Exhibit 4.1 - Form of Stock Purchase Agreement
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made and entered
into as of November 15, 2001 by and between Tengtu International Corp., a
Delaware corporation (the "Company") and ___________________ (the "Investor").
WHEREAS, the Company desires to issue to the Investor, and the
Investor desires to purchase from the Company, _____________________ shares of
the Company's U.S. $.01 par value per share common stock (the "Common Stock"),
along with a warrant to purchase shares of Common Stock, pursuant to Regulation
S, promulgated under the Securities Act of 1933, as amended (the "1933 Act"), on
the terms and conditions set forth in this Agreement;
NOW, THEREFORE, the parties hereby agree as follows:
1. Agreement to Purchase and Sell the Common Stock. The Company will issue and
sell to Investor and Investor agrees to purchase _______________________ shares
of the Company's Common Stock for a purchase price of U.S. $1.00 per share (the
number of shares times the purchase price of U.S. $1.00 per share is referred to
hereinafter as the "Purchase Price") pursuant to Regulation S promulgated under
the 1933 Act.
2. Issuance of Warrant. The Company will issue to Investor a warrant, in the
form annexed hereto as Exhibit A, to purchase a number of shares of Common Stock
equal to twenty percent (20%) of the cash investment divided by U.S. $1.20,
exercisable at U.S. $1.20 per share (the "Warrant"). The Warrant shall have a
term of twelve (12) months from the date hereof.
3. Closing And Payment. The Company will sell and, subject to the terms and
conditions hereof, and in reliance upon the written representations and
warranties of the Company, the Investor will purchase, at a single closing, the
Common Stock and Warrant. The closing shall be held simultaneous with the
execution of this Agreement (the "Closing") at the offices of Guzov, Xxxxxxxx &
Xxxxxx, LLC, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, U.S.A., at 10:00 a.m.
Eastern Standard Time, on or about November 15, 2001 or such other place, date
or time as the parties agree upon. Within ten (10) business days of the Closing,
the Company will deliver to the Investor original stock certificates in its name
and in such denominations as it may specify prior to the Closing. The Purchase
Price shall be paid by wire transfer of immediately available funds to the
account designated by the Company in writing prior to the Closing.
4. Representations and Warranties of the Company. The Company hereby represents
and warrants to the Investor that, except as set forth in the Schedule of
Exceptions ("Schedule of Exceptions") attached to this Agreement as Exhibit B
(which Schedule of Exceptions, when read together with this Section 4, shall be
deemed to be representations and warranties to the Investor by the Company under
this Section 4), the statements in the following paragraphs of this Section 4
are all true and complete as of the date hereof:
4.1 Organization. The Company is a corporation duly organized, validly existing
and in good standing under the laws of Delaware, and has full corporate power
and authority to conduct its business as and to the extent now conducted and to
own, use and lease its assets and properties. The Company has full corporate
power and authority to execute and deliver this Agreement, and to perform its
obligations hereunder, and to consummate the transactions contemplated hereby.
4.2 Authority; Due Authorization. The execution and delivery by the Company of
this Agreement, and the performance by the Company of its obligations hereunder,
have been duly and validly authorized by the Board of Directors of the Company,
no other corporate action on the part of the Company or its respective
shareholders being necessary. This Agreement has been duly and validly executed
and delivered by the Company, and upon the delivery by the Company Debtor of the
Common Stock will constitute, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
4.3 No Conflicts. The execution and delivery by the Company of this Agreement
does not, the performance by the Company of its obligations under this Agreement
and the consummation of the transactions contemplated hereby will not:
4.3.1 conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the certificate of incorporation or by-laws (or
other comparable corporate charter document) of the Company;
4.3.2 conflict with or result in a violation or breach of any term or provision
of any law or order applicable to the Company or any of its assets and
properties; or
4.3.3 (a) conflict with or result in a violation or breach of, (b) constitute
(with or without notice or lapse of time or both) a default under, (c) require
the Company or any other person or entity to obtain any consent, approval or
action of, make any filing with or give any notice to any person or entity as a
result or under the terms of, or (d) result in the creation or imposition of any
lien upon the Company or any of its assets or properties under, any contract or
license to which the Company is a party or by which any of its assets and
properties is bound.
