INVESTORS’ RIGHTS AGREEMENT
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This
Investors’ Rights Agreement (the “Agreement”)
is
made as of January 11, 2007, by and among Allied Moral Holdings, Limited, a
British Virgin Islands company (the “Company”),
Clear
Honest International Limited, a British Virgin Islands company (the
“Shareholder”),
the
Purchasers set forth on Schedule 1 of the Securities Purchase Agreement (each
a
“Purchaser”
and
collectively the “Purchasers”)
and
Chardan Capital, LLC (“Chardan
Capital”)
(each
a “Party” and together “Parties”). Terms
not otherwise defined herein shall have the meaning assigned to them in the
Securities Purchase Agreement by and between the Company, the Shareholder and
Purchasers dated even date herewith (“Securities
Purchase Agreement”).
RECITALS
WHEREAS,
at the
closing of the Securities Purchase Agreement (the “Purchase
Agreement”)
to
which this Agreement is annexed (the “Closing”),
the
Company proposes to issue, and the Purchasers are planning to purchase, a total
of up to 2,666,667 shares of Series A Preferred Stock of the
Company.
WHEREAS,
the
Company and each Purchaser desire to provide for certain registration and
investment rights for the holders of Registrable Securities (as defined below),
as contained herein.
WHEREAS,
to
satisfy a condition of each Purchaser’s acquisition of the Company’s Series A
Preferred Stock, the Shareholder is willing to enter into a “lock-up”
arrangement with respect to all common shares of the Company owned by it or
its
affiliates.
WHEREAS,
the
Parties have agreed in the Purchase Agreement to allow KHD Humboldt Wedag
International, Ltd. or its subsidiaries and affiliates to purchase up to an
additional 1,333,333 shares of the Company’s Series A Preferred Stock on the
terms set forth in the Purchase Agreement, provided they do so on or prior
to
February 16, 2007.
NOW,
THEREFORE,
in
consideration of the mutual promises and covenants and agreements set forth
herein, the Company, the Shareholder and each Purchaser hereby agree as
follows:
AGREEMENT
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Registration
Rights.
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1.1
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Definitions.
For purposes of this
Section 1:
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(a) “Effectiveness
Date”
means,
with respect to the 60th calendar day following the date on which the Company
files the Registration Statement; provided, however, in the event the Company
or
its legal counsel is notified, orally or in writing, by the Securities and
Exchange Commission (“SEC”) that the Registration Statement will not be reviewed
or is no longer subject to further review and comments, the Effectiveness Date
as to such Registration Statement shall be the third Trading Day following
the
date on which the Company is so notified if such date precedes the date required
above. Registration.
The
terms “register,”
“registered,”
and
“registration”
refer
to a registration effected by preparing and filing the Registration Statement
in
compliance with the United States Securities Act of 1933, as amended (the
“Securities
Act”),
and
the declaration or ordering of effectiveness of such registration statement.
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(b) “Form
F-3”
means
such form under the Securities Act as is in effect on the date hereof or any
successor registration form under the Securities Act subsequently adopted by
the
SEC (as defined below) which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the
SEC.
(c) Holder.
For
purposes of this Section 1 and Section 2 hereof, the term
“Holder”
or
“Holders”
means
any person or persons, such as each Purchaser, owning of record Registrable
Securities that have not been sold to the public or pursuant to Rule 144
promulgated under the Securities Act or any assignee of record of such
Registrable Securities to whom rights under this Section 1 have been duly
assigned in accordance with this Agreement; provided,
however,
that
for purposes of this Agreement, a record holder of the Securities convertible
into such Registrable Securities shall be deemed to be the Holder of such
Registrable Securities; and provided,
further,
that
Holders of Registrable Securities will not be required to convert their
Securities into Common Stock in order to exercise the registration rights
granted hereunder.
(d) “Prospectus”
means
the prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a
prospectus filed as part of an effective registration statement in reliance
upon
Rule 430A promulgated under the Securities Act), as amended or supplemented
by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by a Registration Statement,
and
all other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
(e) “Registrable Securities”
means:
(i) any and all shares of the Company’s common stock (“Common
Stock”)
issued
or issuable upon the conversion of the Company’s Series A Preferred Stock (the
“Securities”),
(ii) any shares of Common Stock issued as (or issuable upon the conversion
or exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to, in exchange for or in
replacement of, all such shares of Common Stock described in clause (i),
and (iii) any shares of Common Stock issued or issuable pursuant to Section
1.2(b) below.
(f) “Registrable
Securities Then Outstanding”
shall
mean the number of shares of Common Stock which are Registrable Securities
and
(i) are then issued and outstanding or (ii) are then issuable pursuant
to the exercise or conversion of then outstanding and then exercisable options,
warrants or convertible securities.
(g) “SEC”
means
the United States Securities and Exchange Commission.
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(h) “Trading
Day”
means
any day on which the New York Stock Exchange is open for trading.
Capitalized
terms used in this Agreement that are not otherwise defined shall have the
meaning given them in the Securities Purchase Agreement (the “Purchase
Agreement”)
among
the Company, the Shareholder and each Purchaser of even date herewith, pursuant
to which the Company issued and each Purchaser acquired the Series A Preferred
Stock.
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1.2
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Registration.
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(a) Filing;
Effectiveness.
The
Company shall file the Registration Statement on Form F-3 (except if the Company
is ineligible to register for resale the Registrable Securities on Form F-3,
in
which case such registration shall be on another appropriate form in accordance
herewith) under the Securities Act covering the registration of 125% of the
Registrable Securities not later than the earlier of (i) 90 days following
the closing of the Reverse Transaction and (ii) the six month anniversary of
the
closing of the transactions (“Financing”) contemplated by the Purchase Agreement
(such date shall be referred to as “Filing Date”). The Registration Statement
shall contain the “Plan of Distribution” set forth as Exhibit
A.
Subject
to the terms of this Agreement, the Company shall use its best efforts to cause
the Registration Statement to be declared effective under the Securities Act
as
promptly as possible after the filing thereof, but in any event prior to the
Effectiveness Date, and shall use its best efforts to keep such Registration
Statement continuously effective under the Securities Act until all Registrable
Securities covered by such Registration Statement have been sold in any manner
or may be sold without volume restrictions pursuant to Rule 144(k) promulgated
under the Securities Act as determined by the counsel to the Company pursuant
to
a written opinion letter to such effect, addressed and acceptable to the
Company’s transfer agent and the affected Holders (the “Effectiveness
Period”).
(b) Non-Registration.
