000, the Company engaged Westminster Securities
Corporation (Westminster) to serve as its placement agent for the purpose
of offering up to 105 units at a price of $75,000 per unit for total
maximum proceeds of $7,875,000. The Company will pay Westminster 7% of
the gross sales price of all units sold, and Westminster will have the
right to purchase up to 10% of the units sold.
Each unit consists of 50,000 shares of common stock and 50,000 redeemable
warrants. During the first six months of the 18 month term of the
warrants, each warrant entitles holders to purchase one additional share
of common stock at a price of $4.00 per share. During the following
twelve months, holders are entitled to purchase additional common shares
at a price of $6.00 per share. The warrants are redeemable by the Company
at $0.01 per warrant in the event the Company (i) registers the shares to
honor the warrants, (ii) the shares are listed on a national exchange,
Nasdaq, or the Over-the-Counter Bulletin Board, (iii) the closing bid
price of such shares for the 20 trading days prior to redemption is 200%
of the exercise price of the warrants, and (iv) no lockup provisions
restrict the resale of the shares. In connection with the offering, the
Company intends to register up to 5.25 million common shares and 5.25
million warrants in various states where such securities may be sold.
In April 2000, the Company received paid subscriptions for 92.5 units for
gross proceeds of $6,937,500. Related costs of issuance were
approximately $600,000.
<PAGE>
=========================================================
You should rely only on the information contained in this document or that we
have referred you to. We have not authorized anyone to provide you with
information that is different. This Prospectus is not an offer to sell common
stock and is not soliciting an offer to buy common stock in any state where
the offer or sale is not permitted.
XML - Global Technologies, Inc.
24,335,000 Shares of Common Stock
May ___, 2000
============================================================
Until ___________, 2000 (25 days after the
date of this prospectus), all dealers effecting
transactions in the shares offered by this pro-
spectus - whether or not participating in the
offering - may be required to deliver a copy
of this prospectus. Dealers may also be
required to deliver a copy of this prospectus
when acting as underwriters and for their
unsold allotments or subscriptions.
TABLE OF CONTENTS
----------------------
Page
----
Prospectus Summary
Risk Factors
Forward-Looking Statements
Use of Proceeds
____________________________
Dividend Policy
Capitalization Prospectus
Dilution
Certain Market Information ____________________________
Management Discussion
Business
Management
Certain Transactions May _____, 2000
Principal Stockholders
The Company Offering
Description of Securities
Legal Matters
Experts
Available Information
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
The only statute, charter provision, bylaw, contract, or other
arrangement under which any controlling person, director or officers of the
Registrant is insured or indemnified in any manner against any liability which
he may incur in his capacity as such, is as follows:
Sections 7-109-101 through 7-109-110 of the Colorado Corporation Code
provide as follows:
7-109-101. Definitions. As used in this article:
(1) "Corporation" includes any domestic or foreign entity that is a
predecessor of a corporation by reason of a merger or other
transaction in which the predecessor's existence ceased upon
consummation of the transaction.
(2) "Director" means an individual who is or was a director of a
corporation or an individual who, while a director of a corporation,
is or was serving at the corporation's request as a director,
officer, partner, trustee, employee, fiduciary, or agent of another
domestic or foreign corporation or other person or of an employee
benefit plan. A director is considered to be serving an employee
benefit plan at the corporation's request if his or her duties to
the corporation also impose duties on, or otherwise involve services
by, the director to the plan or to participants in or beneficiaries
of the plan. "Director" includes, unless the context requires
otherwise, the estate or personal representative of a director.
(3) "Expenses" includes counsel fees.
(4) "Liability" means the obligation incurred with respect to a
proceeding to pay a judgment, settlement, penalty, fine, including
an excise tax assessed with respect to an employee benefit plan, or
reasonable expenses.
(5) "Official capacity" means, when used with respect to a
director, the office of director in a corporation and, when used
with respect to a person other than a director as contemplated in
section 7-109-107, the office in a corporation held by the officer
or the employment, fiduciary, or agency relationship undertaken by
the employee, fiduciary, or agent on behalf of the corporation.
"Official capacity" does not include service for any other domestic
or foreign corporation or other person or employee benefit plan.
(6) "Party" includes a person who was, is, or is threatened to be
made a named defendant or respondent in a proceeding.
(7) "Proceeding" means any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal.
7-109-102. Authority to indemnify directors.
(1) Except as provided in subsection (4) of this section, a
corporation may indemnify a person made a party to a proceeding
because the person is or was a director against liability incurred
in the proceeding if:
(a) The person conducted himself or herself in good faith; and
(b) The person reasonably believed:
(i) In the case of conduct in an official capacity with the
corporation, that his or her conduct was in the corporation's best
interests; and
(ii) In all other cases, that his or her conduct was at least
not opposed to the corporation's best interests; and
(c) In the case of any criminal proceeding, the person had no
reasonable cause to believe his or her conduct was unlawful.
(2) A director's conduct with respect to an employee benefit plan
for a purpose the director reasonably believed to be in the
interests of the participants in or beneficiaries of the plan is
conduct that satisfies the requirement of subparagraph (II) of
paragraph (b) of subsection (1) of this section. A director's
conduct with respect to an employee benefit plan for a purpose that
the director did not reasonably believe to be in the interests of
the participants in or beneficiaries of the plan shall be deemed not
to satisfy the requirements of paragraph (a) of subsection (1) of
this section.
(3) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is
not, of itself, determinative that the director did not meet the
standard of conduct described in this section.
(4) A corporation may not indemnify a director under this section:
(a) In connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the
corporation; or
(b) In connection with any other proceeding charging that the
director derived an improper personal benefit, whether or not
involving action in an official capacity, in which proceeding the
director was adjudged liable on the basis that he or she derived an
improper personal benefit.
(5) Indemnification permitted under this section in connection with
a proceeding by or in the right of the corporation is limited to
reasonable expenses incurred in connection with the proceeding.
7-109-103. Mandatory indemnification of directors. Unless limited
by its articles of incorporation, a corporation shall indemnify a
person who was wholly successful, on the merits or otherwise, in the
defense of any proceeding to which the person was a party because
the person is or was a director, against reasonable expenses
incurred by him or her in connection with the proceeding.
7-109-104. Advance of expenses to directors.
(1) A corporation may pay for or reimburse the reasonable expenses
incurred by a director who is a party to a proceeding in advance of
final disposition of the proceeding if:
(a) The director furnishes to the corporation a written
affirmation of the director's good faith belief that he or she has
met the standard of conduct described in section 7-109-102;
(b) The director furnishes to the corporation a written
undertaking, executed personally or on the director's behalf, to
repay the advance if it is ultimately determined that he or she did
not meet the standard of conduct; and
(c) A determination is made that the facts then known to those
making the determination would not preclude indemnification under
this article.
(2) The undertaking required by paragraph (b) of subsection (1) of
this section shall be an unlimited general obligation of the
director but need not be secured and may be accepted without
reference to financial ability to make repayment.
(3) Determinations and authorizations of payments under this
section shall be made in the manner specified in section 7-109-106.
7-109-105. Court-ordered indemnification of directors.
(1) Unless otherwise provided in the articles of incorporation, a
director who is or was a party to a proceeding may apply for
indemnification to the court conducting the proceeding or to another
court of competent jurisdiction. On receipt of an application, the
court, after giving any notice the court considers necessary, may
order indemnification in the following manner:
(a) If it determines that the director is entitled to mandatory
indemnification under section 7-109-103, the court shall order
indemnification, in which case the court shall also order the
corporation to pay the director's reasonable expenses incurred to
obtain court-ordered indemnification.
(b) If it determines that the director is fairly and reasonable
entitled to indemnification in view of all the relevant
circumstances, whether or not the director met the standard of
conduct set forth in section 7-109-102 (1) or was adjudged liable in
the circumstances described in section 7-109-102 (4), the court may
order such indemnification as the court deems proper; except that
the indemnification with respect to any proceeding in which
liability shall have been adjudged in the circumstances described in
section 7-109-102 (4) is limited to reasonable expenses incurred in
connection with the proceeding and reasonable expenses incurred to
obtain court-ordered indemnification.
7-109-106. Determination and authorization of indemnification of
directors.
(1) A corporation may not indemnify a director under section 7-109-
102 unless authorized in the specific case after a determination has
been made that indemnification of the director is permissible in the
circumstances because the director has met the standard of conduct
set forth in section 7-109-102. A corporation shall not advance
expenses to a director under section 7-109-104 unless authorized in
the specific case after the written affirmation and undertaking
required by section 7-109-104 (1) (a) and (1) (b) are received and
the determination required by section 7-109-104 (1) (c) has been
made.
(2) The determinations required by subsection (1) of this section
shall be made:
(a) By the board of directors by a majority vote of those present
at a meeting at which a quorum is present, and only those directors
not parties to the proceeding shall be counted in satisfying the
quorum; or
(b) If a quorum cannot be obtained, by a majority vote of a
committee of the board of directors designated by the board of
directors, which committee shall consist of two or more directors
not parties to the proceeding; except that directors who are parties
to the proceeding may participate in the designation of directors
for the committee.
(3) If a quorum cannot be obtained as contemplated in paragraph (a)
of subsection (2) of this section, and a committee cannot be
established under paragraph (b) of subsection (2) of this section,
or, even if a quorum is obtained or a committee is designated, if a
majority of the directors constituting such quorum or such committee
so directs, the determination required to be made by subsection (1)
of this section shall be made:
(a) By independent legal counsel selected by a vote of the board
of directors or the committee in the manner specified in paragraph
(a) or (b) of subsection (2) of this section or, if a quorum of the
full board cannot be obtained and a committee cannot be established,
by independent legal counsel selected by a majority vote of the full
board of directors; or
(b) By the shareholders.
(4) Authorization of indemnification and advance of expenses shall
be made in the same manner as the determination that indemnification
or advance of expenses is permissible; except that, if the
determination that indemnification or advance of expenses is
permissible is made by independent legal counsel, authorization of
indemnification and advance of expenses shall be made by the body
that selected such counsel.
7-109-107. Indemnification of officers, employees, fiduciaries, and
agents.
(1) Unless otherwise provided in the articles of incorporation:
(a) An officer is entitled to mandatory indemnification under
section 7-109-103, and is entitled to apply for court-ordered
indemnification under section 7-109-105, in each case to the same
extent as a director;
(b) A corporation may indemnify and advance expenses to an
officer, employee, fiduciary, or agent of the corporation to the
same extent as to a director; and
(c) A corporation may also indemnify and advance expenses to an
officer, employee, fiduciary, or agent who is not a director to a
greater extent, if not inconsistent with public policy, and if
provided for by its bylaws, general or specific action of its board
of directors or shareholders, or contract.
7-109-108. Insurance. A corporation may purchase and maintain
insurance on behalf of a person who is or was a director, officer,
employee, fiduciary, or agent of the corporation, or who, while a
director, officer, employee, fiduciary, or agent of the corporation,
is or was serving at the request of the corporation as a director,
officer, partner, trustee, employee, fiduciary, or agent of another
domestic or foreign corporation or other person or of an employee
benefit plan, against liability asserted against or incurred by the
person in that capacity or arising from his or her status as a
director, officer, employee, fiduciary, or agent, whether or not the
corporation would have power to indemnify the person against the
same liability under section 7-109-102, 7-109-103, or 7-109-107.
Any such insurance may be procured from any insurance company
designated by the board of directors, whether such insurance company
is formed under the laws of this state or any other jurisdiction of
the United States or elsewhere, including any insurance company in
which the corporation has an equity or any other interest through
stock ownership or otherwise.
7-109-109. Limitation of indemnification of directors.
(1) A provision treating a corporation's indemnification of, or
advance of expenses to, directors that is contained in its articles
of incorporation or bylaws, in a resolution of its shareholders or
board of directors, or in a contract, except an insurance policy, or
otherwise, is valid only to the extent the provision is not
inconsistent with sections 7-109-101 to 7-109-108. If the article
of incorporation limit indemnification or advance of expenses,
indemnification and advance of expenses are valid only to the extent
not inconsistent with the articles of incorporation.
(2) Sections 7-109-101 to 7-109-108 do not limit a corporation's
power to pay or reimburse expenses incurred by a director in
connection with an appearance as a witness in a proceeding at a time
when he or she has not been made a named defendant or respondent in
the proceeding.
7-109-110. Notice to shareholder of indemnification of director.
If a corporation indemnifies or advances expenses to a director
under this article in connection with a proceeding by or in the
right of the corporation, the corporation shall give written notice
of the indemnification or advance to the shareholders with or before
the notice of the next shareholders' meeting. If the next
shareholder action is taken without a meeting at the instigation of
the board of directors, such notice shall be given to the
shareholders at or before the time the first shareholder signs a
writing consenting to such action.
* * *
Article IX, Section 1 of the Articles of Incorporation of the Company
provides, in pertinent part:
The Board of Directors of the corporation shall have the power to
indemnify any director, officer, employee or agent of the corporation to
the fullest extent permitted by the Colorado Corporation Code as
presently existing or as hereafter amended.
Article XII of the Articles of Incorporation of the Company provides, in
pertinent part:
To the fullest extent permitted by the Colorado Corporation Code as
the same exists or may hereafter be amended, a director of this
corporation shall not be liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a
director.
Item 25. Other Expenses of Issuance and Distribution.
The estimated expenses of the offering, all of which are to be borne by
the Company, are as follows:
<TABLE>
<CAPTION>
<S> <C>
SEC Filing Fee $ 9,636.66
Printing Expenses 5,000.00
Accounting Fees and Expenses 25,000.00
Legal Fees and Expenses 25,000.00
Blue Sky Fees and Expenses 5,000.00
Registrar and Transfer Agent Fee 5,000.00
Miscellaneous 25,363.34
-----------
Total $100,000.00
</TABLE>
Item 26. Recent Sales of Unregistered Securities.
1. In August 1999, the Company issued 12,500,000 shares of common stock
in exchange for 12,500,000 shares of common stock of XML Technologies, Inc., a
Nevada corporation. The shares were issued to 23 persons, all of whom
qualified as "accredited investors" within the meaning of Rule 501(a) of
Regulation D under the Securities Act. The securities, which were taken for
investment and subject to appropriate transfer restrictions, were issued
without registration under the Securities Act pursuant to the exemptions set
forth in Section 4(2) of the Securities Act and Rule 506 of Regulation D
thereunder.
2. In August 1999, we issued and sold a total of 2,330,000 units in
consideration of $1.00 per unit. The units consisted of one share of common
stock and one warrant exercisable until December 31, 2000 to purchase an
additional share of common stock at an exercise price of $4.00 per share. The
shares were issued exclusively to investors who qualified as "accredited
investors" within the meaning of Rule 501(a) of Regulation D under the
Securities Act. The securities, which were taken for investment and subject
to appropriate transfer restrictions, were issued without registration under
the Securities Act pursuant to the exemptions set forth in Section 4(2) of the
Securities Act and Rule 506 of Regulation D thereunder.
3. In September 1999, we issued warrants exercisable to purchase
200,000 shares of our common stock at an exercise price of $5.00 per share to
a consultant in consideration of consulting services. The warrants were
issued to one consultant who qualified as an "accredited investor" within the
meaning of Rule 501(a) of Regulation D under the Securities Act. The
securities, which were taken for investment and subject to appropriate
transfer restrictions, were issued without registration under the Securities
Act pursuant to the exemptions set forth in Section 4(2) of the Securities
Act.
4. In January 2000, we issued to one private investment fund 500,000
units in consideration of payment in the amount of $2.00 per unit. Each unit
consisted of two shares of our common stock, one warrant exercisable for three
years to purchase an additional share of common stock at $2.00 per share and
an additional warrant exercisable for 60 days to purchase an additional share
of common stock at an exercise price of $.07 per share. The units were issued
to one institutional investor that qualified as an "accredited investor"
within the meaning of Rule 501(a) of Regulation D under the Securities Act.
The securities, which were taken for investment and subject to appropriate
transfer restrictions, were issued without registration under the Securities
Act pursuant to the exemptions set forth in Section 4(2) of the Securities Act
and Rule 506 of Regulation D thereunder.
5. In February 2000, we sold to a private trust 500,000 units at a
price of $1.00 per unit. Each unit consisted of one share of common stock and
one warrant exercisable until December 31, 2000 to purchase an additional
share of common stock at an exercise price of $4.00 per share. The investor
qualified as an "accredited investor" within the meaning of Rule 501(a) of
Regulation D under the Securities Act. The securities, which were taken for
investment and subject to appropriate transfer restrictions, were issued
without registration under the Securities Act pursuant to the exemptions set
forth in Section 4(2) of the Securities Act and Rule 506 of Regulation D
thereunder.
6. In April 2000, we sold to two investors 150,000 units at a price of
$1.00 per unit. Each unit consisted of one share of our common stock and one
additional warrant exercisable until December 31, 2000 to purchase an
additional share of common stock at an exercise price of $4.00 per share. The
investors qualified as "accredited investors" within the meaning of Rule
501(a) of Regulation D under the Securities Act. The securities, which were
taken for investment and subject to appropriate transfer restrictions, were
issued without registration under the Securities Act pursuant to the
exemptions set forth in Section 4(2) of the Securities Act and Rule 506 of
Regulation D thereunder.
7. In April 2000, we sold an aggregate of 92.5 units at a price of
$75,000 per unit. Each unit consisted of 50,000 shares of our common stock
and 50,000 warrants exercisable for 18 months to purchase an additional share
of common stock, initially at an exercise price of $4.00 per share and $6.00
after six months. The units were sold to 50 investors, each of which
qualified as an "accredited investor" within the meaning of Rule 501(a) of
Regulation D under the Securities Act. The securities, which were taken for
investment and subject to appropriate transfer restrictions, were issued
without registration under the Securities Act pursuant to the exemptions set
forth in Section 4(2) of the Securities Act and Rule 506 of Regulation D
thereunder.
8. In April 2000, we issued to an investment banker a unit purchase
option exercisable to purchase for 18 months 9.25 units at an exercise price
of $75,000 per unit. Each unit consists of 50,000 shares of our common stock
and 50,000 warrants. The investment banker qualified as an "accredited
investor" within the meaning of Rule 501(a) of Regulation D under the
Securities Act. The securities, which were taken for investment and subject
to appropriate transfer restrictions, were issued without registration under
the Securities Act pursuant to the exemptions set forth in Section 4(2) of the
Securities Act and Rule 506 of Regulation D thereunder.
9. In March 2000, we issued 500,000 shares of our common stock in
consideration of $.07 per share pursuant to the exercise of the warrant issued
to the private investment fund as part of the units identified in Paragraph 4
above. The shares were issued to one investor who qualified as an "accredited
investor" within the meaning of Rule 501(a) of Regulation D under the
Securities Act. The securities, which were taken for investment and subject
to appropriate transfer restrictions, were issued without registration under
the Securities Act pursuant to the exemptions set forth in Section 4(2) of the
Securities Act and Rule 506 of Regulation D thereunder.
10. In April 2000, we sold to the same private trust identified in
Paragraph 5 above an additional 500,000 units at a price of $1.00 per unit.
Each unit consisted of one share of common stock and one warrant exercisable
until December 31, 2000 to purchase an additional share of common stock at an
exercise price of $4.00 per share. The investor qualified as an "accredited
investor" within the meaning of Rule 501(a) of Regulation D under the
Securities Act. The securities, which were taken for investment and subject
to appropriate transfer restrictions, were issued without registration under
the Securities Act pursuant to the exemptions set forth in Section 4(2) of the
Securities Act and Rule 506 of Regulation D thereunder.
Item 27. Exhibits.
a. The following Exhibits are filed as part of this Registration
Statement pursuant to Item 601 of Regulation S-K:
Exhibit No. Title
----------- -------------------------------
* 3.1 Articles of Incorporation dated June 11, 1991
3.2 Articles of Amendment to Articles of Incorporation dated
October 19, 1999
* 3.3 Bylaws
4.1 Specimen Common Stock Certificate
4.2 Specimen Warrant Certificate
4.3 1999 Equity Incentive Plan
5.0 Opinion of Neuman & Drennen, LLC
** 10.1 Agreement and Plan of Reorganization dated as of August
27, 1999
10.2 Purchase Agreement between International Capital
Funding, Inc. and Jonathan Cohen dated September 1, 1999
10.3 Registration Rights Agreement between International
Capital Funding, Inc. and Jonathan Cohen dated September
1, 1999
10.4 Joint Venture Technology Agreement between XML - Global
Technologies, Inc., Gnosis, Inc. and David R. R. Webber
dated as of November 18, 1999
10.5 Consulting Agreement between Data Xchg, Inc. and David
Webber
10.6 License Agreement between Data Xchg, Inc. and XML -
Global Technologies, Inc.
10.7 Pre-Incorporation Agreement between XML - Global
Technologies, Inc. and David Webber
10.8 Form of Lock-up and Vesting Agreement
10.9 Securities Purchase Agreement between XML - Global
Technologies, Inc. and XML Fund, LLC dated January 13,
2000
10.10 Securities Purchase Agreement between XML - Global
Technologies, Inc. and XML Fund, LLC dated April 5, 2000
10.11 Securities Purchase Agreement between XML - Global
Technologies, Inc. and the Tomasovich Family Trust
10.12 Securities Purchase Agreement between XML - Global
Technologies, Inc. and Tomasovich Family Trust
10.13 Unit Purchase Option Agreement between XML - Global
Technologies, Inc. and Westminster Securities Corp.
10.14 Commercial Lease with Radical Entertainment Ltd. dated
May 5, 1999
22.0 List of Subsidiaries
23.1 Consent of Neuman & Drennen, LLC
23.2 Consent of Moss Adams
- -----------------
* Incorporated by reference from the Registration Statement on Form 10-SB
filed with the Commission on November 18, 1997
** Incorporated by referenced from the Current Report on Form 8-K which was
filed with the Commission on September 8, 1999
Item 28. Undertakings.
The undersigned Registrant hereby undertakes:
1. To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933 (the "Securities Act");
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change
in the information in the registration statement;
(iii) Include any additional or changed material information
on the plan of distribution.
2. That, for determining liability under the Securities Act, to treat
each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be the
initial bona fide offering.
3. To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be available to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred and paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered hereby, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized. In the City of Vancouver, British Columbia, Canada, on the
24th of May, 2000.
XML - GLOBAL TECHNOLOGIES, INC.,
a Colorado corporation
By: /s/ Duane Nickull
-----------------------------------
Duane Nickull, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities with XML - Global Technologies, Inc. and on the dates indicated.
Signature Title Date
- --------- ----- --------------
/s/ Peter Shandro Chairman of the Board, 05/24/00
- --------------------- CEO, Director
Peter Shandro
/s/ Duane Nickull President, Director 05/24/00
- ---------------------
Duane Nickull
/s/ Simon Anderson Chief Financial Officer, 05/24/00
- --------------------- Director
Simon Anderson
/s/ David Webber Director 05/24/00
- ---------------------
David Webber
<PAGE> For office use only 002
Mail to: Secretary of State
Corporations Section
1560 Broadway, Suite 200
Denver, CO 80202
(303) 894-2251
MUST BE TYPED Fax (303) 894-2242
FILING FEE: $25.00
MUST SUBMIT TWO COPIES
ARTICLES OF AMENDMENT
Please include a typed TO THE
self-addressed envelope ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is International Capital Funding, Inc.
-----------------------------------
SECOND: The following amendment to the Articles of Incorporation was adopted
on October 19, 1999, as prescribed by the Colorado Business Corporation Act,
in the manner marked with an X below:
______ No shares have been issued or Directors Elected - Action by
Incorporators
______ No shares have been issued but Directors Elected - Action by
Directors
______ Such amendment was adopted by the board of directors where shares
have been issued and shareholder action was not required.
X Such amendment was adopted by a vote of the shareholders. The
- ------ number of shares voted for the amendment was sufficient for
approval.
THIRD: If changing corporate name, the new name of the corporation is
XML - Global Technologies, Inc.
- -------------------------------
FOURTH: The manner, if not set forth in such amendment, in which any
exchange, reclassification, or cancellation of issued shares provided for in
the amendment shall be effected, is as follows:
If these amendments are to have a delayed effective date, please list that
date:
--------------------------------------------------------------------
(Not to exceed ninety (90) days from the date of filing)
XML - GLOBAL TECHNOLOGIES, INC.
formerly known as INTERNATIONAL
CAPITAL FUNDING, INC.
By:
-------------------------------
Peter Shandro, President
<PAGE>
Incorporated Under the Laws of The State of Colorado
No. _________________
_______________
* SPECIMEN *
XML - GLOBAL TECHNOLOGIES, INC.
500,000,000 Shares Common Stock -- Par Value $.0001 Each
** ________________________________________________________ **
___________________________________________________________________________
DATE:_________________
________________________________ __________________________________
Secretary President
<PAGE>
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION") OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). NEITHER THIS
WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD, PLEDGED,
TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS, OR IN A
TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF THE
SECURITIES ACT AND UNDER PROVISIONS OF APPLICABLE STATE SECURITIES LAWS.
STOCK PURCHASE WARRANT
To Purchase _______ Shares of Common Stock of
XML - GLOBAL TECHNOLOGIES, INC.
THIS CERTIFIES that, for value received, __________________________ (the
"Holder") is entitled, upon the terms and subject to the conditions
hereinafter set forth, at any time on or after the date of issuance of this
Warrant (the "Initial Exercise Date") and on or prior to the close of business
on October 6, 2001 (the "Termination Date") unless sooner terminated in
accordance with the Agreement as hereinbelow defined but not thereafter, to
subscribe for and purchase from XML - Global Technologies, Inc., a Colorado
corporation (the "Company"), up to _____________________________ (_______)
shares (the "Warrant Shares") of Common Stock, $.0001 par value per share of
the Company (the "Common Stock"). The purchase price of one share of Common
Stock (the "Exercise Price") under this Warrant shall be $4.00 per share until
October 6, 2000 and thereafter until the Termination Date the exercise price
shall be $6.00 per share. The Exercise Price and the number of shares for
which the Warrant is exercisable shall be subject to adjustment as provided
herein. This Warrant is being issued under the terms of the Company's
Confidential Private Placement Memorandum dated March 6, 2000 and the
Subscription Agreement between the Holder and the Company executed thereunder
(the "Agreement") and is subject to its terms and conditions. In the event of
any conflict between the terms of this Warrant and the Agreement, the
Agreement shall control. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth for such terms in the Agreement.
1. TITLE OF WARRANT. Prior to the expiration hereof and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by
the holder hereof in person or by duly authorized attorney, upon surrender of
this Warrant together with the Assignment Form annexed hereto properly
endorsed.
2. AUTHORIZATION OF SHARES. The Company covenants that all shares of
Common Stock which may be issued upon the exercise of rights represented by
this Warrant will, upon exercise of the rights represented by this Warrant, be
duly authorized, validly issued, fully paid and nonassessable and free from
all taxes, liens and charges in respect of the issue thereof (other than taxes
in respect of any transfer occurring contemporaneously with such issue).
3. EXERCISE OF WARRANT. Except as provided in Section 4 herein,
exercise of the purchase rights represented by this Warrant may be made at any
time or times on or after the Initial Exercise Date, and before the close of
business on the Termination Date, or such earlier date on which this Warrant
may terminate as provided elsewhere in this Warrant, by the surrender of this
Warrant and the Notice of Exercise Form annexed hereto duly executed, at the
office of the Company (or such other office or agency of the Company as it may
designate by notice in writing to the registered holder hereof at the address
of such holder appearing on the books of the Company) and upon payment of the
Exercise Price of the shares thereby purchased in the manner provided for
herein, the holder of this Warrant shall be entitled to receive a certificate
for the number of shares of Common Stock so purchased. Certificates for shares
purchased hereunder shall be delivered to the holder hereof within three (3)
business days after the date on which this Warrant shall have been exercised
as aforesaid. This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and Holder or
any other person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the date the
Warrant has been exercised by payment to the Company of the Exercise Price and
all taxes required to be paid by Holder, if any, pursuant to Section 5 prior
to the issuance of such shares, have been paid. If this Warrant shall have
been exercised in part, the Company shall, at the time of delivery of the
certificate or certificates representing Warrant Shares, deliver to Holder a
new Warrant evidencing the rights of Holder to purchase the unpurchased shares
of Common Stock called for by this Warrant, which new Warrant shall in all
other respects be identical with this Warrant.
4. MANNER OF PAYMENT. The exercise price of each Warrant shall be paid
in cash, certified funds or wire transfer at the time the Warrant is
exercised.
5. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be
entitled to purchase upon such exercise, the Company shall pay a cash
adjustment in respect of such final fraction in an amount equal to the
Exercise Price.
6. CHARGES, TAXES AND EXPENSES. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without charge to
the holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the
name of the holder of this Warrant or in such name or names as may be directed
by the holder of this Warrant; provided, however, that in the event
certificates for shares of Common Stock are to be issued in a name other than
the name of the holder of this Warrant, this Warrant when surrendered for
exercise shall be accompanied by the Assignment Form attached hereto duly
executed by the holder hereof; and provided further, that upon any transfer
involving the issuance or delivery of any certificates for shares of Common
Stock, the Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto.
7. CLOSING OF BOOKS. The Company will not close its shareholder books
or records in any manner which prevents the timely exercise of this Warrant.
8. TRANSFER, DIVISION AND COMBINATION.
(a) Subject to compliance with any applicable securities laws
(including the provision to the Company of an opinion of counsel for the
assignor of this Warrant), transfer of this Warrant and all rights hereunder,
in whole or in part, shall be registered on the books of the Company to be
maintained for such purpose, upon surrender of this Warrant at the principal
office of the Company, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by Holder or its agent
or attorney and funds sufficient to pay any transfer taxes payable upon the
making of such transfer. Upon such surrender and, if required, such payment,
the Company shall execute and deliver a new Warrant or Warrants in the name of
the assignee or assignees and in the denomination specified in such instrument
of assignment, and shall issue to the assignor a new Warrant evidencing the
portion of this Warrant not so assigned, and this Warrant shall promptly be
cancelled. A Warrant, if properly assigned, may be exercised by a new Holder
for the purchase of shares of Common Stock without having a new Warrant
issued.
(b) This Warrant may be divided or combined with other Warrants
upon presentation hereof at the aforesaid office of the Company, together with
a written notice specifying the names and denominations in which new Warrants
are to be issued, signed by Holder or its agent or attorney. Subject to
compliance with Section 7(a), as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant
or Warrants in exchange for the Warrant or Warrants to be divided or combined
in accordance with such notice.
(c) The Company shall prepare, issue and deliver at its own expense
(other than transfer taxes) the new Warrant or Warrants under this Section 7.
(d) The Company agrees to maintain, at its aforesaid office, books
for the registration and the registration of transfer of the Warrants.
9. NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE. This Warrant does not
entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company prior to the exercise hereof. Upon the surrender
of this Warrant and the payment of the aggregate Exercise Price, the Warrant
Shares so purchased shall be and be deemed to be issued to such holder as the
record owner of such shares as of the close of business on the later of the
date of such surrender or payment.
10. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. The Company
represents and warrants that upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant certificate or any stock certificate relating to the Warrant
Shares, and in case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it, and upon surrender and cancellation of such
Warrant or stock certificate, if mutilated, the Company will make and deliver
a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.
11. SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a
Saturday, Sunday or legal holiday.
12. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
(a) STOCK SPLITS, ETC. The number and kind of securities
purchasable upon the exercise of this Warrant and the Exercise Price shall be
subject to adjustment from time to time upon the happening of any of the
following. In case the Company shall (i) pay a dividend in shares of Common
Stock or make a distribution in shares of Common Stock to holders of its
outstanding Common Stock, (ii) subdivide its outstanding shares of Common
Stock into a greater number of shares of Common Stock, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares of Common
Stock or (iv) issue any shares of its capital stock in a reclassification of
the Common Stock, then the number of Warrant Shares purchasable upon exercise
of this Warrant immediately prior thereto shall be adjusted so that the holder
of this Warrant shall be entitled to receive the kind and number of Warrant
Shares or other securities of the Company which he would have owned or have
been entitled to receive had such Warrant been exercised in advance thereof.
Upon each such adjustment of the kind and number of Warrant Shares or other
securities of the Company which are purchasable hereunder, the holder of this
Warrant shall thereafter be entitled to purchase the number of Warrant Shares
or other securities resulting from such adjustment at an Exercise Price per
such Warrant Share or other security obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of Warrant
Shares purchasable pursuant hereto immediately prior to such adjustment and
dividing by the number of Warrant Shares or other securities of the Company
resulting from such adjustment. An adjustment made pursuant to this paragraph
shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(b) REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the
Company), or sell, transfer or otherwise dispose of all or substantially all
its property, assets or business to another corporation and, pursuant to the
terms of such reorganization, reclassification, merger, consolidation or
disposition of assets, shares of common stock of the successor or acquiring
corporation, or any cash, shares of stock or other securities or property of
any nature whatsoever (including warrants or other subscription or purchase
rights) in addition to or in lieu of common stock of the successor or
acquiring corporation ("Other Property"), are to be received by or distributed
to the holders of Common Stock of the Company, then the holder of this Warrant
shall have the right thereafter to receive, upon exercise of this Warrant, the
number of shares of common stock of the successor or acquiring corporation or
of the Company, if it is the surviving corporation, and Other Property
receivable upon or as a result of such reorganization, reclassification,
merger, consolidation or disposition of assets by a holder of the number of
shares of Common Stock for which this Warrant is exercisable immediately prior
to such event. In case of any such reorganization, reclassification, merger,
consolidation or disposition of assets, the successor or acquiring corporation
(if other than the Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this
Warrant to be performed and observed by the Company and all the obligations
and liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board of Directors of the
Company) in order to provide for adjustments of shares of Common Stock for
which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 11. For purposes
of this Section 11, "common stock of the successor or acquiring corporation"
shall include stock of such corporation of any class which is not preferred as
to dividends or assets over any other class of stock of such corporation and
which is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into
or exchangeable for any such stock, either immediately or upon the arrival of
a specified date or the happening of a specified event and any warrants or
other rights to subscribe for or purchase any such stock. The foregoing
provisions of this Section 11 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
13. VOLUNTARY ADJUSTMENT BY THE COMPANY. The Company may at any time
during the term of this Warrant, reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board of Directors
of the Company.
14. NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares or
number or kind of securities or other property purchasable upon the exercise
of this Warrant or the Exercise Price is adjusted, as herein provided, the
Company shall promptly mail by registered or certified mail, return receipt
requested, to the holder of this Warrant notice of such adjustment or
adjustments setting forth the number of Warrant Shares (and other securities
or property) purchasable upon the exercise of this Warrant and the Exercise
Price of such Warrant Shares (and other securities or property) after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was
made. Such notice, in absence of manifest error, shall be conclusive evidence
of the correctness of such adjustment.
15. NOTICE OF CORPORATE ACTION. If at any time:
(a) the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or
other disposition of all or substantially all the property, assets or business
of the Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i)
at least 30 days' prior written notice of the record date for such dividend,
distribution or right or for determining rights to vote in respect of any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, liquidation or winding up, and (ii) in the case of any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, at least 30 days' prior
written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause also shall specify (i) the date on which
the holders of Common Stock shall be entitled to any such dividend,
distribution or right, and the amount and character thereof, and (ii) the date
on which any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up is to take
place and the time, if any such time is to be fixed, as of which the holders
of Common Stock shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such disposition, dissolution,
liquidation or winding up. Each such written notice shall be sufficiently
given if addressed to Holder at the last address of Holder appearing on the
books of the Company and delivered in accordance with Section 17(d).
16. AUTHORIZED SHARES. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of the
Warrant Shares upon the exercise of any purchase rights under this Warrant.
The Company further covenants that its issuance of this Warrant shall
constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates
for the Warrant Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be necessary
to assure that such Warrant Shares may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of
NASDAQ or any domestic securities exchange upon which the Common Stock may be
listed.
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the amount
payable therefor upon such exercise immediately prior to such increase in par
value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock upon the exercise of this Warrant, and (c) use its best
efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be necessary to
enable the Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during the
period this Warrant is outstanding acknowledge in writing, in form reasonably
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
Before taking any action which would cause an adjustment reducing
the current Exercise Price below the then par value, if any, of the shares of
Common Stock issuable upon exercise of the Warrants, the Company shall take
any corporate action which may be necessary in order that the Company may
validly and legally issue fully paid and non-assessable shares of such Common
Stock at such adjusted Exercise Price.