4.4 Capitalization. The capitalization of the Company immediately prior to the
Closing consists of the following:
4.4.1 Common Stock. A total of one hundred million (100,000,000) authorized
common shares, par value U.S.$0.01 per share, of which a maximum of Forty Seven
Million One Hundred Sixty Two Thousand Six Hundred Three (47,162,603) shares are
issued and outstanding.
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4.4.2 Preferred Stock. A total of ten million (10,000,000) authorized preferred
shares, par value U.S.$0.01 per share of which none are issued and outstanding.
4.4.3 Options, Warrants, and Other Securities. The Company currently has options
and warrants outstanding as set forth on Exhibit C. The Company also has a four
year U.S.$1,500,000 principal amount debenture outstanding convertible into
Common Stock with a conversion price of U.S.$1.00 per share until December 21,
2001, U.S.$2.00 between December 22, 2001 and December 21, 2002 and U.S.$4.00
after December 21, 2002 and a U.S.$250.000 principal amount loan, half of which
is convertible into Common Stock at a conversion price of U.S.$3.00 if not
repaid before July 27, 2002.
4.5 Valid Issuance of Common Stock. The Common Stock, when issued and paid for
as provided in this Agreement, will be duly authorized, validly issued, fully
paid and nonassessable.
4.6 Governmental Consents. To the best of the Company's knowledge, no consent,
approval, order or authorization of, or registration, qualification,
designation, declaration or filing with any court, governmental agency,
regulatory authority or political subdivision thereof, or any other entity, is
required in connection with the execution, delivery and performance by the
Company of this Agreement.
4.7 Litigation. To the best of the Company's knowledge, there is no action,
suit, proceeding, claim, arbitration or investigation pending (or, to the best
knowledge of the Company, currently threatened) against the Company or any
Company subsidiary, their respective activities, properties or assets or, to the
best of the Company's knowledge, against any officer, director or key employee
of the Company or any subsidiary in connection with such officer's, director's
or key employee's relationship with, or actions taken on behalf of, the Company
or any subsidiary. The Company has no knowledge or belief that there is pending
or threatened any claim or litigation against the Company contesting its right
to produce, manufacture, sell, use or offer any product, process, method,
substance, part or other material or service presently produced, manufactured,
sold, used or offered or planned to be produced, manufacture, sold, used or
offered by the Company or any of its Subsidiaries. The Company has no knowledge
or belief that there exists, or there is pending or planned, any patent,
invention, device, application or principle, which would materially adversely
affect the condition, financial or otherwise, or the operations of the Company
or its Subsidiaries.
4.8 Reporting Company Status. The Company is a "Reporting Issuer" as defined in
Rule 902(i) of Regulation S and will cause all the materials required to be
filed by it pursuant to Section 13(a) of the U.S. Securities Exchange Act of
1934, as amended (the "Exchange Act") to be filed with the United States
Securities and Exchange Commission for a period of at least three months
following the completion of the Offering. The Common Stock is a class of
securities registered under Section 12(g) of the Exchange Act, and the Company
has filed all reports and documents required to be filed pursuant to the
Exchange Act for a period of at least 12 months preceding the date hereof, or
such shorter period as it has been required to do so. All documents filed by the
Company with the United States Securities and Exchange Commission pursuant to
the Exchange Act for its most recent full fiscal year and subsequent thereto are
available from the Company and should be reviewed by Investor.
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4.9 The Company has not offered any of the Common Stock covered by this
Agreement to any persons in the United States nor to any U.S. person, as defined
in Rule 902(k) of Regulation S, nor to any identifiable group or groups of U.S.
citizens in the United States or abroad.
5. Representations, Warranties and Certain Agreements of Investor. Investor
hereby represents and warrants to, and agrees with, the Company that:
5.1 Authorization. This Agreement constitutes its valid and legally binding
obligation, enforceable in accordance with its terms. Investor represents that
it has full power and authority to enter into this Agreement.
5.2 Purchase for Own Account. The Common Stock to be purchased by the Investor
hereunder will be acquired for investment for Investor's own account, not as a
nominee or agent, and not with a view to the public resale or distribution
thereof, and Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same. Investor also represents
that Investor was not formed for the purpose of investing in Regulation S
securities or formed for the purpose of investing in the Common Stock. Investor
is not registered as an issuer under the 1933 Act and is not required to be
registered with the U.S. Securities and Exchange Commission under the Investment
Company Act of 1940, as amended.
