SUBSCRIPTION AGREEMENT
Subscription
Agreement, dated February 8, 2007, between GENERAL COMPONENTS, INC., a Nevada
corporation having its business xxxxxxx xx Xxxxx 0000, Xxxx Xxxxx 000-000,
Xxxxxxxxxx Xxxx, Xxxxxxxx Xxx, Xxxx Xxxx (the “Company”)
and
certain investors listed on the signature pages hereto (the “Purchasers”).
ARTICLE
I
PURCHASE,
SALE AND TERMS OF SHARES
1.01 The
Shares. Each Purchaser agrees to purchase shares of Series B Preferred Stock
of
the Company (the “Shares”),
at a
purchase price of $50,000 per share, in the amount set forth on such Purchaser’s
signature page hereto, for a total of $7,100,000 in aggregate Subscription
Amounts.
1.02 Closing.
The Company agrees to issue, and sell to the Purchasers and, in consideration
of
and in express reliance upon the representations, warranties, covenants, terms
and conditions of this Agreement, Purchasers agree to purchase the Shares as
described in Section 1.01. The closing (the “Closing”)
of the
purchase and sale of the Shares to be acquired by the Purchasers from the
Company under this Agreement shall take place at the offices of Loeb & Loeb
LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000, at 10:00 a.m., New York City time
as
soon as practicable following the date on which all of the closing conditions
set forth in Article II have been satisfied or waived (the “Closing
Date”).
At
the Closing, the Purchasers will make a payment of their respective Subscription
Amounts, directly by wire transfer or will cause Loeb & Loeb LLP, as escrow
agent, to deliver a wire transfer of such Subscription Amount to the account
of
the Company. Each Purchaser and each Convertible Note Investor that has
acknowledged and signed this Agreement shall also, at the Closing, deliver
to
the Company, signed and completed copies of, (i) if such Purchaser or
Convertible Note Investor is a “United States person” for U.S. federal income
tax purposes, a Form W-9 in accordance with the instructions accompanying the
form or (ii) if such Purchaser or Convertible Note Investor is a nonresident
alien for U. S. federal income tax purposes, a Form W-8BEN in accordance with
the instructions accompanying the form, if applicable (or such other applicable
Form W-8). Subsequent to the Closing, the Company will issue certificates
representing the Series B Preferred Stock to the Purchasers of the Shares,
evidencing the purchase by the Purchasers of the number of Shares corresponding
to their respective Subscription Amounts.
1.03 Representations
by the Purchasers. Each Purchaser make the following representations and
warranties to the Company:
(i) None
of
the Shares (or shares of Common Stock that may be issued upon the conversion
thereof or in payment of dividends thereon) have been registered under the
Securities Act of 1933, as amended (the “Securities
Act”),
or
any state securities laws. The Purchaser understands that the offering and
sale
of the Shares is intended to be exempt from registration under the Securities
Act, by virtue of Section 4(2) thereof and the provisions of Regulation D
promulgated thereunder, or not subject to such requirement, by virtue of
Regulation S promulgated under the Securities Act, based, in part, upon the
representations, warranties and agreements of the Purchaser contained in this
Subscription Agreement.
(ii) The
Purchaser has carefully reviewed the reports and other documents filed by the
Company from time to time with the Securities and Exchange Commission (the
“SEC
Reports”)
and
all other documents requested by the Purchaser (the “Requested Documents”) and
understands the information contained therein.
(iii) Neither
the Securities and Exchange Commission nor any state securities commission
has
approved the Shares, or passed upon or endorsed the merits of the offer or
sale
thereof.
(iv) All
documents, records and books pertaining to the investment in the Shares
(including, without limitation, the Transaction Documents) have been made
available for inspection by the Purchaser and its representatives. Purchaser
hereby acknowledges that all such information is confidential and Purchaser
shall not disclose any such confidential information to any third party other
than as set forth herein.
(v) The
Purchaser has had a reasonable opportunity to ask questions of and receive
answers from a person or persons acting on behalf of the Company concerning
the
offering of the Shares and the business, financial condition, results of
operations and prospects of the Company, and all such questions have been
answered to the full satisfaction of the Purchaser.
(vi) In
evaluating the suitability of an investment in the Company, the Purchaser has
not relied upon any representation or other information (oral or written) other
than as stated in the SEC Reports and the Requested Documents.
(vii) The
Purchaser is unaware of, is in no way relying on, and did not become aware
of
the offering of the Shares through or as a result of, any form of general
solicitation or general advertising as those terms are used in Regulation D
under the Securities Act, including, without limitation, any article, notice,
advertisement or other communication published in any newspaper, magazine or
similar media or broadcast over television or radio, in connection with the
offering and sale of the Shares and is not subscribing for Shares and did not
become aware of the offering of the Shares through or as a result of any seminar
or meeting to which the Purchaser was invited by, or any solicitation of a
subscription by, a person not previously known to the Purchaser in connection
with investments in the Shares generally.
(viii) The
Purchaser has taken no action which would give rise to any claim by any person
for brokerage commissions, finders’ fees or the like relating to this
Subscription Agreement or the transactions contemplated hereby.
(ix) The
Purchaser has such knowledge and experience in financial, tax, and business
matters, and, in particular, investments in securities similar to the Shares,
so
as to enable the Purchaser to utilize the information made available to it
in
connection with the offering of the Shares to evaluate the merits and risks
of
an investment in the Shares and the Company and to make an informed investment
decision with respect thereto.
(x) The
Purchaser is not relying on the Company or any of its employees, officers or
agents with respect to the legal, tax, economic and related considerations
as to
an investment in the Shares, and the Purchaser has relied on the advice of,
or
has consulted with, only his own advisors.
(xi) The
Purchaser is acquiring the Shares solely for the Purchaser's own account for
investment and not with a view to resale, assignment or distribution thereof,
in
whole or in part. The Purchaser has no agreement or arrangement, formal or
informal, with any person to sell or transfer all or any part of the Shares,
and
the Purchaser has no plans to enter into any such agreement or arrangement.
The
Purchaser will not engage in hedging transactions with respect to the Shares
or
the securities received upon exchange of the Shares unless in compliance with
the registration requirements of the Securities Act.
(xii) The
Purchaser must bear the substantial economic risks of the investment in the
Shares indefinitely because none of the Shares (or shares of Common Stock that
may be issued upon the conversion thereof) may be sold, hypothecated or
otherwise disposed of unless subsequently registered under the Securities Act
and applicable state securities laws or an exemption from such registration
is
available. Subject to the terms hereunder, legends shall be placed on the
Securities to the effect that they have not been registered under the Securities
Act or applicable state securities laws and appropriate notations thereof will
be made in the Company’s records. Stop transfer instructions will be placed with
the transfer agent of the shares of Common Stock. Although the Company has
the
obligation to register for resale the securities received upon conversion of
the
shares of Series B Preferred Stock (see the Registration Rights Agreement),
there can be no assurance that such registration will be completed within the
time frames required by the Company, or at all. It is not anticipated that
there
will be any active market for resale of the Securities, and such securities
will
not be freely transferable at any time in the foreseeable future, until the
registration statement filed pursuant to the Registration Rights Agreement
is
declared effective.