The
parties agree that the Holders will suffer damages if the Registrable Securities
are not registered in a timely manner or remain registered after such
Registration Statement has become effective. Therefore, if: (i) the Registration
Statement is not filed on or prior to its Filing Date (if the Company files
the
Registration Statement without affording the Holders the opportunity to review
and comment on the same as required below, the Company shall not be deemed
to
have satisfied this clause (i)), or (ii) the Company fails to file with the
SEC
a request for acceleration in accordance with Rule 461 promulgated under the
Securities Act, within three Trading Days of the date that the Company (or
its
legal counsel) is notified (orally or in writing, whichever is earlier) by
the
SEC that the Registration Statement will not be “reviewed,” or not subject to
further review, or (iii) the Registration Statement filed or required to be
filed hereunder is not declared effective by the SEC by its Effectiveness Date,
(iv) after the Effectiveness Date, the Registration Statement ceases for any
reason to remain continuously effective as to all Registrable Securities for
which it is required to be effective, or the Holders are not permitted to
utilize the Prospectus therein to resell such Registrable Securities for 15
consecutive calendar days but no more than an aggregate of 25 calendar days
during any 12-month period (which need not be consecutive Trading Days), or
(v)
the Company fails to file an amendment to the Registration Statement that
materially addresses SEC comments to the Registration Statement contained in
a
letter within ten Trading Days of receipt of such letter (any such failure
or
breach being referred to as an “Event”,
and
for purposes of clause (i), (iii) the date on which such Event occurs, or for
purposes of clause (ii) the date on which such five Trading Day period is
exceeded, or for purposes of clause (iv) the date on which such 15 or 25
calendar day period, as applicable, is exceeded being referred to as
“Event
Date”),
then
in addition to any other rights the Holders may have hereunder or under
applicable law, on each such Event Date and on each monthly anniversary of
each
such Event Date (if the applicable Event shall not have been cured by such
date)
until the applicable Event is cured, the Company shall pay to each Holder an
amount in cash, as partial liquidated damages and not as a penalty, equal to
2%
of the aggregate purchase price paid by such Holder for any Registrable
Securities (“Purchase Price”) then held by such Holder, but no more than 48% of
such Purchase Price in the aggregate. Such Holder may accept the liquidated
damages in shares of Series A Preferred Stock (if such Series A Preferred Stock
has already been converted, shares of the equivalent number of shares of Company
common stock) valued at the Purchase Price in lieu of cash upon written notice
to the Company. If the Company fails to pay any partial liquidated damages
pursuant to this Section in full within seven days after the date payable,
the
Company will pay interest thereon at a rate of 18% per annum (or such lesser
maximum amount that is permitted to be paid by applicable law) to the Holder,
accruing daily from the date such partial liquidated damages are due until
such
amounts, plus all such interest thereon, are paid in full. The partial
liquidated damages pursuant to the terms hereof shall apply on a daily pro-rata
basis for any portion of a month prior to the cure of an Event.
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(c) Underwriting.
If the
Holders intend to distribute the Registrable Securities following their
registration by means of an underwriting, they shall notify the Company of
their
intention to do so within the later of (i) sixty (60) days from the date of
this
Agreement or (ii) thirty (30) days from the date of a Reverse Transaction.
All
Holders proposing to distribute their securities through such underwriting
shall
enter into an underwriting agreement in customary form with the managing
underwriter or underwriters selected for such underwriting by the Holders (and
shall be reasonably acceptable to the Company). Notwithstanding any other
provision of this Section 1.2, if the underwriter(s) advise(s) the Company
in writing that marketing factors require a limitation of the number of
securities to be underwritten then the Company shall so advise all Holders
of
Registrable Securities which would otherwise be registered and underwritten
pursuant hereto, and the number of Registrable Securities that may be included
in the underwriting shall be reduced as required by the underwriter(s) and
allocated among the Holders of Registrable Securities on a pro rata basis
according to the number of Registrable Securities Then Outstanding held by
each
Holder requesting registration (including the Holders proposing to distribute
such Registrable Securities); provided, however, that the number of shares
of
Registrable Securities to be included in such underwriting and registration
shall not be reduced unless all other securities of the Company are first
entirely excluded from the underwriting and registration. Any Registrable
Securities excluded and withdrawn from such underwriting shall be withdrawn
from
the registration.
(d) Expenses.
All
expenses incurred in connection with a registration pursuant to this
Section 1.2, including without limitation all registration and
qualification fees, printers’ and accounting fees, fees and disbursements of
counsel for the Company and the reasonable fees and disbursements of one counsel
for the selling Holder or Holders, (but excluding underwriters’ discounts and
commissions), shall be borne by the Company. Each Holder participating in a
registration pursuant to this Section 1.2 shall bear such Holder’s
proportionate share (based on the total number of shares sold in such
registration other than for the account of the Company) of all discounts,
commissions or other amounts payable to underwriters or brokers in connection
with such offering.
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1.3 Obligations
of the Company.
Whenever required to effect the registration of any Registrable Securities
under
this Agreement, the Company shall, as expeditiously as reasonably
possible:
(a) Not
less
than two Trading Days prior to the filing of the Registration Statement or
any
related Prospectus or any amendment or supplement thereto (including any
document that would be incorporated or deemed to be incorporated therein by
reference), the Company shall, (i) furnish to each Holder copies of all such
documents proposed to be filed, which documents (other than those incorporated
or deemed to be incorporated by reference) will be subject to the review of
such
Holders, and (ii) cause its officers and directors, counsel and independent
certified public accountants to respond to such inquiries as shall be necessary,
in the reasonable opinion of respective counsel to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities shall reasonably object in good faith, provided that, the Company
is
notified of such objection in writing no later than one Trading Day after the
Holders have been so furnished copies of such documents. Each Holder agrees
to
furnish to the Company a completed Questionnaire in the form attached to this
Agreement as Exhibit B (a “Selling
Shareholder Questionnaire”)
not
less than two Trading Days prior to the Filing Date or by the end of the second
Trading Day following the date on which such Holder receives draft materials
in
accordance with this Section. Copies of any of the aforementioned documents
may
be delivered to the investors via e-mail.
(b) (i)
Prepare and file with the Commission such amendments, including post-effective
amendments, to a Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep a Registration Statement continuously
effective as to the applicable Registrable Securities for the Effectiveness
Period and prepare and file with the Commission such additional Registration
Statements in order to register for resale under the Securities Act all of
the
Registrable Securities; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement (subject to the terms of
this
Agreement), and as so supplemented or amended to be filed pursuant to Rule
424
promulgated under the Securities Act; (iii) respond as promptly as reasonably
possible to any comments received from the Commission with respect to a
Registration Statement or any amendment thereto and as promptly as reasonably
possible provide the Holders true and complete copies of all correspondence
from
and to the Commission relating to a Registration Statement; and (iv) comply
in
all material respects with the provisions of the Securities Act and the Exchange
Act with respect to the disposition of all Registrable Securities covered by
a
Registration Statement during the applicable period in accordance (subject
to
the terms of this Agreement) with the intended methods of disposition by the
Holders thereof set forth in such Registration Statement as so amended or in
such Prospectus as so supplemented.
(c) If
during
the Effectiveness Period, the number of Registrable Securities at any time
exceeds 75% of the number of shares of Common Stock then registered in a
Registration Statement, then the Company shall file as soon as reasonably
practicable but in any case prior to the applicable Filing Date, an additional
Registration Statement covering the resale by the Holders of not less than
125%
of the number of excess Registrable Securities.