5.3 Status as a Non-U.S. Company. No offer to enter into this Agreement has been
made by the Company to Investor in the United States. At the times of the offer
and execution of this Agreement, Investor, and all of its 10% or more equity
owners, were located and resided outside the United States.
5.4 No Directed Selling Efforts. Neither Investor, nor any of its affiliates,
nor any person acting on its behalf or any behalf of any such affiliate, has
engaged or will engage in any activity undertaken for the purpose of, or that
reasonably could be expected to have the effect of, conditioning the markets in
the United States for the Common Stock, including but not limited to effecting
any sale or short sale of the Company's securities through Investor or any of
its affiliates prior to the expiration of any restricted period contained in
Regulation S (any such activity being defined herein as a "Directed Selling
Effort"). To the best knowledge of the undersigned, this Agreement and the
transactions contemplated herein are not part of a plan or scheme to evade the
registration provisions of the 1933 Act, and the Common Stock is being purchased
for investment purposes by Investor. Investor agrees that all offers and sales
of the Common Stock from the date hereof and through the expiration of the any
restricted period set forth in Rule 903 of Regulation S (as the same may be
amended from time to time hereafter) shall not be made to U.S. Persons or for
the account or benefit of U.S. Persons and shall otherwise be made in compliance
with the provisions of Regulation S and any other applicable provisions of the
Securities Act. Investor and its representatives have not conducted any Directed
Selling Effort as that term is used and defined in Rule 902 of Regulation S and
will not engage in any such Directed Selling Effort within the United States
through the expiration of any restricted period set forth in Rule 903 of
Regulation S.
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5.5 Disclosure of Information. Investor believes it has received or has had full
access to all the information it considers necessary or appropriate to make an
informed investment decision with respect to the Common Stock to be purchased by
Investor under this Agreement. Investor further has had an opportunity to ask
questions and receive answers from the Company regarding the terms and
conditions of the offering of the Common Stock and to obtain additional
information (to the extent the Company possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify any
information furnished to Investor or to which Investor had access. Investor has
not relied on any oral representation made by the Company or any officer,
director or employee of the Company.
5.6 Investment Experience. The Investor understands that the purchase of the
Common Stock involves substantial risk. The Investor (a) has experience as an
investor in securities of companies in the development stage and acknowledges
that it can bear the economic risk of Investor's investment in the Common Stock
and (b) has such knowledge and experience in financial or business matters that
Investor is capable of evaluating the merits and risks of this investment in the
Common Stock and protecting its own interests in connection with this investment
and (c) has a preexisting business relationship with the Company and certain of
its officers, directors or controlling persons of a nature and duration that
enables the Investor to be aware of the character, business acumen and financial
circumstances of such persons.
5.7 Accredited Investor Status. The Investor is an "accredited investor" within
the meaning of Rule 502 of Regulation D promulgated under the 0000 Xxx.
5.8 Restricted Securities. The Investor understands that the Common Stock is
characterized as "restricted securities" under the 1933 Act inasmuch as they are
being acquired from the Company in a transaction not involving a public offering
and that under the 1933 Act, and applicable regulations thereunder, such
securities may be resold without registration under the 1933 Act only in certain
limited circumstances. In this connection, Investor represents that it is
familiar with Rule 144 and Regulation S of the U.S. Securities and Exchange
Commission (the "SEC"), as presently in effect, and understands the resale
limitations imposed thereby and by the 1933 Act.