(xiii) The
Purchaser has adequate means of providing for its current financial needs and
foreseeable contingencies and has no need for liquidity of the investment in
the
Shares for an indefinite period of time.
(xiv) The
Purchaser is aware that an investment in the Shares involves a number of very
significant risks and has carefully read and considered the matters set forth
under the caption “Risk Factors” in the SEC Reports.
(xv) The
Purchaser meets the requirements of at least one of the suitability standards
for an “accredited investor” as set forth on the Investor Certification
contained herein or is a “non-US Person” as set forth on such Investor
Certification.
(xvi) The
Purchaser: (i) if a natural person, represents that the Purchaser has reached
the age of 21 and has full power and authority to execute and deliver this
Subscription Agreement and all other related agreements or certificates and
to
carry out the provisions hereof and thereof; (ii) if a corporation, partnership,
limited liability company or partnership, association, joint stock company,
trust, unincorporated organization or other entity, (A) such entity was not
formed for the specific purpose of acquiring the Shares, (B) such entity is
duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (C) the consummation of the transactions
contemplated hereby is authorized by, and will not result in a violation of
law
or its charter or other organizational documents, (D) such entity has full
power
and authority to execute and deliver this Subscription Agreement and all other
related agreements or certificates and to carry out the provisions hereof and
thereof and to purchase and hold the Shares (and the shares of Common Stock
that
are issuable upon the conversion thereof), (E) the execution and delivery of
this Subscription Agreement has been duly authorized by all necessary action,
and (F) this Subscription Agreement has been duly executed and delivered on
behalf of such entity and is a legal, valid and binding obligation of such
entity; and (iii) if executing this Subscription Agreement in a representative
or fiduciary capacity, such representative has full power and authority to
execute and deliver this Subscription Agreement in such capacity and on behalf
of the subscribing individual, xxxx, partnership, trust, estate, corporation,
limited liability company or limited liability partnership, or other entity
for
whom such representative is executing this Subscription Agreement, and such
individual, xxxx, partnership, trust, estate, corporation, limited liability
company or partnership, or other entity has full right and power to perform
this
Subscription Agreement and make an investment in the Company, and that this
Subscription Agreement constitutes a legal, valid and binding obligation of
such
Purchaser. The execution and delivery of this Subscription Agreement will not
violate or be in conflict with any order, judgment, injunction, agreement or
controlling document to which the Purchaser is a party or by which it is
bound.
(xvii) The
Purchaser had the opportunity to obtain any additional information, to the
extent the Company had such information in its possession or could acquire
it
without unreasonable effort or expense, necessary to verify the accuracy of
the
information contained in the SEC Reports and all documents received or reviewed
in connection with the purchase of the Shares and the opportunity to have
representatives of the Company provide it with such additional information
regarding the terms and conditions of this particular investment and the
financial condition, results of operations, business and prospects of the
Company deemed relevant by the Purchaser and all such requested information,
to
the extent the Company had such information in its possession or could acquire
it without unreasonable effort or expense, has been provided to Purchaser to
its
full satisfaction.
(xviii) The
Purchaser represents to the Company that any information which the undersigned
has heretofore furnished or furnishes herewith to the Company is complete and
accurate and may be relied upon by the Company in determining the availability
of an exemption from registration under Federal and state securities laws in
connection with the offering of the Shares. The Purchaser further represents
and
warrants that it will notify and supply corrective information to the Company
immediately upon the occurrence of any change therein occurring prior to the
Company's issuance of the Shares.
(xix) The
Purchaser has a sufficient net worth to sustain a loss of its entire investment
in the Company in the event such a loss should occur. The Purchaser’s overall
commitment to investments which are not readily marketable is not excessive
in
view of its net worth and financial circumstances and the purchase of the Shares
will not cause such commitment to become excessive. The investment is a suitable
one for the Purchaser.
(xx) No
oral
or written representations have been made, or oral or written information
furnished, to the Purchaser in connection with the offering of the Shares or
as
to the Company, which are in any way inconsistent with the information contained
in the SEC Reports.
(xxi) The
Purchaser understands that, until such securities have been registered under
the
Securities Act, any certificates issued to represent the Shares and any shares
of Common Stock issuable upon the conversion thereof will bear a restrictive
legend substantially to the following effect:
NEITHER
THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.
(xxii) Opinion.
The Purchasers will not transfer any or all of the Shares pursuant to Regulation
S or absent an effective registration statement under the Securities Act and
applicable state securities law covering the disposition of Purchaser’s Shares,
without first providing the Company with an opinion of counsel (which counsel
and opinion are reasonably satisfactory to the Company) to the effect that
such
transfer will be made in compliance with Regulation S or will be exempt from
the
registration and the prospectus delivery requirements of the Securities Act
and
the registration or qualification requirements of any applicable U.S. state
securities laws.
(xxiii) The
Purchasers nor any of their respective Affiliates have engaged, or will engage
in any transactions in the securities of the Company (including, without
limitations, any Short Sales (as defined below) involving the Company’s
securities) since the time that the Purchasers were first contacted by the
Company or its representatives regarding the transactions contemplated by this
Agreement. “Short
Sales”
shall
include, without limitation, all “short sales” as defined in Rule 200
promulgated under Regulation SHO under the Exchange Act and all types of direct
and indirect stock pledges, forward sale contracts, options, puts, calls, swaps
and similar arrangements (including on a total return basis), and sales and
other transactions through non-US broker dealers or foreign regulated
brokers.
ARTICLE
II
CONDITIONS
TO PURCHASERS’ OBLIGATIONS
The
obligations of each Purchaser to purchase and pay for the Shares to be purchased
by it at the Closing, is subject to the following conditions:
2.01 Representations
and Warranties. Each of the representations and warranties of the Company set
forth in Article III hereof shall be true, accurate and correct on the date
of
the Closing as if made on the date of the Closing.