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(d) Notify
the Holders of Registrable Securities to be sold (which notice shall, pursuant
to clauses (ii) through (vi) hereof, be accompanied by an instruction to suspend
the use of the Prospectus until the requisite changes have been made) as
promptly as reasonably possible (and, in the case of (i)(A) below, not less
than
two Trading Days prior to such filing) and (if requested by any such Person
in
writing) confirm such notice in writing no later than one Trading Day following
the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to a Registration Statement is proposed to be filed; (B) when the
Commission notifies the Company whether there will be a “review” of such
Registration Statement and whenever the Commission comments in writing on such
Registration Statement (the Company shall provide true and complete copies
thereof and all written responses thereto to each of the Holders); and (C)
with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to a
Registration Statement or Prospectus or for additional information; (iii) of
the
issuance by the Commission or any other federal or state governmental authority
of any stop order suspending the effectiveness of a Registration Statement
covering any or all of the Registrable Securities or the initiation of any
Proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; (v) of the occurrence of any event or passage of time that requires
any
revisions to a Registration Statement, Prospectus or other documents so that,
in
the case of a Registration Statement or the Prospectus, as the case may be,
it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and (vi) the occurrence or existence of any pending corporate
development with respect to the Company that the Company believes may be
material and that, in the determination of the Company, makes it not in the
best
interest of the Company to allow continued availability of the Registration
Statement or Prospectus; provided that any and all of such information shall
remain confidential to each Holder until such information otherwise becomes
public, unless disclosure by a Holder is required by law; provided,
further,
notwithstanding each Holder’s agreement to keep such information confidential,
the Holders make no acknowledgement that any such information is material,
non-public information.
(e) Use
its
best efforts to avoid the issuance of, or, if issued, obtain the withdrawal
of
(i) any order suspending the effectiveness of a Registration Statement, or
(ii)
any suspension of the qualification (or exemption from qualification) of any
of
the Registrable Securities for sale in any jurisdiction, at the earliest
practicable moment.
(f) Furnish
to each Holder upon request, without charge, at least one conformed copy of
each
such Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference to the extent requested by such Person, and
all exhibits to the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the Commission. The Company may be deemed to have furnished
such
document by sending the Holder, via electronic mail, a website link to such
registration statement on xxx.xxx.xxx or any similar
website.
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(g) Furnish
to the Holders such number of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and
such
other documents as they may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by them that are included in
such registration. Subject to the terms of this Agreement, the Company hereby
consents to the use of such Prospectus and each amendment or supplement thereto
by each of the selling Holders in connection with the offering and sale of
the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto, except after the giving on any notice pursuant to Section
1.3(d).
(h) Use
its
best efforts to register and qualify the securities covered by such registration
statement under such other securities or Blue Sky laws of such jurisdictions
as
shall be reasonably requested by the Holders, provided that the Company shall
not be required in connection therewith or as a condition thereto to qualify
to
do business or to file a general consent to service of process in any such
states or jurisdictions.
(i) In
the
event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the managing underwriter(s) of such offering (it being understood and agreed
that, as a condition to the Company’s obligations under this clause (i),
each Holder participating in such underwriting shall also enter into and perform
its obligations under such an agreement).
(j) If
requested by the Holders, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities
to
be delivered to a transferee pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by the Purchase Agreement,
of all restrictive legends, and to enable such Registrable Securities to be
in
such denominations and registered in such names as any such Holders may
request.
(k) Upon
the
occurrence of any event contemplated by Section 1.3(d)(ii) through (vi), as
promptly as reasonably possible under the circumstances taking into account
the
Company’s good faith assessment of any adverse consequences to the Company and
its stockholders of the premature disclosure of such event, prepare a supplement
or amendment, including a post-effective amendment, to a Registration Statement
or a supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any other required document
so
that, as thereafter delivered, neither a Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If the Company notifies the Holders in accordance with clauses
(ii) through (v) of Section 1.3(d) above to suspend the use of any Prospectus
until the requisite changes to such Prospectus have been made, then the Holders
shall suspend use of such Prospectus. The Company will use its best efforts
to
ensure that the use of the Prospectus may be resumed as promptly as is
practicable. The Company shall be entitled to exercise its right under this
Section 1.3(k) to suspend the availability of a Registration Statement and
Prospectus, subject to the payment of partial liquidated damages pursuant to
Section 1.2(b), for a period not to exceed 15 consecutive calendar days but
no
more than an aggregate of 25 calendar days during any 12-month period (which
need not be consecutive Trading Days).
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(l) Comply
with all applicable rules and regulations of the Commission.
(m) Furnish,
at the request of any Holder requesting registration of Registrable Securities,
on the date that such Registrable Securities are delivered to the underwriters
for sale, if such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes effective,
(i) an opinion, dated as of such date, of the counsel representing the
Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities and (ii) a “comfort”
letter dated as of such date, from the independent certified public accountants
of the Company, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering
and reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities.
1.4 Furnish
Information.
It
shall be a condition precedent to the obligations of the Company to take any
action pursuant to Section 1.2, hereof that the selling Holders shall
furnish to the Company such information set forth in the Selling Shareholder
Questionnaire set forth as Exhibit
B.
1.5 Delay
of Registration.
The
Holders of a Majority of the Registrable Securities shall have the right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect
to
the interpretation or implementation of this Section 1.
1.6 Indemnification.
In the
event any Registrable Securities are included in the Registration Statement
under Section 1.2, hereof:
(a) By
the
Company.
To the
extent permitted by law, the Company will indemnify and hold harmless each
Holder, the partners, officers, directors, agents and brokers, investment
advisors and employees of each Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the Securities
Exchange Act of 1934, as amended, (the “Exchange
Act”)
and
the officers, directors, agents, investment advisors and employees of such
persons, against any losses, claims, damages, or liabilities (joint or several)
to which they may become subject under the Securities Act, the Exchange Act
or
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arising out of or are based upon
any
of the following statements, omissions or violations (collectively a
“Violation”):
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(i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements
thereto;
(ii) 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
(iii) any
violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any federal or state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any federal or state
securities law in connection with the offering covered by such registration
statement;
and
the
Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in connection with investigating or defending
any
such loss, claim, damage, liability or action; provided,
however,
that
the indemnity agreement contained in this subsection 1.6(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable
in
any such case for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly
for
use in connection with such registration by such Holder, partner, officer,
director, underwriter or controlling person of such Holder. The Company shall
notify the Holders promptly of the institution, threat or assertion of any
Proceeding arising from or in connection with the transactions contemplated
by
this Agreement of which the Company is aware.
(b) By
Selling Holders.
To the
extent permitted by law, each selling Holder will indemnify and hold harmless
the Company, each of its directors, each of its officers who have signed the
registration statement, each person, if any, who controls the Company within
the
meaning of the Securities Act, any underwriter and any other Holder selling
securities under such registration statement or any of such other Holder’s
partners, directors or officers or any person who controls such Holder within
the meaning of the Securities Act or the Exchange Act, against any losses,
claims, damages or liabilities (joint or several) to which the Company or any
such director, officer, controlling person, underwriter or other such Holder,
partner or director, officer or controlling person of such other Holder may
become subject under the Securities Act, the Exchange Act or other federal
or
state law, insofar as such losses, claims, damages or liabilities (or actions
in
respect thereto) arise out of or are based upon any Violation, in each case
to
the extent (and only to the extent) that such Violation occurs in reliance
upon
and in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be expressly for use
in
connection with such registration; and each such Holder will reimburse any
legal
or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Holder, partner, officer,
director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided,
however,
that
the indemnity agreement contained in this subsection 1.6(b) shall not apply
to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; and provided further,
that
the total amounts payable in indemnity by a Holder under this Section 1.6(b)
in
respect of any Violation shall not exceed the net proceeds received by such
Holder in the registered offering out of which such Violation
arises.