17. REDEMPTION. The Company shall have the right to redeem any or all
outstanding and unexercised Warrants evidenced by this Certificate at a
redemption price of $0.01 per Warrant upon thirty (30) days' written notice in
the event (i) a Registration Statement registering for sale under the
Securities Act of 1933, as amended (the "Act"), the shares of the Company's
Common Stock issuable upon exercise of the Warrant, has been filed with the
Securities and Exchange Commission and is in effect on the date of written
notice and the redemption date contained therein, (ii) there has been
developed and exists on the date of written notice a public trading market for
the Company's Common Stock and such shares are listed for quotation on the
NASDAQ Stock Market or OTC Electronic Bulletin Board, (iii) the public trading
price of the Company's Common Stock has equaled or exceeded 200% of the then
applicable Exercise Price for twenty (20) or more consecutive trading days,
and (iv) all restrictions on resale of the shares issuable upon exercise of
the Warrant imposed by the Company shall have been waived.. On each occasion
that the Company elects to exercise its rights of redemption, the Company must
mail such written notice within ten (10) days following the satisfaction of
all of the foregoing conditions. The holders of the Warrants called for
redemption shall have the right to exercise the Warrants evidenced hereby
until the close of business on the date next preceding the date fixed for
redemption. On or after the date fixed for redemption, the holder hereof
shall have no rights with respect to this Warrant except the right to receive
$0.01 per Warrant upon surrender of this Certificate.
18. MISCELLANEOUS.
(a) JURISDICTION. This Warrant shall be binding upon any successors
or assigns of the Company. This Warrant shall constitute a contract under the
laws of Colorado without regard to its conflict of law, principles or rules,
and be subject to arbitration pursuant to the terms set forth in the
Agreement.
(b) RESTRICTIONS. The holder hereof acknowledges that the Warrant
Shares acquired upon the exercise of this Warrant, if not registered, will
have restrictions upon resale imposed by state and federal securities laws and
by the Agreement.
(c) NONWAIVER AND EXPENSES. No course of dealing or any delay or
failure to exercise any right hereunder on the part of Holder shall operate as
a waiver of such right or otherwise prejudice Holder's rights, powers or
remedies, notwithstanding all rights hereunder terminate on the Termination
Date. If the Company fails to comply with any provision of this Warrant, the
Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights,
powers or remedies hereunder.
(d) NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the holder hereof by the Company shall
be delivered in accordance with the notice provisions of the Agreement.
(e) LIMITATION OF LIABILITY. No provision hereof, in the absence
of affirmative action by Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of Holder hereof, shall give
rise to any liability of Holder for the purchase price of any Common Stock or
as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
(f) REMEDIES. Holder, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any loss incurred
by reason of a breach by it of the provisions of this Warrant and hereby
agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate.
(g) SUCCESSORS AND ASSIGNS. Subject to applicable securities laws,
this Warrant and the rights and obligations evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company and the
successors and permitted assigns of Holder. The provisions of this Warrant
are intended to be for the benefit of all Holders from time to time of this
Warrant and shall be enforceable by any such Holder or holder of Warrant
Shares.
(h) COOPERATION. The Company shall cooperate with Holder in
supplying such information as may be reasonably necessary for Holder to
complete and file any information reporting forms presently or hereafter
required by the SEC as a condition to the availability of an exemption from
the Securities Act for the sale of any Warrant or any Warrant Shares.
(i) INDEMNIFICATION. The Company agrees to indemnify and hold
harmless Holder from and against any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses and disbursements of any kind which may be imposed upon, incurred by
or asserted against Holder in any manner relating to or arising out of any
failure by the Company to perform or observe in any material respect any of
its covenants, agreements, undertakings or obligations set forth in this
Warrant; provided, however, that the Company will not be liable hereunder to
the extent that any liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, attorneys' fees, expenses or
disbursements are found in a final non-appealable judgment by a court to have
resulted from Holder's negligence, bad faith or willful misconduct in its
capacity as a stockholder or warrantholder of the Company.
(j) AMENDMENT. This Warrant may be modified or amended or the
provisions hereof waived only with the written consent of the Company and the
Holder.
(k) SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Warrant.
(l) HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officer thereunto duly authorized.
Dated: April ___, 2000 XML - GLOBAL TECHNOLOGIES, INC.
By:
---------------------------------------
<PAGE>
<PAGE>
NOTICE OF EXERCISE
To: XML - GLOBAL TECHNOLOGIES, INC.
The undersigned hereby elects to purchase ________ shares of Common Stock
(the "Common Stock"), of XML - GLOBAL TECHNOLOGIES, INC. pursuant to the terms
of the attached Warrant, and tenders herewith payment of the exercise price in
full, together with all applicable transfer taxes, if any.
Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
_______________________________
(Name)
_______________________________
(Address)
_______________________________
Dated:
______________________________
Signature
<PAGE>
<PAGE>
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby
assigned to __________________________________________________________ whose
address is
_____________________________________________________________________________.
Dated: ______________, _______
Holder's Signature: ___________________________________
Holder's Address: ___________________________________
___________________________________
Signature Guaranteed: ______________________________________
NOTE: The signature to this Assignment Form must correspond with the name as
it appears on the face of the Warrant, without alteration or enlargement or
any change whatsoever, and must be guaranteed by a bank or trust company.
Officers of corporations and those acting in an fiduciary or other
representative capacity should file proper evidence of authority to assign the
foregoing Warrant.
<PAGE>
INTERNATIONAL CAPITAL FUNDING, INC.
1999 EQUITY INCENTIVE PLAN
INTRODUCTION
On September 15, 1999, the Board of Directors adopted this 1999 Equity
Incentive Plan (the "Plan") which Plan was approved by the Stockholders on
_________________, 1999.
1. PURPOSES
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company and its
Affiliates may be given an opportunity to benefit from increases in
value of the common stock of the Company ("Common Stock") through
the granting of (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses and (iv) rights to purchase restricted
stock, and (v) stock appreciation rights, all as defined below.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees, Directors or Consultants, to secure
and retain the services of new Employees, Directors and Consultants,
and to provide incentives for such persons to exert maximum efforts
for the success of the Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which
responsibility for administration of the Plan has been delegated
pursuant to subsection 3(c), be either (i) Options granted pursuant
to Section 6 or 7 hereof, including Incentive Stock Options and
Nonstatutory Stock Options, or (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 8 hereof, or
(iii) stock appreciation rights granted pursuant to Section 9
hereof. All Options shall be separately designated Incentive Stock
Options or Nonstatutory Stock Options at the time of grant, and a
separate certificate or certificates will be issued for shares
purchased on exercise of each type of Option.
2. DEFINITIONS
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "COMPANY" means INTERNATIONAL CAPITAL FUNDING, INC.
(f) "CONCURRENT STOCK APPRECIATION RIGHT" OR "CONCURRENT RIGHT" means a
right granted pursuant to subsection 9(b)(2) of the Plan.
(g) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is
compensated for such services, provided that the term "Consultant"
shall not include Directors who are paid only a director's fee by
the Company or who are not compensated by the Company for their
services as Directors.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means the
employment or relationship as a Director or Consultant is not
interrupted or terminated. The Board, in its sole discretion, may
determine whether Continuous Status as an Employee, Director or
Consultant shall be considered interrupted in the case of: (i) any
leave of absence approved by the Board, including sick leave,
military leave, or any other personal leave; or (ii) transfers
between locations of the Company or between the Company, Affiliates
or their successors.
(i) "DIRECTOR" means a member of the Board.
(j) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither
service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(l) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock of the Company determined as follows:
(1) If the Common Stock is listed on any established stock
exchange, or traded on the OTC Electronic Bulletin Board, the
Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing
sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such exchange or market (or the
exchange or market with the greatest volume of trading in
Common Stock) on the last market trading day prior to the day
of determination, as reported in the Wall Street Journal or
such other source as the Board deems reliable;
(2) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
(m) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code
and the regulations promulgated thereunder.
(n) "INDEPENDENT STOCK APPRECIATION RIGHT" means a right granted
pursuant to subsection 9(b)(3) of the Plan.
(o) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or
subsidiary, does not receive compensation (directly or indirectly)
from the Company or its parent or subsidiary for services rendered
as a consultant or in any capacity other than as a Director (except
for an amount as to which disclosure would not be required under
Item 404(a) of Regulation S-K promulgated pursuant to the Securities
Act of 1933 ("Regulation S-K"), does not possess an interest in any
other transaction as to which disclosure would be required under
Item 404(a) of Regulation S-K, and is not engaged in a business
relationship as to which disclosure would be required under Item
404(b) of Regulation S-K; or (ii) is otherwise considered a
"non-employee director" for purposes of Rule 16b-3.
(p) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(q) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(r) "OPTION" means a stock option granted pursuant to the Plan.
(s) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual
Option grant. Each Option Agreement shall be subject to the terms
and conditions of the Plan.
(t) "OPTIONEE" means a person to whom an Option is granted pursuant to
the Plan.
(u) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the
meaning of Treasury regulations promulgated under Section 162(m) of
the Code), is not a former employee of the Company or an "affiliated
corporation" receiving compensation for prior services (other than
benefits under a tax qualified pension plan), was not an officer of
the Company or an "affiliated corporation" at any time, and is not
currently receiving direct or indirect remuneration from the Company
or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside
director" for purposes of Section 162(m) of the Code.
(v) "PLAN" means this INTERNATIONAL CAPITAL FUNDING, INC. 1999 Equity
Incentive Plan.
(w) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(x) "STOCK APPRECIATION RIGHT" means any of the various types of rights
which may be granted under Section 9 of the Plan.
(y) "STOCK AWARD" means any right granted under the Plan, including any
Option, any stock bonus, and any right to purchase restricted stock.
(z) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and
conditions of an individual Stock Award grant. Each Stock Award
Agreement shall be subject to the terms and conditions of the Plan.
(aa) "TANDEM STOCK APPRECIATION RIGHT" OR "TANDEM RIGHT" means a right
granted pursuant to subsection 9(b)(1) of the Plan.
3. ADMINISTRATION
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in
subsection 3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each
Stock Award shall be granted; whether a Stock Award will be an
Incentive Stock Option, a Nonstatutory Stock Option, a stock
bonus, a right to purchase restricted stock, a Stock
Appreciation Right, or a combination of the foregoing; the
provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be
permitted to receive stock pursuant to a Stock Award; whether a
person shall be permitted to receive stock upon exercise of an
Independent Stock Appreciation Right; and the number of shares
with respect to which a Stock Award shall be granted to each
such person.
(2) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and
regulations for its administration. The Board, in the exercise
of this power, may correct any defect, omission or
inconsistency in the Plan or in any Stock Award Agreement, in a
manner and to the extent it shall deem necessary or expedient
to make the Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in Section 15.
(4) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best
interests of the Company which are not in conflict with the
provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee or
committees ("Committee") of one or more members of the Board. In
the discretion of the Board, a Committee may consist solely of two
or more Outside Directors, in accordance with Code Section 162(m),
or solely of two or more Non-Employee Directors, in accordance with
Rule 16b-3. If administration is delegated to a Committee, the
Committee shall have, in connection with the administration of the
Plan, the powers theretofore possessed by the Board (and references
in this Plan to the Board shall thereafter be to the Committee),
subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the
Board. The Board may abolish the Committee at any time and revest
in the Board the administration of the Plan.
4. SHARES SUBJECT TO THE PLAN
(a) Subject to the provisions of Section 13 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock
Awards shall not exceed in the aggregate four million (4,000,000)
shares of Common Stock (determined without giving effect to any
stock split that may be made in anticipation of the Company's
initial public offering of the Common Stock). If any Stock Award
shall for any reason expire or otherwise terminate, in whole or in
part, without having been exercised in full (or vested in the case
of Restricted Stock), the stock not acquired under such Stock Award
shall revert to and again become available for issuance under the
Plan. Shares subject to Stock Appreciation Rights exercised in
accordance with Section 9 of the Plan shall not be available for
subsequent issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY
(a) Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Stock Awards other than
Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees, Directors or Consultants.
(b) No person shall be eligible for the grant of an Incentive Stock
Option if, at the time of grant, such person owns (or is deemed to
own pursuant to Section 424(d) of the Code) stock possessing more
than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or of any of its Affiliates unless
the exercise price of such Option is at least one hundred ten
percent (110%) of the Fair Market Value of such stock at the date of
grant and the Option is not exercisable after the expiration of five
(5) years from the date of grant.
6. OPTION PROVISIONS
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise)
the substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of
the stock subject to the Option on the date the Option is granted,
and the exercise price of each Nonstatutory Stock Option shall be
not less than eighty-five percent (85%) of the Fair Market Value of
the stock subject to the Option on the date the Option is granted.
Notwithstanding the foregoing, an Option may be granted with an
exercise price lower than that set forth in the preceding sentence
if such Option is granted pursuant to an assumption or substitution
for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes
and regulations, either (i) in cash at the time the Option is
exercised, or (ii) at the discretion of the Board or the Committee,
at the time of the grant of the Option, (A) by delivery to the
Company of other Common Stock of the Company, (B) according to a
deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other Common
Stock of the Company) with the person to whom the Option is granted
or to whom the Option is transferred pursuant to subsection 6(d), or
(C) in any other form of legal consideration that may be acceptable
to the Board.
In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate
of interest necessary to avoid the treatment as interest, under any
applicable provisions of the Code, of any amounts other than amounts
stated to be interest under the deferred payment arrangement.
(d) TRANSFERABILITY. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and
distribution, and shall be exercisable during the lifetime of the
person to whom the Incentive Stock Option is granted only by such
person. A Nonstatutory Stock Option may be transferred to the
extent provided in the Option Agreement; provided that if the Option
Agreement does not expressly permit the transfer of a Nonstatutory
Stock Option, the Nonstatutory Stock Option shall not be
transferable except by will, by the laws of descent and distribution
or pursuant to a domestic relations order satisfying the
requirements of Rule 16b-3, and shall be exercisable during the
lifetime of the person to whom the Option is granted only by such
person or any transferee pursuant to a domestic relations order.
Notwithstanding the foregoing, the person to whom the Option is
granted may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the
event of the death of the Optionee, shall thereafter be entitled to
exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may,
but need not, be equal). The Option Agreement may provide that from
time to time during each of such installment periods, the Option may
become exercisable ("vest") with respect to some or all of the
shares allotted to that period, and may be exercised with respect to
some or all of the shares allotted to such period and/or any prior
period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and
conditions on the time or times when it may be exercised (which may
be based on performance or other criteria) as the Board may deem
appropriate. The provisions of this subsection 6(e) are subject to
any Option provisions governing the minimum number of shares as to
which an Option may be exercised.
(f) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an
Employee, Director or Consultant terminates (other than upon the
Optionee's death or disability), the Optionee may exercise his or
her Option (to the extent that the Optionee was entitled to exercise
it at the date of termination) but only within such period of time
ending on the earlier of (i) the date three (3) months after the
termination of the Optionee's Continuous Status as an Employee,
Director or Consultant (or such longer or shorter period specified
in the Option Agreement), or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, after termination,
the Optionee does not exercise his or her Option within the time
specified in the Option Agreement, the Option shall terminate, and
the shares covered by such Option shall revert to and again become
available for issuance under the Plan.
(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result
of the Optionee's disability, the Optionee may exercise his or her
Option (to the extent that the Optionee was entitled to exercise it
at the date of termination), but only within such period of time
ending on the earlier of (i) the date twelve (12) months following
such termination (or such longer or shorter period specified in the
Option Agreement), or (ii) the expiration of the term of the Option
as set forth in the Option Agreement. If, at the date of
termination, the Optionee is not entitled to exercise his or her
entire Option, the shares covered by the unexercisable portion of
the Option shall revert to and again become available for issuance
under the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the
Option shall terminate, and the shares covered by such Option shall
revert to and again become available for issuance under the Plan.
(h) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a three-month period (or 12 month period in the case of
totally disabled Optionees) after the termination of, the Optionee's
Continuous Status as an Employee, Director or Consultant, the Option
shall be fully vested and may be exercised by the Optionee's estate,
by a person who acquired the right to exercise the Option by bequest
or inheritance or by a person designated to exercise the option upon
the Optionee's death pursuant to subsection 6(d), but only within
the period ending on the earlier of (i) the date twelve (12) months
following the date of death (or such longer or shorter period
specified in the Option Agreement), or (ii) the expiration of the
term of such Option as set forth in the Option Agreement. If, at
the time of death, the Optionee was not entitled to exercise his or
her entire Option, the shares covered by the unexercisable portion
of the Option shall revert to and again become available for
issuance under the Plan. If, after death, the Option is not
exercised within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and
again become available for issuance under the Plan.
(i) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee,
Director or Consultant to exercise the Option as to any part or all
of the shares subject to the Option prior to the full vesting of the
Option. Any unvested shares so purchased may be subject to a
repurchase right in favor of the Company or to any other restriction
the Board determines to be appropriate.
(j) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board or Committee to make or not to make grants of Options
hereunder, the Board or Committee shall have the authority (but not
an obligation) to include as part of any Option Agreement a
provision entitling the Optionee to a further Option (a "Re-Load
Option") in the event the Optionee exercises the Option evidenced by
the Option agreement, in whole or in part, by surrendering other
shares of Common Stock in accordance with this Plan and the terms
and conditions of the Option Agreement. Any such Re-Load Option (i)
shall be for a number of shares equal to the number of shares
surrendered as part or all of the exercise price of such Option;
(ii) shall have an expiration date which is the same as the
expiration date of the Option the exercise of which gave rise to
such Re-Load Option; and (iii) shall have an exercise price which is
equal to one hundred percent (100%) of the Fair Market Value of the
Common Stock subject to the Re- Load Option on the date of exercise
of the original Option. Notwithstanding the foregoing, a Re-Load
Option which is an Incentive Stock Option and which is granted to a
10% stockholder (as described in subsection 5(b)), shall have an
exercise price which is equal to one hundred ten percent (110%) of
the Fair Market Value of the stock subject to the Re-Load Option on
the date of exercise of the original Option and shall have a term
which is no longer than five (5) years.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board or Committee may designate
at the time of the grant of the original Option; PROVIDED, HOWEVER,
that the designation of any Re-Load Option as an Incentive Stock
Option shall be subject to the one hundred thousand dollars
($100,000) annual limitation on exercisability of Incentive Stock
Options described in subsection 13(d) of the Plan and in Section
422(d) of the Code. There shall be no Re-Load Options on a Re-Load
Option. Any such Re-Load Option shall be subject to the
availability of sufficient shares under subsection 4(a) and shall be
subject to such other terms and conditions as the Board or Committee
may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.
7. OPTION GRANTS FOR NON-EMPLOYEE DIRECTORS
Unless otherwise explicitly provided by the Board, Non-Employee Directors
shall not be eligible for any Stock Awards under the Plan other than the
nonstatutory stock options provided under this Section 7 on the following
terms and conditions:
(a) INITIAL GRANT FOR NON-EMPLOYEE DIRECTORS. Each person who is a Non-
Employee Director shall be granted an option to purchase a number of
shares of Common Stock determined by a majority of non-participating
Directors on the terms and conditions set forth herein.
(b) ANNUAL GRANT. Following each annual meeting of the Company's
stockholders occuring after the effectiveness of the initial public
offering of the Common Stock, (i) each person who continuously has
been a Non-Employee Director for a full year since the last annual
meeting of the Company's stockholders automatically shall be granted
an option to purchase a number of shares of Common Stock determined
by a majority of non-participating Directors (determined without
giving effect to any stock split that may be made in anticipation
of the Company's initial public offering of the Common Stock) on
the terms and conditions set forth herein, and (ii) each other
person who is then a Non-Employee Director automatically shall be
granted an option to purchase, on the terms and conditions set
forth herein, the number of shares of common stock of the Company
(rounded up to the nearest whole share) determined by multiplying
the number of shares determined by the Board (determined without
giving effect to any stock split that may be made in anticipation
of the Company's initial public offering of the Common Stock) by a
fraction, the numerator of which is the number of days the person
continuously has been a Non-Employee Director as of the date of
such grant and the denominator of which is 365.
(c) TERM. The term of each Non-Employee Director's option commences on
the date it is granted and, unless sooner terminated as set forth
herein, expires on the date ("Expiration Date") ten (10) years from
the date of grant. If the Non-Employee Director's Continuous Status
as an Employee, Director or Consultant terminates, the option shall
terminate on the earlier of the Expiration Date or the date three
(3) months following the date of termination of such Continuous
Status (twelve (12) months if such termination is due to death or
disability). In any and all circumstances, a Non-Employee
Director's option may be exercised following termination of his or
her Continuous Status as an Employee, Director or Consultant only as
to that number of shares as to which it was exercisable on the date
of termination of such status under the provisions of subsection
7(g).
(d) PRICE. The exercise price of each Non-Employee Director's option
shall be one hundred percent (100%) of the fair market value of the
stock subject to such option on the date such option is granted.
(e) CONSIDERATION. Payment of the exercise price of each option is due
in full in cash upon any exercise when the number of shares being
purchased upon such exercise is less than 1,000 shares. However,
when the number of shares being purchased upon an exercise is 1,000
or more shares, the Non-Employee Director may elect to make payment
of the exercise price under one of the following alternatives:
(1) Payment of the exercise price per share in cash or by check at
the time of exercise; or
(2) Provided that at the time of the exercise the Company's common
stock is publicly traded and quoted regularly in the Wall
Street Journal, payment by delivery of shares of common stock
of the Company already owned by the optionee, held for the
period required to avoid a charge to the Company's reported
earnings, and owned free and clear of any liens, claims,
encumbrances or security interest, which common stock shall be
valued at its fair market value on the date preceding the date
of exercise; or
(3) Payment by a combination of the methods of payment specified in
Paragraphs (1) and (2) above.
Notwithstanding the foregoing, a Non-Employee Director's option
may be exercised pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board which
results in the receipt of cash (or check) by the Company prior
to the issuance of shares of the Company's common stock.
(f) TRANSFERABILITY. A Non-Employee Director's option shall not be
transferable except by will or by the laws of descent and
distribution, or pursuant to a domestic relations order satisfying
the requirements of Rule 16b-3 and shall be exercisable during the
lifetime of the Non-Employee Director only by such person (or by his
guardian or legal representative) or transferee pursuant to such an
order. Notwithstanding the foregoing, a Non-Employee Director may,
by delivering written notice to the Company in a form satisfactory
to the Company, designate a third party who, in the event of the
death of the Non-Employee Director, shall thereafter be entitled to
exercise the option.
(g) VESTING. A Non-Employee Director's initial grant under Section 7(a)
may, but need not become exercisable in installments over a period
of years at a rate determined by the Board; provided that the
optionee has, during the entire period prior to such vesting date,
continuously served as a Non-Employee Director or employee of or
consultant to the Company or any Affiliate, whereupon such option
shall become fully exercisable in accordance with its terms with
respect to that portion of the shares represented by that
installment. A Non-Employee Director's annual grant under Section
7(b) shall be fully vested at all times.
8. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The terms and conditions of stock bonus or restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate agreements need not be identical, but each stock bonus
or restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:
(a) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee
shall determine and designate in such agreement but in no event
shall the purchase price be less than eighty-five percent (85%) of
the stock's Fair Market Value on the date such award is made.
Notwithstanding the foregoing, the Board or the Committee may
determine that eligible participants in the Plan may be awarded
stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company for its benefit.
(b) TRANSFERABILITY. No rights under a stock bonus or restricted stock
purchase agreement shall be transferable except by will or the laws
of descent and distribution or, if the agreement so provides,
pursuant to a domestic relations order satisfying the requirements
of Rule 16b-3, so long as stock awarded under such agreement remains
subject to the terms of the agreement.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the
time of purchase; (ii) at the discretion of the Board or the
Committee, according to a deferred payment or other arrangement with
the person to whom the stock is sold; or (iii) in any other form of
legal consideration that may be acceptable to the Board or the
Committee in its discretion. Notwithstanding the foregoing, the
Board or the Committee to which administration of the Plan has been
delegated may award stock pursuant to a stock bonus agreement in
consideration for past services actually rendered to the Company or
for its benefit.
(d) VESTING. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company
in accordance with a vesting schedule to be determined by the Board
or the Committee.
(e) TERMINATION OF CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an
Employee, Director or Consultant terminates, the Company may
repurchase or otherwise reacquire any or all of the shares of stock
held by that person which have not vested as of the date of
termination under the terms of the stock bonus or restricted stock
purchase agreement between the Company and such person.
9. STOCK APPRECIATION RIGHTS
(a) The Board or Committee shall have full power and authority,
exercisable in its sole discretion, to grant Stock Appreciation
Rights under the Plan to Employees, Directors and Consultants. To
exercise any outstanding Stock Appreciation Right, the holder must
provide written notice of exercise to the Company in compliance with
the provisions of the Stock Award Agreement evidencing such right.
Except as provided in subsection 5(c), no limitation shall exist on
the aggregate amount of cash payments the Company may make under the
Plan in connection with the exercise of a Stock Appreciation Right.
(b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:
(1) TANDEM STOCK APPRECIATION RIGHTS. Tandem Stock Appreciation
Rights will be granted appurtenant to an Option, and shall,
except as specifically set forth in this Section 9, be subject
to the same terms and conditions applicable to the particular
Option grant to which it pertains. Tandem Stock Appreciation
Rights will require the holder to elect between the exercise of
the underlying Option for shares of stock and the surrender, in
whole or in part, of such Option for an appreciation
distribution. The appreciation distribution payable on the
exercised Tandem Right shall be in cash (or, if so provided, in
an equivalent number of shares of stock based on Fair Market
Value on the date of the Option surrender) in an amount up to
the excess of (A) the Fair Market Value (on the date of the
Option surrender) of the number of shares of stock covered by
that portion of the surrendered Option in which the Optionee is
vested over (B) the aggregate exercise price payable for such
vested shares.
(2) CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent Rights will
be granted appurtenant to an Option and may apply to all or any
portion of the shares of stock subject to the underlying Option
and shall, except as specifically set forth in this Section 9,
be subject to the same terms and conditions applicable to the
particular Option grant to which it pertains. A Concurrent
Right shall be exercised automatically at the same time the
underlying Option is exercised with respect to the particular
shares of stock to which the Concurrent Right pertains. The
appreciation distribution payable on an exercised Concurrent
Right shall be in cash (or, if so provided, in an equivalent
number of shares of stock based on Fair Market Value on the
date of the exercise of the Concurrent Right) in an amount
equal to such portion as shall be determined by the Board or
the Committee at the time of the grant of the excess of (A) the
aggregate Fair Market Value (on the date of the exercise of the
Concurrent Right) of the vested shares of stock purchased under
the underlying Option which have Concurrent Rights appurtenant
to them over (B) the aggregate exercise price paid for such
shares.
(3) INDEPENDENT STOCK APPRECIATION RIGHTS. Independent Rights will
be granted independently of any Option and shall, except as
specifically set forth in this Section 9, be subject to the
same terms and conditions applicable to Nonstatutory Stock
Options as set forth in Section 6. They shall be denominated
in share equivalents. The appreciation distribution payable on
the exercised Independent Right shall be not greater than an
amount equal to the excess of (A) the aggregate Fair Market
Value (on the date of the exercise of the Independent Right) of
a number of shares of Company stock equal to the number of
share equivalents in which the holder is vested under such
Independent Right, and with respect to which the holder is
exercising the Independent Right on such date, over (B) the
aggregate Fair Market Value (on the date of the grant of the
Independent Right) of such number of shares of Company stock.
The appreciation distribution payable on the exercised
Independent Right shall be in cash or, if so provided, in an
equivalent number of shares of stock based on Fair Market Value
on the date of the exercise of the Independent Right.
10. CANCELLATION AND RE-GRANT OF OPTIONS
(a) The Board or the Committee shall have the authority to effect, at
any time and from time to time, (i) the repricing of any outstanding
Options and/or any Stock Appreciation Rights under the Plan and/or
(ii) with the consent of any adversely affected holders of Options
and/or Stock Appreciation Rights, the cancellation of any
outstanding Options and/or any Stock Appreciation Rights under the
Plan and the grant in substitution therefor of new Options and/or
Stock Appreciation Rights under the Plan covering the same or
different numbers of shares of stock, but having an exercise price
per share not less than: eighty-five percent (85%) of the Fair
Market Value for a Nonstatutory Stock Option, one hundred percent
(100%) of the Fair Market Value in the case of an Incentive Stock
Option or, in the case of an Incentive Stock Option held by a 10%
stockholder (as described in subsection 5(b)), not less than one
hundred ten percent (110%) of the Fair Market Value per share of
stock on the new grant date. Notwithstanding the foregoing, the
Board or the Committee may grant an Option and/or Stock
Appreciation Right with an exercise price lower than that set forth
above if such Option and/or Stock Appreciation Right is granted as
part of a transaction to which section 424(a) of the Code applies.
(b) Shares subject to an Option or Stock Appreciation Right canceled
under this Section 10 shall continue to be counted against the
maximum award of Options and Stock Appreciation Rights permitted to
be granted pursuant to the Plan. The repricing of an Option and/or
Stock Appreciation Right hereunder resulting in a reduction of the
exercise price, shall be deemed to be a cancellation of the original
Option and/or Stock Appreciation Right and the grant of a substitute
Option and/or Stock Appreciation Right; in the event of such
repricing, both the original and the substituted Options and Stock
Appreciation Rights shall be counted against the maximum awards of
Options and Stock Appreciation Rights permitted to be granted
pursuant to the Plan, to the extent required by Section 162(m) of
the Code.
11. COVENANTS OF THE COMPANY
(a) During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to
satisfy such Stock Awards.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be
required to issue and sell shares under Stock Awards; provided,
however, that this undertaking shall not require the Company to
register under the Securities Act of 1933, as amended (the
"Securities Act") either the Plan, any Stock Award or any stock
issued or issuable pursuant to any such Stock Award. If, after
reasonable efforts, the Company is unable to obtain from any such
regulatory commission or agency the authority which counsel for the
Company deems necessary for the lawful issuance and sale of stock
under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Stock Awards
unless and until such authority is obtained.
12. USE OF PROCEEDS FROM STOCK
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
13. MISCELLANEOUS
(a) The Board shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock
Award or any part thereof will vest, notwithstanding the provisions
in the Stock Award stating the time at which it may first be
exercised or the time during which it will vest.
(b) Neither an Employee, Director nor a Consultant nor any person to
whom a Stock Award is transferred in accordance with the Plan shall
be deemed to be the holder of, or to have any of the rights of a
holder with respect to, any shares subject to such Stock Award
unless and until such person has satisfied all requirements for
exercise of the Stock Award pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee, Consultant
or other holder of Stock Awards any right to continue in the employ
of the Company or any Affiliate, or to continue serving as a
Consultant and Director, or shall affect the right of the Company or
any Affiliate to terminate the employment of any Employee with or
without notice and with or without cause, or the right to terminate
the relationship of any Consultant pursuant to the terms of such
Consultant's agreement with the Company or Affiliate or service as a
Director pursuant to the Company's By-Laws.
(d) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock
Options are exercisable for the first time by any Optionee during
any calendar year under all plans of the Company and its Affiliates
exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in
which they were granted) shall be treated as Nonstatutory Stock
Options.
(e) The Company may require any person to whom a Stock Award is granted,
or any person to whom a Stock Award is transferred in accordance
with the Plan, as a condition of exercising or acquiring stock under
any Stock Award, (1) to give written assurances satisfactory to the
Company as to such person's knowledge and experience in financial
and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters, and that he or she is
capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award;
and (2) to give written assurances satisfactory to the Company
stating that such person is acquiring the stock subject to the Stock
Award for such person's own account and not with any present
intention of selling or otherwise distributing the stock. The
foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares
upon the exercise or acquisition of stock under the Stock Award has
been registered under a then currently effective registration
statement under the Securities Act, or (ii) as to any particular
requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then
applicable securities laws. The Company may, upon advice of counsel
to the Company, place legends on stock certificates issued under the
Plan as such counsel deems necessary or appropriate in order to
comply with applicable securities laws, including, but not limited
to, legends restricting the transfer of the stock.
(f) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal,
state or local tax withholding obligation relating to the exercise
or acquisition of stock under a Stock Award by any of the following
means or by a combination of such means: (1) tendering a cash
payment; (2) authorizing the Company to withhold shares from the
shares of the Common Stock otherwise issuable to the participant as
a result of the exercise or acquisition of stock under the Stock
Award; or (3) delivering to the Company owned and unencumbered
shares of the Common Stock of the Company.
14. ADJUSTMENTS UPON CHANGES IN STOCK
(a) If any change is made in the stock subject to the Plan, or subject
to any Stock Award, without the receipt of consideration by the
Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend,
combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of shares subject to
the Plan and the maximum number of shares subject to award to any
person during any calendar year, and the outstanding Stock Awards
will be appropriately adjusted in the class(es) and number of shares
and price per share of stock subject to such outstanding Stock
Awards. Such adjustments shall be made by the Board or the
Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a "transaction not involving the
receipt of consideration by the Company".)
(b) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or
consolidation in which the Company is not the surviving corporation;
or (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Common Stock outstanding
immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash
or otherwise, then to the extent permitted by applicable law: (i)
any surviving corporation or an Affiliate of such surviving
corporation shall assume any Stock Awards outstanding under the Plan
or shall substitute similar Stock Awards for those outstanding under
the Plan, or (ii) such Stock Awards shall continue in full force and
effect. In the event any surviving corporation and its Affiliates
refuse to assume or continue such Stock Awards, or to substitute
similar options for those outstanding under the Plan, then, with
respect to Stock Awards held by persons then performing services as
Employees, Directors or Consultants, the time during which such
Stock Awards may be exercised shall be accelerated and the Stock
Awards terminated if not exercised prior to such event.
15. AMENDMENT OF THE PLAN AND STOCK AWARDS
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 14 relating to adjustments
upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent
stockholder is necessary for the Plan to satisfy the requirements of
Section 422 of the Code, Rule 16b-3 or any Nasdaq or securities
exchange listing requirements.
(b) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to,
amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding
the exclusion of performance-based compensation from the limit on
corporate deductibility of compensation paid to certain executive
officers.
(c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide
eligible Employees, Directors or Consultants with the maximum
benefits provided or to be provided under the provisions of the Code
and the regulations promulgated thereunder relating to Incentive
Stock Options and/or to bring the Plan and/or Incentive Stock
Options granted under it into compliance therewith.
(d) Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the
Plan unless (i) the Company requests the consent of the person to
whom the Stock Award was granted and (ii) such person consents in
writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Stock Award; provided, however, that the rights and
obligations under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the person
to whom the Stock Award was granted and (ii) such person consents in
writing.
16. TERMINATION OR SUSPENSION OF THE PLAN
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate ten (10) years from the
date the Plan is adopted by the Board or approved by the
stockholders of the Company, whichever is earlier. No Stock Awards
may be granted under the Plan while the Plan is suspended or after
it is terminated.
(b) Rights and obligations under any Stock Award granted while the Plan
is in effect shall not be impaired by suspension or termination of
the Plan, except with the consent of the person to whom the Stock
Award was granted.
17. EFFECTIVE DATE OF PLAN
This amendment and restatement of the Plan shall become effective on the
date of closing of the initial public offering pursuant to an effective
registration statement covering the offer and sale of Common Stock to the
public, but no Stock Awards granted under the Plan shall be exercised unless
and until the Plan has been approved by the stockholders of the Company, which
approval shall be within twelve (12) months before or after the date the Plan
is adopted by the Board.
IN WITNESS WHEREOF, the Company has executed this Plan as of the ____ day
of ______________, 1999.
INTERNATIONAL CAPITAL FUNDING, INC.
By:____________________________________
Peter Shandro, Chief Executive Officer
By:___________________________________
Simon Anderson, Secretary
<PAGE>
NEUMAN & DRENNEN, LLC
Attorneys at Law
TEMPLE-BOWRON HOUSE
1507 PINE STREET Englewood Office
BOULDER, COLORADO 80302 5445 DTC Parkway
Telephone: (303) 449-2100 Penthouse 4
Facsimile: (303) 449-1045 Englewood, CO 80111
Clifford L. Neuman, P.C. Tel:(303) 221-4700
E-mail: [email protected] Fax: (303) 488-3454
May 24, 2000
XML - Global Technologies, Inc.
1038 Homer Street
Vancouver, B.C. Canada V6B 2W9
Re: Registration Statement on Form SB-2
Ladies and Gentlemen:
We have acted as counsel to XML - Global Technologies, Inc. (the "Company")
in connection with Registration Statement on Form SB-2 (the "Registration
Statement") to be filed with the United Stated Securities and Exchange
Commission, Washington, D.C., pursuant to the Securities Act of 1933, as
amended, covering the registration of an aggregate of 24,335,000 shares of
Common Stock, $.0001 par value ("Common Stock"). In connection with such
representation of the Company, we have examined such corporate records, and
have made such inquiry of government officials and Company officials and have
made such examination of the law as we deemed appropriate in connection with
delivering this opinion.