2.02 Documentation
at Closing. The Purchasers shall have received, prior to or at the Closing,
all
of the following materials, each in form and substance satisfactory to the
Purchasers and their counsel, if any, and each of the following events shall
have occurred, or each of the following documents shall have been delivered,
prior to or simultaneous with such Closing:
(a) Copies
of
(1) the Articles of Incorporation of the Company, as amended or restated to
date, together with such evidence as may be available of the filing thereof;
(2)
the resolutions of the Board of Directors providing for the approval of this
Agreement, the issuance of the Shares, and all other agreements or matters
contemplated hereby or executed in connection herewith; and (3) the By-laws
of
the Company, all of which shall have been certified by the Secretary of the
Company, as of the date of each such Closing, to be true, complete and correct;
and certified copies of all documents evidencing other necessary corporate
or
other action and governmental approvals, if any, required to be obtained at
or
prior to the Closing with respect to this Agreement and the issuance of the
Shares.
(b) The
Company shall have delivered the other documents, instruments or certificates
to
be delivered pursuant to this Agreement by the Company or any of its officers,
including with respect to the incumbency of such officers, and the true specimen
signatures of such officers.
(c) A
certificate of the President of the Company, dated the date of the Closing,
stating that the representations and warranties of the Company contained in
Article III hereof and otherwise made by the Company in writing in connection
with the transactions contemplated hereby are true and correct as of the time
of
the Closing and that all obligations and covenants in this Agreement required
to
be performed prior to or at the Closing have been performed as of the time
of
Closing.
(d) The
Company shall have obtained any consents or waivers necessary to be obtained
at
or prior to the Closing to execute and deliver this Agreement and the other
agreements and instruments executed and delivered by the Company in connection
herewith, to issue the Shares and to carry out the transactions contemplated
hereby and thereby, and such consents and waivers shall be in full force and
effect at the Closing. All corporate and other action and governmental filings
necessary to effectuate the terms of this Agreement and the other agreements
and
instruments executed and delivered by the Company in connection herewith and
the
issuance of the Shares shall have been made or taken.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company represents and warrants as follows:
3.01 Organization
and Qualification. The Company is duly organized, validly existing and in good
standing under the laws of Nevada, has all requisite authority and power
(corporate and other), governmental licenses, authorizations, consents and
approvals to carry on its business as presently conducted and to own, hold
and
operate its properties and assets as now owned, held and operated by it, except
where the failure to be so organized, existing and in good standing, or to
have
such authority and power, governmental licenses, authorizations, consents or
approvals would not have a Material Adverse Effect. The Company is duly
qualified, licensed or domesticated as a foreign corporation in good standing
in
each jurisdiction wherein the nature of its activities or its properties owned,
held or operated makes such qualification, licensing or domestication necessary,
except where the failure to be so duly qualified, licensed or domesticated
and
in good standing would not have a Material Adverse Effect.
3.02 Subsidiaries.
All of the direct and indirect subsidiaries (as defined in Rule 12b-2 under
the
Exchange Act) of the Company are set forth on Schedule 3.02. Schedule 3.02
accurately sets forth the Company’s approximate percentage ownership interest in
each such subsidiary named therein.
3.03 Organizational
Documents. True, correct and complete copies of the organizational documents
of
the Company have been included in the Company SEC Reports, and no action has
been taken to amend or repeal such organizational documents. The Company is
not
in violation or breach of any of the provisions of its organizational documents,
except for such violations or breaches as would not have a Material Adverse
Effect.
3.04 Authorization.
Subject to its receipt of stockholder approval in the manner required by law,
the Company has all requisite authority and power (corporate and other),
governmental licenses, authorizations, consents and approvals to enter into
this
Subscription Agreement and each of the Transaction Documents to which the
Company is a party, to consummate the transactions contemplated by this
Subscription Agreement and each of the Transaction Documents to which the
Company is a party and to perform its obligations under this Agreement and
each
of the Transaction Documents to which the Company is a party. The execution,
delivery and performance by the Company of this Subscription Agreement and
each
of the Transaction Documents to which the Company is a party have been duly
authorized by the Board and do not require from the Company Board any consent
or
approval that has not been validly and lawfully obtained except for approval
by
the Company stockholders. The execution, delivery and performance by the Company
of this Subscription Agreement and each of the Transaction Documents to which
the Company is a party requires no authorization, consent, approval, license,
exemption of or filing or registration with any governmental
authority.
3.05 No
Violation. Neither the execution nor the delivery by the Company of this
Subscription Agreement or any Transaction Document to which the Company is
a
party, nor the consummation or performance by the Company of the transactions
contemplated hereby or thereby will, directly or indirectly, (a) contravene,
conflict with, or result in a violation of any provision of the organizational
documents of the Company; (b) contravene, conflict with, constitute a default
(or an event or condition which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or acceleration of,
or
result in the imposition or creation of any lien under, any agreement or
instrument to which the Company is a party or by which the properties or assets
of the Company is bound; (c) contravene, conflict with, or result in a
violation of, any law or order to which the Company, or any of the properties
or
assets owned or used by the Company, may be subject; or (d) contravene, conflict
with, or result in a violation of, the terms or requirements of, or give any
governmental authority the right to revoke, withdraw, suspend, cancel, terminate
or modify, any licenses, permits, authorizations, approvals, franchises or
other
rights held by the Company or that otherwise relate to the business of, or
any
of the properties or assets owned or used by, the Company, except, in the case
of clause (b), (c), or (d), for any such contraventions, conflicts, violations,
or other occurrences as would not have a Material Adverse Effect.
3.06 Binding
Obligations. Assuming this Subscription Agreement and the Transaction Documents
have been duly and validly authorized, executed and delivered by the parties
thereto other than the Company, this Subscription Agreement and each of the
Transaction Documents to which the Company is a party are duly authorized,
executed and delivered by the Company and constitutes the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforcement is limited
by
general equitable principles, or by bankruptcy, insolvency and other similar
laws affecting the enforcement of creditors rights generally.
3.07 Securities
Laws. Assuming the accuracy of the representations and warranties of the
Purchasers contained in the Investor Certification, the issuance of the Shares
pursuant to this Subscription Agreement will be, when issued and paid for in
accordance with the terms of this Subscription Agreement, issued in accordance
with exemptions from the registration and prospectus delivery requirements
of
the Securities Act and the registration permit or qualification requirements
of
all applicable state securities laws.
3.08 Capitalization
and Related Matters.
(i) Capitalization.