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(c) Notice.
Promptly after receipt by an indemnified party under this Section 1.6 of
notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 1.6, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof with counsel mutually satisfactory to the parties;
provided,
however,
that an
indemnified party shall have the right to retain its own counsel, with the
fees
and expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential conflict of interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if prejudicial
to its ability to defend such action, shall relieve such indemnifying party
of
any liability to the indemnified party under this Section 1.6.
(d) Contribution.
If the
indemnification provided for in this Section 1.6 is held by a court of competent
jurisdiction to be unavailable to an indemnified party with respect to any
losses, claims, damages or liabilities referred to herein, the indemnifying
party, in lieu of indemnifying such indemnified party thereunder, shall to
the
extent permitted by applicable law contribute to the amount paid or payable
by
such indemnified party as a result of such loss, claim, damage or liability
in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other
in
connection with the Violation(s) that resulted in such loss, claim, damage
or
liability, as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by a court of law by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a material
fact relates to information supplied by the indemnifying party or by the
indemnified party and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
provided, that in no event shall any contribution by a Holder hereunder exceed
the net proceeds from the offering received by such Holder.
(e) Survival.
The
obligations of the Company and Holders under this Section 1.6 shall survive
the completion of any offering of Registrable Securities in the Registration
Statement, and otherwise.
1.7 Lock-up
Agreement.
Shareholder and Chardan Capital hereby agree that each of Shareholder and
Chardan shall not sell or otherwise transfer or dispose of or engage in any
other transaction regarding any shares of stock of the Company then owned by
each of Shareholder or Chardan (other than to their donees or partners who
agree
to be similarly bound) commencing on the date hereof and expiring on the date
that is one hundred eighty (180) days following the effective date of the
Registration Statement of the Company filed under the Securities Act as set
forth in Section 1 (the "Lock-up"). In
order
to enforce the foregoing covenant, (i) the Company shall place restrictive
legends on the certificates representing the shares subject to this
Section 1.7 and to impose stop transfer instructions on the shares held by
Shareholder and Chardan Capital (and the shares or securities of every other
person subject to the foregoing restriction) until the end of such period and
(ii) if necessary, the Shareholder and Chardan Capital agree to execute
the form of agreement requested by such Purchaser.
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1.8 Rule 144
Reporting.
With a
view to making available the benefits of certain rules and regulations of the
SEC which may at any time permit the sale of the Registrable Securities to
the
public without registration, after such time as a public market exists for
the
Common Stock, the Company agrees to use its best efforts to:
(a) make
and
keep public information available, as those terms are understood and defined
in
Rule 144 under the Securities Act, at all times after the effective date of
the first registration under the Securities Act filed by the Company for an
offering of its securities to the general public;
(b) file
with
the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act (at any time after it
has
become subject to such reporting requirements); and
(c) as
long
as a Holder owns any Registrable Securities, to furnish to the Holder forthwith
upon request a written statement by the Company as to its compliance with the
reporting requirements of said Rule 144, and of the Securities Act and the
Exchange Act (at any time after it has become subject to the reporting
requirements of the Exchange Act or that it has disclosed financial statements
that otherwise comply with said Rule 144), a copy of the most recent annual
or
quarterly report of the Company and such other reports and documents of the
Company as a Holder may reasonably request in availing itself of any rule or
regulation of the SEC allowing a Holder to sell any such securities without
registration (at any time after the Company has become subject to the reporting
requirements of the Exchange Act).
1.9 Merger;
S-4 Registration.
In lieu
of registering the Holders’ Registrable Securities as set forth in Section
1.2(a) or consummating a Reverse Merger as contemplated in Section 6.6, the
Company may consummate a merger (“Forward Merger”) with a corporation that is
incorporated under the laws of a state of the U.S. and whose securities are
publicly traded on the Over-the-Counter Bulletin Board or other exchange or
quotation system acceptable to Holders (“Pubco”), with the Holders’ prior
written consent. In connection with the Forward Merger, the Company shall be
the
surviving corporation with its common stock publicly traded on the same exchange
or quotation system as Pubco (“Surviving Entity”). The Company shall cause
Surviving Entity to file a registration statement on Form S-4 (“Form S-4”), or
any equivalent successor form or any other applicable form, with the SEC
registering all equity securities issued by the Surviving Entity, including
the
Registrable Securities, prior to the Filing Date. If the actions under Section
1.9 have been or will be performed, the “Filing Date” for purposes of this
Agreement, shall mean the 90th
day
following the closing of the Forward Merger. In addition, the Company shall
cause such Form S-4 to become effective prior to the 90th
day
following the Filing Date (if the actions under Section 1.9 have been or will
be
performed, such date shall mean the “Effectiveness Date” for purposes of this
Agreement). In addition, Section 1.2(b) shall apply to the Form S-4 registration
process, except that Section 1.2(b)(iv) and (v) shall not trigger the liquidated
damages. The Company’s obligations under Section 1.3 are hereby waived if such
actions or omissions are not necessary in order for the Holders to resell their
Surviving Entity securities. Shareholder shall enter into appropriate “lock-up”
agreements with the Surviving Entity restricting the transferability of the
Surviving Entity common stock in a manner satisfactory to the
Holders.
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2. Amendment
of Rights; New Investors.
Any
provision of this Agreement may be amended and the observance thereof may be
waived (either generally or in a particular instance and either retroactively
or
prospectively), only with the written consent of the Company and the Purchasers
(and/or any of their permitted successors or assigns) holding a majority of
Registrable Securities (“Majority of Purchasers”) and if Section 1.7 is being
amended, then the Shareholder. Any amendment or waiver effected in accordance
with this Section 2 shall be binding upon each Purchaser, each Holder, each
permitted successor or assignee of such Purchaser or Holder and the
Company.
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3.
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Information
Rights.
|
3.1 Financial
Statements and Reports.
As long
as any Purchaser (together with any affiliates thereof) or a transferee
permitted under Section 2 hereof holds shares of Registrable
Securities, upon the request of such Purchaser the Company shall deliver to
such
Purchaser:
(a) As
soon
as practicable after the end of each fiscal year of the Company audited
financial statements for such year, which year-end financial statements shall
be
in reasonable detail prepared in accordance with generally accepted accounting
principles; and
(b) As
soon
as practicable after the end of each quarter in each fiscal year of the Company
a balance sheet and statement of income and a statement of cash flows of the
Company for such period, prepared in accordance with generally accepted
accounting principles, together with management’s discussion and analysis
(“MD&A”) of the operating results of the Company for such period, such
MD&A to be in a form and containing such information as would typically be
included in an SEC Form 10-Q.
3.2 Additional
Information.
As long
as any Purchaser (together with any affiliates thereof) or a transferee
permitted under Section 2 hereof holds shares of Registrable
Securities, upon
the
request of such Purchaser the Company will deliver to Purchaser at least thirty
(30) days prior to the beginning of each fiscal year, a budget for the next
fiscal year and any other budgets or revised budgets prepared by the
Company.
3.3 Inspection
Rights.