Based upon the foregoing, we are of the opinion as follows:
1. The Company has been duly incorporated and organized under the laws of
the State of Colorado and is validly existing as a corporation in good standing
under the laws of that state.
2. The Company's authorized capital consists of five hundred million
(500,000,000) shares of Common Stock having a par value of $0.0001 each and one
hundred million (100,000,000) shares of Preferred Stock having a par value of
$.01 each.
3. The 24,335,000 shares of the Company's Common Stock being registered
for sale as more fully described in the Registration Statement are lawfully and
validly issued, fully paid and non-assessable securities of the Company.
Sincerely,
Clifford L. Neuman
CLN:nn
<PAGE>
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE. THERE ARE FURTHER
RESTRICTIONS ON THE TRANSFERABILITY OF SUCH SECURITIES DESCRIBED HEREIN. THE
PURCHASE OF THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK AND SHOULD BE
CONSIDERED ONLY BY PERSONS WHO CAN BEAR THE RISK OF THE LOSS OF THEIR ENTIRE
INVESTMENT. THIS OFFERING IS BEING MADE ONLY TO "ACCREDITED INVESTORS,"AS
SUCH TERM IS DEFINED IN REGULATION D AS PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED.
PURCHASE AGREEMENT
International Capital Funding, Inc.
1038 Homer Street
Vancouver, British Columbia
Canada V6B 2W9
September 1, 1999
Jonathan Cohen
74 Old Church Road
Greenwich, CT 06830
Dear Mr. Cohen:
International Capital Funding, Inc., a Colorado corporation (the
"Company"), agrees with you (the "Purchaser") as follows:
1. OFFERING OF WARRANT. The Company is offering for sale warrants on the
form of Appendix A hereto (the "Warrants") to purchase shares of its common
stock, par value $.0001 per share (the "Common Stock"). The offering is being
made without registration under the Securities Act of 1933, as amended (the
"Act"), or the securities laws of any state, and is being made only to
"accredited investors" (as defined in Rule 501 of Regulation D under the
Securities Act).
2. SUBSCRIPTION FOR WARRANT. Subject to the terms and conditions hereof,
the Purchaser hereby irrevocably subscribes for and agrees to purchase a
Warrant at the total price of $1,000.00 (the "Purchase Price"), payable as
described in Section 4 hereof, and the Company accepts such subscription. The
Purchaser acknowledges that the Warrant and the shares of Common Stock
issuable upon exercise of the Warrant (the "Warrant Shares", and together with
the Warrant, the "Securities") will be subject to restrictions on transfer as
set forth in this Agreement and under the Securities Act.
3. THE CLOSING. The closing of the purchase and sale of the Warrant (the
"Closing") shall take place at the offices of the Company at 10:00 a.m., New
York time, on the third business day after the date of this agreement or at
such other time and place as the parties may agree upon. At the Closing, the
Company and the Purchaser shall enter into a Registration Rights Agreement in
the form of Appendix B hereto.
4. PAYMENT FOR AND DELIVERY OF WARRANT. Payment of the Purchase Price shall
be received by the Company from the Purchaser at or prior to the Closing by
check or wire transfer to an account designated by the Company. The Company
shall deliver the Warrant at the Closing, if the Purchaser or an authorized
representative attends the Closing, or by courier service or registered mail
promptly thereafter to the address set forth on the signature page of this
Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As of the Closing, the
Company represents and warrants that:
(a) The Company is duly incorporated, validly existing and in good
standing under the laws of the State of Colorado, with full power and
authority to conduct its business as it is currently being conducted and to
own its assets; and has secured any other authorizations, approvals, permits
and orders required by law for the conduct by the Company of its business as
it is currently being conducted.
(b) Of the 100,000,000 shares of authorized Preferred Stock of the
Company, par value $.01 per share (the "Preferred Stock"), none are issued and
outstanding. Of the 500,000,000 shares of authorized Common Stock of the
Company, par value $.0001 per share (the "Common Stock"), 19,830,000 shares
are issued and outstanding. All of the issued shares of Common Stock have
been duly and validly authorized and issued, and are fully paid and
nonassessable. There are outstanding no rights, options or warrants to
subscribe for or purchase Common Stock or Preferred Stock, and no securities
convertible into or exchangeable for Common Stock or Preferred Stock.
(c) The Company has duly authorized the issuance and sale of the
Securities by all requisite corporate action.
(d) The Company has duly reserved, out of its authorized and unissued
Common Stock, solely for the purpose of providing for the exercise of the
rights to purchase Warrant Shares pursuant to the Warrant, such number of
shares of Common Stock as are sufficient therefor. The Warrant Shares, when
issued and paid for, will be duly and validly authorized and issued and will
be fully paid and nonassessable, and the issuance thereof will not conflict
with the certificate of incorporation or bylaws of the Company.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER. The
Purchaser hereby represents and warrants to and covenants with the Company and
each officer, director, and agent of the Company that:
(a) The Purchaser has all requisite capacity to enter into this
Agreement and to perform all the obligations required to be performed by the
Purchaser hereunder.
(b) The execution and delivery of this Agreement by the Purchaser, and
the performance by the Purchaser of its obligations hereunder, will not
conflict with any agreement to which the Purchaser is a party.
(c) The Purchaser has such knowledge, skill and experience in business,
financial and investment matters so that the Purchaser is capable of
evaluating the merits and risks of an investment in the Securities. To the
extent necessary, the Purchaser has retained, at the Purchaser's own expense,
and relied upon, appropriate professional advice regarding the investment, tax
and legal merits and consequences of this Agreement and owning Securities.
(d) The Purchaser is an "accredited investor" as defined in Rule 501(a)
under the Securities Act. The Purchaser agrees to furnish any additional
information requested to assure compliance with applicable federal and state
securities laws in connection with the purchase and sale of the Securities.
(e) The Purchaser is acquiring the Securities solely for his own
account, for investment purposes, and not with a view to, or for resale in
connection with, any distribution thereof. The Purchaser understands that the
Securities have not been registered under the Securities Act or any state
securities laws by reason of specific exemptions under the provisions thereof
which depend in part upon the investment intent of the Purchaser and of the
other representations made by the Purchaser in this Agreement. The Purchaser
understands that the Company is relying upon the representations and
agreements contained in this Agreement (and any supplemental information) for
the purpose of determining whether this transaction meets the requirements for
such exemptions.
7. TRANSFER RESTRICTIONS.
(a) The Purchaser is aware that the Securities have not been registered
under the Securities Act and agrees that such Securities shall not be sold,
assigned, pledged, hypothecated, gifted or otherwise transferred or disposed
of (collectively, "Transferred", each such event being a "Transfer") in the
absence of such registration unless such contemplated transfer is exempt from
the registration requirements of the Securities Act and the Company is
provided with an opinion of counsel to the effect that registration under the
Securities Act is not required, or other evidence satisfactory to the Company.
(b) The Purchaser acknowledges that the certificate(s) for the
Securities will bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS INSTRUMENT
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 OR TRANSFERRED OR OFFERED FOR SALE OR
TRANSFER IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND OTHER APPLICABLE SECURITIES LAWS, OR AN
OPINION OF COUNSEL OR SUCH OTHER EVIDENCE
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION UNDER THE SECURITIES ACT AND OTHER
APPLICABLE SECURITIES LAWS IS NOT REQUIRED.
THESE SECURITIES ARE ALSO RESTRICTED BY THE
TERMS OF A PURCHASE AGREEMENT, DATED AS OF
SEPTEMBER 1, 1999, A COPY OF WHICH IS AVAILABLE
AT THE OFFICES OF THE COMPANY."
8. BROKERS. The Purchaser represents and warrants that the Purchaser has
not entered into any agreement to pay any broker's or finder's fee to any
person, and that no fee or other compensation will be payable by the Company
to any affiliate of the Purchaser, with respect to this Agreement or the
transactions contemplated hereby.
9. WAIVER, AMENDMENT. Neither this Agreement nor any provisions hereof
shall be modified, changed, discharged or terminated except by an instrument
in writing, signed by the party against whom any waiver, change, discharge or
termination is sought.
10. ASSIGNABILITY. Neither this Agreement nor any right, remedy, obligation
or liability arising hereunder or by reason hereof shall be assignable by
either the Company or the Purchaser without the prior written consent of the
other party.
11. APPLICABLE LAW; ARBITRATION. This Agreement is to be construed in
accordance with and governed by the laws of the State of New York without
giving effect to any choice of law rule that would cause the application of
the laws of any jurisdiction other than the internal laws of the State of New
York to the rights and duties of the parties. Any dispute arising out of this
Agreement or the transactions contemplated hereby that the parties cannot
settle amicably shall be resolved exclusively by arbitration before one
neutral arbitrator in the City of New York and administered by the American
Arbitration Association ("AAA") in accordance with its Commercial Arbitration
Rules. The arbitrator shall be an attorney selected by mutual agreement of
the parties; provided, that if the parties cannot agree on the selection of an
arbitrator within 15 days following the delivery by either party to the other
of a demand for arbitration, the arbitrator shall be selected by or in
accordance with the Commercial Arbitration Rules of the AAA.
12. SECTION AND OTHER HEADINGS. The section and other headings contained in
this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which together shall be deemed to be one and the
same agreement.
14. NOTICES. All notices and other communications provided for herein shall
be in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail, return receipt requested,
or via internationally recognized courier service, postage prepaid:
If to the Company, to it at the following address:
International Capital Funding, Inc.
1038 Homer Street
Vancouver, British Columbia
Canada V6B 2W9
Attention: Peter Shandro, Chief Executive Officer
If to the Purchaser, to the Purchaser at the address set forth on
the first page hereof; or at such other address as either party shall have
specified by notice in writing to the other.
15. BINDING EFFECT. The provisions of this Agreement shall be binding upon
and accrue to the benefit of the parties hereto and their respective heirs,
legal representatives, successors and assigns.
16. SURVIVAL. All representations, warranties and covenants contained in
this Agreement shall survive the Closing.
17. ENTIRE UNDERSTANDING. This Agreement sets forth the entire agreement and
understanding of the parties hereto and supersedes any and all prior
agreements, arrangements and understandings among the parties.
IN WITNESS WHEREOF, the Company has executed this Purchase Agreement as
of the 1st day of September, 1999.
INTERNATIONAL CAPITAL FUNDING, INC.
By:______________________________________
Peter Shandro, Chief Executive Officer
ACCEPTED AS OF SEPTEMBER 1, 1999:
________________________
Jonathan Cohen
________________________
SS Number
<PAGE>
APPENDIX A
FORM OF WARRANT
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT made as of September 1, 1999 by and between
INTERNATIONAL CAPITAL FUNDING, INC., a Colorado corporation with an office at
1038 Homer Street, Vancouver, British Columbia, Canada V6B 2W9 (the "Company")
and JONATHAN COHEN, with an address at 74 Old Church Road, Greenwich,
Connecticut 06830 ("Cohen"),
WITNESSETH:
WHEREAS, Cohen has, simultaneously herewith, purchased from the Company
the Warrants (defined below); and
WHEREAS, in connection with the sale of the Warrant, the Company has
agreed to enter into this Registration Rights Agreement with Cohen.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other valuable consideration the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"Commission" shall mean the United States Securities and Exchange
Commission, or any other federal agency at the time administering the
"Securities Act" (as defined herein).
"Common Stock" shall mean the Common Stock, par value $.0001 per share,
of the Company, as constituted as of the date of this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Person" means any individual, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock
company, government (or an agency or political subdivision thereof) or other
entity of any kind.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Warrant Shares" shall have the meaning ascribed thereto in the Warrant.
"Warrant" shall mean the Common Stock Purchase Warrant, dated as of the
date hereof, issued and sold by the Company to Cohen, a copy of which is
annexed hereto.
2. PIGGY-BACK REGISTRATION.
(a) If the Company at any time proposes to file a registration statement
to register any of its Common Stock under the Securities Act (except for a
registration filed in connection with an employee benefit plan, a transaction
relating to a merger or business combination, a transaction relating to an
exchange offer, a transaction relating to an acquisition of assets or
securities, or a transaction otherwise described in Rule 145 of the Securities
Act), whether or not for sale for its own account, it will each such time give
prompt written notice to Cohen of its intention to do so. Upon the written
request of Cohen (which request shall specify the amount of Warrant Shares
intended to be disposed of by Cohen) made as promptly as practicable and in
any event within ten (10) days after the receipt of any such notice, the
Company will use its best efforts to effect the registration under the
Securities Act of all Warrant Shares which the Company has been so requested
to register by Cohen.
(b) If the Company proposes to register any of its securities under the
Securities Act as contemplated by this Section and such securities are to be
distributed by or through one or more underwriters, the Company will arrange
for such underwriters to include the Warrant Shares to be offered and sold by
Cohen among the securities of the Company to be distributed by such
underwriters. In such event, (i) Cohen shall be a party to the underwriting
agreement between the Company and such underwriters, which shall contain such
representations and warranties by the Company and such other terms as are
generally prevailing in agreements of that type, including provisions for
indemnification and contribution to the effect and to the extent provided in
Section 7; (ii) the representations and warranties by, and the other
agreements on the part of, the Company in the underwriting agreement to and
for the benefit of such underwriters shall also be made to and for the benefit
of Cohen and the conditions precedent to the obligations of such underwriters
under the underwriting agreement shall be conditions precedent to the
obligations of Cohen; and (iii) Cohen shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding
Cohen, his Warrant Shares and his intended method of distribution or any other
representations required by applicable law. It is a condition to the
obligations of the Company hereunder that Cohen shall accept the terms of the
underwriting agreement as agreed between the Company and such underwriters,
provided such terms are consistent with this Section and are not otherwise
inconsistent with this Agreement.
(c) If the managing underwriter of any underwritten offering shall
deliver a written statement to Cohen that in such underwriter's opinion the
total amount of Warrant Shares requested to be included in such registration
could have a material adverse effect on such offering, then the Company will
include in such registration, to the extent of the number which the Company is
so advised can be sold in (or during the time of) such offering, first, all
securities proposed by the Company to be sold for its own account, and second,
the Warrant Shares requested to be included in such registration by Cohen
pursuant to this Agreement and the securities requested to be included therein
by any other holders entitled to include securities in such registration, pro
rata based on the number of securities which each of them has requested to be
included in such registration.
3. REGISTRATION PROCEDURES. If and whenever the Company is required by the
provisions of this Agreement to use its best efforts to effect the
registration of any Warrant Shares under the Securities Act, the Company will,
as expeditiously as possible:
(a) prepare and file with the Commission a registration statement with
respect to such securities (on such applicable form as the Company may in its
sole discretion elect to use) and use its best efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby, determined as hereinafter provided;
(b) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for the
period specified in subsection (a) above and comply with the provisions of the
Securities Act with respect to the disposition of all Warrant Shares covered
by such registration statement in accordance with Cohen's intended method of
disposition set forth in such registration statement for such period;
(c) furnish to Cohen such number of copies of the registration statement
and the prospectus included therein, including each preliminary prospectus, as
Cohen reasonably may request in order to facilitate the public sale or other
disposition of the Warrant Shares covered by such registration statement;
(d) use its best efforts to register or qualify the Warrant Shares
covered by such registration statement under the securities or "blue sky" laws
of such jurisdictions as Cohen reasonably shall request and keep such
registration or qualification in effect for so long as such registration
statement remains in effect; and take any other action which may be reasonably
necessary or advisable to enable Cohen to consummate the disposition in such
jurisdictions of the Warrant Shares to be sold by Cohen; provided, however,
that the Company shall not for any such purpose be required to qualify
generally to transact business as a foreign corporation in any jurisdiction
where it is not so qualified or to consent to general service of process in
any such jurisdiction;
(e) immediately notify Cohen at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event of which the Company has knowledge as a result of which the
prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing; and at the request
of Cohen promptly prepare and furnish to him a reasonable number of copies of
a supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such Warrant Shares, such
prospectus shall not include 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 not misleading in the light of the circumstances under
which they were made;
(f) otherwise comply with all applicable rules and regulations of the
Commission, and, if required, make available to its security holders, as soon
as reasonably practicable, an earnings statement covering the period of at
least twelve months, but not more than eighteen months, beginning with the
first full calendar month after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 promulgated thereunder, and promptly
furnish to Cohen a copy of any amendment or supplement to such registration
statement or prospectus;
(g) keep Cohen advised in writing as to the initiation and progress of
the registration;
(h) use its best efforts to include or list, as the case may be, the
Warrant Shares being registered on the automated quotation system of the
National Association of Securities Dealers, Inc. or the principal securities
exchange on which Common Stock of the Company is then quoted or listed;
(i) afford to Cohen an opportunity to make such examination and inquiry
into the financial position, business and affairs of the Company and its
subsidiaries as Cohen or his counsel may reasonably deem necessary to satisfy
Cohen and his counsel as to the accuracy and completeness of the registration
statement;
(j) deliver promptly to Cohen copies of all correspondence between the
Commission and the Company relating to the registration statement; and
(k) use reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of the registration statement (which in no event
shall require the Company to commence any judicial proceeding).
For purposes of Section 3(a) hereof, the period of distribution of
Warrant Shares shall be deemed to extend until the earlier of the sale of all
Warrant Shares covered by the Registration Statement or 180 days after the
effective date thereof.
In connection with registration hereunder, Cohen will furnish to the
Company in writing, upon request, such information with respect to himself
and the proposed distribution by him as the Company reasonably deems necessary
in order to assure compliance with federal and applicable state securities
laws.
4. EXPENSES. All expenses incurred by the Company in complying with
Sections 2 and 3 hereof, including without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel for the
Company and independent public accountants for the Company, fees and expenses,
including counsel fees, incurred in connection with complying with state
securities or "blue sky" laws, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars, and
costs of insurance shall be borne by the Company. All selling commissions
applicable to Warrant Shares, including any fees and disbursements of any
special counsel to Cohen, shall be borne by Cohen.
5. RULE 144 REPORTING. With a view to making available to Cohen the
benefits of certain rules and regulations of the Commission which may permit
the sale of the Warrant Shares without registration, the Company agrees that,
from and after the time it becomes subject to the reporting obligations of the
Exchange Act, it will:
(a) make and keep public information available, as those terms are used
and defined in Commission Rule 144;
(b) use its best efforts to file with the Commission in a timely manner
all reports and other documents required by the Company under the Exchange
Act.
6. LIMITATION ON SALES OF REGISTERED WARRANT SHARES. Cohen agrees that,
notwithstanding any registration of Warrant Shares under the Securities Act as
provided herein,
(a) in the event of a public offering of not less than $5 million of
Common Stock by the Company for its own account pursuant to a firm commitment
underwriting (a "Qualified Offering"), if the underwriter requires the
principal shareholders or affiliates of the Company to agree not to dispose of
or pledge their shares of Common Stock during a "lock-up" period, Cohen will
enter into an identical agreement with respect to the Warrant Shares; and
(b) prior to a Qualified Offering, he will not, without the consent of
the Company, sell any Warrant Shares to the public if the sale of such Warrant
Shares would both (i) cause the total number of Warrant Shares sold by Cohen
to the public during the period of three months ending with (and including)
the date of the proposed sale to exceed the average weekly volume of trading
in the Common Stock on all national securities exchanges and/or reported
through NASDAQ for the four calendar weeks preceding such sale and (ii) cause
the total number of Warrant Shares sold by Cohen to the public to exceed the
limitation set forth below for any applicable period:
<TABLE>
<CAPTION>
Applicable Period Limitation
----------------- ----------
<S> <C>
9/1/99 through 11/30/99 50,000 shares
9/1/99 through 2/28/00 100,000 shares
9/1/99 through 5/31/00 150,000 shares
</TABLE>
7. INDEMNIFICATION AND CONTRIBUTION.
(a) In the event of a registration of any Warrant Shares under the
Securities Act pursuant to this Agreement, the Company will indemnify and hold
harmless Cohen, and each other Person, if any, who controls Cohen within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which Cohen or such controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities, or actions in respect thereof, arise out of or
are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such Warrant
Shares was registered under the Securities Act pursuant to this Agreement, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse Cohen and each such controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case if and to the
extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by Cohen, or
any such controlling person in writing specifically for use in such
registration statement or prospectus.
(b) In the event of a registration of any of the Warrant Shares under
the Securities Act pursuant to this Agreement, Cohen will indemnify and hold
harmless the Company, each officer of the Company who signs the registration
statement, each director of the Company, each Person, if any, who participates
as an underwriter in the offering or sale of such securities, and each Person,
if any, who controls the Company or any such underwriter within the meaning of
the Securities Act, against all losses, claims, damages or liabilities, joint
or several, to which the Company or such officer, director, underwriter, or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities, or actions in respect
thereof, arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement under
which such Warrant Shares were registered under the Securities Act pursuant to
this Agreement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and each such officer, director,
underwriter, and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action, provided, however, that Cohen will be
liable hereunder in any such case if and only to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with information pertaining to Cohen,
furnished in writing to the Company by Cohen specifically for use in such
registration statement or prospectus; and provided further, however, that the
liability of Cohen shall be limited to the proceeds received by Cohen from the
sale of the Warrant Shares covered by such registration statement.
(c) Promptly after receipt by a party indemnified hereunder of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 7 and shall only
relieve it from any liability which it may have to such indemnified party
under this Section 7 if and to the extent the indemnifying party is prejudiced
by such omission. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
in and, to the extent it shall wish, to assume and undertake the defense
thereof with counsel satisfactory to such indemnified party and, after notice
from the indemnifying party to such indemnified party of its election so to
assume and undertake the defense thereof, the indemnifying party shall not be
liable to such indemnified party under this Section 7 for any legal expense
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with
counsel so selected; provided, however, that if the defendants in any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified
party reasonably may be deemed to conflict with the interests of the
indemnifying party, the indemnified parties shall have the right to select one
separate counsel and to assume such legal defenses and otherwise to
participate in the defense of such action, with the expenses and fees of such
separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred.
(d) If the indemnification provided for in this Section 7 shall for any
reason be held by a court to be unavailable to an indemnified party under
subparagraph (a) or (b) hereof in respect of any loss, claim, damage or
liability, or any action in respect thereof, then, in lieu of the amount paid
or payable under subparagraph (a) or (b) hereof, the indemnified party and the
indemnifying party under subparagraph (a) or (b) hereof shall contribute to
the aggregate losses, claims, damages and liabilities (including legal or
other expenses reasonably incurred in connection with investigating the same),
(i) in such proportion as is appropriate to reflect the relative fault of the
Company and Cohen which resulted in such loss, claim, damage or liability, or
action in respect thereof, as well as any other relevant equitable
considerations or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as shall be appropriate to
reflect the relative benefits received by the Company and Cohen from the
offering of the securities covered by such registration statement; provided,
however, that in any such case, (x) Cohen will not be required to contribute
any amount in excess of the public offering price of all such Warrant Shares
offered by him pursuant to such registration statement; and (y) no Person
guilty of fraudulent misrepresentation, within the meaning of Section 11(f) of
the Securities Act, will be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
8. MISCELLANEOUS.
(a) The rights granted to Cohen hereunder may not be transferred or
assigned to any other Person except in conjunction with an assignment of the
Warrant (to the extent permitted thereunder) to such other Person, and then
only if such other Person shall agree in writing with the Company to be bound
by the terms hereof. In the event of an transfer or assignment permitted by
this Section, the transferee or assignee shall thereupon be substituted for
Cohen for all purposes of this Agreement and all references to "Cohen" herein
shall thenceforth be deemed references to such transferee or assignee.
(b) All notices, requests, demands and other communications which are
required to be or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when (a) delivered in person, (b) the
day following dispatch by an overnight courier service (such as Federal
Express or UPS, etc.) or (c) five (5) days after dispatch by certified or
registered first class mail, postage prepaid, return receipt requested, to the
party to whom the same is so given or made, at the address of such party set
forth above or at such other address as such party may have given written
notice of.
(c) All questions concerning the construction, validity and
interpretation of this Agreement shall be governed by the internal law, and
not the law of conflicts, of the State of New York.
(d) This Agreement may not be amended or modified or otherwise altered
except pursuant to an instrument, in writing, signed by each of the parties.
(e) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(f) The provisions of Section 2 hereof to the contrary notwithstanding,
the Company's obligation to file a registration statement, or cause such
registration statement to become and remain effective, shall be suspended for
a period not to exceed 90 days in any 12-month period if there exists at the
time material non-public information relating to the Company which, in the
reasonable opinion of the Company, should not be disclosed.
(g) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability
shall attach only to such provision and shall not in any manner affect or
render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by a duly authorized officer, and Cohen has duly executed this Agreement, as
of the date first written above.
INTERNATIONAL CAPITAL FUNDING, INC.
By ______________________________________
Peter Shandro, Chief Executive Officer
----------------------------------------
Jonathan Cohen
<PAGE>
JOINT VENTURE TECHNOLOGY AGREEMENT
THIS JOINT VENTURE TECHNOLOGY AGREEMENT (hereinafter the "Agreement") is
made and entered into as of the _____ day of _________, 1999,
BETWEEN: XML - GLOBAL TECHNOLOGIES, INC., a Colorado corporation having
a place of business at 7345 East Peakview, Englewood,
Colorado 80111 (hereinafter "XML-Global")
AND: GNOSIS INC., a Maryland corporation having offices at 25405
Clearwater Drive, Demascus, Maryland 20872-2338 (hereinafter
"Gnosis")
AND: DAVID R. R. WEBBER, a businessman having a place of business at
25404 Clearwater Drive, Damascus, Maryland 20872-2338
(hereinafter "Webber")
WHEREAS, Gnosis and Webber have developed certain Technology (as defined
herein);
WHEREAS, XML-Global owns one hundred percent of the common stock of
DataXchg, Inc., a Delaware corporation having a business address at
____________________________________ ("DataXchg, Inc.");
WHEREAS, upon the terms and subject to the conditions set forth herein,
the parties wish to further enhance and market the Technology under a joint
venture by having the Technology transferred to DataXchg, Inc. and having
certain shares in DataXchg, Inc. transferred to Webber; and
WHEREAS, the parties wish to set out in writing the terms and conditions
of their agreements and understandings in respect of such venture;
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of
which are conclusively acknowledged by each party, the parties hereby agree as
follows:
ARTICLE 1
INTERPRETATION
1.1 Definitions. Whenever used in this Agreement, unless the context
clearly requires otherwise, the following words and phrases shall have the
following meaning:
"Assignments" means the Assignment instruments set forth in Schedule
"B" attached hereto.
"Business" means any and all commercial and non-commercial
activities and products of each and both of Webber and Gnosis pertaining to
business-to-business ("B2B") solutions, EDI, or XML/EDI solutions, including,
without limitation, all activities and products pertaining to the software
known as "Xchg" and the e-Business solutions known as "BizTokens".
"Closing Date" has the meaning set forth in Section 2.2 of this
Agreement.
"Consulting Agreement" has the meaning set forth in Section 2.3.2 of
this Agreement.
"Encumbrance" means any claim, lien, pledge, option, charge,
easement, security interest, right-of-way, encumbrance, mortgage, defects of
title, restrictions or other right.
"Intellectual Property Rights" means all copyrights, design rights,
trademark rights and service mark rights and goodwill associated therewith,
patent rights, and trade secrets and confidential information (including,
without limitation, inventions, technical data, and methodologies), whether
registered or unregistered, and all applications for registration of any of
the foregoing, and all rights to file such applications, which may subsist
anywhere in the world.
"License Agreement" has the meaning set forth in Section 2.5 of this
Agreement.
"Operative Documents" means the Consulting Agreement, the
Assignments and the License Agreement attached hereto.
"Person" means any person, limited liability company, partnership,
trust, corporation, business, group, government body or agency, or other
entity.
"Technology" means all of the Intellectual Property Rights and
underlying technology owned, developed, or conceived of by Webber, Gnosis or
both Webber and Gnosis in relation to the Business, including, without
limitation, all materials, software (including source codes, object codes,
executable codes, scripts and databases) including all software relating to
U.S. Patent No. 5,909,570 and all software known as "Xchg" and "BizTokens",
database schemas, documentation, development plans, design notes, test plans,
test criteria, test suites, implementation plans, data conversion plans, and
system support plans.
ARTICLE 2
TECHNOLOGY AND SHARE TRANSFER
2.1 TRANSFER. On the basis of the representations, warranties,
covenants and agreements and subject to the satisfaction or waiver of the
conditions set forth herein, Webber and Gnosis agree to and will sell,
transfer, assign and deliver to DataXchg, Inc. all legal and beneficial right,
title and interest in and to the Technology free and clear of all Encumbrances
(collectively, the "Tech Transfer"), and XML-Global agrees to and will sell,
transfer, assign and deliver to Webber certain Shares in DataXchg, Inc.
representing on the Closing Date sixty percent (60%) of all outstanding shares
of common stock of DataXchg, Inc. (the "Share Transfer"). Webber and Gnosis
jointly and severally acknowledge that the Share Transfer to Webber is fair
and reasonable consideration for the Tech Transfer by Webber and Gnosis.
2.2 TIME AND PLACE OF CLOSING. The closing of the Tech Transfer and the
Share Transfer (the "Closing") shall take place at the offices of
_______________________ on November ___, 1999 or at such other location and on
such other date as is mutually agreed to by XML-Global, Webber and Gnosis (the
date and time on which the Closing actually occurs is the "Closing Date").
2.3 PERFORMANCE BY GNOSIS AND WEBBER. On or before the Closing Date (or
on or before such other date that the parties agree to in writing), Webber and
Gnosis shall ensure that all of the following terms are fulfilled:
2.3.1 Gnosis and Webber shall duly execute and deliver the
Assignments to DataXchg, Inc..
2.3.2 Webber, and DataXchg, Inc. shall have entered into a
Consulting Agreement in the form of Schedule "C" (the "Consulting Agreement")
which shall have been duly executed by such parties and shall be in full force
and effect.
2.3.3 All of the terms, covenants, agreements and conditions of
this Agreement to be complied with, performed or satisfied by Gnosis and/or
Webber on or before the Closing Date shall be duly complied with, performed
and satisfied on or before the Closing Date.
2.4 PERFORMANCE BY XML-GLOBAL. On or before the Closing Date (or on or
before such other date that the parties agree to in writing), XML-Global shall
ensure that all of the following terms are fulfilled:
2.4.1 XML-Global shall have transferred and delivered to Webber
Shares in DataXchg, Inc. representing on the Closing Date sixty percent (60%)
of all outstanding shares of common stock of DataXchg, Inc..
2.4.2 All of the terms, covenants, agreements and conditions of
this Agreement to be complied with, performed or satisfied by XML-Global on or
before the Closing Date shall be duly complied with, performed and satisfied
on or before the Closing Date.
2.5 LICENSE. Once the Technology is transferred to DataXchg, Inc. by way
of the Assignments in Section 2.3.1, the parties agree that DataXchg, Inc.
shall grant XML-Global a license pursuant to a License Agreement in the form
of Schedule "D" attached hereto (hereinafter the "License Agreement"). The
parties shall execute all necessary documents, take all necessary steps and
provide all necessary assistance to enable and ensure that DataXchg, Inc. duly
executes and delivers the License Agreement to XML-Global and provides XML-
Global with full access to the Technology and improvements and modifications
thereto.
2.6 COMMERCIALISATION. The parties agree that DataXchg, Inc. shall
further develop and commercialise the Technology in conjunction with XML-
Global in accordance with the License Agreement. The parties agree that
DataXchg, Inc. shall provide XML-Global with guidance on and assist in
determining the development paths for the Technology. A royalty from the
sales generated by XML-Global from commercialising products based on the
Technology shall be paid to DataXchg, Inc. pursuant to the License Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF WEBBER AND GNOSIS
Webber and Gnosis jointly and severally represent and warrant to XML-
Global as follows:
3.1 ORGANIZATION. Gnosis is a corporation duly organized, validly
existing and in good standing under the laws of Maryland and is authorized to
do business in all jurisdictions where such authorization is necessary.
3.2 POWER AND AUTHORITY. Gnosis and Webber have the power, capacity and
authority to own, license, make, use and sell the Technology, to conduct the
Business as presently conducted.
3.3 GNOSIS - AUTHORITY FOR AGREEMENT. The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been authorized by all requisite corporate action on
the part of Gnosis. Gnosis has full corporate power, authority, and legal
right to enter into this Agreement and each other Operative Document to which
it is a party and to consummate the transactions contemplated hereby and
thereby. This Agreement and each other Operative Document to which Gnosis is
a party has been duly executed and delivered by Gnosis and is a legal, valid
and binding obligation of Gnosis, enforceable against Gnosis in accordance
with its terms.
3.4 WEBBER - AUTHORITY FOR AGREEMENT. Webber has full and absolute
legal right, capacity, power, and authority to enter into this Agreement and
each other Operative Document to which he is a party, all of which, when
executed and delivered by Webber as contemplated hereby, will be the legal,
valid and binding obligation of Webber, enforceable against Webber in
accordance with their terms.
3.5 NO VIOLATION TO RESULT. The execution, delivery, and performance of
this Agreement and each other Operative Document to which either of Gnosis and
Webber is a party, and the consummation of the transactions contemplated
hereby and thereby: (i) are not in violation or breach of, do not conflict
with or constitute a default under, and will not accelerate or permit the
acceleration of the performance required by, any of the terms of the Articles
of Incorporation of Gnosis or any contract to which Gnosis or Webber is a
party or which affects Gnosis or Webber; (ii) will not be an event which,
after notice or lapse of time or both, will result in any such violation,
breach, conflict, default or acceleration; (iii) will not result in a
violation under any law, judgment, decree, order, rule, regulation, permit or
other legal requirement of any Government or Regulatory Authority, court or
arbitration tribunal whether federal, state, provincial, municipal or local
(within the U.S., Canada or otherwise) at law or in equity, and applicable to
Gnosis or Webber; and (iv) will not result in the creation or imposition of
any Encumbrances in favor of any Person upon any of the Technology.
3.6 INTELLECTUAL PROPERTY.
3.6.1 Schedule "A" contains a complete and accurate list of (i)
all registered and unregistered Intellectual Property Rights owned, conceived
of or applied for by either or both of Gnosis and Webber relating to the
Business; and (ii) all computer software owned, conceived of or developed by
either or both of Gnosis and Webber relating to the Business. Schedule "A"
also contains a complete and accurate list of all licenses and other rights
granted by any of Gnosis and Webber to any third party with respect to any
Intellectual Property Rights relating to the Business, and all licenses and
other rights granted by any third party to any of Gnosis and Webber with
respect to any Intellectual Property Rights relating to the Business. Gnosis
and Webber own all right, title and interest to, or have the right to use
pursuant to a valid license, all Intellectual Property Rights necessary for
the operation of the Business of Gnosis and Webber as presently conducted,
free and clear of all Encumbrances. The loss or expiration of any
Intellectual Property Rights or related group of Intellectual Property Rights
owned or used by Gnosis and Webber has not had and would not reasonably be
expected to have an adverse effect on the conduct of the Business, and no such
loss or expiration is threatened, pending or reasonable. Gnosis and Webber
have taken all necessary and desirable actions to maintain and protect the
Intellectual Property Rights which they own.
3.6.2 Except as set forth in Schedule "A", (i) Gnosis and Webber
own all right, title and interest in and to all of the Technology free and
clear of all Encumbrances, (ii) there have been no claims made against Gnosis
or Webber asserting the invalidity, misuse, or unenforceability of any such
Technology, and there are no grounds for same, (iii) each and both of Gnosis
and Webber have not received any notices of, and are not aware of any facts
which indicate a likelihood of, any infringement or misappropriation by, or
conflict with, any third party with respect to such Technology (including,
without limitation, any demand or request that Gnosis or Webber license any
rights from a third party), (iv) to the best of Gnosis' and Webbers'
knowledge, the conduct of the Business has not infringed, misappropriated or
conflicted with and does not infringe, misappropriate or conflict with any
Intellectual Property Rights of other Persons, (v) to the best of Gnosis's and
Webbers' knowledge, the Intellectual Property Rights owned by or licensed to
Gnosis and/or Webber have not been infringed, misappropriated or conflicted by
other Persons.
3.6.3 To the best of Gnosis' and Webbers' knowledge, none of the
employees of Gnosis is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
conflict with the Business.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF XML-GLOBAL
XML-Global represents and warrants to Gnosis and Webber as follows:
4.1 ORGANIZATION. XML-Global is a corporation duly organized, validly
existing and in good standing under the laws of Colorado and is authorized to
do business in all jurisdictions where such authorization is necessary.