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5.9 Regulation S Limitations on Dispositions.Investor acknowledges and agrees
that it may not resell the Common Stock to a "U.S. person" as defined in Rule
902(k) of Regulation S, or within the United States, until the expiration of any
restricted period provided by Rule 903 of Regulation S, and that following any
restricted period the Common Stock may be resold to a U.S. person or within the
United States only: (i) pursuant to a registration statement under the 1933 Act,
or (ii) if applicable, pursuant to an exemption from such registration for sales
by a person other than an issuer, underwriter, or dealer as those terms are used
in Section 4(1) and related provisions of the 1933 Act and regulations
thereunder or pursuant to another exemption from registration. Investor
acknowledges that the Common Stock has not been registered under the 1933 Act or
qualified under state securities laws of the United States and that the
transferability hereof and thereof within the jurisdiction of the United States
is restricted by the 1933 Act as well as such state laws. Investor acknowledges
that the Common Stock is being sold in reliance upon the transaction exemption
afforded by Regulation S in connection with an offshore offer and sale of
securities of the Company not within or subject to the jurisdiction of the
United States markets. Investor acknowledges it has received a copy of
Regulation S, is familiar with and understands the terms thereof, and has had
the opportunity to consult with its legal counsel concerning this Agreement and
Regulation S.
Investor acknowledges that if any transfer of the Common Stock is proposed to be
made in reliance upon an exemption under the 1933 Act, the Company may require
an opinion of counsel satisfactory to the Company that such transfer may be made
pursuant to an applicable exemption under the 1933 Act. Investor acknowledges
that, so long as appropriate, a legend similar to the following may appear on
the certificates representing the Common Stock:
THESE SHARES HAVE BEEN ISSUED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. PURSUANT TO REGULATION S THEREUNDER. THE
SHARES EVIDENCED BY THIS CERTIFICATE CANNOT BE TRANSFERRED, OFFERED, OR SOLD IN
THE UNITED STATES OR TO U.S. PERSONS (AS THAT TERM IS DEFINED IN REGULATION S)
UNTIL AFTER _____ (ONE YEAR AFTER COMPLETION OF THE OFFERING).
5.10 Further Limitations on Disposition. Without in any way limiting the
representations set forth above, Investor further agrees not to make any
disposition of all or any portion of the Common Stock except:
5.10.1 pursuant to a registration statement under the 1933 Act covering such
disposition; or
5.10.2 pursuant to an exemption from registration under the 1933 Act, including,
without limitation, Rule 144, Rule 144A or Regulation S thereunder.
5.11 No General Solicitation. Investor has not received any general solicitation
or advertising regarding the offering of the Common Stock or this Agreement.
6. Conditions to Investor's Obligations at Closing. The obligations of the
Investor under Section 2 of this Agreement are subject to the fulfillment or
waiver, on or before the Closing, of each of the following conditions:
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6.1 Representations and Warranties True. Each of the representations and
warranties of the Company contained in Section 3 shall be true and complete on
and as of the Closing with the same effect as though such representations and
warranties had been made on and as of the date of the Closing.
6.2 Performance. The Company shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing and
shall have obtained all approvals, consents and qualifications necessary to
complete the purchase and sale described herein.
6.3 Securities Exemptions. The offer and sale of the Common Stock to the
Investor pursuant to this Agreement shall be exempt from the registration
requirements of the 1933 Act.
6.4 Completion of Due Diligence. Investor shall have completed its legal and
financial due diligence, the results of which shall be reasonably satisfactory
to the Investor, and the Company shall have reasonably cooperated with Investor
in connection therewith.
7. Conditions to the Company's Obligations at Closing.The obligations of the
Company to Investor under this Agreement are subject to the fulfillment or
waiver on or before the Closing of each of the following conditions by Investor:
7.1 Representations and Warranties. The representations and warranties of
Investor contained in Section 4 shall be true and complete on the date of the
Closing with the same effect as though such representations and warranties had
been made on and as of the Closing.
7.2 Payment of Purchase Price. Investor shall have delivered to the Company the
Purchase Price in accordance with the provisions of Section 3.
7.3 Securities Exemptions. The offer and sale of the Common Stock to the
Investor pursuant to this Agreement shall be exempt from the registration
requirements of the 1933 Act.
8. Registration Rights. The Company and Investor shall enter into the
Registration Rights Agreement annexed hereto as Exhibit D granting to Investor
registration rights with respect to the Common Stock issued hereunder and the
Common Stock issuable upon exercise of the Warrant.