As long
as any Purchaser (together with any affiliates thereof) or a transferee
permitted under Section 2 hereof holds shares of Registrable Securities,
Purchaser shall have the right to visit and inspect any of the properties of
the
Company, including its corporate and financial records, and to discuss its
affairs, finances and accounts with any officer of the Company during normal
business hours and following reasonable notice, provided, however, that the
Company shall not be required at any time to disclose any trade secrets or
secret or other proprietary data, know-how or other information, the disclosure
of which the Company believes may adversely affect its business, or any
information or data that is classified as confidential by any governmental
agency or authority.
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3.4 Termination.
The
covenants set forth in this Section 3 shall terminate and be of no further
force and effect after the effectiveness of the Company’s Registration
Statement.
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4.
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Participation
Right.
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4.1 Participation
Right.
If, at
any time after the date of this Agreement and prior to the termination of this
participation right pursuant to subsection 4.6, the Company should desire to
issue in a transaction not registered under the Securities Act any Equity
Securities (as hereinafter defined), it shall give each Purchaser the right
to
purchase such Purchaser’s pro rata share (or any part thereof) of all of such
privately offered Equity Securities on the same terms as the Company is willing
to sell such Equity Securities to any other person, for a period of thirty
calendar days prior to or concurrently with the issuance of such Equity
Securities. Such Purchaser’s pro rata share of the Equity Securities shall be
equal to that percentage of the outstanding Common Stock of the Company held
by
Purchaser on the date of delivery of notice to such Purchaser, as set forth
in
Section 4.2 below, of the Company’s intention to sell and issue such Equity
Securities. For purposes of this subsection 4.1, the outstanding Common Stock
of
the Company shall include (i) outstanding shares of Common Stock, and (ii)
shares of Common Stock issuable upon conversion of any then outstanding
Preferred Stock of the Company.
4.2 Notice.
Prior
to the sale or issuance by the Company of any Equity Securities, the Company
shall notify each Purchaser in writing of the sale and issuance of such
securities, setting forth the terms of such sale. Within ten business (10)
days
after receipt of such notice, Purchaser shall notify the Company whether
Purchaser desires to purchase Purchaser’s pro rata share, or any part thereof,
of the Equity Securities so offered.
4.3 Closing
of Investor Purchases.
If any
Purchaser gives the Company notice that such Purchaser desires to purchase
any
of the Equity Securities offered by the Company, payment for the Equity
Securities shall be by check or wire transfer, against delivery of the Equity
Securities at the executive offices of the Company within twenty days after
giving the Company such notice. The Company shall take all such action as may
be
required by any regulatory authority in connection with the exercise by such
Purchaser of the right to purchase Equity Securities as set forth in this
Section 4.
4.4 Exempted
Issuances.
The
participation right contained in this Section 4 shall not apply to the issuance
by the Company of Equity Securities (i) upon conversion of the Preferred Stock;
(ii) of up to 1,566,666 shares of Common Stock to officers, directors or
employees of, or consultants to, the Company pursuant to a warrant, stock grant,
option agreement or plan, purchase plan or other employee stock incentive
program or agreement approved by the Board of Directors; (iii) in connection
with the acquisition by the Company of another business entity or majority
ownership thereof approved by the Board of Directors; (iv) to leasing companies,
real estate lessors, banks or financial institutions, in connection with any
lease or debt financing transaction approved unanimously by the Board of
Directors; (v) in connection with any stock split, stock dividend, distribution,
recapitalization or similar event; (vi) in connection with a strategic
investment and/or acquisition of technology or intellectual property not
principally for equity financing purposes approved by the Board of Directors;
(vii) in connection with an initial public offering of the Company’s securities
in which the offering price of the Company’s common stock is at least $6.43 per
share and the gross proceeds to be raised in such offering are at least
US$34,000,000 (less the total of all private sales of securities by the Company
prior to the Initial Public Offering (as defined herein) commencing with the
sale of securities pursuant to the Purchase Agreement in the amount of
$10,000,000), prior to underwriters’ discounts, commissions and expenses
(“Initial Public Offering”); (viii) pursuant to the Purchase Agreement; (ix) to
KHD Humboldt Wedag International, Ltd. or its subsidiaries and affiliates to
purchase up to an additional 1,333,333 shares of the Company’s Series A
Preferred Stock on the terms set forth in the Purchase Agreement, provided
they
do so on or prior to February 16, 2007; or (x) by way of a dividend or other
distribution on Equity Securities described in the foregoing clauses (i) through
(ix).
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4.5 Equity
Securities Defined.
The
term “Equity Securities” shall mean (i) Common Stock and rights, options or
warrants to purchase Common Stock, (ii) any security other than Common Stock
having voting rights in the election of the Board of Directors, not contingent
upon a failure to pay dividends, (iii) any security convertible into or
exchangeable for any of the foregoing, and (iv) any agreement or commitment
to
issue any of the foregoing.
4.6 Termination.
The
participation right set forth in this Section 4 shall terminate and be of
no further force and effect after the first anniversary of the earlier of the
closing of the Company’s
Initial Public Offering, the effectiveness of the Registration Statement or
the
closing of the Reverse Transaction.
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5.
|
Delivery
of Unlegended
Shares.
|
5.1 Within
five (5) business days (such fifth (5th) business day, the “Unlegended Shares
Delivery Date”) after the business day on which the Company has received (i) a
notice that Registrable Securities have been sold either pursuant to the
Registration Statement or Rule 144 under the Securities Act, (ii) a
representation that the prospectus delivery requirements, or the requirements
of
Rule 144, as applicable, have been satisfied, and (iii) the original share
certificates representing the shares of Common Stock that have been sold, and
(iv) in the case of sales under Rule 144, customary representation letters
of
the Holder and/or Holder’s broker regarding compliance with the requirements of
Rule 144 and Company is reasonably satisfied that the requirements of Rule
144
have been satisfied, the Company at its expense, (y) shall deliver, and shall
cause legal counsel selected by the Company to deliver, to its transfer agent
(with copies to Holder) an appropriate instruction and opinion of such counsel,
directing the delivery of shares of Common Stock without any legends, issuable
pursuant to any effective and current Registration Statement described in
Section 1 of this Agreement or pursuant to Rule 144 under the 1933 Act (the
“Unlegended Shares”); and (z) cause the transmission of the certificates
representing the Unlegended Shares together with a legended certificate
representing the balance of the unsold shares of Common Stock, if any, to the
Holder at the address specified in the notice of sale, via express courier,
by
electronic transfer or otherwise on or before the Unlegended Shares Delivery
Date. Transfer fees shall be the responsibility of the Holder.
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5.2 In
lieu
of delivering physical certificates representing the Unlegended Shares, if
the
Company’s transfer agent is participating in the Depository Trust Company
(“DTC”) Fast Automated Securities Transfer program, upon request of a Holder, so
long as the certificates therefor do not bear a legend and the Holder is not
obligated to return such certificate for the placement of a legend thereon,
the
Company shall cause its transfer agent to electronically transmit the Unlegended
Shares by crediting the account of Holder’s prime Broker with DTC through its
Deposit Withdrawal Agent Commission system. Such delivery must be made on or
before the Unlegended Shares Delivery Date.