4.2 AUTHORITY FOR AGREEMENT. XML-Global has full corporate power,
authority, and legal right to enter into this Agreement and each other
Operative Document to which it is a party and to consummate the transactions
contemplated hereby and thereby. This Agreement and each other Operative
Document to which XML-Global is a party has been duly executed and delivered
by XML-Global and is a legal, valid and binding obligation of XML-Global,
enforceable against XML-Global in accordance with its terms.
4.3 NO VIOLATION TO RESULT. The execution, delivery, and performance of
this Agreement and each other Operative Document to which XML-Global is a
party, and the consummation of the transactions contemplated hereby and
thereby: (i) are not in violation or breach of, do not conflict with or
constitute a default under, and will not accelerate or permit the acceleration
of the performance required by, any of the terms of the Articles of
Incorporation of XML-Global or any contract to which XML-Global is a party or
which affects XML-Global; (ii) will not be an event which, after notice or
lapse of time or both, will result in any such violation, breach, conflict,
default or acceleration; and (iii) will not result in a violation under any
law, judgment, decree, order, rule, regulation, permit or other legal
requirement of any Government or Regulatory Authority, court or arbitration
tribunal whether federal, state, provincial, municipal or local (within the
U.S., Canada or otherwise) at law or in equity, and applicable to XML-Global.
ARTICLE 5
MISCELLANEOUS
5.1 SURVIVAL. The representations, warranties, covenants and agreements
of Gnosis and Webber contained in this Agreement will terminate on the fifth
anniversary of the Closing Date with respect to the provisions in Sections 3.1
to 3.6 and 4.1 to 4.3. This Section 5.1 shall not limit in any covenant or
agreement of the parties which by its terms contemplates performance after the
Closing Date, which shall survive for the respective periods specified in such
covenant or agreement.
5.2 SCHEDULES. This Agreement includes the following schedules which
are incorporated into and form an integral part of this Agreement: (a)
Schedule "A" entitled "Technology"; (b) Schedule "B" entitled "Assignments";
(c) Schedule "C" entitled "Consulting Agreement"; (d) Schedule "D" entitled
"License Agreement".
5.3 NOTICES. Any notice required or permitted to be given under this
Agreement shall be made in writing and shall be deemed to have been given if
it is in writing and is delivered in person, sent by same day or overnight
courier, or mailed by certified or registered mail, return receipt requested,
postage prepaid, addressed to the party at its address set forth first above
or at such other address as such party may subsequently furnish to the other
party by notice hereunder. Notices will be deemed effective on the date of
delivery in the case of personal delivery, or two (2) business days after
mailing or courier pickup.
5.4 GOVERNING LAW. This Agreement shall be construed, enforced,
performed and in all respects governed by and in accordance with the laws of
the State of Delaware. The parties hereto submit and attorn to the exclusive
jurisdiction of the courts of the State of Delaware.
5.5 WAIVER. No waiver by any party of any term or condition of this
Agreement or any breach thereof shall be made effective unless made in writing
and signed by the party purporting to give the waiver. No waiver by any party
of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term
or condition of this Agreement on any future occasion.
5.6 SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable shall be deemed automatically amended so that it is
enforceable to the maximum extent permissible under the laws of that
jurisdiction without invalidating the remaining provisions hereof.
5.7 SPECIFIC ENFORCEMENT. Each party acknowledges that money damages
would be inadequate for any breach of the provisions of this Agreement. Upon
a breach or threatened breach of the terms, covenants or conditions of this
Agreement by any of the parties hereto, the other parties shall, in addition
to all other remedies, be entitled to a temporary or permanent injunction,
without showing any actual damage, or a decree for specific performance, in
accordance with the provisions hereof.
5.8 FURTHER ASSURANCES. Each of the parties shall execute all further
documents and instruments and do all further and other things as may be
necessary to implement and carry out the terms of this Agreement.
5.9 NON-MERGER. Except as otherwise expressly provided in this
Agreement, the covenants, representations and warranties contained herein
shall not merge with and shall survive the Closing in accordance with the
express terms of this Agreement and shall continue in full force and effect.
The Closing shall not prejudice any right of one party against any other party
in respect of anything done or omitted under this Agreement or in any respect
of any right to damages or other remedies.
5.10 SUCCESSORS, ASSIGNS AND THIRD PARTIES. This Agreement shall inure
to the benefit of and be binding upon the parties and their respective
successors and permitted assigns. Gnosis and Webber may not make any
assignment of this Agreement or any interest herein without the prior written
consent of XML-Global. This Agreement may be assigned by XML-Global to a
third party with the prior written consent of Webber. Webber shall not
assign, transfer, or sell any of the Shares that form part of the Share
Transfer (the "Webber Shares"), any right, title or interest in the Webber
Shares, or subject any of the Webber Shares to any Encumbrances, without the
prior written consent of XML-Global.
5.11 INDEPENDENT PARTIES. The relationship between XML-Global the other
parties is that of independent contractors. Gnosis, Webber and its agents
have no authority to bind XML-Global in any way.
5.12 FACSIMILE TRANSMISSION. The parties agree that this Agreement may
be entered into by a party by means of facsimile transmission and, in such an
event, the same shall constitute a legal and binding obligation in the same
manner as if an originally executed version hereof had been delivered by such
party to the other party.
5.13 HEADINGS AND PLURALS. The headings herein have been inserted as a
matter of convenience only and in no way define, limit or enlarge the scope or
meaning of this Agreement or any of its provisions. Unless the context
clearly indicates otherwise, where appropriate the singular shall include the
plural and vice versa, to the extent necessary to give the terms defined
herein and/or the terms otherwise used in this Agreement their proper
meanings.
5.14 ENTIRE AGREEMENT. This Agreement and those documents expressly
referred to herein embody the entire agreement and understanding between the
parties concerning the subject matter hereof and supersede all prior
understandings, communications and agreements between the parties, written or
oral, with respect to the subject matter hereof, and all past courses of
dealing or industry custom. This Agreement may only be amended, supplemented
or modified in a written instrument duly executed by or on behalf of each
party hereto. Time is of the essence in this Agreement and for each and every
term and condition hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed.
GNOSIS, INC. XML-GLOBAL TECHNOLOGIES, INC.
a Maryland corporation a Colorado corporation
By:_____________________________ By:_____________________________
(Authorized Signatory) (Authorized Signatory)
Name: __________________________ Name: __________________________
Title:__________________________ Title:__________________________
Date:___________________________ Date:___________________________
________________________________
DAVID R.R. WEBBER
Date:___________________________
<PAGE>
<PAGE>
SCHEDULE "A"
TECHNOLOGY
1. Patent Rights and Patentable Inventions
---------------------------------------
United States Patent No. 5,909,570, issued June 1, 1999
Title: TEMPLATE MAPPING SYSTEM FOR DATA TRANSLATION
Inventors: David R.R. Webber
2. Software
--------
All software relating to U.S. Patent No. 5,909,570 and all components,
data, algorithms and inventions relating to software known as "Xchg" and
"BizTokens", including, without limitation, all source codes, object
codes, executable codes, databases, scripts, data and documentation
(collectively, the "Software and Documentation").
3. Copyrights
----------
All copyrights in the Software and Documentation.
Copyright Registrations: None applied for.
4. License Rights
--------------
Licenses obtained by either Webber or Gnosis from third parties: None.
5. Contracts
---------
Contracts that Webber and/or Gnosis have entered into where either is
using, providing or implementing any of the Software and Documentation or
the inventions covered in U.S. Patent No. 5,909,570: None.
<PAGE>
<PAGE>
SCHEDULE "B"
ASSIGNMENT
WHEREAS, GNOSIS INC., a Maryland corporation having offices at 25405
Clearwater Drive, Demascus, Maryland 20872-2338 (hereinafter "Gnosis") and
DAVID R.R. WEBBER, a businessman having an address at 6811 Kenilworth Ave.,
Riverdale, Maryland 20737 (hereinafter "Webber") own all legal and beneficial
right, title and interest in and to the Technology (as defined below), and
whereas Gnosis and Webber (collectively referred to hereinafter as
"Assignors"), have agreed to transfer all such right, title and interest to:
DataXchg, Inc., a Delaware corporation having a business address of
_____________________________________________________ (hereinafter the
"Assignee")
NOW THEREFORE, in consideration of One U.S. Dollar (USD $1.00) and other
good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged by the Assignors, the Assignors hereby irrevocably assign,
sell, transfer and grant to the Assignee, and all of the Assignee's successors
and assigns, all right, title, benefit and interest in and to the Technology.
The Assignors shall, at the Assignee's request, promptly assist with and
execute all necessary applications, declarations, verifications, responses,
submissions, assignments and such further documents, and provide such other
acts and assistance, without charge to the Assignee but at the Assignee's
expense, to enable the Assignee or the Assignee's nominees to apply for,
acquire, prosecute, perfect, enforce and/or maintain any and all right, title
and interest in and to the Technology in any and all countries.
For the foregoing, the following terms have the following meaning:
(a) "Technology" means all of the Intellectual Property Rights and
underlying technology owned, developed, or conceived of by Webber, Gnosis or
both Webber and Gnosis in relation to the Business, including, without
limitation, all software (including source codes, object codes, executable
codes, scripts, and databases) including all software relating to U.S. Patent
No. 5,909,570 and all software known as "Xchg" and "BizTokens", database
schemas, documentation, development plans, design notes, test plans, test
criteria, test suites, implementation plans, data conversion plans, system
support plans.
(b) "Intellectual Property Rights" means all copyrights, design rights,
trademark and service mark rights (and goodwill associated therewith), patent
rights, and trade secrets and confidential information (including, without
limitation, inventions, technical data, and methodologies), whether registered
or unregistered, and all applications for registration of any of the
foregoing, and all rights to file such applications, which may subsist
anywhere in the world.
(c) "Business" means any and all commercial and non-commercial
activities and products of each and both of Webber and Gnosis pertaining to
business-to-business ("B2B") solutions, EDI, or XML/EDI solutions, including,
without limitation, all activities and products pertaining to the software
known as "Xchg" and the e-Business solutions known as "BizTokens" and
"BizCodes".
IN WITNESS WHEREOF, the Assignors has caused this assignment to be duly
executed.
SIGNED AT
----------------------------------------------------
(City and State)
by GNOSIS INC. this ______ day of _____________________, 1999.
- ------------------------------------
(Authorized Signatory)
Name:
-------------------------------
Title:
------------------------------
WITNESS:
Signature:
------------------------------------
Name:
------------------------------------
Address:
------------------------------------
------------------------------------
SIGNED AT
-------------------------------------------------------
(City and State)
by DAVID R.R. WEBBER this _______ day of _______________________, 1999.
- -------------------------------------
David R.R. Webber
WITNESS:
Signature:
---------------------------------------
Name:
---------------------------------------
Address:
---------------------------------------
---------------------------------------
<PAGE>
<PAGE>
ASSIGNMENT
In consideration of One U.S. Dollar (USD $1.00) and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, I the undersigned, whose full name and post office address is:
DAVID R.R. WEBBER, a businessman having an address at 6811 Kenilworth Ave.,
Riverdale, Maryland 20737 (hereinafter the "Assignor"), do hereby sell,
assign, and transfer to: DataXchg, Inc., a Delaware corporation having a
business address of _______________________________________ (hereinafter the
"Assignee") and to the Assignee's successors and assigns, all legal and
beneficial right, title and interest, for all countries throughout the world,
in and to certain inventions relating to: TEMPLATE MAPPING SYSTEM FOR DATA
TRANSLATION set forth in United States Patent No. 5,909,570 (issued June 1,
1999) for which I, the Assignor, am the sole inventor and owner, and I, the
Assignor do hereby sell, assign, and transfer all right, title and interest in
and to any and all letters patent that may be granted for said inventions.
The Assignor further agrees and undertakes to promptly cooperate with and
execute all necessary applications, declarations, verifications, responses,
submissions, assignments and such further documents, and provide such other
acts and assistance, without charge to the Assignee but at the Assignee's
expense, to enable the Assignee or the Assignee's nominees to apply for,
acquire, prosecute, perfect, enforce and/or maintain any and all right, title
and interest in and to letters patent for said inventions in any and all
countries.
IN WITNESS WHEREOF, the Assignor has caused this assignment to be duly
executed.
SIGNED AT
-------------------------------------------------------
(City and State)
by DAVID R.R. WEBBER this _____ day of _________________, 1999.
- ---------------------------------------
David R.R. Webber
WITNESS:
Signature:
-----------------------------
Name:
-----------------------------
Address:
----------------------------
----------------------------
<PAGE>
<PAGE>
SCHEDULE "C"
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement") is made and entered into as
of this ____ day of ___________, 1999 by and between (i) DataXchg, Inc., a
Delaware corporation having a business address of
___________________________________ (the "Company") and (ii) David R.R.
Webber, a businessman having an address of 6811 Kenilworth Ave., Riverdale,
Maryland 20737 (the "Consultant").
WHEREAS, pursuant to that certain Joint Venture Technology Agreement (the
"JV Technology Agreement") of even date herewith by and among XML-Global
Technologies, Inc. ("XML-Global"), Gnosis Inc. ("Gnosis") and the Consultant,
the Consultant and Gnosis agreed to transfer the Technology (as defined in the
JV Technology Agreement) to the Company, and XML-Global agreed to transfer to
the Consultant common stock shares in the Company representing sixty percent
(60%) of all outstanding common stock shares of the Company on the Closing
Date of the JV Technology Agreement;
WHEREAS, it is a condition of the closing of the JV Technology Agreement
that the Company and the Consultant enter into this Agreement;
WHEREAS, the Company desires to engage the Consultant to perform certain
duties as shall be assigned to the Consultant by the officers of the Company
from time to time;
WHEREAS, the Consultant desires to be engaged by the Company;
WHEREAS, the Company and the Consultant wish to set out in writing the
terms and conditions of their agreements and understandings in respect of such
engagement; and
WHEREAS, capitalized terms used but not otherwise defined herein shall
have the meaning specified in the JV Technology Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. ENGAGEMENT. The Consultant shall undertake and assume the
responsibility of performing for the Company such duties as shall be assigned
from time to time to the Consultant by the officers of the Company. The
Consultant covenants and agrees that, at all times during the term of this
Agreement, the Consultant shall devote such amount of the Consultant's time as
shall be required for the Consultant to perform promptly, efficiently and
professionally the duties assigned to the Consultant by the officers of the
Company. The Consultant covenants and agrees not to directly or indirectly
engage or participate in any activities at any time during the term of this
Agreement in conflict with the best interests of the Company.
2. TERM. The term of this Agreement shall, subject to earlier
termination in accordance with the terms herein, be for five years commencing
as of the date hereof (the "Term").
3. COMPENSATION. During the Term hereof, as and for compensation for
the services to be rendered for or on behalf of the Company by the Consultant
hereunder, and subject to compliance by the Consultant with all of the
Consultant's representations, covenants and agreements set forth in this
Agreement, the Company shall pay the Consultant for expenses incurred pursuant
to Section 4. Neither party shall charge the other party for services rendered
under this Agreement. During the Term, the Company shall not be obligated,
under any circumstances, to pay for, or keep in effect, any hospitalization,
health, life or other insurance for the benefit of the Consultant.
4. EXPENSES INCURRED. During the Term, the Company shall pay or
promptly reimburse the Consultant for all reasonable travel, telephone and
other business expenses paid or incurred by the Consultant in connection with
the performance of the Consultant's duties hereunder (which expenses must be
pre-approved by the Company), upon presentation of expense statements or other
reasonable evidence of expenses.
5. NONCOMPETITION. The Consultant covenants and agrees that during the
period commencing as of the date hereof and ending on such date which is two
(2) years following the expiration of the Term hereof (the "Covenant Period"),
the Consultant shall not engage in or carry on, directly or indirectly, either
for himself, through a relative or as a member of a partnership or as an
executive, employee, officer, or director of a corporation (other than the
Company or a subsidiary or affiliate of the Company) or as an agent, associate
or consultant of any person, partnership or corporation (other than the
Company or a subsidiary or affiliate of the Company) any business in XML/EDI
or business-to-business (B2B) e-commerce solutions without the Company's
express written consent which the Company will not withhold unless there
exists a reasonable expectation of competitive harm.
6. NON-DISCLOSURE OF INFORMATION.
6.1 For the purposes of this Agreement, "Confidential Information"
means all trade secrets and confidential information pertaining to the
Company's business, including, without limitation, any and all formulae, data,
algorithms, processes, techniques, developments, research, designs, technical
information, business information, documentation in any form or media,
drawings, diagrams, software (including source codes, object codes,
executables, databases, scripts, test data and test results), works in
progress, and any other information, whether in oral, written, graphic,
electronic, optical, or digital form, or any other form, that (i) is in the
Company's possession or is used in the business of the Company, and (ii)
derives actual or potential value from not being generally known or
ascertainable.
6.2 The Consultant acknowledges that in the course of the
Consultant's services to the Company, the Consultant shall or may be making
use of, having access to and/or adding to Confidential Information which is of
a special and unique nature and value to the Company. The Consultant
covenants and agrees that the Consultant shall not, except with the prior
written consent of the Company, at any time during the Consultant's engagement
or following the termination or non-renewal of the Consultant's engagement by
the Company hereunder, for any reason whatsoever, directly or indirectly,
disclose, report, publish, transfer, make available, or use, for any purpose
whatsoever, any of such Confidential Information. Disclosure of any such
Confidential Information of the Company shall not be prohibited if required by
law. The Consultant shall notify the Company promptly of any legal proceeding
that would require disclosure of any Confidential Information so that the
Company may seek an appropriate protective order prior to such disclosure.
7. DEVELOPMENTS. The Consultant covenants and agrees to promptly and
fully disclose to the Company all inventions, discoveries, designs,
developments, modifications, improvements, derivative works, computer programs
in any form, databases, scripts, electronic documents, algorithms, trade
secrets, products, methods, and other items in any form that the Consultant,
solely or jointly, conceives, modifies, enhances, develops or reduces to
practice during the Term, whether or not developed in whole or in part prior
to the execution of this Agreement or outside of Company time, which:
7.1 relate to the Consultant's activities for the Company;
7.2 are suggested by the Consultant's services for which he is
engaged;
7.3 are related, directly or indirectly, to the business, research
or development of the Company; or
7.4 arise as a result of using the resources, facilities,
proprietary information or Confidential Information of the Company,
(collectively, the "Works").
8. ACKNOWLEDGEMENT AND ASSIGNMENT. The Consultant acknowledges that all
Works are works made in the course of or as a result of the Consultant's
services to the Company. The Consultant shall hold in trust for the sole
benefit of the Company, and shall assign and hereby assigns exclusively and
completely to the Company all of the Consultant's legal and beneficial right,
title and interest in and to all Works which involve any contribution from the
Consultant and all Intellectual Property Rights in such Works. The Consultant
hereby waives and shall waive any and all moral rights arising in the Works
and all copyrights therein.
9. ASSISTANCE TO COMPANY. The Consultant shall, at the Company's
request, assist with and execute all necessary instruments, applications,
declarations, verifications, responses, submissions, assignments and do all
other things reasonably requested by the Company, without charge to the
Company but at the Company's expense, to enable the Company or the Company's
nominees to apply for, acquire, prosecute, perfect, enforce and/or maintain
any and all right, title and interest in and to the Works and all Intellectual
Property Rights therein in any country.
10. WORK MADE FOR HIRE. If any one or more of the Works are protectable
by copyright and in any way to fall within the definition of "work made for
hire", as such term is defined in 17 U.S.C. Section101, such Works shall be
considered a "work made for hire", the copyright of which shall be owned
solely, completely and exclusively by the Company. If any one or more of the
Works are entitled to copyright protection and are not considered to be
included in the categories of works covered by the "work made for hire"
definition contained in 17 U.S.C. Section 101, the Consultant shall, by virtue
of this Agreement, assign and transfer completely and exclusively the
copyright in such Works to the Company.
11. RETURN OF MATERIALS. All notes, data, tapes, diskettes, reference
items, sketches, drawings, memoranda, papers, documents, manuals, software
tools, computer-readable codes in any form, records, and other materials in
any form and on any media, in any way relating to any of the information
disclosed, generated or obtained pursuant to this Agreement (including,
without limitation, any Confidential Information or Works) or pursuant to any
Company activities shall belong exclusively to the Company (collectively, the
"Company Materials") and the Consultant agrees to turn over to the Company all
originals and copies of such Company Materials in the Consultant's possession
or control at the request of the Company or, in the absence of such a request,
upon the termination of the Consultant's engagement with the Company.
12. NON-SOLICITATION. Except if Consultant is acting solely for the
benefit of the Company and the Company's best interests, the Consultant will
not, while engaged with the Company and for a period of two (2) years
thereafter, solicit or attempt to solicit business for any reason, directly or
indirectly, from any customer or client of the Company or any affiliate or
subsidiary of the Company.
13. NON-HIRING. While engaged with the Company and for a period of two
(2) years thereafter, the Consultant will not induce or attempt to influence
directly or indirectly any employee of the Company to terminate his or her
employment with the Company or to work for the Consultant or any other person
or entity.
14. REASONABLENESS OF RESTRICTIONS. THE CONSULTANT HAS CAREFULLY READ
AND CONSIDERED THE PROVISIONS OF SECTIONS 5, 12, 13 AND 15 HEREOF AND, HAVING
DONE SO, AGREES THAT THE RESTRICTIONS SET FORTH ARE FAIR AND REASONABLE AND
ARE REASONABLY REQUIRED FOR THE PROTECTION OF THE INTERESTS OF THE COMPANY,
AND ITS OFFICERS, DIRECTORS, STOCKHOLDERS AND EMPLOYEES.
15. SEVERABILITY. If, in any legal proceeding, the court or tribunal
refuses to enforce all of the separate covenants contained in Sections 5, 12,
and 13 of this Agreement because the time limit is excessive, it is expressly
understood and agreed between the parties hereto that for the purposes of such
proceeding such time limit shall be deemed reduced to the extent necessary to
permit enforcement of such covenants. If, in any legal proceeding, the court
or tribunal refuses to enforce all of the covenants contained in Sections 5,
12, and 13 because they are more extensive (whether as to geographic area,
scope of business or otherwise) than necessary to protect the business and
goodwill of the Company, it is expressly understood and agreed between the
parties hereto that for purposes of such proceeding the geographic area, scope
of business or other aspect shall be deemed reduced to the extent necessary to
permit enforcement of such covenants.
16. TERMINATION. This Agreement may only be terminated by a party in
accordance with the express terms hereof. Either party may terminate this
Agreement with written notice of termination if the other party is in breach
of any covenant hereunder on its part and such other party fails to cure the
breach within sixty (60) days of receiving written notice to cure such breach.
Termination under this Section shall be effective from the date written notice
is delivered to such other party or the date specified in the written notice
of termination, whichever is later. Upon termination of this Agreement, the
Consultant shall return to the Company all Company Materials and shall cease
all use of such Company Materials, Works and Confidential Information.
17. SURVIVAL. In the event of termination or expiration of this
Agreement for any reason, Sections 6, 9, 11, and 16 together with all
provisions of this Agreement necessary the interpretation and enforcement of
same (to the extent such provisions are necessary for such interpretation
and/or enforcement) shall survive this Agreement. Neither party shall be
liable to the other for damages of any sort resulting solely from such party
terminating this Agreement in accordance with its terms. This Section 17
shall not limit in any covenant or agreement of the parties which by its terms
contemplates performance after termination, which shall survive for the
respective periods specified in such covenant or agreement.
18. NOTICES. Any notice required or permitted to be given under this
Agreement shall be made in writing and shall be deemed to have been given if
it is in writing and is delivered in person, sent by same day or overnight
courier, or mailed by certified or registered mail, return receipt requested,
postage prepaid, addressed to the party at its address set forth first above
or at such other address as such party may subsequently furnish to the other
party by notice hereunder. Notices will be deemed effective on the date of
delivery in the case of personal delivery, or two (2) business days after
mailing or courier pickup.
19. GOVERNING LAW. This Agreement shall be construed, enforced,
performed and in all respects governed by and in accordance with the laws of
the State of Delaware. The parties hereto submit and attorn to the exclusive
jurisdiction of the courts of the State of Delaware.
20. SEVERABILITY. Subject to Section 15, any provision of this
Agreement which is prohibited or unenforceable shall be deemed automatically
amended so that it is enforceable to the maximum extent permissible under the
laws of that jurisdiction without invalidating the remaining provisions
hereof.
21. SPECIFIC ENFORCEMENT. Each party acknowledges that money damages
would be inadequate for any breach of the provisions of this Agreement. Upon
a breach or threatened breach of the terms, covenants or conditions of this
Agreement by any of the parties hereto, the other parties shall, in addition
to all other remedies, be entitled to a temporary or permanent injunction,
without showing any actual damage, or a decree for specific performance, in
accordance with the provisions hereof.
23. FURTHER ASSURANCES. Each of the parties shall execute all further
documents and instruments and do all further and other things as may be
necessary to implement and carry out the terms of this Agreement.
24. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the parties and their respective successors and
permitted assigns. The Consultant may not make any assignment of this
Agreement or any interest herein without the prior written consent of the
Company. The Company may assign its interests hereunder without the prior
written consent of the Consultant.
25. INDEPENDENT PARTIES. The relationship between the Consultant and the
Company is that of independent contractors, and not that of an
agent/principal, employee/employer, or co-venturers. In addition, it is
understood and agreed by the parties hereto that the Consultant shall not be
treated as an employee for U.S. federal, state and local tax purposes. The
Consultant hereby represents and warrants to the Company that the Consultant
is an independent contractor for U.S. federal, state and local tax purposes.
The Consultant covenants and agrees to pay any and all U.S. federal, state and
local taxes required to be paid by an independent contractor.
26. HEADINGS AND PLURALS. The headings herein have been inserted as a
matter of convenience only and in no way define, limit or enlarge the scope or
meaning of this Agreement or any of its provisions. Unless the context
clearly indicates otherwise, where appropriate the singular shall include the
plural and vice versa, to the extent necessary to give the terms defined
herein and/or the terms otherwise used in this Agreement their proper
meanings.
27. FACSIMILE TRANSMISSION. The parties agree that this Agreement may
be entered into by a party by means of facsimile transmission and, in such an
event, the same shall constitute a legal and binding obligation in the same
manner as if an originally executed version hereof had been delivered by such
party to the other party.
28. ENTIRE AGREEMENT. This Agreement and those documents expressly
referred to herein embody the entire agreement and understanding between the
parties concerning the engagement of the Consultant's services which are the
subject matter hereof and supersede all prior understandings, communications
and agreements between the parties, written or oral, with respect to the
subject matter hereof, and all past courses of dealing or industry custom.
This Agreement may only be amended, supplemented or modified in a written
instrument duly executed by or on behalf of each party hereto. Time is of the
essence in this Agreement and for each and every term and condition hereof.
No waiver by any party of any term or condition of this Agreement or any
breach thereof shall be made effective unless made in writing and signed by
the party purporting to give the waiver. No waiver by any party of any term
or condition of this Agreement, in any one or more instances, shall be deemed
to be or construed as a waiver of the same or any other term or condition of
this Agreement on any future occasion.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed.
DATAXCHG, INC.
a Delaware corporation
By:______________________________ _________________________________
(Authorized Signatory) DAVID R.R. WEBBER
Name:____________________________ Date:________________________
Title:___________________________
Date:____________________________
<PAGE>
<PAGE>
SCHEDULE "D"
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (this "Agreement") is made and entered into as of
this ____ day of ____________, 1999 by and between (i) DataXchg, Inc., a
Delaware corporation having a business address of ______________________ (the
"Licensor") and (ii) XML-Global Technologies, Inc., a Colorado corporation a
Colorado corporation having a place of business at 7345 East Peakview,
Englewood, Colorado 80111 (the "Licensee").
WHEREAS, pursuant to that certain Joint Venture Technology Agreement (the
"JV Technology Agreement") of even date herewith by and among XML-Global
Technologies, Inc. ("XML-Global"), Gnosis Inc. ("Gnosis") and David R.R.
Webber ("Webber"), Webber and Gnosis agreed to transfer the Technology (as
defined in the JV Technology Agreement) to Licensor, and Licensee agreed to
transfer to Webber common stock shares in the Licensor representing sixty
percent (60%) of all outstanding common stock shares of the Licensor on the
Closing Date of the JV Technology Agreement;
WHEREAS, it is a condition of the closing of the JV Technology Agreement
that Licensor and Licensee enter into this Agreement;
WHEREAS, Licensor desires to grant Licensee a license to the Technology;
WHEREAS, Licensee desires a license to the Technology from Licensor;
WHEREAS, Licensor and Licensee wish to set out in writing the terms and
conditions of their agreements and understandings in respect of such license;
and
WHEREAS, capitalized terms used but not otherwise defined herein shall
have the meaning specified in the JV Technology Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. DEFINITIONS. Whenever used in this Agreement, unless the context
clearly requires otherwise, the following words and phrases shall have the
following meaning:
"Improvements" means any improvements, modifications, or
enhancements to the Technology.
"License Fees" means all amounts paid to Licensee pursuant to the
grant of sublicenses by Licensee with respect to sublicensing the right to
make or sell Products.
"Net Sales" means Licensee's gross revenues received from the sale
or license of software, less taxes, royalties payable to other than the
Licensor, shipping charges, quantity trade discounts and returns.
"Products" means any product(s) that is covered by one or more valid
claims in any patent wholly owned by Licensor, any software program(s)
developed or owned by Licensor and implemented using any of the Technology or
any Improvements, or any software products created in collaboration between
the parties.
2. GRANT. Licensor hereby grants Licensee a sole, perpetual, world-
wide, exclusive license to make, use and sublicense the Technology and any
Improvements thereto, and to make, use and sell products based on the
Technology and any Improvements thereto (collectively, the "License"). The
parties agree that the Licensee shall have the sole right to make, use, sell
and distribute products created or owned by Licensor or created in
collaboration between the parties.
2.1 SOURCE CODE. The parties agree that the Licensor and the
Licensee will not distribute the source code for the "Xchg" and "BizTokens"
software or any jointly developed product, and may only license such source
code with the prior written agreement of both parties.
2.2 ACCESS. Licensee will have full access to the source code for
the "Xchg" and "BizTalk" software, and may subsequently modify, extend,
rewrite and adapt such software as it sees fit for the requirements of the
Licensee's products.
3.1. LICENSOR ROYALTY. In consideration of the licenses granted
hereunder, Licensee agrees to pay Licensor a royalty (the "Licensor Royalty")
equal to:
3.1.1 Twenty percent (20%) of the Net Sales earned by Licensee,
for sales comprising a combination of (1) the sale or license of Products and
(2) any of the Licensee's suite of products, including software licensed from
third parties.
3.1.2 Eighty percent (80%) of the Net Sales earned by Licensee,
for sales composed solely of the sale or license of Products,.
3.2. VERSIONS OFFERED. Only limited evaluation Products may be used for
marketing and promotional purposes. Fully enabled versions of Products will
only be available to customers who have purchased licenses to use such
Products.
4. SALES TAXES. The amounts payable to Licensor and Licensee pursuant
to this Agreement are exclusive of any applicable sales taxes and the payor
(whether Licensor or Licensee) shall be responsible for payment of such taxes.
5. ROYALTY PAYMENTS. The Licensor Royalty and the Licensee Royalty
shall be calculated on a semi-annual calendar basis (the "Royalty Period") and
shall be payable no later than thirty (30) calendar days after the termination
of the preceding half calendar year, i.e. no later than twenty nine (29)
calendar days from the first day of July, and January of each year. For the
purposes of determining Royalty Periods, the first semi-annual calendar period
hereunder shall be an extended period commencing on the date hereof and ending
on July 30, 2000.
6. LICENSOR'S REPRESENTATIONS. Licensor covenants, represents and
warrants to Licensee as follows:
6.1 Licensor is a corporation duly organized, validly existing and
in good standing under the laws of the State of Maryland and is authorized to
do business in all jurisdictions where such authorization is necessary.
6.2 Licensor has full corporate power, authority, and legal right
to enter into this Agreement and this Agreement has been duly executed and
delivered by Licensor to Licensee and is a legal, valid and binding obligation
of Licensor, enforceable against Licensor in accordance with its terms.
6.3 Licensor is the sole owner of the Technology and has all legal
and beneficial title to the Technology free and clear of all encumbrances.
6.4 Licensor will use its best efforts to maintain all existing
patents and patent applications that Licensor owns in respect of the
Technology, at no charge to Licensee.
6.5 Licensor will, at the request of Licensee, continue to
undertake research and development to improve the Products and Technology.
6.6 Licensor will work with Licensee to develop the Technology and
will provide Licensee with guidance on technical matters at Licensee's
request.
6.7 Licensor will not assert, against Licensor, any claim that the
use or sublicense of any Technology or any manufacture, use, sale or
sublicense of any products relating to the Technology in accordance with this
Agreement infringes or violates any intellectual property rights of Licensor
now or hereafter existing.
7. LICENSEE'S REPRESENTATIONS. Licensee covenants, represents and
warrants to Licensor as follows:
7.1 Licensee is a corporation duly organized, validly existing and
in good standing under the laws of Colorado and is authorized to do business
in all jurisdictions where such authorization is necessary.
7.2 Licensee has full corporate power, authority, and legal right
to enter into this Agreement and this Agreement has been duly executed and
delivered by Licensee to Licensor and is a legal, valid and binding obligation
of Licensee, enforceable against Licensee in accordance with its terms.
7.3 Licensee shall make reasonable efforts to market and sell
Products based on the Technology and made available by Licensor.
8. PATENT PROTECTION. Licensor retains ownership over the Technology
licensed hereunder and the ability to file additional patent applications and
copyright applications in its developments, which shall form part of the
License. Licensor will, at the Licensee's written request, use its best
efforts to apply for and obtain registered patent and/or copyright protection
for the Technology and/or any Improvements thereto developed or owned by
Licensor. Where Licensee provides a written request that Licensor obtain such
protection or a written request that Licensee participate in such patent
and/or copyright protection, Licensee will pay for the cost of such efforts,
and may obtain reimbursement from Licensor for up to half of such costs.
Licensor hereby grants to Licensee a sole, perpetual, world-wide, exclusive
license to use the Improvements developed or owned by Licensor, to make, use
and sell products based on the Improvements and to sublicense same.
8.1 DEVELOPMENTS BY THE PARTIES. Any developments that the parties
jointly develop will be jointly owned and subject to the royalty provisions of
Section 3.1 and 3.2. Each party must notify the other party of any intentions
to file any patent applications or copyright applications on such joint
developments at least thirty calendar days before making such filings, and
provide the other party with the opportunity to participate and benefit
equally in the rights sought in such applications and registrations and
patents issuing therefrom.
9. CONFIDENTIALITY. Each party hereby acknowledges that trade secrets
and confidential information contained herein or obtained hereby or otherwise
disclosed to the other party have been disclosed or made available in the
strictest confidence and, accordingly, each party hereby covenants and agrees
with the other that they will not disclose or use such information except in
order to fulfill the terms of this Agreement. This Section 9 shall survive
for three (3) years following any termination of this Agreement.
10. TERM AND TERMINATION. This Agreement shall continue until
terminated in accordance with this Section 10. Either party may terminate
this Agreement with written notice of termination if the other party is in
breach of any covenant hereunder on its part and such other party fails to
cure the breach within sixty (60) days of receiving written notice to cure
such breach. Termination under this Section shall be effective from the date
written notice is delivered to such other party or the date specified in the
written notice of termination, whichever is later. Neither party shall be
liable to the other for damages of any sort resulting solely from such party
terminating this Agreement in accordance with its terms.
11. NOTICES. Any notice required or permitted to be given under this
Agreement shall be made in writing and shall be deemed to have been given if
it is in writing and is delivered in person, sent by same day or overnight
courier, or mailed by certified or registered mail, return receipt requested,
postage prepaid, addressed to the party at its address set forth first above
or at such other address as such party may subsequently furnish to the other
party by notice hereunder. Notices will be deemed effective on the date of
delivery in the case of personal delivery, or two (2) business days after
mailing or courier pickup.
12. GOVERNING LAW. This Agreement shall be construed, enforced,
performed and in all respects governed by and in accordance with the laws of
Delaware. The parties hereto submit and attorn to the exclusive jurisdiction
of the courts of the Delaware.
13. WAIVER. No waiver by any party of any term or condition of this
Agreement or any breach thereof shall be made effective unless made in writing
and signed by the party purporting to give the waiver. No waiver by any party
of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term
or condition of this Agreement on any future occasion.
14. SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable shall be deemed automatically amended so that it is
enforceable to the maximum extent permissible under the laws of that
jurisdiction without invalidating the remaining provisions hereof.