The
authorized capital stock of the Company consists of 280 million shares,
consisting of 280 million shares of Company Common Stock and 10 million shares
of preferred stock, of which approximately 279,997,207 shares of Company Common
Stock are issued and outstanding, no shares of preferred stock are outstanding
and approximately 287,132,793 shares of Common Stock and 120 shares of Series
B
Preferred Stock are issuable pursuant to outstanding options, warrants, purchase
agreements, participation agreements, subscription rights, conversion rights,
exchange rights or other securities or contracts. All issued and outstanding
shares of the Company’s Common Stock are duly authorized, validly issued, fully
paid and nonassessable, and have not been issued in violation of any preemptive
or similar rights. There are no outstanding stockholders’ agreements, voting
trusts or arrangements, registration rights agreements, rights of first refusal
or other contracts pertaining to the capital stock of the Company, other than
with respect to the 12,500,000 shares of Common Stock issuable pursuant to
a
warrant to be issued to Comtech Global Investments, Inc. (“Comtech”)
pursuant to an Engagement Letter between Comtech and the Company (the
“Comtech
Warrant”),
the
16,250,000 shares of Common Stock issuable pursuant to a warrant to be issued
to
Broadband Capital Management LLC (“Broadband”)
pursuant to an Engagement Letter between Broadband and the Company (the
“Broadband
Warrant”,
and
together with the Comtech Warrant, the “Warrants”)
and
the 30,000,000 shares of Common Stock issuable pursuant to a warrant (the
“Beijing
HTW Warrants”)
to be
issued to Beijing Hi-Tech Wealth Investment and Development Company Limited
(“Beijing
HTW”)
pursuant to an Asset Purchase Agreement dated as of the date hereof among
Beijing HTW, the Company and Magical Insight Investments Limited. The Warrants
expire three years from the issue date thereof and the exercise price applicable
under such Warrants will be $0.15 per share on the date of issuance and the
Beijing HTW Warrants will have a nominal exercise price and will be exercisable
at any time after the consummation a 1 for 10 reverse split of its outstanding
common shares by the Company. To the best knowledge of the Company, the issuance
of all of the shares of Company’s Common Stock described in this Section 3.08
have been in compliance with U.S. federal and state securities
laws.
(ii) No
Redemption Requirements.
Except
as set forth in the SEC Reports, there are no outstanding contractual
obligations (contingent or otherwise) of the Company to retire, repurchase,
redeem or otherwise acquire any outstanding shares of capital stock of, or
other
ownership interests in, the Company or to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
other person.
(iii) Duly
Authorized.
The
issuance of the Shares has been duly authorized and, upon delivery to the
Purchasers of certificates therefor in accordance with the terms of this
Subscription Agreement, such Shares have the rights, preferences and privileges
specified, will be free of preemptive rights and will be free and clear of
all
liens and restrictions, other than liens created by the Purchasers and
restrictions on transfer imposed by this Subscription Agreement and the
Securities Act, and will have been validly issued and be will be fully paid
and
nonassessable.
3.09 Compliance
with Laws. Except as would not have a Material Adverse Effect, the business
and
operations of the Company have been and are being conducted in accordance with
all applicable laws and orders. Except as would have a Material Adverse Effect,
the Company has not received notice of any violation (or any proceeding
involving an allegation of any violation) of any applicable law or order by
or
affecting such Company and, to the knowledge of the Company, no proceeding
involving an allegation of violation of any applicable law or order is
threatened or contemplated. Except as would have a Material Adverse Effect,
the
Company is not subject to any obligation or restriction of any kind or
character, nor is there, to the knowledge of the Company, any event or
circumstance relating to the Company that materially and adversely affects
in
any way its business, properties, assets or prospects or that prohibits the
Company from entering into this Subscription Agreement or would prevent or
make
burdensome its performance of or compliance with all or any part of this
Subscription Agreement or the consummation of the transactions contemplated
hereby.
3.10 Certain
Proceedings. There is no pending proceeding that has been commenced against
the
Company and that challenges, or may have the effect of preventing, delaying,
making illegal, or otherwise interfering with, any of the transactions
contemplated by this Subscription Agreement. To the knowledge of the Company,
no
such proceeding has been threatened.
3.11 No
Brokers or Finders. No person has, or as a result of the transactions
contemplated herein will have, any right or valid claim against the Company
for
any commission, fee or other compensation as a finder or broker, other than
Broadband.
3.12 Absence
of Undisclosed Liabilities. Except as set forth in the SEC Reports, the Company
does not have any debt, obligation or liability (whether accrued, absolute,
contingent, liquidated or otherwise, whether due or to become due, whether
or
not known to the Company) arising out of any transaction entered into at or
prior to the Closing Date or any act or omission at or prior to the Closing
Date, except to the extent set forth on or reserved against on the most recent
balance sheet included in the SEC Reports. Except as set forth in the SEC
Reports, the Company has not incurred any liabilities or obligations under
agreements entered into, in the usual and ordinary course of business since
December 31, 2005.
3.13 Changes.
Except as set forth in the SEC Reports, the Company has not, since December
31,
2005:
(i) Ordinary
Course of Business.
Conducted its business or entered into any transaction other than in the usual
and ordinary course of business, except for this Subscription
Agreement;
(ii) Adverse
Changes.
Suffered or experienced any change in, or affecting, its condition (financial
or
otherwise), properties, assets, liabilities, business, operations, results
of
operations or prospects other than changes, events or conditions in the usual
and ordinary course of its business, none of which would have a Material Adverse
Effect;
(iii) Loans.
Made
any loans or advances to any person other than travel advances and reimbursement
of expenses made to employees, officers and directors in the ordinary course
of
business;
(iv) Liens.
Created
or permitted to exist any lien on any material property or asset of the Company,
other than as such as would not have a Material Adverse Effect;
(v) Capital
Stock.
Issued,
sold, disposed of or encumbered, or authorized the issuance, sale, disposition
or encumbrance of, or granted or issued any option to acquire any shares of
its
capital stock or any other of its securities or any equity security, or altered
the term of any of its outstanding securities or made any change in its
outstanding shares of capital stock or its capitalization, whether by reason
of
reclassification, recapitalization, stock split, combination, exchange or
readjustment of shares, stock dividend or otherwise;
(vi) Dividends.
Declared, set aside, made or paid any dividend or other distribution to any
of
its stockholders;
(vii) Material
Company Contracts.
Terminated or modified any material Company contract, except for termination
upon expiration in accordance with the terms thereof;
(viii) Claims.
Released, waived or cancelled any claims or rights relating to or affecting
the
Company in excess of US $10,000 in the aggregate or instituted or settled any
proceeding involving in excess of US $10,000 in the aggregate;
(ix) Discharged
Liabilities.
Paid,
discharged or satisfied any claim, obligation or liability in excess of US
$10,000 in the aggregate, except for liabilities incurred prior to the date
of
this Subscription Agreement in the ordinary course of business;
(x) Indebtedness.
Created, incurred, assumed or otherwise become liable for any Indebtedness
in
excess of US $150,000 in the aggregate, other than professional
fees;
(xi) Guarantees.
Guaranteed or endorsed in a material amount any obligation or net worth of
any
person;
(xii) Acquisitions.
Acquired the capital stock or other securities or any ownership interest in,
or
substantially all of the assets of, any other person;
(xiii) Accounting.