5.3 The
Company understands that a delay in the delivery of the Unlegended Shares
pursuant to Section 5 hereof beyond the Unlegended Shares Delivery Date could
result in economic loss to a Holder. As compensation to a Holder for such loss,
the Company agrees to pay late payment fees (as liquidated damages and not
as a
penalty) to the Holder for late delivery of Unlegended Shares in the amount
of
$75 per business day after the Delivery Date for each $10,000 of purchase price
of the Unlegended Shares subject to the delivery default. If during any 360
day
period, the Company fails to deliver Unlegended Shares as required by this
Section 5 for an aggregate of 30 days, then each Holder or assignee holding
Company securities subject to such default may, at its option, require the
Company to purchase all or any portion of the Shares subject to such default
at
a price per share equal to 130% of the purchase price of such Common Stock.
The
Company shall pay any payments incurred under this Section in immediately
available funds upon demand.
5.4 In
addition to any other rights available to a Holder, if the Company fails to
deliver to a Holder Unlegended Shares as required pursuant to this Agreement,
within three calendar days after the Unlegended Shares Delivery Date and the
Holder purchases (in an open market transaction or otherwise) shares of common
stock to deliver in satisfaction of a sale by such Holder of the shares of
Common Stock which the Holder anticipated receiving from the Company (a
"Buy-In"), then the Company shall pay in cash to the Holder (in addition to
any
remedies available to or elected by the Holder) the amount by which (A) the
Holder's total purchase price (including brokerage commissions, if any) for
the
shares of common stock so purchased exceeds (B) the aggregate purchase price
of
the shares of Common Stock delivered to the Company for reissuance as Unlegended
Shares, together with interest thereon at a rate of 15% per annum, accruing
until such amount and any accrued interest thereon is paid in full (which amount
shall be paid as liquidated damages and not as a penalty). For example, if
a
Holder purchases shares of Common Stock having a total purchase price of $11,000
to cover a Buy-In with respect to $10,000 of purchase price of shares of Common
Stock delivered to the Company for reissuance as Unlegended Shares, the Company
shall be required to pay the Holder $11,000, plus interest. The Holder shall
provide the Company written notice indicating the amounts payable to the Holder
in respect of the Buy-In.
In
the
event a Holder shall request delivery of Unlegended Shares as described in
Section 5.1, the Company may not refuse to deliver Unlegended Shares based
on
any claim that such Holder or any one associated or affiliated with such Holder
has been engaged in any violation of law, or for any other reason, unless,
an
injunction or temporary restraining order from a court, on notice, restraining
and or enjoining delivery of such Unlegended Share shall have been sought and
obtained and the Company has posted a surety bond for the benefit of such Holder
in the amount of 130% of the amount of the aggregate purchase price of the
Common Stock which are subject to the injunction or temporary restraining order,
which bond shall remain in effect until the completion of arbitration/litigation
of the dispute and the proceeds of which shall be payable to such Holder to
the
extent Holder obtains judgment in Holder’s favor.
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6.
|
General
Provisions.
|
6.1 Notices.
All
notices and other communications required or permitted hereunder shall be in
writing and shall be deemed effectively given (i) upon actual delivery to the
party to be notified, (ii) 24 hours after confirmed facsimile or e-mail
transmission, or (iii) two business days after deposit with a recognized
overnight courier, addressed:
(i)
If to
Purchaser:
The
address set forth on Schedule 1 of the Purchase Agreement
(ii)
if
to the Shareholder, to the address set forth below:
Clear
Honest International Ltd.
Intelig
Digital Park, Hongmian Road
Futian
Free Trade Xxxx
Xxxxxxxx,
XX Xxxxx 000000
Fax:
(___)
(iii) if
to the Company, to the address set forth below:
Allied
Moral Holdings Ltd.
Intelig
Digital Park, Hongmian Road
Futian
Free Trade Xxxx
Xxxxxxxx,
XX Xxxxx 000000
Fax:
(00-000-00000000)
(iv)
if to Chardan Capital
Chardan
Capital, LLC
000
Xxxxxxxx, Xxx 0000
Xxx
Xxxxx, XX 00000
Fax:
(619)
000-
0000
Any
party
hereto (and such party’s permitted assigns) may by notice so given change its
address for future notices hereunder. Notice shall be deemed conclusively given
when personally delivered or when deposited in the mail in the manner set forth
above.
6.2 Entire
Agreement.
This
Agreement, together with all the exhibits hereto, constitutes and contains
the
entire agreement and understanding of the parties with respect to the subject
matter hereof and supersedes any and all prior negotiations, correspondence,
agreements, understandings, duties or obligations between the parties respecting
the subject matter hereof.
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6.3 Governing
Law.
This
Agreement shall be deemed to have been executed and delivered in New York and
both this Agreement and the transactions contemplated hereby shall be governed
as to validity, interpretation, construction, effect, and in all other respects
by the laws of the State of New York pursuant to Section 5-1401 of the New
York
General Obligations Law, without regard to the conflicts of laws principals
thereof (other than The New York General Obligations Law). Each Party agrees
that any legal suit, action or proceeding arising out of or relating to this
Agreement and/or the transactions contemplated hereby shall be instituted
exclusively in the Hong Kong International Arbitration Center (“HKIAC”).
6.4 Severability.
If one
or more provisions of this Agreement are held to be unenforceable under
applicable law, then such provision(s) shall be excluded from this Agreement
and
the balance of this Agreement shall be interpreted as if such provision(s)
were
so excluded and shall be enforceable in accordance with its terms.
6.5 Third
Parties.
Nothing
in this Agreement, express or implied, is intended to confer upon any person,
other than the parties hereto and their successors and assigns, any rights
or
remedies under or by reason of this Agreement.
6.6 Successors
and Assigns.
The
provisions of this Agreement shall inure to the benefit of, and shall be binding
upon, the successors and permitted assigns of the parties hereto. Upon the
closing of a Reverse Transaction (as defined in the Purchase Agreement), the
Company shall cause the Shell to execute and deliver an agreement substantially
similar to this Agreement binding the Shell, each Purchaser and Shareholder.
6.7 Captions.
The
captions to sections of this Agreement have been inserted for identification
and
reference purposes only and shall not be used to construe or interpret this
Agreement.
6.8 Counterparts.
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. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of
the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature page were an original
thereof
6.9 Costs
and Attorneys’ Fees.
In the
event that any action, suit or other proceeding is instituted concerning or
arising out of this Agreement or any transaction contemplated hereunder, the
prevailing party shall recover all of such party’s costs and attorneys’ fees
incurred in each such action, suit or other proceeding, including any and all
appeals or petitions therefrom.
6.10 Adjustments
for Stock Splits and Certain Other Changes.
Wherever in this Agreement there is a reference to a specific number of shares
of Common Stock or Preferred Stock of the Company of any class or series, then,
upon the occurrence of any subdivision, combination or stock dividend of such
class or series of stock, the specific number of shares so referenced in
this Agreement shall automatically be proportionally adjusted to reflect the
affect on the outstanding shares of such class or series of stock by such
subdivision, combination or stock dividend.
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Execution
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6.11 Intentionally
left blank.
6.12 Tax
Reporting.