15. SPECIFIC ENFORCEMENT. Each party acknowledges that money damages
would be inadequate for any breach of the provisions of this Agreement. Upon
a breach or threatened breach of the terms, covenants or conditions of this
Agreement by any of the parties hereto, the other parties shall, in addition
to all other remedies, be entitled to a temporary or permanent injunction,
without showing any actual damage, or a decree for specific performance, in
accordance with the provisions hereof.
16. ARBITRATION. Any unresolved dispute arising out of or in connection
with this Agreement or any breach thereof shall be referred to and finally
resolved by arbitration under the rules of the American Arbitration
Association ("AAA") then in effect. Unless the parties otherwise agree in
writing, all arbitration proceedings hereunder shall be conducted by a three
(3) person arbitration panel, with one arbitrator selected by Webber, one
arbitrator selected by XML-Global and a third arbitrator selected the by the
two arbitrators selected by Webber and XML-Global. If XML-Global or Webber
fails to appoint its arbitrator within sixty (60) days after receipt of notice
of the appointment by the other of its arbitrator, or if the arbitrators fail
to appoint a third, then the third arbitrator shall be appointed by the AAA.
All arbitrators shall be neutral, independent, disinterested, unbiased
arbitrators, bound by the Rules of Ethics of the ABA or AAA for neutral
arbitrators, and none shall have ex parte communications with parties. Each
arbitration shall be conducted at a location selected by the arbitrators or,
if no location can be agreed to by the arbitrators, at a location selected by
the AAA. In each arbitration: (a) on any issue where the relevant information
is in the possession of one party and another party has the burden of proof,
the party having the information shall yield such discovery as is appropriate
to ensure a fair determination of the issue; (b) oral discovery depositions,
interrogatories and requests for admissions, as well as examinations of
witnesses by the parties and the arbitrators shall be permitted; (c) a written
transcript of all hearings shall be made and furnished to the parties at a
cost borne equally amongst the parties; (d) evidence, arguments and
submissions shall be held in confidence by the parties, their counsel and the
arbitrators; and (e) the parties agree that exclusion of evidence by the
arbitrators on the grounds of irrelevance, redundance, or prejudice beyond its
probative value shall not be grounds of failure to confirm and enforce an
award arising from such arbitration. The arbitrators shall not have the
authority to add to, detract from, or modify any provision hereof nor to award
punitive damages to any injured party. A decision by a majority of the
arbitration panel shall be final and binding. It is agreed by the parties
that the arbitrators shall render an award in any arbitration within sixty
(60) days of the close of evidence or any post-evidence briefing argument.
The language of any arbitration shall be English. The prevailing party in any
arbitration or legal action arising out of or related to this Agreement shall
be entitled, in addition to any other rights and remedies it may have, to
reimbursement for its expenses incurred in such arbitration or action,
including court costs and reasonable lawyer's fees. Judgment may be entered
on the arbitrators' award in any court having jurisdiction. Notwithstanding
the foregoing, the parties shall be entitled to seek injunctive or other
equitable relief from any court of competent jurisdiction, without the need to
resort to arbitration.
17. FURTHER ASSURANCES. Each of the parties shall execute all further
documents and instruments and do all further and other things as may be
necessary to implement and carry out the terms of this Agreement.
18. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the parties and their respective successors and
permitted assigns. Neither party may assign its interests hereunder without
the prior written consent of the other party.
19. INDEPENDENT PARTIES. The relationship between the parties is that of
independent contractors.
20. HEADINGS AND PLURALS. The headings herein have been inserted as a
matter of convenience only and in no way define, limit or enlarge the scope or
meaning of this Agreement or any of its provisions. Unless the context
clearly indicates otherwise, where appropriate the singular shall include the
plural and vice versa, to the extent necessary to give the terms defined
herein and/or the terms otherwise used in this Agreement their proper
meanings.
21. FACSIMILE TRANSMISSION. The parties agree that this Agreement may
be entered into by a party by means of facsimile transmission and, in such an
event, the same shall constitute a legal and binding obligation in the same
manner as if an originally executed version hereof had been delivered by such
party to the other party.
22. ENTIRE AGREEMENT. This Agreement and those documents expressly
referred to herein embody the entire agreement and understanding between the
parties concerning the subject matter hereof and supersede all prior
understandings, communications and agreements between the parties, written or
oral, with respect to the subject matter hereof, and all past courses of
dealing or industry custom. This Agreement may only be amended, supplemented
or modified in a written instrument duly executed by or on behalf of each
party hereto. Time is of the essence in this Agreement and for each and every
term and condition hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed.
DATAXCHG, INC. XML-GLOBAL TECHNOLOGIES, INC.
a Delaware corporation a Colorado corporation
By:_______________________________ By:_____________________________
(Authorized Signatory) (Authorized Signatory)
Name:_____________________________ Name: __________________________
Title:____________________________ Title:__________________________
Date:_____________________________ Date:___________________________
<PAGE>
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement") is made and entered into as
of this ____ day of ___________, 1999 by and between (i) DataXchg, Inc., a
Delaware corporation having a business address of
___________________________________ (the "Company") and (ii) David R.R.
Webber, a businessman having an address of 6811 Kenilworth Ave., Riverdale,
Maryland 20737 (the "Consultant").
WHEREAS, pursuant to that certain Joint Venture Technology Agreement (the
"JV Technology Agreement") of even date herewith by and among XML-Global
Technologies, Inc. ("XML-Global"), Gnosis Inc. ("Gnosis") and the Consultant,
the Consultant and Gnosis agreed to transfer the Technology (as defined in the
JV Technology Agreement) to the Company, and XML-Global agreed to transfer to
the Consultant common stock shares in the Company representing sixty percent
(60%) of all outstanding common stock shares of the Company on the Closing
Date of the JV Technology Agreement;
WHEREAS, it is a condition of the closing of the JV Technology Agreement
that the Company and the Consultant enter into this Agreement;
WHEREAS, the Company desires to engage the Consultant to perform certain
duties as shall be assigned to the Consultant by the officers of the Company
from time to time;
WHEREAS, the Consultant desires to be engaged by the Company;
WHEREAS, the Company and the Consultant wish to set out in writing the
terms and conditions of their agreements and understandings in respect of such
engagement; and
WHEREAS, capitalized terms used but not otherwise defined herein shall
have the meaning specified in the JV Technology Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. ENGAGEMENT. The Consultant shall undertake and assume the
responsibility of performing for the Company such duties as shall be assigned
from time to time to the Consultant by the officers of the Company. The
Consultant covenants and agrees that, at all times during the term of this
Agreement, the Consultant shall devote such amount of the Consultant's time as
shall be required for the Consultant to perform promptly, efficiently and
professionally the duties assigned to the Consultant by the officers of the
Company. The Consultant covenants and agrees not to directly or indirectly
engage or participate in any activities at any time during the term of this
Agreement in conflict with the best interests of the Company.
2. TERM. The term of this Agreement shall, subject to earlier
termination in accordance with the terms herein, be for five years commencing
as of the date hereof (the "Term").
3. COMPENSATION. During the Term hereof, as and for compensation for
the services to be rendered for or on behalf of the Company by the Consultant
hereunder, and subject to compliance by the Consultant with all of the
Consultant's representations, covenants and agreements set forth in this
Agreement, the Company shall pay the Consultant for expenses incurred pursuant
to Section 4. Neither party shall charge the other party for services rendered
under this Agreement. During the Term, the Company shall not be obligated,
under any circumstances, to pay for, or keep in effect, any hospitalization,
health, life or other insurance for the benefit of the Consultant.
4. EXPENSES INCURRED. During the Term, the Company shall pay or
promptly reimburse the Consultant for all reasonable travel, telephone and
other business expenses paid or incurred by the Consultant in connection with
the performance of the Consultant's duties hereunder (which expenses must be
pre-approved by the Company), upon presentation of expense statements or other
reasonable evidence of expenses.
5. NONCOMPETITION. The Consultant covenants and agrees that during the
period commencing as of the date hereof and ending on such date which is two
(2) years following the expiration of the Term hereof (the "Covenant Period"),
the Consultant shall not engage in or carry on, directly or indirectly, either
for himself, through a relative or as a member of a partnership or as an
executive, employee, officer, or director of a corporation (other than the
Company or a subsidiary or affiliate of the Company) or as an agent, associate
or consultant of any person, partnership or corporation (other than the
Company or a subsidiary or affiliate of the Company) any business in XML/EDI
or business-to-business (B2B) e-commerce solutions without the Company's
express written consent which the Company will not withhold unless there
exists a reasonable expectation of competitive harm.
6. NON-DISCLOSURE OF INFORMATION.
6.1 For the purposes of this Agreement, "Confidential Information"
means all trade secrets and confidential information pertaining to the
Company's business, including, without limitation, any and all formulae, data,
algorithms, processes, techniques, developments, research, designs, technical
information, business information, documentation in any form or media,
drawings, diagrams, software (including source codes, object codes,
executables, databases, scripts, test data and test results), works in
progress, and any other information, whether in oral, written, graphic,
electronic, optical, or digital form, or any other form, that (i) is in the
Company's possession or is used in the business of the Company, and (ii)
derives actual or potential value from not being generally known or
ascertainable.
6.2 The Consultant acknowledges that in the course of the
Consultant's services to the Company, the Consultant shall or may be making
use of, having access to and/or adding to Confidential Information which is of
a special and unique nature and value to the Company. The Consultant
covenants and agrees that the Consultant shall not, except with the prior
written consent of the Company, at any time during the Consultant's engagement
or following the termination or non-renewal of the Consultant's engagement by
the Company hereunder, for any reason whatsoever, directly or indirectly,
disclose, report, publish, transfer, make available, or use, for any purpose
whatsoever, any of such Confidential Information. Disclosure of any such
Confidential Information of the Company shall not be prohibited if required by
law. The Consultant shall notify the Company promptly of any legal proceeding
that would require disclosure of any Confidential Information so that the
Company may seek an appropriate protective order prior to such disclosure.
7. DEVELOPMENTS. The Consultant covenants and agrees to promptly and
fully disclose to the Company all inventions, discoveries, designs,
developments, modifications, improvements, derivative works, computer programs
in any form, databases, scripts, electronic documents, algorithms, trade
secrets, products, methods, and other items in any form that the Consultant,
solely or jointly, conceives, modifies, enhances, develops or reduces to
practice during the Term, whether or not developed in whole or in part prior
to the execution of this Agreement or outside of Company time, which:
7.1 relate to the Consultant's activities for the Company;
7.2 are suggested by the Consultant's services for which he is
engaged;
7.3 are related, directly or indirectly, to the business, research
or development of the Company; or
7.4 arise as a result of using the resources, facilities,
proprietary information or Confidential Information of the Company,
(collectively, the "Works").
8. ACKNOWLEDGEMENT AND ASSIGNMENT. The Consultant acknowledges that all
Works are works made in the course of or as a result of the Consultant's
services to the Company. The Consultant shall hold in trust for the sole
benefit of the Company, and shall assign and hereby assigns exclusively and
completely to the Company all of the Consultant's legal and beneficial right,
title and interest in and to all Works which involve any contribution from the
Consultant and all Intellectual Property Rights in such Works. The Consultant
hereby waives and shall waive any and all moral rights arising in the Works
and all copyrights therein.
9. ASSISTANCE TO COMPANY. The Consultant shall, at the Company's
request, assist with and execute all necessary instruments, applications,
declarations, verifications, responses, submissions, assignments and do all
other things reasonably requested by the Company, without charge to the
Company but at the Company's expense, to enable the Company or the Company's
nominees to apply for, acquire, prosecute, perfect, enforce and/or maintain
any and all right, title and interest in and to the Works and all Intellectual
Property Rights therein in any country.
10. WORK MADE FOR HIRE. If any one or more of the Works are protectable
by copyright and in any way to fall within the definition of "work made for
hire", as such term is defined in 17 U.S.C. Section101, such Works shall be
considered a "work made for hire", the copyright of which shall be owned
solely, completely and exclusively by the Company. If any one or more of the
Works are entitled to copyright protection and are not considered to be
included in the categories of works covered by the "work made for hire"
definition contained in 17 U.S.C. Section 101, the Consultant shall, by virtue
of this Agreement, assign and transfer completely and exclusively the
copyright in such Works to the Company.
11. RETURN OF MATERIALS. All notes, data, tapes, diskettes, reference
items, sketches, drawings, memoranda, papers, documents, manuals, software
tools, computer-readable codes in any form, records, and other materials in
any form and on any media, in any way relating to any of the information
disclosed, generated or obtained pursuant to this Agreement (including,
without limitation, any Confidential Information or Works) or pursuant to any
Company activities shall belong exclusively to the Company (collectively, the
"Company Materials") and the Consultant agrees to turn over to the Company all
originals and copies of such Company Materials in the Consultant's possession
or control at the request of the Company or, in the absence of such a request,
upon the termination of the Consultant's engagement with the Company.
12. NON-SOLICITATION. Except if Consultant is acting solely for the
benefit of the Company and the Company's best interests, the Consultant will
not, while engaged with the Company and for a period of two (2) years
thereafter, solicit or attempt to solicit business for any reason, directly or
indirectly, from any customer or client of the Company or any affiliate or
subsidiary of the Company.
13. NON-HIRING. While engaged with the Company and for a period of two
(2) years thereafter, the Consultant will not induce or attempt to influence
directly or indirectly any employee of the Company to terminate his or her
employment with the Company or to work for the Consultant or any other person
or entity.
14. REASONABLENESS OF RESTRICTIONS. THE CONSULTANT HAS CAREFULLY READ
AND CONSIDERED THE PROVISIONS OF SECTIONS 5, 12, 13 AND 15 HEREOF AND, HAVING
DONE SO, AGREES THAT THE RESTRICTIONS SET FORTH ARE FAIR AND REASONABLE AND
ARE REASONABLY REQUIRED FOR THE PROTECTION OF THE INTERESTS OF THE COMPANY,
AND ITS OFFICERS, DIRECTORS, STOCKHOLDERS AND EMPLOYEES.
15. SEVERABILITY. If, in any legal proceeding, the court or tribunal
refuses to enforce all of the separate covenants contained in Sections 5, 12,
and 13 of this Agreement because the time limit is excessive, it is expressly
understood and agreed between the parties hereto that for the purposes of such
proceeding such time limit shall be deemed reduced to the extent necessary to
permit enforcement of such covenants. If, in any legal proceeding, the court
or tribunal refuses to enforce all of the covenants contained in Sections 5,
12, and 13 because they are more extensive (whether as to geographic area,
scope of business or otherwise) than necessary to protect the business and
goodwill of the Company, it is expressly understood and agreed between the
parties hereto that for purposes of such proceeding the geographic area, scope
of business or other aspect shall be deemed reduced to the extent necessary to
permit enforcement of such covenants.
16. TERMINATION. This Agreement may only be terminated by a party in
accordance with the express terms hereof. Either party may terminate this
Agreement with written notice of termination if the other party is in breach
of any covenant hereunder on its part and such other party fails to cure the
breach within sixty (60) days of receiving written notice to cure such breach.
Termination under this Section shall be effective from the date written notice
is delivered to such other party or the date specified in the written notice
of termination, whichever is later. Upon termination of this Agreement, the
Consultant shall return to the Company all Company Materials and shall cease
all use of such Company Materials, Works and Confidential Information.
17. SURVIVAL. In the event of termination or expiration of this
Agreement for any reason, Sections 6, 9, 11, and 16 together with all
provisions of this Agreement necessary the interpretation and enforcement of
same (to the extent such provisions are necessary for such interpretation
and/or enforcement) shall survive this Agreement. Neither party shall be
liable to the other for damages of any sort resulting solely from such party
terminating this Agreement in accordance with its terms. This Section 17
shall not limit in any covenant or agreement of the parties which by its terms
contemplates performance after termination, which shall survive for the
respective periods specified in such covenant or agreement.
18. NOTICES. Any notice required or permitted to be given under this
Agreement shall be made in writing and shall be deemed to have been given if
it is in writing and is delivered in person, sent by same day or overnight
courier, or mailed by certified or registered mail, return receipt requested,
postage prepaid, addressed to the party at its address set forth first above
or at such other address as such party may subsequently furnish to the other
party by notice hereunder. Notices will be deemed effective on the date of
delivery in the case of personal delivery, or two (2) business days after
mailing or courier pickup.
19. GOVERNING LAW. This Agreement shall be construed, enforced,
performed and in all respects governed by and in accordance with the laws of
the State of Delaware. The parties hereto submit and attorn to the exclusive
jurisdiction of the courts of the State of Delaware.
20. SEVERABILITY. Subject to Section 15, any provision of this
Agreement which is prohibited or unenforceable shall be deemed automatically
amended so that it is enforceable to the maximum extent permissible under the
laws of that jurisdiction without invalidating the remaining provisions
hereof.
21. SPECIFIC ENFORCEMENT. Each party acknowledges that money damages
would be inadequate for any breach of the provisions of this Agreement. Upon
a breach or threatened breach of the terms, covenants or conditions of this
Agreement by any of the parties hereto, the other parties shall, in addition
to all other remedies, be entitled to a temporary or permanent injunction,
without showing any actual damage, or a decree for specific performance, in
accordance with the provisions hereof.
23. FURTHER ASSURANCES. Each of the parties shall execute all further
documents and instruments and do all further and other things as may be
necessary to implement and carry out the terms of this Agreement.
24. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the parties and their respective successors and
permitted assigns. The Consultant may not make any assignment of this
Agreement or any interest herein without the prior written consent of the
Company. The Company may assign its interests hereunder without the prior
written consent of the Consultant.
25. INDEPENDENT PARTIES. The relationship between the Consultant and the
Company is that of independent contractors, and not that of an
agent/principal, employee/employer, or co-venturers. In addition, it is
understood and agreed by the parties hereto that the Consultant shall not be
treated as an employee for U.S. federal, state and local tax purposes. The
Consultant hereby represents and warrants to the Company that the Consultant
is an independent contractor for U.S. federal, state and local tax purposes.
The Consultant covenants and agrees to pay any and all U.S. federal, state and
local taxes required to be paid by an independent contractor.
26. HEADINGS AND PLURALS. The headings herein have been inserted as a
matter of convenience only and in no way define, limit or enlarge the scope or
meaning of this Agreement or any of its provisions. Unless the context
clearly indicates otherwise, where appropriate the singular shall include the
plural and vice versa, to the extent necessary to give the terms defined
herein and/or the terms otherwise used in this Agreement their proper
meanings.
27. FACSIMILE TRANSMISSION. The parties agree that this Agreement may
be entered into by a party by means of facsimile transmission and, in such an
event, the same shall constitute a legal and binding obligation in the same
manner as if an originally executed version hereof had been delivered by such
party to the other party.
28. ENTIRE AGREEMENT. This Agreement and those documents expressly
referred to herein embody the entire agreement and understanding between the
parties concerning the engagement of the Consultant's services which are the
subject matter hereof and supersede all prior understandings, communications
and agreements between the parties, written or oral, with respect to the
subject matter hereof, and all past courses of dealing or industry custom.
This Agreement may only be amended, supplemented or modified in a written
instrument duly executed by or on behalf of each party hereto. Time is of the
essence in this Agreement and for each and every term and condition hereof.
No waiver by any party of any term or condition of this Agreement or any
breach thereof shall be made effective unless made in writing and signed by
the party purporting to give the waiver. No waiver by any party of any term
or condition of this Agreement, in any one or more instances, shall be deemed
to be or construed as a waiver of the same or any other term or condition of
this Agreement on any future occasion.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed.
DATAXCHG, INC.
a Delaware corporation
By:______________________________ _________________________________
(Authorized Signatory) DAVID R.R. WEBBER
Name:____________________________ Date:________________________
Title:___________________________
Date:____________________________
<PAGE>
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (this "Agreement") is made and entered into as of
this ____ day of ____________, 1999 by and between (i) DataXchg, Inc., a
Delaware corporation having a business address of ______________________ (the
"Licensor") and (ii) XML-Global Technologies, Inc., a Colorado corporation a
Colorado corporation having a place of business at 7345 East Peakview,
Englewood, Colorado 80111 (the "Licensee").
WHEREAS, pursuant to that certain Joint Venture Technology Agreement (the
"JV Technology Agreement") of even date herewith by and among XML-Global
Technologies, Inc. ("XML-Global"), Gnosis Inc. ("Gnosis") and David R.R.
Webber ("Webber"), Webber and Gnosis agreed to transfer the Technology (as
defined in the JV Technology Agreement) to Licensor, and Licensee agreed to
transfer to Webber common stock shares in the Licensor representing sixty
percent (60%) of all outstanding common stock shares of the Licensor on the
Closing Date of the JV Technology Agreement;
WHEREAS, it is a condition of the closing of the JV Technology Agreement
that Licensor and Licensee enter into this Agreement;
WHEREAS, Licensor desires to grant Licensee a license to the Technology;
WHEREAS, Licensee desires a license to the Technology from Licensor;
WHEREAS, Licensor and Licensee wish to set out in writing the terms and
conditions of their agreements and understandings in respect of such license;
and
WHEREAS, capitalized terms used but not otherwise defined herein shall
have the meaning specified in the JV Technology Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Definitions. Whenever used in this Agreement, unless the context
clearly requires otherwise, the following words and phrases shall have the
following meaning:
"Improvements" means any improvements, modifications, or
enhancements to the Technology.
"License Fees" means all amounts paid to Licensee pursuant to the
grant of sublicenses by Licensee with respect to sublicensing the right to
make or sell Products.
"Net Sales" means Licensee's gross revenues received from the sale
or license of software, less taxes, royalties payable to other than the
Licensor, shipping charges, quantity trade discounts and returns.
"Products" means any product(s) that is covered by one or more valid
claims in any patent wholly owned by Licensor, any software program(s)
developed or owned by Licensor and implemented using any of the Technology or
any Improvements, or any software products created in collaboration between
the parties.
2. Grant. Licensor hereby grants Licensee a sole, perpetual, world-
wide, exclusive license to make, use and sublicense the Technology and any
Improvements thereto, and to make, use and sell products based on the
Technology and any Improvements thereto (collectively, the "License"). The
parties agree that the Licensee shall have the sole right to make, use, sell
and distribute products created or owned by Licensor or created in
collaboration between the parties.
2.1 Source Code. The parties agree that the Licensor and the
Licensee will not distribute the source code for the "Xchg" and "BizTokens"
software or any jointly developed product, and may only license such source
code with the prior written agreement of both parties.
2.2 Access. Licensee will have full access to the source code for
the "Xchg" and "BizTalk" software, and may subsequently modify, extend,
rewrite and adapt such software as it sees fit for the requirements of the
Licensee's products.
3.1. Licensor Royalty. In consideration of the licenses granted
hereunder, Licensee agrees to pay Licensor a royalty (the "Licensor Royalty")
equal to:
3.1.1 Twenty percent (20%) of the Net Sales earned by Licensee,
for sales comprising a combination of (1) the sale or license of Products and
(2) any of the Licensee's suite of products, including software licensed from
third parties.
3.1.2 Eighty percent (80%) of the Net Sales earned by Licensee,
for sales composed solely of the sale or license of Products,.
3.2. Versions Offered. Only limited evaluation Products may be used for
marketing and promotional purposes. Fully enabled versions of Products will
only be available to customers who have purchased licenses to use such
Products.
4. Sales Taxes. The amounts payable to Licensor and Licensee pursuant
to this Agreement are exclusive of any applicable sales taxes and the payor
(whether Licensor or Licensee) shall be responsible for payment of such taxes.
5. Royalty Payments. The Licensor Royalty and the Licensee Royalty
shall be calculated on a semi-annual calendar basis (the "Royalty Period") and
shall be payable no later than thirty (30) calendar days after the termination
of the preceding half calendar year, i.e. no later than twenty nine (29)
calendar days from the first day of July, and January of each year. For the
purposes of determining Royalty Periods, the first semi-annual calendar period
hereunder shall be an extended period commencing on the date hereof and ending
on July 30, 2000.
6. Licensor's Representations. Licensor covenants, represents and
warrants to Licensee as follows:
6.1 Licensor is a corporation duly organized, validly existing and
in good standing under the laws of the State of Maryland and is authorized to
do business in all jurisdictions where such authorization is necessary.
6.2 Licensor has full corporate power, authority, and legal right
to enter into this Agreement and this Agreement has been duly executed and
delivered by Licensor to Licensee and is a legal, valid and binding obligation
of Licensor, enforceable against Licensor in accordance with its terms.
6.3 Licensor is the sole owner of the Technology and has all legal
and beneficial title to the Technology free and clear of all encumbrances.
6.4 Licensor will use its best efforts to maintain all existing
patents and patent applications that Licensor owns in respect of the
Technology, at no charge to Licensee.
6.5 Licensor will, at the request of Licensee, continue to
undertake research and development to improve the Products and Technology.
6.6 Licensor will work with Licensee to develop the Technology and
will provide Licensee with guidance on technical matters at Licensee's
request.
6.7 Licensor will not assert, against Licensor, any claim that the
use or sublicense of any Technology or any manufacture, use, sale or
sublicense of any products relating to the Technology in accordance with this
Agreement infringes or violates any intellectual property rights of Licensor
now or hereafter existing.
7. Licensee's Representations. Licensee covenants, represents and
warrants to Licensor as follows:
7.1 Licensee is a corporation duly organized, validly existing and
in good standing under the laws of Colorado and is authorized to do business
in all jurisdictions where such authorization is necessary.
7.2 Licensee has full corporate power, authority, and legal right
to enter into this Agreement and this Agreement has been duly executed and
delivered by Licensee to Licensor and is a legal, valid and binding obligation
of Licensee, enforceable against Licensee in accordance with its terms.
7.3 Licensee shall make reasonable efforts to market and sell
Products based on the Technology and made available by Licensor.
8. Patent Protection. Licensor retains ownership over the Technology
licensed hereunder and the ability to file additional patent applications and
copyright applications in its developments, which shall form part of the
License. Licensor will, at the Licensee's written request, use its best
efforts to apply for and obtain registered patent and/or copyright protection
for the Technology and/or any Improvements thereto developed or owned by
Licensor. Where Licensee provides a written request that Licensor obtain such
protection or a written request that Licensee participate in such patent
and/or copyright protection, Licensee will pay for the cost of such efforts,
and may obtain reimbursement from Licensor for up to half of such costs.
Licensor hereby grants to Licensee a sole, perpetual, world-wide, exclusive
license to use the Improvements developed or owned by Licensor, to make, use
and sell products based on the Improvements and to sublicense same.
8.1 Developments by the Parties. Any developments that the parties
jointly develop will be jointly owned and subject to the royalty provisions of
Section 3.1 and 3.2. Each party must notify the other party of any intentions
to file any patent applications or copyright applications on such joint
developments at least thirty calendar days before making such filings, and
provide the other party with the opportunity to participate and benefit
equally in the rights sought in such applications and registrations and
patents issuing therefrom.
9. Confidentiality. Each party hereby acknowledges that trade secrets
and confidential information contained herein or obtained hereby or otherwise
disclosed to the other party have been disclosed or made available in the
strictest confidence and, accordingly, each party hereby covenants and agrees
with the other that they will not disclose or use such information except in
order to fulfill the terms of this Agreement. This Section 9 shall survive
for three (3) years following any termination of this Agreement.
10. Term and Termination. This Agreement shall continue until
terminated in accordance with this Section 10. Either party may terminate
this Agreement with written notice of termination if the other party is in
breach of any covenant hereunder on its part and such other party fails to
cure the breach within sixty (60) days of receiving written notice to cure
such breach. Termination under this Section shall be effective from the date
written notice is delivered to such other party or the date specified in the
written notice of termination, whichever is later. Neither party shall be
liable to the other for damages of any sort resulting solely from such party
terminating this Agreement in accordance with its terms.
11. Notices. Any notice required or permitted to be given under this
Agreement shall be made in writing and shall be deemed to have been given if
it is in writing and is delivered in person, sent by same day or overnight
courier, or mailed by certified or registered mail, return receipt requested,
postage prepaid, addressed to the party at its address set forth first above
or at such other address as such party may subsequently furnish to the other
party by notice hereunder. Notices will be deemed effective on the date of
delivery in the case of personal delivery, or two (2) business days after
mailing or courier pickup.
12. Governing Law. This Agreement shall be construed, enforced,
performed and in all respects governed by and in accordance with the laws of
Delaware. The parties hereto submit and attorn to the exclusive jurisdiction
of the courts of the Delaware.
13. Waiver. No waiver by any party of any term or condition of this
Agreement or any breach thereof shall be made effective unless made in writing
and signed by the party purporting to give the waiver. No waiver by any party
of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term
or condition of this Agreement on any future occasion.
14. Severability. Any provision of this Agreement which is prohibited
or unenforceable shall be deemed automatically amended so that it is
enforceable to the maximum extent permissible under the laws of that
jurisdiction without invalidating the remaining provisions hereof.
15. Specific Enforcement. Each party acknowledges that money damages
would be inadequate for any breach of the provisions of this Agreement. Upon
a breach or threatened breach of the terms, covenants or conditions of this
Agreement by any of the parties hereto, the other parties shall, in addition
to all other remedies, be entitled to a temporary or permanent injunction,
without showing any actual damage, or a decree for specific performance, in
accordance with the provisions hereof.
16. Arbitration. Any unresolved dispute arising out of or in connection
with this Agreement or any breach thereof shall be referred to and finally
resolved by arbitration under the rules of the American Arbitration
Association ("AAA") then in effect. Unless the parties otherwise agree in
writing, all arbitration proceedings hereunder shall be conducted by a three
(3) person arbitration panel, with one arbitrator selected by Webber, one
arbitrator selected by XML-Global and a third arbitrator selected the by the
two arbitrators selected by Webber and XML-Global. If XML-Global or Webber
fails to appoint its arbitrator within sixty (60) days after receipt of notice
of the appointment by the other of its arbitrator, or if the arbitrators fail
to appoint a third, then the third arbitrator shall be appointed by the AAA.
All arbitrators shall be neutral, independent, disinterested, unbiased
arbitrators, bound by the Rules of Ethics of the ABA or AAA for neutral
arbitrators, and none shall have ex parte communications with parties. Each
arbitration shall be conducted at a location selected by the arbitrators or,
if no location can be agreed to by the arbitrators, at a location selected by
the AAA. In each arbitration: (a) on any issue where the relevant information
is in the possession of one party and another party has the burden of proof,
the party having the information shall yield such discovery as is appropriate
to ensure a fair determination of the issue; (b) oral discovery depositions,
interrogatories and requests for admissions, as well as examinations of
witnesses by the parties and the arbitrators shall be permitted; (c) a written
transcript of all hearings shall be made and furnished to the parties at a
cost borne equally amongst the parties; (d) evidence, arguments and
submissions shall be held in confidence by the parties, their counsel and the
arbitrators; and (e) the parties agree that exclusion of evidence by the
arbitrators on the grounds of irrelevance, redundance, or prejudice beyond its
probative value shall not be grounds of failure to confirm and enforce an
award arising from such arbitration. The arbitrators shall not have the
authority to add to, detract from, or modify any provision hereof nor to award
punitive damages to any injured party. A decision by a majority of the
arbitration panel shall be final and binding. It is agreed by the parties
that the arbitrators shall render an award in any arbitration within sixty
(60) days of the close of evidence or any post-evidence briefing argument.
The language of any arbitration shall be English. The prevailing party in any
arbitration or legal action arising out of or related to this Agreement shall
be entitled, in addition to any other rights and remedies it may have, to
reimbursement for its expenses incurred in such arbitration or action,
including court costs and reasonable lawyer's fees. Judgment may be entered
on the arbitrators' award in any court having jurisdiction. Notwithstanding
the foregoing, the parties shall be entitled to seek injunctive or other
equitable relief from any court of competent jurisdiction, without the need to
resort to arbitration.
17. Further Assurances. Each of the parties shall execute all further
documents and instruments and do all further and other things as may be
necessary to implement and carry out the terms of this Agreement.
18. Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the parties and their respective successors and
permitted assigns. Neither party may assign its interests hereunder without
the prior written consent of the other party.
19. Independent Parties. The relationship between the parties is that of
independent contractors.
20. Headings and Plurals. The headings herein have been inserted as a
matter of convenience only and in no way define, limit or enlarge the scope or
meaning of this Agreement or any of its provisions. Unless the context
clearly indicates otherwise, where appropriate the singular shall include the
plural and vice versa, to the extent necessary to give the terms defined
herein and/or the terms otherwise used in this Agreement their proper
meanings.
21. Facsimile Transmission. The parties agree that this Agreement may
be entered into by a party by means of facsimile transmission and, in such an
event, the same shall constitute a legal and binding obligation in the same
manner as if an originally executed version hereof had been delivered by such
party to the other party.
22. Entire Agreement. This Agreement and those documents expressly
referred to herein embody the entire agreement and understanding between the
parties concerning the subject matter hereof and supersede all prior
understandings, communications and agreements between the parties, written or
oral, with respect to the subject matter hereof, and all past courses of
dealing or industry custom. This Agreement may only be amended, supplemented
or modified in a written instrument duly executed by or on behalf of each
party hereto. Time is of the essence in this Agreement and for each and every
term and condition hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed.
DATAXCHG, INC., XML-GLOBAL TECHNOLOGIES, INC.,
a Delaware corporation a Colorado corporation
By: By:
------------------------- ----------------------------
(Authorized Signatory) (Authorized Signatory)
Name: Name:
------------------------- ----------------------------
Title: Title:
------------------------- ----------------------------
Date: Date:
------------------------- ----------------------------
<PAGE>
DATAXCHG, INC.
PRE-INCORPORATION AGREEMENT
THIS PRE-INCORPORATION AGREEMENT is made and entered into this ____ day
of October, 1999, by and among each of the undersigned (sometimes individually
referred to as a "Party" or collectively referred to as the "Parties"), whose
principal places of business are set forth below their respective names.
RECITALS
WHEREAS, the Parties have collectively agreed to form a for-profit
corporation (the "Corporation" or the "Company") to be organized under the
laws of the State of Delaware for the purpose of operating a business; and
WHEREAS, the Parties have collectively agreed to subscribe for the stock
of the Corporation as set forth in this Agreement; and
WHEREAS, following the formation of the Corporation, the Parties have
agreed that the officers and directors of the Corporation shall be elected in
accordance with, and the capitalization and operation of the Corporation shall
be governed by, the terms and provisions of this Agreement and the
Stockholders Agreement referenced herein.
NOW THEREFORE, in consideration of the foregoing, and of the mutual
covenants and agreements contained herein, the Parties agree as follows:
1. Name. The name of the Corporation shall be DataXchg, Inc.
2. Formation - Articles of Incorporation and Bylaws. The Parties shall
forthwith execute and file with the Delaware Secretary of State, or cause to
be executed and filed with the Colorado Secretary of State, articles of
incorporation in the form annexed to this Agreement as Exhibit "A"
("Articles"), which Articles shall be filed under and in accordance with the
laws of the State of Delaware. After the incorporation of the Corporation, the
Parties shall cause the bylaws annexed hereto as Exhibit "B" to be adopted as
and for the bylaws of the Corporation.
3. Purposes. The purpose for which the Corporation is to be organized
shall be to transact any other lawful business for which corporations may be
organized under the laws of the State of Delaware.
4. Capital Stock. The total number of shares of capital stock which the
Corporation shall have authority to issue shall be one hundred and fifty
million (150,000,000) shares of which one hundred million (100,000,000) shares
shall be designated common stock, having a par value of one tenth of one cent
($.001) each, and of which fifty million (50,000,000) shares shall be
designated preferred stock of the Corporation, having a par value of one cent
($.01) each.
5. Initial Stockholders. The undersigned shall be the initial, and
only, stockholders of the Corporation at the time it is formed. Initially,
shares of common stock shall be issued to the shareholders in such a manner as
to qualify for a tax-free reorganization under Section 351 of the Internal
Revenue Code of 1986, as amended. The initial issuance of shares of common
stock and the capital contributions of the parties are set forth below:
<TABLE>
<CAPTION>
Name Number of Shares Capital Contribution
- ---- ---------------- --------------------
<S> <C> <C>
David Webber 60 Technology transfer and
assignment
XML - Global Technologies,
Inc. 40 Services and working capital
</TABLE>
6. Technology Assignments. As his initial capital contribution to the
Company, Webber shall transfer and assign to the Company all of Webber's
right, title and interest in and to certain technology and software related to
certain U.S. Patent No. 5,909,570 and all software known as "Xchg" and
"BizTokens" as well as inventions relating to Template Mapping System for Data
Transmission. Webber agrees to execute and deliver such forms of Assignment
as the Company and its legal counsel may reasonably request in order to effect
such assignments.