Changed
its method of accounting or the accounting principles or practices utilized
in
the preparation of its financial statements, other than as required by
GAAP;
(xiv) Agreements.
Entered
into any agreement, or otherwise obligated itself, to do any of the
foregoing.
3.14 Tax
Returns and Audits.
(i) Tax
Returns.
The
Company has filed all material Tax Returns required to be filed by or on behalf
of the Company and has paid all material Taxes of the Company required to have
been paid (whether or not reflected on any Tax Return). Except as set forth
in
the SEC Reports, (a) no governmental authority in any jurisdiction has made
a
claim, assertion or threat to such Company that such Company is or may be
subject to Taxation by such jurisdiction; (b) there are no liens with respect
to
taxes on the Company’s property or assets other than such as would not have a
Material Adverse Effect; and (c) there are no Tax rulings, requests for rulings,
or closing agreements relating to the Company for any period (or portion of
a
period) that would affect any period after the date hereof.
(ii) No
Disputes.
There
is no pending audit, examination, investigation, dispute, proceeding or claim
with respect to any Taxes of the Company, nor is any such claim or dispute
pending or contemplated.
3.15 Insurance
Coverage. Except as disclosed in the SEC Reports, the Company does not maintain
any insurance policies.
3.16 Litigation;
Orders. There is no proceeding (whether federal, state, local or foreign)
pending or, to the knowledge of the Company, threatened against or affecting
the
Company or any of Company’s properties, assets, business or employees. To the
knowledge of the Company, there is no fact that might result in or form the
basis for any such proceeding. The Company is not subject to any material
governmental orders.
3.17 Licenses.
Except as would not have a Material Adverse Effect, the Company possesses from
the appropriate governmental authority all licenses, permits, authorizations,
approvals, franchises and rights that are necessary for the Company to engage
in
its business as currently conducted and to permit the Company to own and use
its
properties and assets in the manner in which it currently owns and uses such
properties and assets (collectively, “Company
Permits”).
The
Company has not received notice from any governmental authority or other Person
that there is lacking any license, permit, authorization, approval, franchise
or
right necessary for such Company to engage in its business as currently
conducted and to permit such Company to own and use its properties and assets
in
the manner in which it currently owns and uses such properties and assets.
Except as would not have a Material Adverse Effect, the Company Permits are
valid and in full force and effect. Except as would not have a Material Adverse
Effect, no event has occurred or circumstance exists that may (with or without
notice or lapse of time): (a) constitute or result, directly or indirectly,
in a
violation of or a failure to comply with any Company Permit; or (b) result,
directly or indirectly, in the revocation, withdrawal, suspension, cancellation
or termination of, or any modification to, any Company Permit. The Company
has
not received notice from any governmental authority or any other Person
regarding: (a) any actual, alleged, possible or potential contravention of
any
Company Permit; or (b) any actual, proposed, possible or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to, any
Company Permit. All applications required to have been filed for the renewal
of
such Company Permits have been duly filed on a timely basis with the appropriate
Persons, and all other filings required to have been made with respect to such
Company Permits have been duly made on a timely basis with the appropriate
Persons. All Company Permits are renewable by their terms or in the ordinary
course of business without the need to comply with any special qualification
procedures or to pay any amounts other than routine fees or similar charges,
all
of which have, to the extent due, been duly paid.
3.18 Interested
Party Transactions. Except as disclosed in the SEC Reports, no officer, director
or stockholder of the Company or any Affiliate or “associate” (as such term is
defined in Rule 405 of the Commission under the Securities Act) of any such
Person, has or has had, either directly or indirectly, (1) an interest in any
Person which (a) furnishes or sells services or products which are furnished
or
sold or are proposed to be furnished or sold by the Company, or (b) purchases
from or sells or furnishes to, or proposes to purchase from, sell to or furnish
the Company any goods or services; or (2) a beneficial interest in any contract
or agreement to which the Company is a party or by which it may be bound or
affected.
3.19 SEC
Documents; Financial Statements. The Company has filed all reports required
to
be filed by it under the Exchange Act, including pursuant to Section 13(a)
or
15(d) thereof, for the three years preceding the date hereof (or such shorter
period as the Company was required by law to file such material) and, while
not
having filed all such Company SEC Reports prior to the date such filings may
have been due, is nevertheless current with respect to its Exchange Act filing
requirements. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission promulgated thereunder,
and
none of the SEC Documents, when filed, 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 statement therein, in light of the
circumstances under which they were made, not misleading. All material
agreements to which the Company is a party or to which the property or assets
of
the Company are subject have been appropriately filed as exhibits to the Company
SEC Reports as and to the extent required under the Exchange Act. The financial
statements of the Company included in the Company SEC Reports comply in all
material respects with applicable accounting requirement and the rules and
regulations of the Commission with respect thereto as in effect at the time
of
filing, were prepared in accordance with GAAP applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto,
or, in the case of unaudited statements as permitted by Form 10-QSB of the
Commission), and fairly present in all material respects (subject in the case
of
unaudited statements, to normal, recurring audit adjustments) the financial
position of the Company as at the dates thereof and the results of its
operations and cash flows for the periods then ended.
3.20 Environmental
Matters. Except as would not have a Material Adverse Effect:
(i) The
Company has at all time been and is in compliance with all Environmental Laws
applicable to the Company.
(ii) There
are
no proceedings pending or threatened against the Company alleging the violation
of any Environmental Law or Environmental Permit applicable to the Company
or
alleging that the Company is a potentially responsible party for any
environmental site contamination.
(iii) Neither
this Subscription Agreement nor the consummation of the transactions
contemplated by this Subscription Agreement shall impose any obligations to
notify or obtain the consent of any governmental authority or third persons
under any Environmental Laws applicable to the Company.
3.21 Title
to
and Condition of Properties. Except
as
would not have a Material Adverse Effect, the Company owns (with good and
marketable title in the case of real property) or holds under valid leases
or
other rights to use all real property, plants, machinery, equipment and other
personal property necessary for the conduct of its business as presently
conducted, free and clear of all liens, except such as would not have a Material
Adverse Effect. The material buildings, plants, machinery and equipment
necessary for the conduct of the business of the Company as presently conducted
are structurally sound, are in good operating condition and repair and are
adequate for the uses to which they are being put, and none of such buildings,
plants, machinery or equipment is in need of maintenance or repairs, except
for
ordinary, routine maintenance and repairs that are not material in nature or
cost.