Notwithstanding anything herein to the contrary, any party to this Agreement
(and any employee, representative, or other agent of any party to this
Agreement) may disclose to any and all persons, without limitation of any kind,
the tax treatment and tax structure of the transactions contemplated by this
Agreement and all materials of any kind (including opinions or other tax
analyses) that are provided to it relating to such tax treatment and tax
structure; provided however, that such disclosure may not be made to the extent
of restrictions on disclosure which are reasonably necessary to comply with
any
applicable federal or state securities laws. For the purposes of the foregoing
sentence, (i) the “tax treatment” of a transaction means the purported or
claimed federal income tax treatment of the transaction, and (ii) the “tax
structure” of a transaction means any fact that may be relevant to understanding
the purported or claimed federal income tax treatment of the transaction. Thus,
for the avoidance of doubt, the parties acknowledge and agree that the tax
treatment and tax structure of any transaction does not include the name of
any
party to a transaction or any sensitive business information unless such
information may be related or relevant to the purported or claimed federal
income tax treatment of the transaction.
6.13 Remedies.
In the
event of a breach by the Company or by a Holder, of any of their obligations
under this Agreement, each Holder or the Company, as the case may be, in
addition to being entitled to exercise all rights granted by law and under
this
Agreement, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company and each Holder
agree that monetary damages would not provide adequate compensation for any
losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense
that
a remedy at law would be adequate.
6.14 No
Piggyback on Registrations.
Neither
the Company nor any of its security holders (other than the Holders in such
capacity pursuant hereto) may include securities of the Company in the
Registration Statement other than the Registrable Securities. The Company shall
not file any other registration statements until at least ninety (90) days
after
the initial Registration Statement required hereunder is declared effective
by
the Commission, provided that this Section 6.14 shall not prohibit the Company
from filing amendments to registration statements already filed.
6.15 Piggy-Back
Registrations.
If at
any time during the Effectiveness Period there is not an effective Registration
Statement covering all of the Registrable Securities and the Company shall
determine to prepare and file with the SEC a registration statement relating
to
an offering for its own account or the account of others under the Securities
Act of any of its equity securities, other than on Form S-4 or Form S-8 (each
as
promulgated under the Securities Act) or their then equivalents relating to
equity securities to be issued solely in connection with any acquisition of
any
entity or business or equity securities issuable in connection with the stock
option or other employee benefit or consultant plans, then the Company shall
send to each Holder a written notice of such determination and, if within
fifteen days after the date of such notice, any such Holder shall so request
in
writing, the Company shall include in such registration statement all or any
part of such Registrable Securities such holder requests to be registered;
provided, that, the Company shall not be required to register any Registrable
Securities pursuant to this Section 6.15 that are eligible for resale pursuant
to Rule 144 (provided that all Registrable Securities may be resold immediately
without volume restrictions) or Rule 144(k) promulgated under the Securities
Act
or that are the subject of a then effective Registration Statement.
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6.16 No
Inconsistent Agreements.
Neither
the Company nor any of its subsidiaries has entered, as of the date hereof,
nor
shall the Company or any of its subsidiaries, on or after the date of this
Agreement, enter into any agreement with respect to its securities, that would
have the effect of impairing the rights granted to the Holders in this Agreement
or otherwise conflicts with the provisions hereof. Except as set forth on
Schedule
6.16,
neither
the Company nor any of its subsidiaries has previously entered into any
agreement granting any registration rights with respect to any of its securities
to any Person.
[signature
page follows]
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IN
WITNESS WHEREOF, the parties hereto have executed this Investors’ Rights
Agreement as of the date and year first above written.
|
ALLIED
MORAL HOLDINGS, LIMITED
|
|
|
By:
|
/s/ Xxx Xxxxxxxx |
| Xxx Xxxxxxxx | |
|
Chief
Executive Officer and President
|
|
|
SHAREHOLDER
|
|
|
CLEAR
HONEST INTERNATIONAL LIMITED
|
|
|
By:
|
/s/ Xxx Xxxxxxxx |
| Xxx Xxxxxxxx | |
|
Chief
Executive Officer and President
|
|
|
CHARDAN
CAPITAL, LLC
|
|
|
By:
|
/s/
Xxxxxxx X. Xxxxxxx
|
|
Name:
|
Xxxxxxx
X. Xxxxxxx, MD
|
|
Its:
|
President
|
|
PURCHASER
|
|
|
CHARDAN
CHINA INVESTMENTS, LLC
|
|
|
By:
|
Chardan
China Management, LLC
|
|
Its:
|
Manager
|
|
By:
|
/s/
Xxxxxx X. Xxxxxxx
|
|
Name:
|
Xxxxxx
X. Xxxxxxx
|
|
Its:
|
Secretary
|
|
Address:
|
000
Xxxxxxxx, Xxx. 0000
|
|
Xxx
Xxxxx, XX 00000
|
|
|
Phone:
|
000
000-0000
|
|
Fax:
|
000
000-0000
|
|
Name:
|
Harborview
Master Fund L.P.
|
|
By:
|
/s/
Navigator Management, Ltd.
|
|
Title:
|
Authorized
Signatory
|
|
(If
signing in a representative capacity)
|
|
|
Name:
|
J
Wild Fund, LP
|
|
By:
|
/s/
Xxxxx Xxxx
|
|
Title:
|
JW
GP LLC, Managing Member
|
|
(If
signing in a representative capacity)
|
|
|
Name:
|
JW
Partners, LP
|
|
By:
|
/s/
Xxxxx Xxxx
|
|
Title:
|
JW
GP LLC, Managing Member
|
|
(If
signing in a representative capacity)
|
|
|
Name:
|
DKR
SoundShore Oasis Holding Fund, Ltd.
|
|
By:
|
DKR
Oasis Management Company LP, its Investment Manager
|
|
By:
|
/s/
Xxxxxxx Xxxxxx
|
|
Title:
|
Authorized
Signatory
|
|
(If
signing in a representative capacity)
|
|
|
Name:
|
Monarch
Capital Fund, Ltd.
|
|
By:
|
/s/
Navigator Management, Ltd.
|
|
Title:
|
Authorized
Signatory
|
|
(If
signing in a representative capacity)
|
|
|
Name:
|
MidSouth
Investor Fund LP
|
|
By:
|
/s/
Xxxxx X. Xxxxxxx
|
|
Title:
|
Authorized
Signatory
|
|
(If
signing in a representative capacity)
|
|
|
Name:
|
Xxxxx
Xxxxxxx
|
|
By:
|
/s/
Xxxxx Xxxxxxx
|
20
Execution
Copy
Exhibit
A
Plan
of
Distribution
Each
Selling Stockholder (the “Selling
Stockholders”)
of the
common stock (“Common
Stock”)
of
Allied Moral Holdings Limited, a British Virgin Islands company (the
“Company”)
and
any of their pledgees, assignees and successors-in-interest may, from time
to
time, sell any or all of their shares of Common Stock on the Trading Market
or
any other stock exchange, market or trading facility on which the shares are
traded or in private transactions. These sales may be at fixed or negotiated
prices. A Selling Stockholder may use any one or more of the following methods
when selling shares:
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
·
|
privately
negotiated transactions;
|
|
·
|
settlement
of short sales entered into after the date of this prospectus;
|
|
·
|
broker-dealers
may agree with the Selling Stockholders to sell a specified number
of such
shares at a stipulated price per
share;
|
|
·
|
a
combination of any such methods of
sale;
|
|
·
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;
or
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
Selling Stockholders may also sell shares under Rule 144 under the Securities
Act of 1933, as amended (the “Securities
Act”),
if
available, rather than under this prospectus.