7. License Agreement. Following the assignment of the Technology to
the Company, the Company will enter into a License Agreement with XML - Global
Technologies, Inc. ("XML") pursuant to which XML shall be granted the right to
further develop the Technology and to commercialize the distribution, sale and
marketing of products utilizing the Technology. Under the terms of the
License Agreement, XML shall pay to the Company a royalty equal to 20% of net
sales for sales comprising a combination of (i) the sale or license of
products utilizing the Technology, and (ii) any of XML's suite of products,
including software licensed from third parties, and a royalty of 80% of net
sales for sales composed solely of products utilizing the Technology assigned
to the Company by Webber.
8. Stockholders Agreement. The undersigned shall each agree as
follows:
a. Transfer of Common Stock.
i. Restrictions on Transfer. The parties agree that they
shall not sell, pledge or otherwise encumber their shares of common stock of
the Corporation without first obtaining the unanimous written consent of the
remaining stockholders of the Corporation, and except in strict accordance
with the provisions of this Agreement. If so pledged, transferred or
encumbered, such stock shall nevertheless remain subject to this Agreement in
the hands of the pledgee, donee or other holder and shall be treated as if
still owned by the transferring stockholder. The Corporation shall neither
transfer nor reissue any stock interest in the Corporation in violation of, or
without proof of compliance with, this Agreement.
ii. Remedies for Violation of Restrictions on Transfer. Any
transfer in violation of the restrictions on transfer outlined in this
Agreement will give rise to the remedies set forth in this Agreement,
including, but not limited to, the forced liquidation of the breaching
stockholder's ownership interest in the Corporation, the revocation of all
licenses and sub-licenses then existing between the Corporation and the
breaching stockholder, and the termination and reversion to the Corporation
of any rights the breaching stockholder may have in and/or to any products
offered by the breaching stockholder in furtherance of the business plan
contemplated by this Agreement and/or any other document or agreement
referenced herein.
iii. Certificate Endorsement. The Corporation and Parties
shall cause any certificates for shares of common stock of the Corporation
subject to this Agreement to be endorsed substantially as follows:
Notice of Restrictions on Disposition
This certificate and the shares of stock represented
thereby are subject to the provisions of a Stockholders
Agreement dated as of __________ ____, ______ (as it may
be amended from time-to-time) whereby the disposition in
any manner of such shares of stock or any interest therein
is restricted. A copy of said Agreement is on file at the
registered office of the Company where it may be
inspected.
b. Sale or Change in Control of Party. A stockholder of the
Corporation that is not a natural person may not, without the advance written
consent of the remaining stockholders of the Corporation, cause or permit an
ownership interest, direct or indirect, in itself to be disposed of such that,
after the disposition, that stockholder ceases to be controlled by the same
persons who control it as of the date of the stockholder's acquisition of
common stock of the Corporation. Any breach of this section will cause the
disposition of the ownership interest to be deemed a transfer in violation of
the restrictions on transfer outlined in this Agreement. Any transfer in
violation of the restrictions on transfer outlined in this Agreement will give
rise to the remedies set forth in this Agreement, including, but not limited
to, the forced liquidation of the breaching stockholder's ownership interest
in the Corporation, the revocation of all licenses and sub-licenses then
existing between the Corporation and the breaching stockholder, and the
termination and reversion to the Corporation of any rights the breaching
stockholder may have in and/or to any products offered by the breaching
stockholder in furtherance of the business plan contemplated by this Agreement
and/or any other document or agreement referenced herein.
c. Governance of Corporation.
i. Election of Directors. The initial Board of Directors of
the Corporation shall consist of Peter Shandro and David Webber who shall
serve until the next annual meeting of the stockholders of the Corporation and
until their successors have been duly elected and qualified. Thereafter, each
stockholder of the Corporation shall be entitled to nominate one (1) person to
serve as a director of the Corporation, and the stockholders of the
Corporation shall agree to vote their shares of common stock of the
Corporation in favor of the persons so nominated.
ii. Appointment of Officers. The president of the Corporation
shall initially be Peter Shandro and David Webber. All other officers of the
Corporation shall be appointed by a majority of the Board of Directors of the
Corporation.
iii. Voting. Each shareholder shall have a vote equal to the
number of shares of Corporation common stock it owns on shareholder matters
and each director of the Corporation shall have an equal vote on matters
decided by the Board of Directors.
9. Consulting Agreement. The Company shall enter into a Consulting
Agreement with Webber pursuant to which Webber shall provide additional
developmental services to the Company. Under the terms of the Consulting
Agreement, Webber shall not be entitled to receive any additional compensation
for such services, but shall be entitled to reimbursement for his out of
pocket expenses. The Consulting Agreement shall provide that any and all
inventions, discoveries, improvements, enhancements or upgrades developed by
Webber as a consultant to the Company shall constitute the proprietary rights
and technology of the Company.
10. Organizational Expenses. The Corporation shall pay its organization
expenses.
11. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
12. Assignment. No Party may assign, pledge or transfer this Agreement
or any interest herein without the prior written consent of the other Parties.
13. Waiver. No waiver of any provision of this Agreement is valid unless
it is in writing and signed by the person against whom it is charged.
14. Notices. Any and all notices between the parties provided for or
permitted under this Agreement or by law shall be in writing and shall be
deemed duly served when personally delivered to a Party, or, in lieu of such
personal service, when deposited in the United States Mail, certified, postage
prepaid, addressed to such Party at its principal place of business specified
in this Agreement, or at any address changed in this manner.
15. Attorney's Fees. Should any litigation be commenced between the
Parties concerning any provision of this Agreement or the rights and duties of
any Party in relation thereto, the Party or Parties prevailing in such
litigation shall be entitled, in addition to such other relief as may be
granted, to a reasonable sum as and for their attorney's fees in such
litigation which shall be determined by the Court in such litigation or in a
separate action brought for that purpose.
IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement
on the day and date first above written:
XML - GLOBAL TECHNOLOGIES, INC.
By:
----------------------------
---------------------------------
DAVID WEBBER
<PAGE>
LOCKUP AND VESTING AGREEMENT
THIS LOCKUP AND VESTING AGREEMENT is made and entered into effective as
of the 5th day of January, 2000, by and between XML - GLOBAL TECHNOLOGIES, a
Colorado corporation (the "Company"), formerly known as International Capital
Funding, Inc., and DUANE NICKULL, an employee of the Company (the "Employee").
WITNESSETH
WHEREAS, pursuant to a certain Agreement and Plan of Reorganization
between the Company and XML Technologies, Inc., a Nevada corporation, Employee
received certain shares of common stock of the Company, $.0001 par value (the
"Shares" or the "Common Stock") in exchange for shares of
common stock of XML Technologies, Inc. owned by Employee; and
WHEREAS, it was the understanding that Employee received the Shares
subject to Employee's agreement to continue in the employ of the Company in
accordance with the terms hereinbelow set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinbelow set forth, and in consideration of the sum of $10.00 paid by the
Company to Employee, the receipt and sufficiency whereof are hereby
acknowledged, the parties hereto agree as follows:
1. Employee covenants and agrees for himself, his successors and
assigns, that for so long as the Shares are subject to the provisions of this
Agreement, he will not offer to sell, sell, contract to sell or otherwise
dispose of, pledge, encumber, hypothecate or enter into any contract or
agreement providing for or contemplating the foregoing without the prior
written consent of the Company, which consent may be withheld at the Company's
sole discretion.
2. The Shares shall be subject to the restrictions contained in
paragraph 1 hereof until such time as the Shares, or any portion of them, have
become fully vested in Employee in accordance with the provisions hereof.
Subject to Employee continuing to be in the active and full time employ of the
Company on each of the vesting dates set forth below, the Shares shall be
deemed vested and released from the provisions of this Agreement, in the
numbers and on the dates set forth below:
<TABLE>
<CAPTION>
Number of Shares Vested Vesting Date
----------------------- ------------
<S> <C>
500,000 shares November 29, 2000
500,000 shares February 29, 2001
500,000 shares May 29, 2001
500,000 shares August 28, 2001
</TABLE>
3. If Employee's employment by the Company terminates for any reason,
including, but not limited to resignation by Employee or termination by the
Company with or without cause, then all or any part of the Shares subject to
this Agreement which have not yet vested in Employee pursuant to the
provisions of paragraph two (2) of this Agreement shall be forfeited by the
Employee and thereafter conditionally and irrevocable void.
4. Not withstanding the provisions of number 3 above the following
provisions shall apply:
a. In the event the employee's employment is terminated by the
Company with or without cause before November 29, 2000 then 500,000 shares
shall vest with the employee.
b. If the Company was to sell more than fifty percent of the
issued and outstanding common stock of the Company either through a merger,
acquisition or secondary financing prior to August 28, 2001 then this
agreement does not apply and all restricted shares owned by the employee shall
be treated the same as all other shareholders
5. Until such time as all of the Shares have become fully vested in the
Employee, Employee shall deliver the certificates evidencing the Shares to the
Company's then acting secretary who shall hold the Shares for the benefit of
Employee subject to the terms of this Agreement. It is understood that the
Company shall not accept or acknowledge any proposed transfer, assignment,
declaration of trust, pledge, hypothecation or other document evidencing a
change of legal or beneficial ownership or interest in the Shares so held
unless pursuant to a transaction consented to in writing by the Company.
6. For so long as the Shares are held by the Company subject to being
vested in Employee, Employee shall nevertheless be deemed the record and
beneficial owner of the Shares and shall be entitled to exercise all rights of
beneficial ownership with respect to the Shares, including, without
limitation, the right to vote such Shares at any regular or special meeting of
the Company's shareholders, as well as the right to participate and receive
any and all dividends declared and paid on the Shares as and when determined
by the Company's Board of Directors.
7. As each portion of the Shares become vested, the Company will
deliver certificates evidencing the fully vested shares to Employee, whereupon
such shares shall be deemed fully released and discharged from the covenants
and provisions of this Agreement.
8. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, successors in interest and assigns.
9. This Agreement may be executed by telex, telecopy or other facsimile
transmission, and such facsimile transmission shall be valid and binding to
the same extent as if it were an original. Further, this Agreement may be
signed in one or more counterparts, all of which when taken together shall
constitute the same documents. For all evidentiary purposes, any one complete
counter set of this Agreement shall be considered an original.
XML - GLOBAL TECHNOLOGIES, INC.
By:
----------------------------
Peter Shandro, CEO
---------------------------------
DUANE NICKULL
<PAGE>
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT ("Agreement") is entered into this
____ day of January, 2000 by and between XML - GLOBAL TECHNOLOGIES, INC., a
Colorado corporation, ("Company") and XMLFUND, LLC, a Washington limited
liability company, ("Buyer").
W I T N E S S E T H:
WHEREAS, Company and Buyer are executing and delivering this Agreement in
accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under 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") and/or Section 4(2) of the Securities Act; and
WHEREAS, Buyer wishes to purchase, upon the terms and subject to the
conditions of this Agreement, shares of Common Stock, $.0001 par value per
share of Company (the "Common Stock"), and Common Stock purchase warrants (the
"Warrants") upon the terms and subject to the conditions of this Agreement
(the Common Stock and the Warrants sometimes referred to herein as the
"Securities").
NOW THEREFORE, in consideration of the promises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE.
a. Units. Buyer hereby agrees to purchase from the Company five
hundred thousand (500,000) Units (the "Units"), at a price of $2.00 per Unit,
for an aggregate purchase price of $1,000,000. Each Unit consists of two (2)
shares of the Company's Common Stock and one (1) Class A Warrant (the "A
Warrant") and one (1) Class A-1 Warrant ("A-1 Warrant").
b. A Warrants. Each A Warrant shall entitle the Buyer to purchase
one (1) additional share of Common Stock at an exercise price of $2.00 per
share. Each A Warrant shall be exercisable for a period of three (3) years
commencing the date of issue.
c. A-1 Warrants. Each A-1 Warrant shall entitle the Buyer to
purchase one (1) additional share of the Company's Common Stock at an exercise
price of $.07 per share. Each A-1 Warrant shall be exercisable for a period
of sixty (60) days commencing the date of issue.
d. Form of Payment. Buyer shall pay the purchase price for the
Units and shall pay the exercise price upon exercise of the Warrants by
delivering immediately available good funds in United States Dollars to the
Company in the amount of the purchase price for the Units or the exercise
price for the Warrants, as the case may be.
2. ADDITIONAL AGREEMENTS.
a. Board of Directors. Concurrently with the purchase of the
Units and subject to the Company obtaining directors and officers liability
insurance, David Pool shall be elected to serve as a member of the Company's
Board of Directors and shall agree to serve in such capacity until the next
regular annual meeting of the Company's shareholders and until his successor
has been duly elected and qualified.
3. BUYER REPRESENTATIONS AND WARRANTIES. Buyer represents and warrants
to, and covenants and agrees with, Company as follows:
a. Buyer is purchasing the Securities and will be acquiring the
shares of Common Stock issuable upon exercise of the Warrants for its own
account for investment only and not with a view towards the public sale or
distribution thereof;
b. Buyer is (i) an "accredited investor" as that term is defined
in Rule 501 of the General Rules and Regulations under the Securities Act by
reason of Rule 501(a)(3), and (ii) experienced in making investments of the
kind described in this Agreement and the related documents, (iii) able, by
reason of the business and financial experience of its officers (if an entity)
and professional advisors (who are not affiliated with or compensated in any
way by Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its
investment in the Securities;
c. All subsequent offers and sales of the Securities and the
shares of Common Stock issuable upon exercise of the Warrants (the "Shares" or
"Common Stock") by Buyer shall be made pursuant to registration of the Shares
under the Securities Act or pursuant to an exemption from registration;
d. Buyer understands that the Securities are being offered and
sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that
Company is relying upon the truth and accuracy of, and Buyer's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of Buyer to acquire the
Securities and to receive an offer of the Shares;
e. Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of Company and
materials relating to the offer and sale of the Securities which have been
requested by Buyer. Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of Company and have received complete and
satisfactory answers to any such inquiries.
f. Buyer understands that its investment in the Securities
involves a high degree of risk;
g. Buyer understands that no United States federal or state agency
or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities;
h. This Agreement has been duly and validly authorized, executed
and delivered on behalf of Buyer and is a valid and binding agreement of Buyer
enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and
other similar laws affecting the enforcement of creditors' rights generally.
i. Neither Buyer, nor any affiliate of Buyer, will enter into, any
put option, short position, or other similar position with respect to the
Securities or the Shares.
4. COMPANY REPRESENTATIONS AND WARRANTIES. Company represents and
warrants to Buyer that:
a. Concerning the Shares. There are no preemptive rights of any
stockholder of Company, as such, to acquire the Common Stock.
b. Reporting Company Status. Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Colorado, and has the requisite corporate power to own its properties and
to carry on its business as now being conducted. Company is duly qualified as
a foreign corporation to do business and is in good standing in each
jurisdiction where the nature of the business conducted or property owned by
it makes such qualification necessary other than those jurisdictions in which
the failure to so qualify would not have a material and adverse effect on the
business, operations, properties, prospects or condition (financial or
otherwise) of Company. Company has registered its Common Stock pursuant to
Section 12 of the Exchange Act.
c. Authorized Shares. Company has sufficient authorized and
unissued Shares as may be reasonably necessary to effect the exercise of the
Warrants. The Shares have been duly authorized and, when issued upon exercise
of the Securities, will be duly and validly issued, fully paid and non-
assessable and will not subject the holder thereof to personal liability by
reason of being such holder.
d. Securities Purchase Agreement. This Agreement, and the
transactions contemplated thereby, have been duly and validly authorized by
Company, this Agreement has been duly executed and delivered by Company and
this Agreement is the valid and binding agreement of Company enforceable in
accordance with their respective terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium, and
other similar laws affecting the enforcement of creditors' rights generally;
and the Securities will be duly and validly authorized and, when executed and
delivered on behalf of Company in accordance with this Agreement, will be a
valid and binding obligation of Company in accordance with its terms, subject
to general principles of equity and to bankruptcy, insolvency, moratorium, or
other similar laws affecting the enforcement of creditors' rights generally.
e. Non-contravention. The execution and delivery of this
Agreement by Company, the issuance of the Securities, and the consummation by
Company of the other transactions contemplated by this Agreement, do not and
will not conflict with or result in a breach by Company of any of the terms or
provisions of, or constitute a default under (i) the articles of incorporation
or by-laws of Company, (ii) any indenture, mortgage, deed of trust, or other
material agreement or instrument to which Company is a party or by which it or
any of its properties or assets are bound, including any listing agreement for
the Common Stock except as herein set forth, (iii) to its knowledge, any
existing applicable law, rule, or regulation or any applicable decree,
judgment, or (iv) to its knowledge, order of any court, United States federal
or state regulatory body, administrative agency, or other governmental body
having jurisdiction over Company or any of its properties or assets, except
such conflict, breach or default which would not have a material adverse
effect on the transactions contemplated herein. Company is not in violation of
any material laws, governmental orders, rules, regulations or ordinances to
which its property, real, personal, mixed, tangible or intangible, or its
businesses related to such properties, are subject.
f. Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market is required to be obtained by Company for the issuance and
sale of the Securities to Buyer as contemplated by this Agreement, except such
authorizations, approvals and consents that have been obtained.
g. SEC Documents, Financial Statements. The Common Stock of
Company is registered pursuant to Section 12(g) of the Exchange Act. Company,
through its agent, has delivered to Buyer true and complete copies of the SEC
Documents (except for exhibits and incorporated documents). Company has not
provided to Buyer any information which, according to applicable law, rule or
regulation, should have been disclosed publicly by Company but which has not
been so disclosed, other than with respect to the transactions contemplated by
this Agreement.
As of their respective dates, all of Company's reports,
statements and other filings with the Commission (the "SEC Documents")
complied in all material respects with the requirements of the Act or the
Exchange Act as the case may be and the rules and regulations of the
Commission promulgated thereunder and other federal, state and local laws,
rules and regulations applicable to such SEC Documents, and none of the SEC
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 Company included in
the SEC 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 generally
accepted accounting principles 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 Company 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).
h. Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board or body pending
or, to the knowledge of Company, threatened against or affecting Company,
wherein an unfavorable decision, ruling or finding would have a material
adverse effect on the business or financial condition of Company or the
transactions contemplated by this Agreement or any of the documents
contemplated hereby or which would adversely affect the validity or
enforceability of, or the authority or ability of Company to perform its
obligations under, this Agreement or any of such other documents.
i. Absence of Events of Default. No Event of Default, as defined
in the respective agreement to which Company is a party, and no event which,
with the giving of notice or the passage of time or both, would become an
Event of Default (as so defined), has occurred and is continuing, which would
have a material adverse effect on Company's financial condition or results of
operations.
j. Capitalization. The authorized capital stock of the Company
consists entirely of 500,000,000 shares of Common Stock having a par value of
$.0001 per share and 100,000,000 shares of Preferred Stock having a par value
of $.01 per share. As of the date of this Agreement, 19,830,000 shares of
Common Stock and no shares of Preferred Stock are issued and outstanding. In
addition, there are issued and outstanding options and warrants exercisable to
purchase, in the aggregate, 5,660,000 shares of Common Stock. Other than the
foregoing, there are no other equity securities of the Company authorized,
issued or outstanding, and there are no authorized, issued or outstanding
subscriptions, options, warrants, contracts, calls, commitments or other
purchase rights of any nature or character relating to any of the Company's
capital stock, equity securities, debt or other securities convertible into
stock or equity securities of the Company.
5. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. Buyer acknowledges that (1) the
Securities have not been and are not being registered under the provisions of
the Securities Act and the Securities have not been and are not being
registered under the Securities Act, and may not be transferred unless (A)
subsequently registered thereunder or (B) Buyer shall have delivered to
Company an opinion of counsel, reasonably satisfactory in form, scope and
substance to Company, to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; (2) any sale of the Securities made in reliance on Rule 144
promulgated under the Securities Act may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable, any resale of
such Securities under circumstances in which the seller, or the person through
whom the sale is made, may be deemed to be an underwriter, as that term is
used in the Securities Act, may require compliance with some other exemption
under the Securities Act or the rules and regulations of the Commission
thereunder; and (3) neither Company nor any other person is under any
obligation to register the Securities under the Securities Act or to comply
with the terms and conditions of any exemption thereunder.
b. Restrictive Legend. Buyer acknowledges and agrees that the
Securities issued to Buyer shall bear a restrictive legend in substantially
the following form (and a stop-transfer order may be placed against transfer
of the Securities):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD
OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION
IS NOT REQUIRED.
c. Filings. Company undertakes and agrees to make all necessary
filings in connection with the sale of the Securities to Buyer under any
United States laws and regulations, or by any domestic securities exchange or
trading market, and to provide a copy thereof to Buyer promptly after such
filing.
d. Reporting Status. So long as Buyer beneficially owns any of
the Securities, Company shall file all reports required to be filed with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act, and Company
shall not terminate its status as an issuer required to file reports under the
Exchange Act even if the Exchange Act or the rules and regulations thereunder
would permit such termination.
6. REGISTRATION RIGHTS.
a. Subject to the various provisions of this paragraph, if at any
time within one (1) year of the date of this Agreement the Company proposes to
register any of its Common Stock under the Act in connection with the public
offering of such securities solely for cash on a form that would also permit
the registration of the Common Stock issued as part of the Units or issuable
upon exercise of the Warrants (hereafter collectively the "Registrable
Securities"), the Company shall promptly give Buyer written notice of such
determination, and the Company, subject to the provisions of this Paragraph 6,
shall use its best efforts to cause to be registered under the Act all of the
Registrable Securities.
b. In connection with any offering involving an underwriting of
shares being issued by the Company as described in Paragraph 6a above, the
Company shall not be required under Paragraph 6a hereof to include Buyer's
Registrable Securities in such underwriting unless it accepts the terms of the
underwriting as agreed upon between the Company and the underwriters selected
by it, and then only in such quantity as will not, in the written opinion of
the underwriters, jeopardize the success of the offering by the Company. If
the total number of shares of Registrable Securities to be included in such
offering is an amount of securities that the underwriters state in their
written opinion jeopardizes the success of the offering, the Company shall
only be required to include in the offering so many of the shares of
Registrable Securities as the underwriters opine (in writing) will not
jeopardize the success of the offering, subject to the following provisions
and exceptions:
c. Except as provided in Paragraph 6d below, all limitations on
the number of shares of Registrable Securities to be included in the
applicable underwriting shall be pro rata with respect to the number of shares
of Registrable Securities reserved for issuance pursuant to outstanding
Warrants of the same class as the Warrants represented by this Certificate.
If Buyer disapproves of the terms of any such underwriting, it may elect to
withdraw therefrom by written notice to the Company and the underwriter, and
any shares excluded or withdrawn from such underwriting shall be withdrawn
from registration.
d. Notwithstanding any provision to the contrary elsewhere herein;
(i) if Directors and Officers of the Company elect to include any shares of
Common Stock held by them in any registration effected by the Company as
described in Paragraph 6a hereof, then such shares, subject to the
underwriter's opinion and percentage limitations described in Paragraph 6d(ii)
immediately following, shall be considered entitled to "piggyback
registration" rights under Paragraph 6c and (ii) if the underwriter for an
underwriting contemplated under Paragraph 6a hereof determines that marketing
factors permit the registration of securities other than those offered for the
Company's account in such underwriting ("Piggybacked Securities"), the
registration rights granted elsewhere herein to the Buyer shall apply to such
number of the registrable securities requested to be registered by such
Directors and Officers.
e. In connection with the preparation and filing of the
Registration Statement, the Company agrees to (i) use its best efforts to
cause such Registration Statement to become and remain effective; (ii) prepare
and file with the SEC such amendments and supplements to such Registration
Statement as may be necessary to keep such Registration Statement effective
until the Expiration Date; (iii) furnish to the Buyer such number of copies of
a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and such
other documents as Buyer may reasonably request in order to facilitate the
disposition of the shares of Common Stock; and (iv) use its best efforts to
register and qualify the shares of Common Stock covered by such Registration
Statement under such other securities or Blue Sky laws of such jurisdictions
as shall be identified by the warrant Buyers for the distribution of the
securities covered by the Registration Statement.
f. All expenses incurred in connection with the registration,
offering and distribution of the shares of Common Stock underlying this
Warrant including fees and disbursements of counsel, shall be borne by the
Company, including, without limitation, Securities and Exchange Commission
filing fees, Blue Sky filing fees, printing costs, accounting fees costs,
transfer agent fees, and any other miscellaneous costs and disbursements.
Each Buyer participating in the Registration shall be liable for any and all
underwriting discounts, brokerage commissions or other fees or expenses
incurred in connection with the sale or other disposition by Buyer of the
shares of Common Stock covered by the Registration Statement.
g. To the extent permitted by law, Buyer will indemnify and hold
harmless the Company, and its directors, officers, employees, agents and
representatives, as well as its controlling persons (within the meaning of the
Act) against any losses, claims, damages, liabilities, or expenses, including
without limitation, attorney's fees and disbursements, which arise out of or
are based upon any violation by Buyer of the Act or under the Securities
Exchange Act of 1934, or any rule or regulation promulgated thereunder
applicable to Buyer, or arise out of or are based upon any untrue statement or
omission of Buyer in the Subscription Agreement between the Company and Buyer,
or arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, but only to the extent that such untrue
statement or alleged untrue statement or omission, or alleged omission was
made in such Registration Statement in reliance upon and in conformity with
information furnished by Buyer in writing, expressly for use in connection
with such Registration Statement.
h. To the extent permitted by law, the Company will indemnify and
hold harmless Buyer, including its officers, directors, employees, agents, and
representatives, against any losses, claims, damages, liabilities, or
expenses, including without limitation attorney's fees and disbursements, to
which Buyer may become subject under the Act to the extent that such losses,
claims, damages or liabilities arise out of or are based upon any violation by
the Company of the Act or under the Securities Exchange Act of 1934, or any
rule or regulation promulgated thereunder applicable to the Company, or arise
out of or are based upon any untrue or alleged untrue statement of any
material fact contained in the Registration Statement, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or arise out of any violation by the Company of any rule or
regulation promulgated under the Act applicable to the Company and relating to
action or inaction required of the Company in connection with such
Registration Statement; provided, however, that the indemnity agreement
contained in this paragraph shall not apply to any loss, damage or liability
to the extent that same arises out of or is based upon an untrue statement or
omission made in connection with such Registration Statement in reliance upon
and in conformity with information furnished in writing expressly for use in
connection with such Registration Statement by Buyer.
i. Buyer undertakes to comply with all applicable laws governing
the distribution of securities in connection with Buyer's sale of Common Stock
of the Company acquired pursuant to the exercise of this Warrant, including,
without limitation, Regulation M under the Securities Exchange Act of 1934,
and to notify the Company of any changes in Buyer's plan of distribution,
including the determination of the public offering price and any dealer
concession or discount so that the Company can sticker or amend the
Registration Statement as the Company deems appropriate in its sole
discretion.
7. GOVERNING LAW: MISCELLANEOUS. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of Colorado. Each of
the parties consents to the jurisdiction of the federal courts whose districts
encompass any part of the City of and County of Boulder, State of Colorado in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. A facsimile transmission of this signed Agreement shall be
legal and binding on all parties hereto. This Agreement may be signed in one
or more counterparts, each of which shall be deemed an original. The headings
of this Agreement are for convenience of reference and shall not form part of,
or affect the interpretation of, this Agreement. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or enforceability
of the remainder of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction. This Agreement may be amended only by an
instrument in writing signed by the party to be charged with enforcement.
This Agreement supersedes all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof.
8. NOTICES. Any notice required or permitted hereunder shall be given
in writing (unless otherwise specified herein) and shall be deemed effectively
given, (i) on the date delivered, (a) by personal delivery, or (b) if advance
copy is given by fax, (ii) seven business days after deposit in the United
States Postal Service by regular or certified mail, or (iii) three business
days mailing by international express courier, with postage and fees prepaid,
addressed to the other party thereunto entitled at the following addresses, or
at such other addresses as a party may designate by ten days' advance written
notice to each of the other party hereto:
COMPANY: XML - GLOBAL TECHNOLOGIES, INC.
ATTN: Peter Shandro, Chief Executive Officer
1038 Homer Street
Vancouver, B.C. V6B 2W9, Canada
Fax No. (604) 717-1107
with a copy to: Clifford L. Neuman, Esq.
Neuman & Drennen, LLC
1507 Pine Street
Boulder, Colorado 80302
Fax No. (303) 449-1045
BUYER: XMLFUND, LLC
ATTN: Bruce Dick, Esq.
777 108th Avenue, N.E., Suite 1800
Bellevue, WA 98004
Fax No._________________
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Company's
representations and warranties shall survive the execution and delivery hereof
of this Agreement and the delivery of the Securities and the Purchase Price,
and shall inure to the benefit of their respective successors and assigns.
10. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
as of the date first above written.
COMPANY: XML - GLOBAL TECHNOLOGIES, INC.
By:
----------------------------
Authorized Agent
BUYER: XMLFUND, LLC
By:
----------------------------
Authorized Agent
<PAGE>
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT ("Agreement") is entered into this
____ day of _______________, 2000 by and between XML - GLOBAL TECHNOLOGIES,
INC., a Colorado corporation, ("Company") and XML FUND, LLC ("Buyer").
W I T N E S S E T H:
WHEREAS, Company and Buyer are executing and delivering this Agreement in
accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under 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") and/or Section 4(2) of the Securities Act; and
WHEREAS, Buyer wishes to purchase, upon the terms and subject to the
conditions of this Agreement, shares of Common Stock, $.0001 par value per
share of Company (the "Common Stock"), and Common Stock purchase warrants (the
"Warrants") upon the terms and subject to the conditions of this Agreement
(the Common Stock and the Warrants sometimes referred to herein as the
"Securities").
NOW THEREFORE, in consideration of the promises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE.
a. Units. Buyer hereby unconditionally and irrevocably agrees to
purchase from the Company one hundred thousand (100,000) Units (the "Units"),
at a price of $1.00 per Unit, for an aggregate purchase price of $100,000.
Each Unit consists of one (1) share of the Company's Common Stock and one (1)
Warrant (the "Warrant").
b. Warrants. Each Warrant shall entitle the Buyer to purchase one
(1) additional share of Common Stock at an exercise price of $4.00 per share.
Each Warrant shall be exercisable until December 31, 2000.
c. Payment. Buyer shall pay the purchase price for the Units
against delivery and tender of the purchase price in the amount of $100,000
concurrently with the execution of this Agreement.
2. BUYER REPRESENTATIONS AND WARRANTIES. Buyer represents and warrants
to, and covenants and agrees with, Company as follows:
a. Buyer is purchasing the Securities and will be acquiring the
shares of Common Stock issuable upon exercise of the Warrants for its own
account for investment only and not with a view towards the public sale or
distribution thereof;
b. Buyer is (i) an "accredited investor" as that term is defined
in Rule 501(a) of the General Rules and Regulations under the Securities Act
and summarized on Appendix H hereto, and (ii) experienced in making
investments of the kind described in this Agreement and the related documents,
(iii) able, by reason of the business and financial experience of its officers
(if an entity) and professional advisors (who are not affiliated with or
compensated in any way by Company or any of its affiliates or selling agents),
to protect its own interests in connection with the transactions described in
this Agreement, and the related documents, and (iv) able to afford the entire
loss of its investment in the Securities;
c. All subsequent offers and sales of the Securities and the
shares of Common Stock issuable upon exercise of the Warrants (the "Shares" or
"Common Stock") by Buyer shall be made pursuant to registration of the Shares
under the Securities Act or pursuant to an exemption from registration;
d. Buyer understands that the Securities are being offered and
sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that
Company is relying upon the truth and accuracy of, and Buyer's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of Buyer to acquire the
Securities and to receive an offer of the Shares;
e. Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of Company and
materials relating to the offer and sale of the Securities which have been
requested by Buyer. Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of Company and have received complete and
satisfactory answers to any such inquiries.
f. Buyer understands that its investment in the Securities
involves a high degree of risk;
g. Buyer understands that no United States federal or state agency
or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities;
h. This Agreement has been duly and validly authorized, executed
and delivered on behalf of Buyer and is a valid and binding agreement of Buyer
enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and
other similar laws affecting the enforcement of creditors' rights generally.
i. Neither Buyer, nor any affiliate of Buyer, will enter into, any
put option, short position, or other similar position with respect to the
Securities or the Shares.
3. COMPANY REPRESENTATIONS AND WARRANTIES. Company represents and
warrants to Buyer that:
a. Concerning the Shares. There are no preemptive rights of any
stockholder of Company, as such, to acquire the Common Stock.
b. Reporting Company Status. Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Colorado, and has the requisite corporate power to own its properties and
to carry on its business as now being conducted. Company is duly qualified as
a foreign corporation to do business and is in good standing in each
jurisdiction where the nature of the business conducted or property owned by
it makes such qualification necessary other than those jurisdictions in which
the failure to so qualify would not have a material and adverse effect on the
business, operations, properties, prospects or condition (financial or
otherwise) of Company. Company has registered its Common Stock pursuant to
Section 12 of the Exchange Act.
c. Authorized Shares. Company has sufficient authorized and
unissued Shares as may be reasonably necessary to effect the exercise of the
Warrants. The Shares have been duly authorized and, when issued upon exercise
of the Securities, will be duly and validly issued, fully paid and non-
assessable and will not subject the holder thereof to personal liability by
reason of being such holder.
d. Securities Purchase Agreement. This Agreement, and the
transactions contemplated thereby, have been duly and validly authorized by
Company, this Agreement has been duly executed and delivered by Company and
this Agreement is the valid and binding agreement of Company enforceable in
accordance with their respective terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium, and
other similar laws affecting the enforcement of creditors' rights generally;
and the Securities will be duly and validly authorized and, when executed and
delivered on behalf of Company in accordance with this Agreement, will be a
valid and binding obligation of Company in accordance with its terms, subject
to general principles of equity and to bankruptcy, insolvency, moratorium, or
other similar laws affecting the enforcement of creditors' rights generally.
e. Non-contravention. The execution and delivery of this
Agreement by Company, the issuance of the Securities, and the consummation by
Company of the other transactions contemplated by this Agreement, do not and
will not conflict with or result in a breach by Company of any of the terms or
provisions of, or constitute a default under (i) the articles of incorporation
or by-laws of Company, (ii) any indenture, mortgage, deed of trust, or other
material agreement or instrument to which Company is a party or by which it or
any of its properties or assets are bound, including any listing agreement for
the Common Stock except as herein set forth, (iii) to its knowledge, any
existing applicable law, rule, or regulation or any applicable decree,
judgment, or (iv) to its knowledge, order of any court, United States federal
or state regulatory body, administrative agency, or other governmental body
having jurisdiction over Company or any of its properties or assets, except
such conflict, breach or default which would not have a material adverse
effect on the transactions contemplated herein. Company is not in violation of
any material laws, governmental orders, rules, regulations or ordinances to
which its property, real, personal, mixed, tangible or intangible, or its
businesses related to such properties, are subject.
f. Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market is required to be obtained by Company for the issuance and
sale of the Securities to Buyer as contemplated by this Agreement, except such
authorizations, approvals and consents that have been obtained.
g. SEC Documents, Financial Statements. The Common Stock of
Company is registered pursuant to Section 12(g) of the Exchange Act. Buyer
has had the opportunity to obtain on Buyer's behalf true and complete copies
of the SEC Documents (except for exhibits and incorporated documents).
Company has not provided to Buyer any information which, according to
applicable law, rule or regulation, should have been disclosed publicly by
Company but which has not been so disclosed, other than with respect to the
transactions contemplated by this Agreement.