ARTICLE
IV
COVENANTS
OF THE COMPANY
4.01 Operations.
From and after the date hereof through the Closing, the Company will operate
only in the ordinary course of business and in addition thereto, and not in
limitation thereof; will not and will not permit or suffer any Subsidiary to:
(i) voluntarily incur any obligation; (ii) declare, authorize or become
obligated to make (or express any intention to make) any significant
distribution, dividend, increase in compensation or bonus to any Person; (iii)
incur any material Indebtedness; (iv) engage in a transaction with any
Affiliate; (v) amend any of its material agreements, contracts, articles of
incorporation or by-laws; or (vi) agree to do any of the foregoing.
4.02 Inspection.
The Company shall permit authorized representatives of the Purchasers to visit
and inspect any of the properties of the Company, including its books of account
(and to make copies thereof and take extracts therefrom), and to discuss its
affairs, finances and accounts with its officers, employees, independent
accountants, consultants and attorneys, all at such reasonable times and as
often as may be reasonably requested.
4.03 Reverse
Stock Split. The Company shall take such actions as are necessary to consummate
a 1 for 10 reverse split of its outstanding common shares at the earliest
practicable date.
ARTICLE
V
INDEMNIFICATION;
REMEDIES
5.01 Survival.
All representations, warranties, covenants, and obligations in this Subscription
Agreement shall survive the Closing and expire six months from the date hereof
(the “Survival
Period”).
5.02 Indemnification
by the Company. From and after the Closing until (1) the expiration of the
Survival Period, or (2) with respect to a specific claim made by the Purchasers
against the Company prior to the expiration of the Survival Period, until a
court of competent jurisdiction renders a final unappealable decision (or
appeals of a decision are not taken within the time period permitted for filing
same) (the “Claims
Period”),
the
Company shall indemnify and hold harmless the Purchasers from and against any
liabilities, loss, claims, damages (excluding consequential, punitive and other
similar damages), fines, penalties, expenses (including costs of investigation
and defense and reasonable attorneys’ fees) or diminution of value
(collectively, “Damages”)
arising, directly or indirectly, from or in connection with:
(i) any
breach of any representation or warranty made by the Company in this Agreement
or in any certificate delivered by the Company pursuant to this Agreement;
or
(ii) any
breach by the Company of any covenant or obligation of the Company in this
Agreement required to be performed by the Company on or prior to
Closing.
5.03 Limitations
on Amount. The Purchasers shall not be entitled to indemnification pursuant
to
Section 5.02, unless and until the aggregate amount of Damages to the Purchasers
with respect to such matters under Section 5.02 exceeds $250,000, at which
time,
subject to the following cap on the maximum amount of damages in respect of
which the Purchasers may seek indemnification hereunder, the Purchasers shall
be
entitled to indemnification for the total amount of such Damages in excess
of
$250,000. The aggregate amount of Damages for which the Company shall be
responsible to indemnify the Purchasers with respect to shall in no event exceed
$13,100,000.
5.04 Determining
Damages. Materiality qualifications to the representations and warranties of
the
Company shall be taken into account in determining the amount of Damages
occasioned by a breach of any such representation or warranty for purposes
of
determining the whether the baskets set forth in 5.03 have been
met.
ARTICLE
VI
GLOSSARY
6.01 Certain
Defined Terms. As used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
“Affiliate”
of any person shall mean a Person controlling, controlled by or under common
control with, any such Person.
“Agreement”
means this Subscription Agreement as from time to time amended and in effect
between the parties, including all exhibits hereto.
“Board
of
Directors” or “Board” means the board of directors of the Company as constituted
from time to time.
“Claims
Period” shall have the meaning assigned to that term in
Section
5.02.
“Closing”
shall have the meaning assigned to that term in Section 1.02.
“Code”
means the Internal Revenue Code of 1986, as amended.
“Commission”
shall mean the United States Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act or the Exchange
Act.
“Damages”
shall have the meaning assigned to that term in Section
5.02.
“Environmental
Laws” means any Law or other requirement relating to the environment, natural
resources, or public or employee health and safety.
“Environmental
Permit” means all licenses, permits, authorizations, approvals, franchises and
rights required under any applicable Environmental Law or order.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended, or any similar
federal statute, and the rules and regulations of the Commission (or of any
other Federal agency then administering the Exchange Act) thereunder, all as
the
same shall be in effect at the time.
“Material
Adverse Effect” means any change, effect or circumstance which, individually or
in the aggregate, would reasonably be expected to (a) have a material adverse
effect on the business, assets, financial condition or results of operations
of
the Company and its Subsidiaries, taken as a whole or (b) materially impair
the
ability of the Company to perform its obligations under this Subscription
Agreement, excluding any change, effect or circumstance resulting from (i)
the
announcement, pendency or consummation of the transactions contemplated by
this
Subscription Agreement, (ii) changes in the United States securities markets
generally, or (iii) changes in general economic, currency exchange rate,
political or regulatory conditions in industries in which the Company or its
Subsidiaries, as the case may be, operate.
“Regulation
S” means Regulation S promulgated under the Securities Act, as the same may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission.
“Requested
Documents” shall have the meaning assigned to that term in Section
1.03(ii).
“SEC
Reports” shall have the meaning assigned to that term in Section
1.03(ii).
“Securities”
includes the Shares and shares of Common Stock issuable upon the conversion
thereof.
“Securities
Act” means the Securities Act of 1933, as amended, or any similar federal
statute, and the rules and regulations of the Commission (or of any other
federal agency then administering the Securities Act) thereunder, all as the
same shall be in effect at the time.
“Series
B
Preferred Stock” means the Company’s Series B Preferred Stock, $.001 par value,
as authorized on the date of this Agreement.
“Subsidiary”
or “Subsidiaries” means, with respect to any person, any corporation, limited
liability company, joint venture or partnership of which such person (a)
beneficially owns, either directly or indirectly, more than 50% of (i) the
total
combined voting power of all classes of voting securities of such entity, (ii)
the total combined equity interests, or (iii) the capital or profit interests,
in the case of a partnership; or (b) otherwise has the power to vote or to
direct the voting of sufficient securities to elect a majority of the board
of
directors or similar governing body.
“Survival
Period” shall have the meaning assigned to that term in
Section
5.01.
“Taxes”
means all foreign, federal, state or local taxes, charges, fees, levies,
imposts, duties and other assessments, as applicable, including, but not limited
to, any income, alternative minimum or add-on, estimated, gross income, gross
receipts, sales, use, transfer, transactions, intangibles, ad valorem,
value-added, franchise, registration, title, license, capital, paid-up capital,
profits, withholding, payroll, employment, unemployment, excise, severance,
stamp, occupation, premium, real property, recording, personal property, federal
highway use, commercial rent, environmental (including, but not limited to,
taxes under Section 59A of the Code) or windfall profit tax, custom, duty or
other tax, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest, penalties or additions to tax with
respect to any of the foregoing; and “Tax” means any of the foregoing
Taxes.