Broker-dealers
engaged by the Selling Stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the Selling Stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. Each
Selling Stockholder does not expect these commissions and discounts relating
to
its sales of shares to exceed what is customary in the types of transactions
involved.
21
Execution
Copy
In
connection with the sale of the Common Stock or interests therein, the Selling
Stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the Common
Stock in the course of hedging the positions they assume. The Selling
Stockholders may also sell shares of the Common Stock short and deliver these
securities to close out their short positions, or loan or pledge the Common
Stock to broker-dealers that in turn may sell these securities. The Selling
Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
The
Selling Stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Each Selling Stockholder has informed the
Company that it does not have any agreement or understanding, directly or
indirectly, with any person to distribute the Common Stock.
The
Company is required to pay certain fees and expenses incurred by the Company
incident to the registration of the shares. The Company has agreed to indemnify
the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
Because
Selling Stockholders may be deemed to be “underwriters” within the meaning of
the Securities Act, they will be subject to the prospectus delivery requirements
of the Securities Act. In addition, any securities covered by this prospectus
which qualify for sale pursuant to Rule 144 under the Securities Act may be
sold
under Rule 144 rather than under this prospectus. Each Selling Stockholder
has
advised us that they have not entered into any agreements, understandings or
arrangements with any underwriter or broker-dealer regarding the sale of the
resale shares. There is no underwriter or coordinating broker acting in
connection with the proposed sale of the resale shares by the Selling
Stockholders.
We
agreed
to keep this prospectus effective until the earlier of (i) the date on which
the
shares may be resold by the Selling Stockholders without registration and
without regard to any volume limitations by reason of Rule 144(e) under the
Securities Act or any other rule of similar effect or (ii) all of the shares
have been sold pursuant to the prospectus or Rule 144 under the Securities
Act
or any other rule of similar effect. The resale shares will be sold only through
registered or licensed brokers or dealers if required under applicable state
securities laws. In addition, in certain states, the resale shares may not
be
sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with.
22
Execution
Copy
Under
applicable rules and regulations under the Exchange Act, any person engaged
in
the distribution of the resale shares may not simultaneously engage in market
making activities with respect to the Common Stock for a period of two business
days prior to the commencement of the distribution. In addition, the Selling
Stockholders will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including Regulation M, which may limit
the timing of purchases and sales of shares of the Common Stock by the Selling
Stockholders or any other person. We will make copies of this prospectus
available to the Selling Stockholders and have informed them of the need to
deliver a copy of this prospectus to each purchaser at or prior to the time
of
the sale.
23
Execution
Copy
Exhibit
B
ALLIED
MORAL HOLDINGS, LTD.
Selling
Securityholder Notice and Questionnaire
The
undersigned beneficial owner of common stock (the “Common Stock”) or
Series A Preferred Stock, of ALLIED MORAL HOLDINGS, LTD., a British Virgin
Islands company (the “Company”), (the “Registrable Securities”)
understands that the Company has filed or intends to file with the Securities
and Exchange Commission (the “Commission”) a registration statement on
Form F-3 or other alternate form if Form F-3 is unavailable (the
“Registration Statement”) for the registration and resale under Rule 415
of the Securities Act of 1933, as amended (the “Securities Act”), of the
Registrable Securities, in accordance with the terms of the Investors’ Rights
Agreement, dated as of January ___, 2007 (the “Registration Rights
Agreement”), among the Company and the Purchasers named therein. A copy of
the Investors’ Rights Agreement is available from the Company upon request at
the address set forth below. All capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Investors’ Rights
Agreement.
Certain
legal consequences arise from being named as a selling securityholder in the
Registration Statement and the related prospectus. Accordingly, holders and
beneficial owners of Registrable Securities are advised to consult their own
securities law counsel regarding the consequences of being named or not being
named as a selling securityholder in the Registration Statement and the related
prospectus.
NOTICE
The
undersigned beneficial owner (the “Selling
Securityholder”)
of
Registrable Securities hereby elects to include the Registrable Securities
owned
by it and listed below in Item 3 (unless otherwise specified under such Item
3)
in the Registration Statement.
24
Execution
Copy
The
undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:
QUESTIONNAIRE
1. Name.
|
(a)
|
Full
Legal Name of Selling
Securityholder
|
|
(b)
|
Full
Legal Name of Registered Holder (if not the same as (a) above)
through
which Registrable Securities Listed in Item 3 below are
held:
|
|
(c)
|
Full
Legal Name of Natural Control Person (which means a natural person
who
directly or indirectly, alone or with others, has power to vote
or dispose
of the securities covered by the
questionnaire):
|
2.
Address for Notices to Selling Securityholder:
|
Telephone:
|
|
Fax:
|
|
Contact
Person:
|
3.
Beneficial Ownership of Registrable Securities:
|
(a)
|
Type
and Principal Amount of Registrable Securities beneficially
owned:
|
25
Execution
Copy
4.
Broker-Dealer Status:
|
(a)
|
Are
you a broker-dealer?
|
Yes o
No
o
|
Note:
|
If
yes, the Commission’s staff has indicated that you should be identified as
an underwriter in the Registration
Statement.
|
|
(b)
|
Are
you an affiliate of a
broker-dealer?
|
Yes
o
No
o
|
(c)
|
If
you are an affiliate of a broker-dealer, do you certify that you
bought
the Registrable Securities in the ordinary course of business, and
at the
time of the purchase of the Registrable Securities to be resold,
you had
no agreements or understandings, directly or indirectly, with any
person
to distribute the Registrable
Securities?
|
Yes
o
No
o
|
Note:
|
If
no, the Commission’s staff has indicated that you should be identified as
an underwriter in the Registration
Statement.
|
5.
Beneficial Ownership of Other Securities of the Company Owned by the Selling
Securityholder.
Except
as set forth below in this Item 5, the undersigned is not the beneficial or
registered owner of any securities of the Company other than the Registrable
Securities listed above in Item 3.
|
(a)
|
Type
and Amount of Other Securities beneficially owned by the Selling
Securityholder:
|
26
Execution
Copy
6.
Relationships with the Company:
Except
as set forth below, neither the undersigned nor any of its affiliates, officers,
directors or principal equity holders (owners of 5% of more of the equity
securities of the undersigned) has held any position or office or has had any
other material relationship with the Company (or its predecessors or affiliates)
during the past three years.
State
any
exceptions here:
The
undersigned agrees to promptly notify the Company of any inaccuracies or changes
in the information provided herein that may occur subsequent to the date hereof
at any time while the Registration Statement remains effective.
By
signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items 1 through 6 and the inclusion of such
information in the Registration Statement and the related prospectus. The
undersigned understands that such information will be relied upon by the Company
in connection with the preparation or amendment of the Registration Statement
and the related prospectus.
IN
WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice
and Questionnaire to be executed and delivered either in person or by its duly
authorized agent.
PLEASE
FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN
THE ORIGINAL BY OVERNIGHT MAIL, TO:
Allied
Moral Holdings Ltd.
Intelig
Digital Park, Hongmian Road
Futian
Free Trade Zone
Shenzhen,
PR China 518038
Attn:
President
Fax:
(00-000-00000000)
27