As of their respective dates, all of Company's reports,
statements and other filings with the Commission (the "SEC Documents")
complied in all material respects with the requirements of the Act or the
Exchange Act as the case may be and the rules and regulations of the
Commission promulgated thereunder and other federal, state and local laws,
rules and regulations applicable to such SEC Documents, and none of the SEC
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 Company included in
the SEC 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 generally
accepted accounting principles 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 Company 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).
h. Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board or body pending
or, to the knowledge of Company, threatened against or affecting Company,
wherein an unfavorable decision, ruling or finding would have a material
adverse effect on the business or financial condition of Company or the
transactions contemplated by this Agreement or any of the documents
contemplated hereby or which would adversely affect the validity or
enforceability of, or the authority or ability of Company to perform its
obligations under, this Agreement or any of such other documents.
i. Absence of Events of Default. No Event of Default, as defined
in the respective agreement to which Company is a party, and no event which,
with the giving of notice or the passage of time or both, would become an
Event of Default (as so defined), has occurred and is continuing, which would
have a material adverse effect on Company's financial condition or results of
operations.
j. Capitalization. The authorized capital stock of the Company
consists entirely of 500,000,000 shares of Common Stock having a par value of
$.0001 per share and 100,000,000 shares of Preferred Stock having a par value
of $.01 per share. As of the date of this Agreement, 20,830,000 shares of
Common Stock and no shares of Preferred Stock are issued and outstanding. In
addition, there are issued and outstanding options and warrants exercisable to
purchase, in the aggregate, 6,660,000 shares of Common Stock. Other than the
foregoing, there are no other equity securities of the Company authorized,
issued or outstanding, and there are no authorized, issued or outstanding
subscriptions, options, warrants, contracts, calls, commitments or other
purchase rights of any nature or character relating to any of the Company's
capital stock, equity securities, debt or other securities convertible into
stock or equity securities of the Company.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. Buyer acknowledges that (1) the
Securities have not been and are not being registered under the provisions of
the Securities Act and the Securities have not been and are not being
registered under the Securities Act, and may not be transferred unless (A)
subsequently registered thereunder or (B) Buyer shall have delivered to
Company an opinion of counsel, reasonably satisfactory in form, scope and
substance to Company, to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; (2) any sale of the Securities made in reliance on Rule 144
promulgated under the Securities Act may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable, any resale of
such Securities under circumstances in which the seller, or the person through
whom the sale is made, may be deemed to be an underwriter, as that term is
used in the Securities Act, may require compliance with some other exemption
under the Securities Act or the rules and regulations of the Commission
thereunder; and (3) neither Company nor any other person is under any
obligation to register the Securities under the Securities Act or to comply
with the terms and conditions of any exemption thereunder.
b. Restrictive Legend. Buyer acknowledges and agrees that the
Securities issued to Buyer shall bear a restrictive legend in substantially
the following form (and a stop-transfer order may be placed against transfer
of the Securities):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD
OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION
IS NOT REQUIRED.
c. Filings. Company undertakes and agrees to make all necessary
filings in connection with the sale of the Securities to Buyer under any
United States laws and regulations, or by any domestic securities exchange or
trading market, and to provide a copy thereof to Buyer promptly after such
filing.
d. Reporting Status. So long as Buyer beneficially owns any of
the Securities, Company shall file all reports required to be filed with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act, and Company
shall not terminate its status as an issuer required to file reports under the
Exchange Act even if the Exchange Act or the rules and regulations thereunder
would permit such termination.
5. REGISTRATION RIGHTS.
a. Subject to the various provisions of this paragraph, if at any
time within one (1) year of the date of this Agreement the Company proposes to
register any of its Common Stock under the Act in connection with the public
offering of such securities solely for cash on a form that would also permit
the registration of the Common Stock issued as part of the Units or issuable
upon exercise of the Warrants (hereafter collectively the "Registrable
Securities"), the Company shall promptly give Buyer written notice of such
determination, and the Company, subject to the provisions of this Paragraph 6,
shall use its best efforts to cause to be registered under the Act all of the
Registrable Securities.
b. In connection with any offering involving an underwriting of
shares being issued by the Company as described in Paragraph 6a above, the
Company shall not be required under Paragraph 6a hereof to include Buyer's
Registrable Securities in such underwriting unless it accepts the terms of the
underwriting as agreed upon between the Company and the underwriters selected
by it, and then only in such quantity as will not, in the written opinion of
the underwriters, jeopardize the success of the offering by the Company. If
the total number of shares of Registrable Securities to be included in such
offering is an amount of securities that the underwriters state in their
written opinion jeopardizes the success of the offering, the Company shall
only be required to include in the offering so many of the shares of
Registrable Securities as the underwriters opine (in writing) will not
jeopardize the success of the offering, subject to the following provisions
and exceptions:
c. Except as provided in Paragraph 6d below, all limitations on
the number of shares of Registrable Securities to be included in the
applicable underwriting shall be pro rata with respect to the number of shares
of Registrable Securities reserved for issuance pursuant to outstanding
Warrants of the same class as the Warrants represented by this Certificate.
If Buyer disapproves of the terms of any such underwriting, it may elect to
withdraw therefrom by written notice to the Company and the underwriter, and
any shares excluded or withdrawn from such underwriting shall be withdrawn
from registration.
d. Notwithstanding any provision to the contrary elsewhere herein;
(i) if Directors and Officers of the Company elect to include any shares of
Common Stock held by them in any registration effected by the Company as
described in Paragraph 6a hereof, then such shares, subject to the
underwriter's opinion and percentage limitations described in Paragraph 6d(ii)
immediately following, shall be considered entitled to "piggyback
registration" rights under Paragraph 6c and (ii) if the underwriter for an
underwriting contemplated under Paragraph 6a hereof determines that marketing
factors permit the registration of securities other than those offered for the
Company's account in such underwriting ("Piggybacked Securities"), the
registration rights granted elsewhere herein to the Buyer shall apply to such
number of the registrable securities requested to be registered by such
Directors and Officers.
e. In connection with the preparation and filing of the
Registration Statement, the Company agrees to (i) use its best efforts to
cause such Registration Statement to become and remain effective; (ii) prepare
and file with the SEC such amendments and supplements to such Registration
Statement as may be necessary to keep such Registration Statement effective
until the Expiration Date; (iii) furnish to the Buyer such number of copies of
a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and such
other documents as Buyer may reasonably request in order to facilitate the
disposition of the shares of Common Stock; and (iv) use its best efforts to
register and qualify the shares of Common Stock covered by such Registration
Statement under such other securities or Blue Sky laws of such jurisdictions
as shall be identified by the warrant Buyers for the distribution of the
securities covered by the Registration Statement.
f. All expenses incurred in connection with the registration,
offering and distribution of the shares of Common Stock underlying this
Warrant including fees and disbursements of counsel, shall be borne by the
Company, including, without limitation, Securities and Exchange Commission
filing fees, Blue Sky filing fees, printing costs, accounting fees costs,
transfer agent fees, and any other miscellaneous costs and disbursements.
Each Buyer participating in the Registration shall be liable for any and all
underwriting discounts, brokerage commissions or other fees or expenses
incurred in connection with the sale or other disposition by Buyer of the
shares of Common Stock covered by the Registration Statement.
g. To the extent permitted by law, Buyer will indemnify and hold
harmless the Company, and its directors, officers, employees, agents and
representatives, as well as its controlling persons (within the meaning of the
Act) against any losses, claims, damages, liabilities, or expenses, including
without limitation, attorney's fees and disbursements, which arise out of or
are based upon any violation by Buyer of the Act or under the Securities
Exchange Act of 1934, or any rule or regulation promulgated thereunder
applicable to Buyer, or arise out of or are based upon any untrue statement or
omission of Buyer in the Subscription Agreement between the Company and Buyer,
or arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, but only to the extent that such untrue
statement or alleged untrue statement or omission, or alleged omission was
made in such Registration Statement in reliance upon and in conformity with
information furnished by Buyer in writing, expressly for use in connection
with such Registration Statement.
h. To the extent permitted by law, the Company will indemnify and
hold harmless Buyer, including its officers, directors, employees, agents, and
representatives, against any losses, claims, damages, liabilities, or
expenses, including without limitation attorney's fees and disbursements, to
which Buyer may become subject under the Act to the extent that such losses,
claims, damages or liabilities arise out of or are based upon any violation by
the Company of the Act or under the Securities Exchange Act of 1934, or any
rule or regulation promulgated thereunder applicable to the Company, or arise
out of or are based upon any untrue or alleged untrue statement of any
material fact contained in the Registration Statement, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or arise out of any violation by the Company of any rule or
regulation promulgated under the Act applicable to the Company and relating to
action or inaction required of the Company in connection with such
Registration Statement; provided, however, that the indemnity agreement
contained in this paragraph shall not apply to any loss, damage or liability
to the extent that same arises out of or is based upon an untrue statement or
omission made in connection with such Registration Statement in reliance upon
and in conformity with information furnished in writing expressly for use in
connection with such Registration Statement by Buyer.
i. Buyer undertakes to comply with all applicable laws governing
the distribution of securities in connection with Buyer's sale of Common Stock
of the Company acquired pursuant to the exercise of this Warrant, including,
without limitation, Regulation M under the Securities Exchange Act of 1934,
and to notify the Company of any changes in Buyer's plan of distribution,
including the determination of the public offering price and any dealer
concession or discount so that the Company can sticker or amend the
Registration Statement as the Company deems appropriate in its sole
discretion.
6. GOVERNING LAW: MISCELLANEOUS. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of Colorado. Each of
the parties consents to the jurisdiction of the federal courts whose districts
encompass any part of the City of and County of Boulder, State of Colorado in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. A facsimile transmission of this signed Agreement shall be
legal and binding on all parties hereto. This Agreement may be signed in one
or more counterparts, each of which shall be deemed an original. The headings
of this Agreement are for convenience of reference and shall not form part of,
or affect the interpretation of, this Agreement. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or enforceability
of the remainder of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction. This Agreement may be amended only by an
instrument in writing signed by the party to be charged with enforcement.
This Agreement supersedes all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof.
7. NOTICES. Any notice required or permitted hereunder shall be given
in writing (unless otherwise specified herein) and shall be deemed effectively
given, (i) on the date delivered, (a) by personal delivery, or (b) if advance
copy is given by fax, (ii) seven business days after deposit in the United
States Postal Service by regular or certified mail, or (iii) three business
days mailing by international express courier, with postage and fees prepaid,
addressed to the other party thereunto entitled at the following addresses, or
at such other addresses as a party may designate by ten days' advance written
notice to each of the other party hereto:
COMPANY: XML - GLOBAL TECHNOLOGIES, INC.
ATTN: Peter Shandro, Chief Executive Officer
1038 Homer Street
Vancouver, B.C. V6B 2W9, Canada
Fax No. (604) 717-1107
with a copy to: Clifford L. Neuman, Esq.
Neuman & Drennen, LLC
1507 Pine Street
Boulder, Colorado 80302
Fax No. (303) 449-1045
BUYER: XML FUND, LLC
ATTN: Bruce Dick, Esq.
777 108th Avenue, N.E., Suite 1800
Bellevue, WA 98004
Fax No._________________
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Company's
representations and warranties shall survive the execution and delivery hereof
of this Agreement and the delivery of the Securities and the Purchase Price,
and shall inure to the benefit of their respective successors and assigns.
9. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
as of the date first above written.
COMPANY: XML - GLOBAL TECHNOLOGIES, INC.
By:
----------------------------
Authorized Agent
BUYER: XML FUND, LLC
By:
----------------------------
Authorized Agent
<PAGE>
<PAGE>
APPENDIX A
The term "Accredited Investor" refers to any person or entity who comes
within any of the following categories or who we reasonably believe comes
within any of the following categories, at the time of the sale of the Units
to such Investor:
1. Any bank as defined in Section 3(a)(2) of the Act, or any savings
and loan association or other institution as defined in Section 3(a)(5)(A) of
the Act whether acting in its individual or fiduciary capacity; any broker or
dealer registered pursuant to Section 15 of the Securities Exchange Act of
1934; insurance company as defined in Section 2(13) of the Act; investment
company registered under the Investment Company Act of 1940 or a business
development company as defined in Section 2(a)(48) of the Investment Company
Act of 1940; Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; any plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of employees, if such plan has total
assets in excess of $5,000,000; employee benefit plan within the meaning of
Title I of the Employee Retirement Income Security Act of 1974 ("ERISA"), if
the investment decision is made by a plan fiduciary, as defined in
Section 3(2) of ERISA, which is either a bank, a savings and loan association,
insurance company, registered investment advisor, or if the employee benefit
plan has total assets in excess of $5,000,000 or if a self-directed plan, with
investment decisions made solely by persons that are accredited investors;
2. Any private business development company as defined in
Section 202(a)(22) of the Investment Advisors Act of 1940;
3. Any organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust, or
partnership not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
4. Any Director or executive officer of XML - Global Technologies,
Inc.;
5. Any trust, with total assets in excess of $5,000,000 not formed for
the specific purpose of acquiring the securities offered, whose purchase is
directed by a sophisticated person as described in Rule 506 of Regulation D;
6. Any natural person whose individual net worth or joint net worth
with that person's spouse, at the time of his purchase, exceeds $1,000,000;
7. Any natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with that
person's spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income in the current year; and
8. Any entity in which all of the equity owners are accredited
investors.
<PAGE>
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT ("Agreement") is entered into this
____ day of February, 2000 by and between XML - GLOBAL TECHNOLOGIES, INC., a
Colorado corporation, ("Company") and TOMASOVICH FAMILY TRUST, ("Buyer").
W I T N E S S E T H:
WHEREAS, Company and Buyer are executing and delivering this Agreement in
accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under 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") and/or Section 4(2) of the Securities Act; and
WHEREAS, Buyer wishes to purchase, upon the terms and subject to the
conditions of this Agreement, shares of Common Stock, $.0001 par value per
share of Company (the "Common Stock"), and Common Stock purchase warrants (the
"Warrants") upon the terms and subject to the conditions of this Agreement
(the Common Stock and the Warrants sometimes referred to herein as the
"Securities").
NOW THEREFORE, in consideration of the promises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE.
a. Units. Buyer hereby unconditionally and irrevocably agrees to
purchase from the Company five hundred thousand (500,000) Units (the "Units"),
at a price of $1.00 per Unit, for an aggregate purchase price of $500,000.
Each Unit consists of one (1) share of the Company's Common Stock and one (1)
Warrant (the "Warrant").
b. Warrants. Each Warrant shall entitle the Buyer to purchase one
(1) additional share of Common Stock at an exercise price of $4.00 per share.
Each Warrant shall be exercisable until December 31, 2000.
c. Payment. Buyer shall pay the purchase price for the Units
concurrently with the execution of this Agreement.
2. BUYER REPRESENTATIONS AND WARRANTIES. Buyer represents and warrants
to, and covenants and agrees with, Company as follows:
a. Buyer is purchasing the Securities and will be acquiring the
shares of Common Stock issuable upon exercise of the Warrants for its own
account for investment only and not with a view towards the public sale or
distribution thereof;
b. Buyer is (i) an "accredited investor" as that term is defined
in Rule 501 of the General Rules and Regulations under the Securities Act by
reason of Rule 501(a)(7), and (ii) experienced in making investments of the
kind described in this Agreement and the related documents, (iii) able, by
reason of the business and financial experience of its officers (if an entity)
and professional advisors (who are not affiliated with or compensated in any
way by Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its
investment in the Securities;
c. All subsequent offers and sales of the Securities and the
shares of Common Stock issuable upon exercise of the Warrants (the "Shares" or
"Common Stock") by Buyer shall be made pursuant to registration of the Shares
under the Securities Act or pursuant to an exemption from registration;
d. Buyer understands that the Securities are being offered and
sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that
Company is relying upon the truth and accuracy of, and Buyer's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of Buyer to acquire the
Securities and to receive an offer of the Shares;
e. Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of Company and
materials relating to the offer and sale of the Securities which have been
requested by Buyer. Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of Company and have received complete and
satisfactory answers to any such inquiries.
f. Buyer understands that its investment in the Securities
involves a high degree of risk;
g. Buyer understands that no United States federal or state agency
or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities;
h. This Agreement has been duly and validly authorized, executed
and delivered on behalf of Buyer and is a valid and binding agreement of Buyer
enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and
other similar laws affecting the enforcement of creditors' rights generally.
i. Neither Buyer, nor any affiliate of Buyer, will enter into, any
put option, short position, or other similar position with respect to the
Securities or the Shares.
3. COMPANY REPRESENTATIONS AND WARRANTIES. Company represents and
warrants to Buyer that:
a. Concerning the Shares. There are no preemptive rights of any
stockholder of Company, as such, to acquire the Common Stock.
b. Reporting Company Status. Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Colorado, and has the requisite corporate power to own its properties and
to carry on its business as now being conducted. Company is duly qualified as
a foreign corporation to do business and is in good standing in each
jurisdiction where the nature of the business conducted or property owned by
it makes such qualification necessary other than those jurisdictions in which
the failure to so qualify would not have a material and adverse effect on the
business, operations, properties, prospects or condition (financial or
otherwise) of Company. Company has registered its Common Stock pursuant to
Section 12 of the Exchange Act.
c. Authorized Shares. Company has sufficient authorized and
unissued Shares as may be reasonably necessary to effect the exercise of the
Warrants. The Shares have been duly authorized and, when issued upon exercise
of the Securities, will be duly and validly issued, fully paid and non-
assessable and will not subject the holder thereof to personal liability by
reason of being such holder.
d. Securities Purchase Agreement. This Agreement, and the
transactions contemplated thereby, have been duly and validly authorized by
Company, this Agreement has been duly executed and delivered by Company and
this Agreement is the valid and binding agreement of Company enforceable in
accordance with their respective terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium, and
other similar laws affecting the enforcement of creditors' rights generally;
and the Securities will be duly and validly authorized and, when executed and
delivered on behalf of Company in accordance with this Agreement, will be a
valid and binding obligation of Company in accordance with its terms, subject
to general principles of equity and to bankruptcy, insolvency, moratorium, or
other similar laws affecting the enforcement of creditors' rights generally.
e. Non-contravention. The execution and delivery of this
Agreement by Company, the issuance of the Securities, and the consummation by
Company of the other transactions contemplated by this Agreement, do not and
will not conflict with or result in a breach by Company of any of the terms or
provisions of, or constitute a default under (i) the articles of incorporation
or by-laws of Company, (ii) any indenture, mortgage, deed of trust, or other
material agreement or instrument to which Company is a party or by which it or
any of its properties or assets are bound, including any listing agreement for
the Common Stock except as herein set forth, (iii) to its knowledge, any
existing applicable law, rule, or regulation or any applicable decree,
judgment, or (iv) to its knowledge, order of any court, United States federal
or state regulatory body, administrative agency, or other governmental body
having jurisdiction over Company or any of its properties or assets, except
such conflict, breach or default which would not have a material adverse
effect on the transactions contemplated herein. Company is not in violation of
any material laws, governmental orders, rules, regulations or ordinances to
which its property, real, personal, mixed, tangible or intangible, or its
businesses related to such properties, are subject.
f. Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market is required to be obtained by Company for the issuance and
sale of the Securities to Buyer as contemplated by this Agreement, except such
authorizations, approvals and consents that have been obtained.
g. SEC Documents, Financial Statements. The Common Stock of
Company is registered pursuant to Section 12(g) of the Exchange Act. Buyer
has had the opportunity to obtain on Buyer's behalf true and complete copies
of the SEC Documents (except for exhibits and incorporated documents).
Company has not provided to Buyer any information which, according to
applicable law, rule or regulation, should have been disclosed publicly by
Company but which has not been so disclosed, other than with respect to the
transactions contemplated by this Agreement.
As of their respective dates, all of Company's reports,
statements and other filings with the Commission (the "SEC Documents")
complied in all material respects with the requirements of the Act or the
Exchange Act as the case may be and the rules and regulations of the
Commission promulgated thereunder and other federal, state and local laws,
rules and regulations applicable to such SEC Documents, and none of the SEC
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 Company included in
the SEC 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 generally
accepted accounting principles 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 Company 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).
h. Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board or body pending
or, to the knowledge of Company, threatened against or affecting Company,
wherein an unfavorable decision, ruling or finding would have a material
adverse effect on the business or financial condition of Company or the
transactions contemplated by this Agreement or any of the documents
contemplated hereby or which would adversely affect the validity or
enforceability of, or the authority or ability of Company to perform its
obligations under, this Agreement or any of such other documents.
i. Absence of Events of Default. No Event of Default, as defined
in the respective agreement to which Company is a party, and no event which,
with the giving of notice or the passage of time or both, would become an
Event of Default (as so defined), has occurred and is continuing, which would
have a material adverse effect on Company's financial condition or results of
operations.
j. Capitalization. The authorized capital stock of the Company
consists entirely of 500,000,000 shares of Common Stock having a par value of
$.0001 per share and 100,000,000 shares of Preferred Stock having a par value
of $.01 per share. As of the date of this Agreement, 20,830,000 shares of
Common Stock and no shares of Preferred Stock are issued and outstanding. In
addition, there are issued and outstanding options and warrants exercisable to
purchase, in the aggregate, 6,660,000 shares of Common Stock. Other than the
foregoing, there are no other equity securities of the Company authorized,
issued or outstanding, and there are no authorized, issued or outstanding
subscriptions, options, warrants, contracts, calls, commitments or other
purchase rights of any nature or character relating to any of the Company's
capital stock, equity securities, debt or other securities convertible into
stock or equity securities of the Company.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. Buyer acknowledges that (1) the
Securities have not been and are not being registered under the provisions of
the Securities Act and are not being registered under the Securities Act, and
may not be transferred unless (A) subsequently registered thereunder or (B)
Buyer shall have delivered to Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to Company, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Securities made in
reliance on Rule 144 promulgated under the Securities Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the Securities Act, may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the Commission thereunder; and (3) neither Company nor any
other person is under any obligation to register the Securities under the
Securities Act or to comply with the terms and conditions of any exemption
thereunder.
b. Restrictive Legend. Buyer acknowledges and agrees that the
Securities issued to Buyer shall bear a restrictive legend in substantially
the following form (and a stop-transfer order may be placed against transfer
of the Securities):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD
OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION
IS NOT REQUIRED.
c. Filings. Company undertakes and agrees to make all necessary
filings in connection with the sale of the Securities to Buyer under any
United States laws and regulations, or by any domestic securities exchange or
trading market, and to provide a copy thereof to Buyer promptly after such
filing.
d. Reporting Status. So long as Buyer beneficially owns any of
the Securities, Company shall file all reports required to be filed with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act, and Company
shall not terminate its status as an issuer required to file reports under the
Exchange Act even if the Exchange Act or the rules and regulations thereunder
would permit such termination.
5. REGISTRATION RIGHTS.
a. Subject to the various provisions of this paragraph, if at any
time within one (1) year of the date of this Agreement the Company proposes to
register any of its Common Stock under the Act in connection with the public
offering of such securities solely for cash on a form that would also permit
the registration of the Common Stock issued as part of the Units or issuable
upon exercise of the Warrants (hereafter collectively the "Registrable
Securities"), the Company shall promptly give Buyer written notice of such
determination, and the Company, subject to the provisions of this Paragraph 6,
shall use its best efforts to cause to be registered under the Act all of the
Registrable Securities.
b. In connection with any offering involving an underwriting of
shares being issued by the Company as described in Paragraph 6a above, the
Company shall not be required under Paragraph 6a hereof to include Buyer's
Registrable Securities in such underwriting unless it accepts the terms of the
underwriting as agreed upon between the Company and the underwriters selected
by it, and then only in such quantity as will not, in the written opinion of
the underwriters, jeopardize the success of the offering by the Company. If
the total number of shares of Registrable Securities to be included in such
offering is an amount of securities that the underwriters state in their
written opinion jeopardizes the success of the offering, the Company shall
only be required to include in the offering so many of the shares of
Registrable Securities as the underwriters opine (in writing) will not
jeopardize the success of the offering, subject to the following provisions
and exceptions:
c. Except as provided in Paragraph 6d below, all limitations on
the number of shares of Registrable Securities to be included in the
applicable underwriting shall be pro rata with respect to the number of shares
of Registrable Securities reserved for issuance pursuant to outstanding
Warrants of the same class as the Warrants represented by this Certificate.
If Buyer disapproves of the terms of any such underwriting, it may elect to
withdraw therefrom by written notice to the Company and the underwriter, and
any shares excluded or withdrawn from such underwriting shall be withdrawn
from registration.
d. Notwithstanding any provision to the contrary elsewhere herein;
(i) if Directors and Officers of the Company elect to include any shares of
Common Stock held by them in any registration effected by the Company as
described in Paragraph 6a hereof, then such shares, subject to the
underwriter's opinion and percentage limitations described in Paragraph 6d(ii)
immediately following, shall be considered entitled to "piggyback
registration" rights under Paragraph 6c and (ii) if the underwriter for an
underwriting contemplated under Paragraph 6a hereof determines that marketing
factors permit the registration of securities other than those offered for the
Company's account in such underwriting ("Piggybacked Securities"), the
registration rights granted elsewhere herein to the Buyer shall apply to such
number of the registrable securities requested to be registered by such
Directors and Officers.
e. In connection with the preparation and filing of the
Registration Statement, the Company agrees to (i) use its best efforts to
cause such Registration Statement to become and remain effective; (ii) prepare
and file with the SEC such amendments and supplements to such Registration
Statement as may be necessary to keep such Registration Statement effective
until the Expiration Date; (iii) furnish to the Buyer such number of copies of
a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and such
other documents as Buyer may reasonably request in order to facilitate the
disposition of the shares of Common Stock; and (iv) use its best efforts to
register and qualify the shares of Common Stock covered by such Registration
Statement under such other securities or Blue Sky laws of such jurisdictions
as shall be identified by the warrant Buyers for the distribution of the
securities covered by the Registration Statement.
f. All expenses incurred in connection with the registration,
offering and distribution of the shares of Common Stock underlying this
Warrant including fees and disbursements of counsel, shall be borne by the
Company, including, without limitation, Securities and Exchange Commission
filing fees, Blue Sky filing fees, printing costs, accounting fees costs,
transfer agent fees, and any other miscellaneous costs and disbursements.
Each Buyer participating in the Registration shall be liable for any and all
underwriting discounts, brokerage commissions or other fees or expenses
incurred in connection with the sale or other disposition by Buyer of the
shares of Common Stock covered by the Registration Statement.
g. To the extent permitted by law, Buyer will indemnify and hold
harmless the Company, and its directors, officers, employees, agents and
representatives, as well as its controlling persons (within the meaning of the
Act) against any losses, claims, damages, liabilities, or expenses, including
without limitation, attorney's fees and disbursements, which arise out of or
are based upon any violation by Buyer of the Act or under the Securities
Exchange Act of 1934, or any rule or regulation promulgated thereunder
applicable to Buyer, or arise out of or are based upon any untrue statement or
omission of Buyer in this Agreement between the Company and Buyer, or arise
out of or are based upon any untrue statement or alleged untrue statement of
any material fact contained in the Registration Statement, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, but only to the extent that such untrue statement or alleged
untrue statement or omission, or alleged omission was made in such
Registration Statement in reliance upon and in conformity with information
furnished by Buyer in writing, expressly for use in connection with such
Registration Statement.
h. To the extent permitted by law, the Company will indemnify and
hold harmless Buyer, including its officers, directors, employees, agents, and
representatives, against any losses, claims, damages, liabilities, or
expenses, including without limitation attorney's fees and disbursements, to
which Buyer may become subject under the Act to the extent that such losses,
claims, damages or liabilities arise out of or are based upon any violation by
the Company of the Act or under the Securities Exchange Act of 1934, or any
rule or regulation promulgated thereunder applicable to the Company, or arise
out of or are based upon any untrue or alleged untrue statement of any
material fact contained in the Registration Statement, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or arise out of any violation by the Company of any rule or
regulation promulgated under the Act applicable to the Company and relating to
action or inaction required of the Company in connection with such
Registration Statement; provided, however, that the indemnity agreement
contained in this paragraph shall not apply to any loss, damage or liability
to the extent that same arises out of or is based upon an untrue statement or
omission made in connection with such Registration Statement in reliance upon
and in conformity with information furnished in writing expressly for use in
connection with such Registration Statement by Buyer.
i. Buyer undertakes to comply with all applicable laws governing
the distribution of securities in connection with Buyer's sale of Common Stock
of the Company acquired pursuant to the exercise of this Warrant, including,
without limitation, Regulation M under the Securities Exchange Act of 1934,
and to notify the Company of any changes in Buyer's plan of distribution,
including the determination of the public offering price and any dealer
concession or discount so that the Company can sticker or amend the
Registration Statement as the Company deems appropriate in its sole
discretion.
6. GOVERNING LAW: MISCELLANEOUS. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of Colorado. Each of
the parties consents to the jurisdiction of the federal courts whose districts
encompass any part of the City of and County of Boulder, State of Colorado in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. A facsimile transmission of this signed Agreement shall be
legal and binding on all parties hereto. This Agreement may be signed in one
or more counterparts, each of which shall be deemed an original. The headings
of this Agreement are for convenience of reference and shall not form part of,
or affect the interpretation of, this Agreement. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or enforceability
of the remainder of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction. This Agreement may be amended only by an
instrument in writing signed by the party to be charged with enforcement.
This Agreement supersedes all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof.
7. NOTICES. Any notice required or permitted hereunder shall be given
in writing (unless otherwise specified herein) and shall be deemed effectively
given, (i) on the date delivered, (a) by personal delivery, or (b) if advance
copy is given by fax, (ii) seven business days after deposit in the United
States Postal Service by regular or certified mail, or (iii) three business
days mailing by international express courier, with postage and fees prepaid,
addressed to the other party thereunto entitled at the following addresses, or
at such other addresses as a party may designate by ten days' advance written
notice to each of the other party hereto:
COMPANY: XML - GLOBAL TECHNOLOGIES, INC.
ATTN: Peter Shandro, Chief Executive Officer
1038 Homer Street
Vancouver, B.C. V6B 2W9, Canada
Fax No. (604) 717-1107
with a copy to: Clifford L. Neuman, Esq.
Neuman & Drennen, LLC
1507 Pine Street
Boulder, Colorado 80302
Fax No. (303) 449-1045
BUYER: TOMASOVICH FAMILY TRUST
600 Wilshire Boulevard, Suite 1410
Los Angeles, CA 90017
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Company's
representations and warranties shall survive the execution and delivery hereof
of this Agreement and the delivery of the Securities and the Purchase Price,
and shall inure to the benefit of their respective successors and assigns.
9. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
as of the date first above written.
COMPANY: XML - GLOBAL TECHNOLOGIES, INC.
By:
----------------------------
Authorized Agent
BUYER: TOMASOVICH FAMILY TRUST
By:
----------------------------
Authorized Agent
<PAGE>
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT ("Agreement") is entered into this
____ day of February, 2000 by and between XML - GLOBAL TECHNOLOGIES, INC., a
Colorado corporation, ("Company") and TOMASOVICH FAMILY TRUST, ("Buyer").
W I T N E S S E T H:
WHEREAS, Company and Buyer are executing and delivering this Agreement in
accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under 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") and/or Section 4(2) of the Securities Act; and
WHEREAS, Buyer wishes to purchase, upon the terms and subject to the
conditions of this Agreement, shares of Common Stock, $.0001 par value per
share of Company (the "Common Stock"), and Common Stock purchase warrants (the
"Warrants") upon the terms and subject to the conditions of this Agreement
(the Common Stock and the Warrants sometimes referred to herein as the
"Securities").
NOW THEREFORE, in consideration of the promises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE.
a. Units. Buyer hereby unconditionally and irrevocably agrees to
purchase from the Company five hundred thousand (500,000) Units (the "Units"),
at a price of $1.00 per Unit, for an aggregate purchase price of $500,000.
Each Unit consists of one (1) share of the Company's Common Stock and one (1)
Warrant (the "Warrant").
b. Warrants. Each Warrant shall entitle the Buyer to purchase one
(1) additional share of Common Stock at an exercise price of $4.00 per share.
Each Warrant shall be exercisable until December 31, 2000.
c. Payment. Buyer shall pay the purchase price for the Units
within forty-five (45) days of the date of this Agreement.
2. BUYER REPRESENTATIONS AND WARRANTIES. Buyer represents and warrants
to, and covenants and agrees with, Company as follows:
a. Buyer is purchasing the Securities and will be acquiring the
shares of Common Stock issuable upon exercise of the Warrants for its own
account for investment only and not with a view towards the public sale or
distribution thereof;
b. Buyer is (i) an "accredited investor" as that term is defined
in Rule 501 of the General Rules and Regulations under the Securities Act by
reason of Rule 501(a)(7), and (ii) experienced in making investments of the
kind described in this Agreement and the related documents, (iii) able, by
reason of the business and financial experience of its officers (if an entity)
and professional advisors (who are not affiliated with or compensated in any
way by Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its
investment in the Securities;
c. All subsequent offers and sales of the Securities and the
shares of Common Stock issuable upon exercise of the Warrants (the "Shares" or
"Common Stock") by Buyer shall be made pursuant to registration of the Shares
under the Securities Act or pursuant to an exemption from registration;
d. Buyer understands that the Securities are being offered and
sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that
Company is relying upon the truth and accuracy of, and Buyer's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of Buyer to acquire the
Securities and to receive an offer of the Shares;
e. Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of Company and
materials relating to the offer and sale of the Securities which have been
requested by Buyer. Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of Company and have received complete and
satisfactory answers to any such inquiries.
f. Buyer understands that its investment in the Securities
involves a high degree of risk;
g. Buyer understands that no United States federal or state agency
or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities;
h. This Agreement has been duly and validly authorized, executed
and delivered on behalf of Buyer and is a valid and binding agreement of Buyer
enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and
other similar laws affecting the enforcement of creditors' rights generally.
i. Neither Buyer, nor any affiliate of Buyer, will enter into, any
put option, short position, or other similar position with respect to the
Securities or the Shares.
3. COMPANY REPRESENTATIONS AND WARRANTIES. Company represents and
warrants to Buyer that:
a. Concerning the Shares. There are no preemptive rights of any
stockholder of Company, as such, to acquire the Common Stock.
b. Reporting Company Status. Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Colorado, and has the requisite corporate power to own its properties and
to carry on its business as now being conducted. Company is duly qualified as
a foreign corporation to do business and is in good standing in each
jurisdiction where the nature of the business conducted or property owned by
it makes such qualification necessary other than those jurisdictions in which
the failure to so qualify would not have a material and adverse effect on the
business, operations, properties, prospects or condition (financial or
otherwise) of Company. Company has registered its Common Stock pursuant to
Section 12 of the Exchange Act.
c. Authorized Shares. Company has sufficient authorized and
unissued Shares as may be reasonably necessary to effect the exercise of the
Warrants. The Shares have been duly authorized and, when issued upon exercise
of the Securities, will be duly and validly issued, fully paid and non-
assessable and will not subject the holder thereof to personal liability by
reason of being such holder.
d. Securities Purchase Agreement. This Agreement, and the
transactions contemplated thereby, have been duly and validly authorized by
Company, this Agreement has been duly executed and delivered by Company and
this Agreement is the valid and binding agreement of Company enforceable in
accordance with their respective terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium, and
other similar laws affecting the enforcement of creditors' rights generally;
and the Securities will be duly and validly authorized and, when executed and
delivered on behalf of Company in accordance with this Agreement, will be a
valid and binding obligation of Company in accordance with its terms, subject
to general principles of equity and to bankruptcy, insolvency, moratorium, or
other similar laws affecting the enforcement of creditors' rights generally.
e. Non-contravention. The execution and delivery of this
Agreement by Company, the issuance of the Securities, and the consummation by
Company of the other transactions contemplated by this Agreement, do not and
will not conflict with or result in a breach by Company of any of the terms or
provisions of, or constitute a default under (i) the articles of incorporation
or by-laws of Company, (ii) any indenture, mortgage, deed of trust, or other
material agreement or instrument to which Company is a party or by which it or
any of its properties or assets are bound, including any listing agreement for
the Common Stock except as herein set forth, (iii) to its knowledge, any
existing applicable law, rule, or regulation or any applicable decree,
judgment, or (iv) to its knowledge, order of any court, United States federal
or state regulatory body, administrative agency, or other governmental body
having jurisdiction over Company or any of its properties or assets, except
such conflict, breach or default which would not have a material adverse
effect on the transactions contemplated herein. Company is not in violation of
any material laws, governmental orders, rules, regulations or ordinances to
which its property, real, personal, mixed, tangible or intangible, or its
businesses related to such properties, are subject.
f. Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market is required to be obtained by Company for the issuance and
sale of the Securities to Buyer as contemplated by this Agreement, except such
authorizations, approvals and consents that have been obtained.
g. SEC Documents, Financial Statements. The Common Stock of
Company is registered pursuant to Section 12(g) of the Exchange Act. Buyer
has had the opportunity to obtain on Buyer's behalf true and complete copies
of the SEC Documents (except for exhibits and incorporated documents).
Company has not provided to Buyer any information which, according to
applicable law, rule or regulation, should have been disclosed publicly by
Company but which has not been so disclosed, other than with respect to the
transactions contemplated by this Agreement.