“Tax
Return” means any return, declaration, report, claim for refund or credit,
information return, statement or other similar document filed with any
Governmental authority with respect to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
“Transaction
Documents” means, collectively, this Agreement and all agreements, instruments
and other documents to be executed and delivered in connection with the
transactions contemplated by this Agreement.
“U.S.”
means the United States of America.
“U.S.
Person” has the meaning set forth in Regulation S.
6.02 Accounting
Terms. All accounting terms not specifically defined herein or in any of the
Transaction Documents shall be construed in accordance with generally accepted
accounting principles as applied in the United States of America (“GAAP”)
consistently applied, and all financial data submitted pursuant to this
Agreement shall be prepared in accordance with such principles.
ARTICLE
VII
MISCELLANEOUS
7.01 No
Waiver: Cumulative Remedies. No failure or delay on the part of any party to
this Agreement in exercising any right, power or remedy hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy hereunder. The remedies herein provided
are
cumulative and not exclusive of any remedies provided by law.
7.02 Amendments.
Waivers and Consents. Any provision in the Agreement to the contrary
notwithstanding, and except as hereinafter provided, changes in, termination
or
amendments of or additions to this Agreement may be made, and compliance with
any covenant or provision set forth herein may be omitted or waived, if the
Company (i) shall obtain consent thereto in writing from the holder or holders
of at least a majority in interest of the Shares and (ii) shall deliver copies
of such consent in writing to any holders who did not execute such consent;
provided that no consents shall be effective to reduce the percentage in
interest of the Shares the consent of the holders of which is required under
this Section 9.02. Any waiver or consent may be given subject to satisfaction
of
conditions stated therein and any waiver or consent shall be effective only
in
the specific instance and for the specific purpose for which given.
7.03 Notices.
All notices, consents, waivers, and other communications under this Agreement
must be in writing and will be deemed to have been duly given when (a) delivered
by hand (with written confirmation of receipt), (b) sent by telecopier (with
written confirmation of receipt), or (c) when received by the addressee, if
sent
by a nationally recognized overnight delivery service (receipt requested),
in
each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate
by
written notice to the other parties):
|
If
to the Company:
Suite
1503, Sino Plaza 000-000
Xxxxxxxxxx
Xxxx, Xxxxxxxx Xxx, Xxxx Xxxx
|
with
a copy to:
Loeb
& Loeb LLP
000
Xxxx Xxxxxx
Xxx
Xxxx, XX 00000
|
|
Attention:
Mr. Ma Qing, Chief Financial Officer
Telephone
No.: x000 0000 0000
|
Attention:
Xxxxxxxx X. Xxxxxxxx, Esq.
Telephone
No.:000-000-0000
Facsimile
No.: 000-000-0000
|
|
If
to the Purchasers: To the address set forth on the signature pages
hereto
|
7.04 Costs,
Expenses and Taxes. Each of the parties hereto shall bear its own expenses
with
regard to the negotiation, drafting and completion of the Transaction Documents
and all related matters and transactions. The Company shall pay any and all
stamp, or other similar taxes payable or determined to be payable in connection
with the execution and delivery of this Subscription Agreement, the issuance
of
any securities and the other instruments and documents to be delivered hereunder
or thereunder, and agrees to save the Purchasers harmless from and against
any
and all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes.
7.05 Effectiveness:
Binding Effect: Assignment. This Agreement shall be binding upon and inure
to
the benefit of the Company, the Purchasers and the respective successors and
assigns. This Subscription Agreement may not be assigned by any party hereto
without the written consent of the Company (in the event a Purchaser shall
seek
to assign its rights and duties hereunder) or all the Purchasers (in the event
the Company shall seek to assign its rights and duties hereunder).
7.06 Survival
of Representations and Warranties. All representations and warranties made
in
the Transaction Documents, the Shares or any other instrument or document
delivered in connection herewith or therewith, shall survive the execution
and
delivery hereof or thereof.
7.07 Prior
Agreements. The Transaction Documents executed and delivered in connection
herewith constitute the entire agreement between the parties and supersede
any
prior understandings or agreements concerning the subject matter
hereof.
7.08 Severability.
The provisions of the Transaction Documents are severable and, in the event
that
any court of competent jurisdiction shall determine that any one or more of
the
provisions or part of a provision contained therein shall, for any reason,
be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision or part
of a
provision of such Transaction Document and the terms of the Shares shall be
reformed and construed as if such invalid or illegal or unenforceable provision,
or part of a provision, had never been contained herein, and such provisions
or
part reformed so that it would be valid, legal and enforceable to the maximum
extent possible.
7.09 Governing
Law. This Agreement shall be governed by, and construed in accordance with,
the
internal laws of the State of New York, and without giving effect to choice
of
laws provisions.
7.10 Headings.
Article, section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
7.11 Counterparts.
This Agreement may be executed in any number of counterparts, all of which
taken
together shall constitute one and the same instrument, and any of the parties
hereto may execute this Agreement by signing any such counterpart.
7.12 Further
Assurances. From and after the date of this Agreement, upon the request of
the
Purchasers or the Company, the Company and the Purchasers shall execute and
deliver such instruments, documents and other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of the Transaction Documents and the Shares.
7.13 Transfer.
Nothing in the Transaction Documents or the Shares shall restrict the right
and
ability of the Purchasers or its Affiliates to transfer, and the Purchasers
are
hereby granted the right to transfer any rights, power or privileges of or
under
the Transaction Documents or the Shares to its Affiliates. The foregoing is
in
addition to, and not in limitation of; all other rights, powers and privileges
of the Purchasers.
IN
WITNESS WHEREOF, the parties hereto have caused this Subscription Agreement
to
be executed as of the date first above written.
SIGNATURE
PAGE TO
SUBSCRIPTION
AGREEMENT
EXECUTION
OF THIS AGREEMENT BY ANY PURCHASER SHALL ALSO BE DEEMED TO CONSTITUTE EXECUTION
BY SUCH PURCHASER OF THE REGISTRATION RIGHTS AGREEMENT ANNEXED
HERETO.
(NOTE:
to
be completed by purchaser):
Purchaser
hereby elects to subscribe under the Subscription Agreement for a total of
$__________ of Shares (Such Purchaser’s “Subscription Amount”)
Date:
_______________, 2007.
If
the
purchaser is an INDIVIDUAL, or if the purchasers are INDIVIDUALS who have
purchased as JOINT TENANTS, as JOINT TENANTS with RIGHT OF SURVIVORSHIP, as
TENANTS IN COMMON, or as COMMUNITY PROPERTY:
|
___________________________
Print
Names(s)
|
___________________________
Social
Security Number(s)
|
|
___________________________
Signature(s)
of Investor(s)
|
___________________________
Joint
Signature
|
|
___________________________
Address
|
___________________________
Date
|
If
the
purchaser is a PARTNERSHIP, CORPORATION, TRUST, LIMITED LIABILITY COMPANY or
LIMITED LIABILITY PARTNERSHIP:
|
___________________________
Name
of Partnership, Corporation,
Trust,
Limited Liability Company
or
Limited Liability Partnership
Address:
|
___________________________
Federal
Taxpayer
Identification
Number
|
|
By:___________________________
|
___________________________
|
|
Name:
________________________
|
State
of Organization
|
|
Title:________________________
|
Company
Signature Page Follows
THE
FOREGOING SUBSCRIPTION IS ACCEPTED AND AGREED TO this ___ day of ___________,
2007 with respect to _____________ Shares.
By:______________________________________________
Name:
Ma
Qing
Title:
Chief Financial Officer
ACKNOWLEDGEMENT
OF CONVERTIBLE NOTE INVESTORS
Each
of
the undersigned hereby acknowledges that the Convertible Promissory Note
previously issued to it shall automatically convert into Series B Preferred
Stock upon the consummation of the transactions contemplated by this Agreement
and hereby waives any and all rights to the notice of conversion required
pursuant to Section 5 of such Convertible Promissory Note. Each of the
undersigned hereby releases and discharges the Company from and against all
actions, proceedings, causes of action, claims for relief, demands, rights,
titles, interest, damages, losses, costs, expenses, obligations, liabilities
and
other claims of every nature whatsoever arising out the performance of any
obligations under such Convertible Promissory Note. Each of the undersigned
hereby represents and warrants to the Company as to the same factual matters
and
to the same extent as a Purchaser represents and warrants to the Company in
Section 1.03 of the Subscription Agreement as if it were deemed to be purchasing
Shares upon the automatic conversion of such Convertible Promissory Note. In
consideration of the foregoing representations and warranties on the part of
the
undersigned, the Company hereby represents and warrants to each of the
undersigned as to the same factual matters and to the same extent the Company
represents and warrants to a Purchaser in Article III of the Subscription
Agreement as of the date of the automatic conversion of such Convertible
Promissory Note.
|
COMTECH
GLOBAL INVESTMENTS, INC.
By:
___________________________
Name:
Title:
|
|
BERRARD
HOLDINGS LIMITED PARTNERSHIP
By:
___________________________
Name:
Title:
|
|
BLOOMING
TECHNOLOGY INVESTMENTS LTD.
By:
___________________________
Name:
Title:
|
|
LONGVIEW
FUND
By:
___________________________
Name:
Title:
|
|
____________________________________
Xxxxxxx
Xxxxxxxx
|
|
____________________________________
Shi
Xxx Xxx
|
Investor
Certification
NAME
OF INVESTOR:
Initial
or Check the appropriate item(s)
US
INVESTORS - The undersigned further represents and warrants as indicated below
by the undersigned’s initials:
A. Individual
investors:
(Please
initial one or more of the following statements)
1._______I
certify
that I am an accredited investor because I have had individual income (exclusive
of any income earned by my spouse) of more than $200,000 in each of the most
recent two years and I reasonably expect to have an individual income in excess
of $200,000 for the current year.
2._______I
certify
that I am an accredited investor because I have had joint income with my spouse
in excess of $300,000 in each of the most recent two years and reasonably expect
to have joint income with my spouse in excess of $300,000 for the current
year.
3._______I
certify
that I am an accredited investor because I have an individual net worth, or
my
spouse and I have a joint net worth, in excess of $1,000,000.
4._______I
am a
director or executive officer of General Components, Inc.
5._______I
have
individual net worth or my spouse and I have joint net worth of over
$5,000,000.
|
B.
|
Partnerships,
corporations, trusts or other entities:
(Please initial one of the following seven statements). The undersigned
hereby certifies that it is an accredited investor because it
is:
|
|
1._____
|
an
employee benefit plan whose total assets exceed
$5,000,000;
|
|
2._____
|
an
employee benefit plan whose investments decisions are made by a plan
fiduciary which is either a bank, savings and loan association or
an
insurance company (as defined in Section 3(a) of the Securities Act)
or an
investment adviser registered as such under the Investment Advisers
Act of
1940;
|
|
3._____
|
a
self-directed employee benefit plan, including an Individual Retirement
Account, with investment decisions made solely by persons that are
accredited investors;
|
|
4._____
|
an
organization described in Section 501(c)(3) of the Internal Revenue
Code
of 1986, as amended, not formed for the specific purpose of acquiring
the
Shares, with total assets in excess of
$5,000,000;
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|
5._____
|
a
corporation, partnership, limited liability company, limited liability
partnership, other entity or similar business trust, not formed for
the
specific purpose of acquiring the Shares, with total assets excess
of
$5,000,000;
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|
6._____
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a
trust, not formed for the specific purpose of acquiring the Shares,
with
total assets exceed $5,000,000, whose purchase is directed by a person
who
has such knowledge and experience in financial and business matters
that
he is capable of evaluating the merits and risks of an investment
in the
Shares; or
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|
7._____
|
an
entity (including a revocable grantor trust but other than a conventional
trust) in which each of the equity owners qualifies as an accredited
investor.
|
NON-US
INVESTORS - The undersigned further represents and warrants as indicated below
by the undersigned’s initials:
A. Please
initial the following statement:
1._______I
certify
that I am not a “U.S. person” (as defined in Regulation S) or purchasing for the
account or benefit of a “U.S. person” and am purchasing Shares in an “offshore
transaction” in accordance with Regulation S.
Schedule
3.02
General
Components, Inc. - Group Chart
GCI :
General
Components, Inc., Nevada
Magical :
Magical
Insight Investments Limited, British Virgin Islands
HTW :
Beihai
Hi-Tech Wealth Technology Development Co. Ltd, China
Euro
Asia :
Euro
Asia Arbitrage Investment Limited, Hong Kong
HEP :
Beihai
Hi-Tech Wealth Electronic Products Co. Ltd, China
BJ
MCT :
Beijing
Hi-Tech Wealth Mobile Communication Technology Co. Ltd, China
BJ
HTS :
Beijing
Hi-Tech Wealth Software Technology Ltd, China
Note:
| 1) |
On
December 21, 2006 Magical invested US$3.6m into HTW enlarging its
ownership in HTW from 90% to 92.29%. On January 31, 2007 Magical entered
into an asset purchase agreement for the remaining interest in
HTW.
|
| 2) |
HEP
and BJ MCT are expected to be disposed of during the first quarter
of
2007. Currently, HEP and BJ MCT have limited assets, liabilities and
operations.
|