As of their respective dates, all of Company's reports,
statements and other filings with the Commission (the "SEC Documents")
complied in all material respects with the requirements of the Act or the
Exchange Act as the case may be and the rules and regulations of the
Commission promulgated thereunder and other federal, state and local laws,
rules and regulations applicable to such SEC Documents, and none of the SEC
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 Company included in
the SEC 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 generally
accepted accounting principles 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 Company 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).
h. Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board or body pending
or, to the knowledge of Company, threatened against or affecting Company,
wherein an unfavorable decision, ruling or finding would have a material
adverse effect on the business or financial condition of Company or the
transactions contemplated by this Agreement or any of the documents
contemplated hereby or which would adversely affect the validity or
enforceability of, or the authority or ability of Company to perform its
obligations under, this Agreement or any of such other documents.
i. Absence of Events of Default. No Event of Default, as defined
in the respective agreement to which Company is a party, and no event which,
with the giving of notice or the passage of time or both, would become an
Event of Default (as so defined), has occurred and is continuing, which would
have a material adverse effect on Company's financial condition or results of
operations.
j. Capitalization. The authorized capital stock of the Company
consists entirely of 500,000,000 shares of Common Stock having a par value of
$.0001 per share and 100,000,000 shares of Preferred Stock having a par value
of $.01 per share. As of the date of this Agreement, 20,830,000 shares of
Common Stock and no shares of Preferred Stock are issued and outstanding. In
addition, there are issued and outstanding options and warrants exercisable to
purchase, in the aggregate, 6,660,000 shares of Common Stock. Other than the
foregoing, there are no other equity securities of the Company authorized,
issued or outstanding, and there are no authorized, issued or outstanding
subscriptions, options, warrants, contracts, calls, commitments or other
purchase rights of any nature or character relating to any of the Company's
capital stock, equity securities, debt or other securities convertible into
stock or equity securities of the Company.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. Buyer acknowledges that (1) the
Securities have not been and are not being registered under the provisions of
the Securities Act and are not being registered under the Securities Act, and
may not be transferred unless (A) subsequently registered thereunder or (B)
Buyer shall have delivered to Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to Company, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Securities made in
reliance on Rule 144 promulgated under the Securities Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the Securities Act, may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the Commission thereunder; and (3) neither Company nor any
other person is under any obligation to register the Securities under the
Securities Act or to comply with the terms and conditions of any exemption
thereunder.
b. Restrictive Legend. Buyer acknowledges and agrees that the
Securities issued to Buyer shall bear a restrictive legend in substantially
the following form (and a stop-transfer order may be placed against transfer
of the Securities):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD
OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION
IS NOT REQUIRED.
c. Filings. Company undertakes and agrees to make all necessary
filings in connection with the sale of the Securities to Buyer under any
United States laws and regulations, or by any domestic securities exchange or
trading market, and to provide a copy thereof to Buyer promptly after such
filing.
d. Reporting Status. So long as Buyer beneficially owns any of
the Securities, Company shall file all reports required to be filed with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act, and Company
shall not terminate its status as an issuer required to file reports under the
Exchange Act even if the Exchange Act or the rules and regulations thereunder
would permit such termination.
5. REGISTRATION RIGHTS.
a. Subject to the various provisions of this paragraph, if at any
time within one (1) year of the date of this Agreement the Company proposes to
register any of its Common Stock under the Act in connection with the public
offering of such securities solely for cash on a form that would also permit
the registration of the Common Stock issued as part of the Units or issuable
upon exercise of the Warrants (hereafter collectively the "Registrable
Securities"), the Company shall promptly give Buyer written notice of such
determination, and the Company, subject to the provisions of this Paragraph 6,
shall use its best efforts to cause to be registered under the Act all of the
Registrable Securities.
b. In connection with any offering involving an underwriting of
shares being issued by the Company as described in Paragraph 6a above, the
Company shall not be required under Paragraph 6a hereof to include Buyer's
Registrable Securities in such underwriting unless it accepts the terms of the
underwriting as agreed upon between the Company and the underwriters selected
by it, and then only in such quantity as will not, in the written opinion of
the underwriters, jeopardize the success of the offering by the Company. If
the total number of shares of Registrable Securities to be included in such
offering is an amount of securities that the underwriters state in their
written opinion jeopardizes the success of the offering, the Company shall
only be required to include in the offering so many of the shares of
Registrable Securities as the underwriters opine (in writing) will not
jeopardize the success of the offering, subject to the following provisions
and exceptions:
c. Except as provided in Paragraph 6d below, all limitations on
the number of shares of Registrable Securities to be included in the
applicable underwriting shall be pro rata with respect to the number of shares
of Registrable Securities reserved for issuance pursuant to outstanding
Warrants of the same class as the Warrants represented by this Certificate.
If Buyer disapproves of the terms of any such underwriting, it may elect to
withdraw therefrom by written notice to the Company and the underwriter, and
any shares excluded or withdrawn from such underwriting shall be withdrawn
from registration.
d. Notwithstanding any provision to the contrary elsewhere herein;
(i) if Directors and Officers of the Company elect to include any shares of
Common Stock held by them in any registration effected by the Company as
described in Paragraph 6a hereof, then such shares, subject to the
underwriter's opinion and percentage limitations described in Paragraph 6d(ii)
immediately following, shall be considered entitled to "piggyback
registration" rights under Paragraph 6c and (ii) if the underwriter for an
underwriting contemplated under Paragraph 6a hereof determines that marketing
factors permit the registration of securities other than those offered for the
Company's account in such underwriting ("Piggybacked Securities"), the
registration rights granted elsewhere herein to the Buyer shall apply to such
number of the registrable securities requested to be registered by such
Directors and Officers.
e. In connection with the preparation and filing of the
Registration Statement, the Company agrees to (i) use its best efforts to
cause such Registration Statement to become and remain effective; (ii) prepare
and file with the SEC such amendments and supplements to such Registration
Statement as may be necessary to keep such Registration Statement effective
until the Expiration Date; (iii) furnish to the Buyer such number of copies of
a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and such
other documents as Buyer may reasonably request in order to facilitate the
disposition of the shares of Common Stock; and (iv) use its best efforts to
register and qualify the shares of Common Stock covered by such Registration
Statement under such other securities or Blue Sky laws of such jurisdictions
as shall be identified by the warrant Buyers for the distribution of the
securities covered by the Registration Statement.
f. All expenses incurred in connection with the registration,
offering and distribution of the shares of Common Stock underlying this
Warrant including fees and disbursements of counsel, shall be borne by the
Company, including, without limitation, Securities and Exchange Commission
filing fees, Blue Sky filing fees, printing costs, accounting fees costs,
transfer agent fees, and any other miscellaneous costs and disbursements.
Each Buyer participating in the Registration shall be liable for any and all
underwriting discounts, brokerage commissions or other fees or expenses
incurred in connection with the sale or other disposition by Buyer of the
shares of Common Stock covered by the Registration Statement.
g. To the extent permitted by law, Buyer will indemnify and hold
harmless the Company, and its directors, officers, employees, agents and
representatives, as well as its controlling persons (within the meaning of the
Act) against any losses, claims, damages, liabilities, or expenses, including
without limitation, attorney's fees and disbursements, which arise out of or
are based upon any violation by Buyer of the Act or under the Securities
Exchange Act of 1934, or any rule or regulation promulgated thereunder
applicable to Buyer, or arise out of or are based upon any untrue statement or
omission of Buyer in this Agreement between the Company and Buyer, or arise
out of or are based upon any untrue statement or alleged untrue statement of
any material fact contained in the Registration Statement, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, but only to the extent that such untrue statement or alleged
untrue statement or omission, or alleged omission was made in such
Registration Statement in reliance upon and in conformity with information
furnished by Buyer in writing, expressly for use in connection with such
Registration Statement.
h. To the extent permitted by law, the Company will indemnify and
hold harmless Buyer, including its officers, directors, employees, agents, and
representatives, against any losses, claims, damages, liabilities, or
expenses, including without limitation attorney's fees and disbursements, to
which Buyer may become subject under the Act to the extent that such losses,
claims, damages or liabilities arise out of or are based upon any violation by
the Company of the Act or under the Securities Exchange Act of 1934, or any
rule or regulation promulgated thereunder applicable to the Company, or arise
out of or are based upon any untrue or alleged untrue statement of any
material fact contained in the Registration Statement, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or arise out of any violation by the Company of any rule or
regulation promulgated under the Act applicable to the Company and relating to
action or inaction required of the Company in connection with such
Registration Statement; provided, however, that the indemnity agreement
contained in this paragraph shall not apply to any loss, damage or liability
to the extent that same arises out of or is based upon an untrue statement or
omission made in connection with such Registration Statement in reliance upon
and in conformity with information furnished in writing expressly for use in
connection with such Registration Statement by Buyer.
i. Buyer undertakes to comply with all applicable laws governing
the distribution of securities in connection with Buyer's sale of Common Stock
of the Company acquired pursuant to the exercise of this Warrant, including,
without limitation, Regulation M under the Securities Exchange Act of 1934,
and to notify the Company of any changes in Buyer's plan of distribution,
including the determination of the public offering price and any dealer
concession or discount so that the Company can sticker or amend the
Registration Statement as the Company deems appropriate in its sole
discretion.
6. GOVERNING LAW: MISCELLANEOUS. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of Colorado. Each of
the parties consents to the jurisdiction of the federal courts whose districts
encompass any part of the City of and County of Boulder, State of Colorado in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. A facsimile transmission of this signed Agreement shall be
legal and binding on all parties hereto. This Agreement may be signed in one
or more counterparts, each of which shall be deemed an original. The headings
of this Agreement are for convenience of reference and shall not form part of,
or affect the interpretation of, this Agreement. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or enforceability
of the remainder of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction. This Agreement may be amended only by an
instrument in writing signed by the party to be charged with enforcement.
This Agreement supersedes all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof.
7. NOTICES. Any notice required or permitted hereunder shall be given
in writing (unless otherwise specified herein) and shall be deemed effectively
given, (i) on the date delivered, (a) by personal delivery, or (b) if advance
copy is given by fax, (ii) seven business days after deposit in the United
States Postal Service by regular or certified mail, or (iii) three business
days mailing by international express courier, with postage and fees prepaid,
addressed to the other party thereunto entitled at the following addresses, or
at such other addresses as a party may designate by ten days' advance written
notice to each of the other party hereto:
COMPANY: XML - GLOBAL TECHNOLOGIES, INC.
ATTN: Peter Shandro, Chief Executive Officer
1038 Homer Street
Vancouver, B.C. V6B 2W9, Canada
Fax No. (604) 717-1107
with a copy to: Clifford L. Neuman, Esq.
Neuman & Drennen, LLC
1507 Pine Street
Boulder, Colorado 80302
Fax No. (303) 449-1045
BUYER: TOMASOVICH FAMILY TRUST
600 Wilshire Boulevard, Suite 1410
Los Angeles, CA 90017
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Company's
representations and warranties shall survive the execution and delivery hereof
of this Agreement and the delivery of the Securities and the Purchase Price,
and shall inure to the benefit of their respective successors and assigns.
9. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
as of the date first above written.
COMPANY: XML - GLOBAL TECHNOLOGIES, INC.
By:
---------------------------------
Authorized Agent
BUYER: TOMASOVICH FAMILY TRUST
By:
---------------------------------
Authorized Agent
<PAGE>
UNIT PURCHASE OPTION AGREEMENT
between
XML - GLOBAL TECHNOLOGIES, INC.
and
WESTMINISTER SECURITIES CORP.
_________________
Options for Purchase of __________ Units of
XML - Global Technologies, Inc.
Each Unit consisting of 50,000 shares of Common Stock,
par value $.0001 per share
and 50,000 Common Stock Purchase Warrants
Options Void after September ___, 2001
<PAGE>
<PAGE>
UNIT PURCHASE OPTION AGREEMENT
THIS AGREEMENT is dated as of March ___, 2000, between XML - GLOBAL
TECHNOLOGIES, INC. (the "Company") and WESTMINSTER SECURITIES CORP. (the
"Placement Agent").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Placement Agent Options
("Options") to purchase up to an aggregate of _______ units (the "Units"),
each Unit consisting of 50,000 shares of the Company's Common Stock, par value
$.0001 per share (the "Common Stock") and 50,000 Common Stock Purchase
Warrants (the "Underlying Warrants"); and
WHEREAS, the Underlying Warrants entitle holder to purchase one share of
Common Stock at an initial exercise price of $4.00 per share for six months
and thereafter at an exercise price of $6.00 per share ("Warrant Exercise
Price"), subject to adjustment under certain circumstances at any time before
September ___, 2001 (the "Warrant Expiration Date") unless earlier redeemed;
and
WHEREAS, the Placement Agent has agreed pursuant to the agency agreement
(the "Agency Agreement") to act as the Placement Agent in connection with the
Company's proposed private offering of up to ___________ Units as a private
offering price of $75,000 per Unit (the "Private Offering"); and
WHEREAS, the Options to be issued pursuant to this Agreement will be
issued on the Closing Date (as such term is defined in the Agency Agreement)
by the Company to the Placement Agent in consideration for, and as part of the
Placement Agent's compensation in connection with, the Placement Agent acting
as the Placement Agent pursuant to the Agency Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency which is hereby
acknowledged, the parties hereto agreed as follows:
The Placement Agent (or its designees) is hereby granted the right to
purchase, at any time from ____________, 2000, until 5:00 p.m., Pacific time,
on ____________, 2001, up to an aggregate of _________ Units at an initial
exercise price (subject to adjustment as provided in Section 3 hereof) of
$75,000 per Unit subject to the terms and conditions of this Agreement.
The Options issued pursuant hereto are subject to the following terms and
conditions:
1. Definitions of Certain Terms. Except as may be otherwise clearly
required by the context, the following terms have the following meanings:
(a) "Act" means the Securities Act of 1933, as amended.
(b) "Closing Date" means the date on which the Offering is closed.
(c) "Commission" means the Securities and Exchange Commission.
(d) "Common Stock" means the common stock, $.0001 par value, of the
Company.
(e) "Company" means XML - Global Technologies, Inc., a Colorado
corporation.
(f) "Effective Date" means the date on which the Registration
Statement is declared effective by the Commission.
(g) "Exercise Price" means the price at which the Optionholder may
purchase one Unit (or other Securities obtainable in lieu of one Unit) upon
exercise of a Option as determined from time to time pursuant to the
provisions hereof. The initial Exercise Price is $75,000 per Unit.
(h) "Offering" means the private offering of Units by the Company.
(i) "Participating Underwriter" means any underwriter participating
in the sale of the Shares pursuant to the Registration Statement, as defined
below.
(j) "Placement Agent" means Westminster Securities Corp.
(k) "Registration Statement" means the Company's registration
statement.
(l) "Rules and Regulations" means the rules and regulations of the
Commission adopted under the Act.
(m) "Securities" means the securities obtained or obtainable upon
exercise of the Option(s) or securities obtained or obtainable upon exercise,
exchange, or conversion of such securities.
(n) "Underlying Warrants" mean the common stock purchase warrants
included in the Units.
(o) "Units" mean the Units offered in the Offering.
(p) "Option Certificate" means the certificate evidencing the
Option(s), a form of which is annexed hereto as Exhibit A.
(q) "Optionholder" means the record holder of the Option(s) or
Securities. The initial Warrantholder is the Placement Agent.
(r) "Warrant(s)" mean the warrant(s) evidenced by the Warrant
Certificate, any similar certificate issued in connection with the Offering,
or any certificate obtained upon transfer or partial exercise of the
Warrant(s) evidenced by any such certificate.
2. Exercise of Option(s). All or any part of the Option may be
exercised during an 18 month period commencing on the date of issue (the
"Exercise Date") and ending at 5:00 p.m. Pacific Time 18 months following the
Exercise Date by surrendering the Option Certificate, together with
appropriate instructions, duly executed by the Optionholder or by its duly
authorized attorney, at the office of the Company, 1038 Homer Street,
Vancouver, British Columbia V6B 2W9 Canada, or at such other office or agency
as the Company may designate. Upon receipt of notice of exercise, the Company
shall immediately instruct its transfer agent to prepare certificates for the
Securities to be received by the Optionholder upon completion of the Option
exercise. When such certificates are prepared, the Company shall notify the
Optionholder and deliver such certificates to the Optionholder (or as
otherwise designated by the Optionholder's written instructions) immediately
upon payment in full by the Optionholder, in lawful money of the United
States, of the Exercise Price payable with respect to the Securities being
purchased. If the Optionholder shall represent and warrant that all applicable
registration and prospectus delivery requirements for their sale have been
complied with upon sale of the Securities received upon exercise of the
Option(s), such certificates shall not bear a legend with respect to the Act.
If fewer than all the Securities purchasable under the Option(s) are
purchased, the Company will, upon such partial exercise, execute and deliver
to the Optionholder a new Option Certificate (dated the date hereof), in form
and tenor similar to the Option Certificate, evidencing that portion of the
Option not exercised. The Securities to be obtained on exercise of the
Option(s) will be deemed to have been issued, and any person exercising the
Options will be deemed to have become a holder of record of those Securities
as of the date of the payment of the Exercise Price.
3. Adjustments in Certain Events. The number, class, and price of
Securities for which the Option Certificate may be exercised are subject to
adjustment from time to time upon the happening of certain events as follows:
(a) If the outstanding shares of the Company's Common Stock are
divided into a greater number of shares or a dividend in stock is paid on the
Common Stock, the number of shares of Common Stock, the number of Securities
for which the Options are then exercisable will be proportionately increased
and, conversely, if the outstanding shares of Common Stock are combined into a
smaller number of shares of Common Stock, the number of the Securities for
which the Options are then exercised will be proportionately reduced and the
Exercise Price will be proportionately reduced. The increases and reductions
provided for in this Paragraph (a) of Section 3 will be made with the intent
and, as nearly as practicable, the effect that neither the percentage of the
total equity of the Company obtainable on exercise of the Option(s) nor the
price payable for such percentage upon such exercise will be affected by any
event described in this Paragraph (a) of Section 3.
(b) In case of any change in the Common Stock through merger,
consolidation, reclassification, reorganization, partial or complete
liquidation, purchase of substantially all the assets of the Company, or other
change in the capital structure of the Company, then, as a condition of such
change, lawful and adequate provision will be made so that the holder of the
Option Certificate will have the right thereafter to receive upon the exercise
of the Option(s) the kind and amount of shares of stock or other Securities or
property to which it would have been entitled if, immediately prior to such
event, it had held the number of shares of Common Stock obtainable upon the
exercise of the Option(s) and the Underlying Warrants. In any such case,
appropriate adjustment will be made in the application of the provisions set
forth herein with respect to the rights and interest thereafter of the
Optionholder, to the end that the provisions set forth herein will thereafter
be applicable, as nearly as reasonably may be, in relation to any shares of
stock or other property thereafter deliverable upon the exercise of the
Option(s). The Company will not permit any change in its capital structure to
occur unless the issuer of the shares of stock or other securities to be
received by the holder of the Option Certificate, if not the Company, agrees
to be bound by and comply with the provisions of the Option Certificate.
(c) When any adjustment is required to be made in the number of
Units or other Securities, or property purchasable upon exercise of the
Option(s), the Company will promptly determine the new number of such shares
or other Securities or property purchasable upon exercise of the Option(s) and
(i) prepare and retain on file a statement describing in reasonable detail the
method used in arriving at the new number of such shares or other Securities
or property purchasable upon exercise of the Option(s) and the Underlying
Warrants and (ii) cause a copy of such statement to be mailed to the
Optionholder within thirty (30) days after the date of the event giving rise
to the adjustment.
(d) No fractional shares of Common Stock or other securities will
be issued in connection with the exercise of the Option(s), but the Company
will pay, in lieu of fractional shares, a cash payment therefor.
(e) If preferred securities of the Company or securities of any
subsidiary of the Company are distributed pro rata to holders of any or all of
the Company's securities, such number of securities will be distributed to the
Optionholder or its assignee upon exercise of its rights hereunder as such
Optionholder or assignee would have been entitled to if the Option Certificate
had been exercised prior to such distribution. The provisions with respect to
adjustment of the Common Stock provided in this Section 3 will also apply to
the preferred securities and securities of any subsidiary to which the
Optionholder or his assignee is entitled under this Paragraph (e) of Section
3.
(f) Notwithstanding anything herein to the contrary, there will be
no adjustment made hereunder on account of the sale of any Securities
purchasable upon exercise of the Option(s).
4. Reservation of Shares. The Company agrees that the number of shares
of Common Stock or other Securities sufficient to provide for the exercise of
the Option(s) and the Underlying Warrants upon the basis set forth above will
at all times during the term of the Option(s) be reserved for exercise.
5. Validity of Securities. All Securities delivered pursuant the
exercise of the Option(s) will be duly and validly issued in accordance with
their terms, and the Company will pay all documentary and transfer taxes, if
any, in respect of the original issuance thereof upon exercise of the
Option(s).
6. Registration of Securities Issuable on Exercise of Option(s).
(a) The Company shall register the Securities with the Commission
pursuant to the Act so as to allow the unrestricted sale of the Securities to
the public from time to time during a two year period commencing 120 days
following the Exercise Date and ending at 5:00 p.m. Pacific Time on the second
anniversary of the Exercise Date (the "Registration Period"). The Company
shall also file such applications and other documents necessary to permit the
sale of the Securities to the public during the Registration Period in those
states in which the Shares were qualified for sale in the Offering or such
other states as to which the Company and the Optionholder agree. In order to
comply with the provisions of this Section 6(a), the Company shall not be
required to file more than one registration statement. No registration right
of any kind, "piggyback" or otherwise, is required to be in effect longer than
five years from the Closing Date.
(b) The Company shall pay all of the Expenses relating to the
registration, offer, and sale of the Securities.
(c) Except as specifically provided herein, the manner and conduct
of the registration, including the contents of the registration statement,
will be entirely in the control and at the discretion of the Company. The
Company shall file such post-effective amendments and supplements as may be
necessary to maintain the currency of the registration statement during the
period of its use. In addition, if the Optionholder participating in the
registration is advised by counsel that the registration statement, in its
opinion, is deficient in any material respect, the Company shall use its best
efforts to cause the registration statement to be amended to eliminate the
concerns raised.
(d) The Company shall furnish to the Optionholder the number of
copies of a prospectus, including a preliminary prospectus, in conformity with
the requirements of the Act, and such other documents as the Optionholder may
reasonably request in order to facilitate the disposition of Securities owned
by it.
(e) The Company shall, at the request of Optionholder: (i) furnish
an opinion of the counsel representing the Company for the purposes of the
registration pursuant to this Section 6, addressed to the Optionholder and any
Participating Underwriter, (ii) furnish an appropriate letter from the
independent public accountants of the Company, addressed to the Optionholder
and any Participating Underwriter, and (iii) make representations and
warranties to the Optionholder and any Participating Underwriter. A request
pursuant to this subsection (e) may be made on three occasions. The documents
required to be delivered pursuant to this subsection (e) will be dated within
30 days of the request and will be, in form and substance equivalent to
similar documents furnished to the underwriters in connection with the
Offering, with such changes as may be appropriate in light of changed
circumstances.
7. Indemnification in Connection with Registration.
(a) In connection with its registration obligations, the Company
shall indemnify and hold harmless the selling Optionholder, and any person who
controls the selling Optionholder within the meaning of the Act, against any
losses, claims, damages, or liabilities, joint or several, to which the
Optionholder or controlling person may be subject under the Act or otherwise;
and it shall reimburse each Optionholder and each controlling person for any
legal or other expenses reasonably incurred by the Optionholder or controlling
person in connection with investigating or defending any such loss, claim,
damage, liability, or action, insofar as such losses, claims, damages, or
liabilities, joint or several (or actions in respect thereof), arise out of or
are based upon any untrue statement or alleged untrue statement of any
material fact contained, on the effective date thereof, in any such
registration statement or any preliminary prospectus or final prospectus, or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that the Company will not be liable in any case to the
extent that any loss, claim, damage, or liability arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission made in any registration statement, preliminary prospectus, final
prospectus, or any amendment or supplement thereto, in reliance upon and in
conformity with written information furnished by the Optionholder or any
person controlling the Optionholder for use in the preparation thereof. The
indemnity agreement contained in this subparagraph (a) will not apply to
amounts paid to any claimant in settlement of any suit or claim unless such
payment is first approved by the Company, such approval not to be unreasonably
withheld or delayed.
(b) The selling Optionholder, as a condition of the Company's
registration obligation, shall indemnify and hold harmless the Company, each
of its directors, each of its officers who have signed any registration
statement or other filing or any amendment or supplement thereto, and any
person who controls the Company within the meaning of the Act, against any
losses, claims, damages, or liabilities to which the Company or any such
director, officer, or controlling person may become subject under the Act or
otherwise, and shall reimburse any legal or other expenses reasonably incurred
by the Company or any such director, officer, or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability, or action, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue or
alleged untrue statement of any material fact contained in said registration
statement, any preliminary or final prospectus, or other filing, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
but only to the extent that such untrue statement or alleged untrue statement
or omission or alleged omission was made in said registration statement,
preliminary or final prospectus, or other filing, or amendment or supplement,
in reliance upon and in conformity with written information furnished by the
Optionholder or any person controlling the Optionholder for use in the
preparation thereof; provided, however, that the indemnity agreement contained
in this Subparagraph (b) shall not apply to amounts paid to any claimant in
settlement of any suit or claim unless such payment is first approved by the
Optionholder, such approval not to be unreasonably withheld or delayed.
(c) Promptly after receipt by an indemnified party under
Subparagraphs (a) or (b) above of notice of the commencement of any action,
such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, notify the indemnifying party of the
commencement thereof, but the omission to notify the indemnifying party will
not relieve it from any liability that it may have to any indemnified party
otherwise than under Subparagraphs (a) and (b).
(d) If any such action is brought against any indemnified party and
it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel satisfactory to such indemnified
parry; and after notice from the indemnifying party to such indemnified party
of its election to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation.
8. Restrictions on Transfer. The Option Certificate and the Option(s)
may not be sold, transferred, assigned or hypothecated except to underwriters
of the Offering or to individuals who are either a partner or an officer of
such an underwriter or by will or by operation of law. The Option(s) may only
be exercised by one of the aforesaid persons or by a successor entity or legal
Placement Agent. The Option(s) may be divided or combined, upon request to
the Company by the Optionholder, into a certificate or certificates evidencing
the same aggregate number of Options.
9. No Rights as a Stockholder. Except as otherwise provided herein,
the Optionholder will not, by virtue of ownership of the Option(s), be
entitled to any rights of a stockholder of the Company but will, upon written
request to the Company, be entitled to receive such quarterly or annual
reports as the Company distributes to its stockholders.
10. Options not Callable. The Options may not be called or redeemed
by the Company at any time.
11. Notice. Any notices required or permitted to be given hereunder
will be in writing and may be served personally or by mail; and if served will
be addressed as follows:
If to the Company: XML - Global Technologies, Inc.
ATTN: Peter Shandro
1038 Homer Street
Vancouver, British Columbia V6B 2W9 CANADA
If to the Optionholder: Westminster Securities Corp.
ATTN: John O'Shea
100 Park Avenue, 28th Floor
New York, NY 10017
Any notice so given by mail will be deemed effectively given 48 hours
after mailing when deposited in the United States mail, registered or
certified mail, return receipt requested, postage prepaid and addressed as
specified above. Any party may by written notice to the other specify a
different address for notice purposes.
11. Applicable Law. This Option Agreement and the Option(s) issuable
pursuant to the provisions hereof will be governed by and construed in
accordance with the laws of the State of Colorado, without reference to
conflict of laws principles thereunder. All disputes relating to this Option
Agreement and/or the Option(s) issuable hereunder shall be tried before the
courts of Colorado located in Boulder County, Colorado to the exclusion of all
other courts that might have jurisdiction.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
XML - GLOBAL TECHNOLOGIES, INC.
By: /s/ Peter Shandro
-------------------------------
Peter Shandro
WESTMINISTER SECURITIES CORP.
By: /s/ John P. O'Shea
-------------------------------
John P. O'Shea
<PAGE>
<PAGE>
EXHIBIT A
[FORM OF UNIT PURCHASE OPTION CERTIFICATE]
THE SECURITIES ISSUABLE UPON EXERCISE OF THE OPTIONS REPRESENTED BY THIS
CERTIFICATE MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE EXTENT
APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) UPON RECEIPT BY THE
ISSUER OF AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY
SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE OPTIONS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE UNIT PURCHASE OPTION AGREEMENT REFERRED TO
HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., PACIFIC TIME, ________, 2001
No.________ Options to Purchase
_________ Units
Each Unit consisting of 50,000 shares of Common Stock and 50,000 Common Stock
Purchase Warrants
UNIT PURCHASE OPTION CERTIFICATE
This Unit Purchase Option Certificate certifies that ________________, or
registered assigns, is the registered holder of a Option to purchase
initially, at any time from _____________, 2000 until 5:00 p.m., Pacific Time,
on ____________, 2001 ("Expiration Date"), up to ___________ Units (each a
"Unit") and collectively the "Units") of XML - Global Technologies, Inc., a
Colorado corporation, (the "Company"), at the initial exercise price, subject
to adjustment in certain events (the "Exercise Price"), of $75,000 per Unit
upon surrender of this Option Certificate and payment of the Exercise Price in
cash at an office or agency of the Company, but subject to the conditions set
forth herein and in the Unit Purchase Option Agreement dated as of
_________________ between the Company and Westminister Securities Corp. (the
"Warrant Agreement"). Payment of the Exercise Price shall be made by
certified or official bank check in New York Clearing House funds payable to
the order of the Company.
The Option(s) may not be exercised after 5:00 p.m., Pacific time, on the
Expiration Date, at which time the Option(s) shall become null and void.
Each Unit consists of 50,000 shares of the Company's Common Stock, par
value $.0001 per share (the "Common Stock") and 50,000 Common Stock Purchase
Warrants (the "Underlying Warrants"). Each Underlying Warrant entitles holder
to purchase one share of Common Stock at a price of $4.00 per share for six
months, and thereafter at an exercise price of $6.00 per share ("Warrant
Exercise Price"), subject to adjustment under certain circumstances. The
Warrants are exercisable commencing on the date of issue and will expire on
September ___, 2001 (the "Warrant Expiration Date") unless earlier redeemed.
The Unit Purchase Option Agreement provides that upon the occurrence of
certain events the Exercise Price and the type and/or number of the Company's
securities issuable upon exercise of the Option(s) may, subject to certain
conditions, be adjusted. In such event, the Company will, at the request of
the holder, issue a new Option Certificate evidencing the adjustment in the
Exercise Price and the number and/or type of securities issuable upon the
exercise of the Option(s); provided, however, that the failure of the Company
to issue such new Option Certificate shall not in any way change, alter, or
otherwise impair, the rights of the holder as set forth in the Option
Agreement.
Upon due presentment for registration of transfer of this Option
Certificate at an office or agency of the Company, a new Option Certificate or
Option Certificates of like tenor and evidencing a like number of securities
for which this Option may be exercised shall be issued to the transferee(s) in
exchange for this Option Certificate, subject to the limitations provided
herein and in the Option Agreement, without any charge except for any tax or
other governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the securities for which this
Option may be exercised, the Company shall forthwith issue to the holder
hereof a new Option Certificate representing the remaining number of
unexercised Options.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Option Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms use in this Option Certificate which are defined in the Option
Agreement shall have the meanings assigned to them in the Option Agreement.
IN WITNESS WHEREOF, the Company has caused this Option Certificate to be
duly executed under its corporate seal.
Dated as of ______________, 2000
XML - GLOBAL TECHNOLOGIES, INC.
[Seal]
By:
-------------------------------
Name/Title:
---------------------
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right,
represented by this Option Certificate, to purchase ____________ Units and
herewith tenders in payment for such securities a certified or official bank
check payable in New York Clearing House funds to the order of XML - Global
Technologies, Inc. in the amount of $________________, all in accordance with
the terms of Section 2 of the Unit Purchase Option Agreement, dated as of
____________, 2000, between XML - Global Technologies, Inc. and Westminister
Securities Corp. The undersigned requests that certificates for such
securities be registered in the name of _____________________ whose address is
_____________________________________________________ and that such
certificate be delivered to _____________________ whose address is
___________________________________.
Dated:
Signature
-----------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the Option Certificate)
---------------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Option Certificate or any part thereof, such
assignment to be subject to restrictions of the Option Agreement referred to
in the Option Certificate.)
FOR VALUE RECEIVED, ______________________ hereby sells, assigns and
transfers unto __________________________________________________________
(Please print name and address of transferee)
[this Option Certificate] [________ Options exercisable pursuant to this
Option Certificate], together with all right, title and interest therein. The
undersigned requests that a certificate for such securities be registered in
the name of _________________________ whose address is
___________________________________________________ and that such certificate
be delivered to __________________ whose address is
____________________________________________________. The undersigned also
requests that a certificate for the remaining number of unexercised Options be
registered in the name of ___________________ whose address is
___________________________________________ and that such certificate be
delivered to ________________________ whose address is
___________________________________________________________________.
Dated:__________________
Signature:
----------------------------------
(Signature must conform in all respects to name
of holder as specified on the face of the Option
Certificate.)
--------------------------------------------
(Insert Social Security or Other Identifying
Number of Assignee)
<PAGE>
OFFER TO SUBLEASE PREMISES
SUBTENANT: XML Global Technologies Inc.
SUBLANDLORD: Radical Entertainment Ltd.
PREMISES: Approximately 4,284 square feet located on the Main
floor of 1038 Homer Street, Vancouver, BC
TERM: Approximately Twelve (12) months commencing June 7,
1999 (the "Commencement Date") and ending May 31,
2000 (the "Termination Date"). The Subtenant shall
be permitted access to the Premises upon full
execution of the Sublease Agreement free of gross
rent prior to the Commencement Date.
ANNUAL GROSS RENT: $23.50 per square foot per annum (excludes in-suite
janitorial)
CONDITION OF PREMISES: The Premises are to be provided "as is" including the
furniture (20 chairs & 20 desks) in the Premises as
of the date hereof.
DEPOSIT: The Tenant shall submit a deposit cheque in the
amount of equal to the first and last months' gross
rent plus GST payable to the Sublandlord's agent, CB
Richard Ellis Limited (in trust), which represents
payment towards the first and last months' gross
rent, plus GST. Should this Offer to Sublease be
unconditionally accepted, the Subtenant authorizes CB
Richard Ellis Limited to transfer the Deposit from
its trust account to the Landlord.
EXPANSION/
RENEWAL OPTION: The Subtenant shall provide three (3) months' prior
written notice ("Date of Notice") of its intention to
expand by approximately 960 square feet and/or renew
this Sublease Agreement with the Sublandlord for an
additional period that expires on February 28, 2000.
The Sublandlord has three (3) business days from the
Date of Notice by the Subtenant to permit the
Subtenant to expand and/or extend this sublease
agreement after which time if no permission is
granted in writing, the sublease shall end on the
Termination Date.
SECURITY: The Sublandlord shall be responsible for "closing
off" the doors separating the Premises from the
north-east premises the Sublandlord intends to keep.
The work required herein shall be completed as expeditiously as possible
by the Sublandlord using its best efforts.
WE HEREBY AGREE TO THE TERMS CONTAINED HEREIN.
DATED at Vancouver, BC this 5th day of May, 1999,
XML GLOBAL TECHNOLOGIES INC.
Per:________________________________ __________________________________
(Authorized Signatory) Witness
WE HEREBY AGREE TO THE TERMS CONTAINED HEREIN.
DATED at Vancouver, BC this 10th day of May, 1999,
RADICAL ENTERTAINMENT LTD.
Per:________________________________ __________________________________
(Authorized Signatory) Witness
<PAGE>
LIST OF SUBSIDIARIES
* XML Technologies, Inc., a Nevada corporation
* DataXchg, Inc., a Delaware corporation
* XML Global Research, Inc., a British Columbia, Canada corporation
* Walkabout Website Designs, Ltd., a British Columbia, Canada
corporation
<PAGE>
NEUMAN & DRENNEN, LLC
Temple-Bowron House
1507 Pine Street
Boulder, Colorado 80302
Telephone: (303) 449-2100
Facsimile: (303) 449-1045
May 24, 2000
XML - Global Technologies, Inc.
1038 Homer Street
Vancouver, B.C. Canada V6B 2W9
Re: S.E.C. Registration Statement on Form SB-2
Ladies and Gentlemen:
We hereby consent to the inclusion of our opinion regarding the legality
of the securities being registered by the Registration Statement to be filed
with the United Stated Securities and Exchange Commission, Washington, D.C.,
pursuant to the Securities Act of 1933, as amended, by XML - Global
Technologies, Inc., a Colorado corporation, (the "Company") in connection with
the offering of up to 24,335,000 shares of its Common Stock, $.0001 par value,
as proposed and more fully described in such Registration Statement.
We further consent to the reference in such Registration Statement to our
having given such opinions.
Sincerely,
Clifford L. Neuman
CLN:nn
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to (a) the inclusion in the Registration Statement of XML-Global
Technologies, Inc. on Form SB-2 of our report dated October 6, 1999, except
for Note 1, as to which the date is November 8, 1999, relating to the
consolidated financial statements of XML-Global Technologies, Inc. and
Subsidiaries as of June 30, 1999 and for the period May 18, 1999 (date of
inception) to June 30, 1999, and (b) the reference to our firm in the
Registration Statement under the caption "Experts."
MOSS ADAMS LLP
Bellingham, Washington
May 24, 2000