9. Post-closing Covenants of Investor.
9.1 Confidentiality.
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9.1.1 Investor acknowledges that the Company could be irreparably damaged if
confidential information concerning the business and affairs of the Company were
disclosed to or utilized on behalf of any person. Investor covenants and agrees
to and with the Company that, except as otherwise provided in this Agreement, it
will not, at any time, directly or indirectly, without the prior written consent
of the Company, divulge, or permit any of its partners, shareholders, directors,
officers, employees or agents to divulge to any person any non-public
information concerning the business or financial or other affairs, or any of the
methods of doing business used by the Company or any of its subsidiaries, nor
release any information provided pursuant to or concerning this Agreement or the
transaction contemplated by this Agreement if such release is intended for, or
may result in, its public dissemination. The foregoing requirements of
confidentiality shall not apply to information: (i) that is now or in the future
becomes freely available to the public through no fault of or action by the
using or disclosing party; (ii) that is in the possession of the using or
disclosing party prior to the time such information was obtained from the
Company or that is independently acquired by the using or disclosing party
without the aid, application or use of such other information; (iii) that is
obtained by the using or disclosing party in good faith without knowledge of any
breach of a secrecy arrangement from a third party; (iv) that is required to be
disclosed by applicable law or order of government agency or self-regulatory
body; or (v) that is disclosed in connection with any bona-fide offer to
purchase any shares in the Company; provided that the proposed transferor
obtains an undertaking from the proposed transferee to keep such information
confidential in accordance with the provision of this Section 7.1 prior to such
disclosure.
9.1.2 Investor and the Company agree to consult with each other (and to take
into consideration any comments reasonably raised by any such party) prior to
the dissemination of any press release or public communication concerning this
Agreement or the transaction contemplated by this Agreement. Any such press
release or public communication shall be subject to the approval of both the
Company and Investor.
9.1.3 This Section 9.1 will survive termination of this Agreement.
10. General Provisions.
10.1 Survival of Warranties; Investigation. The representations, warranties and
covenants of the Company and Investor contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing. It shall be no defense to an action for breach of this Agreement that
Investor or its agents have (or have not) made investigations into the affairs
of the Company or that the Company could not have known of the misrepresentation
or breach of warranty. Damages for breach of a representation or warranty or
other provision of this Agreement shall not be diminished by alleged tax savings
resulting to the complaining party as a result of the loss complained of.
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10.2 Successors and Assigns. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
assigns of the parties, except that the Company may not assign or transfer any
of its rights or obligations under this Agreement.
10.3 Governing Law; Jurisdiction. Any dispute, disagreement, conflict of
interpretation or claim arising out of or relating to this Agreement, or its
enforcement, shall be governed by the laws of the State of New York. The Company
and Investor hereby irrevocably and unconditionally submit, for themselves and
their property, to the nonexclusive jurisdiction of the Supreme Court of the
State of New York sitting in New York County and of the United States District
Court of the Southern District of New York, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such New
York State or, to the extent permitted by law, in such Federal court. Each of
the parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Each party hereby irrevocably
and unconditionally waives, to the fullest extent it may legally and effectively
do so, any objection which it may now or hereafter have to the laying of venue
of any suit, action or proceeding arising out of or relating to this Agreement
in any court referred to above. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court. Each
party to this Agreement irrevocably consents to service of process in the manner
provided for notices below. Nothing in this Agreement will affect the right of
any party to this Agreement to serve process in any other manner permitted by
law. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION.
10.4 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 agreement. A telefaxed copy of this Agreement shall
be deemed an original.
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10.5 Headings. The headings and captions used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement. All references in this Agreement to sections, paragraphs, exhibits
and schedules shall, unless otherwise provided, refer to sections and paragraphs
hereof and exhibits and schedules attached hereto, all of which exhibits and
schedules are incorporated herein by this reference.
10.6 Notices. All notices and other communications provided for herein shall be
in writing and shall be delivered by hand or overnight courier service, mailed
by certified or registered mail or sent by facsimile, as follows:
If to the Company:
If to Investor:
Except as otherwise provided in this Agreement, all such communications shall be
deemed to have been duly given when transmitted by telecopier or personally
delivered or, in the case of a mailed notice, upon receipt, in each case given
or addressed as aforesaid. Any party hereto may change its address or facsimile
number for notices and other communications hereunder by notice to the other
parties hereto.
10.7 Costs, Expenses. Each party hereto shall bear its own costs in connection
with the preparation, execution and delivery of this Agreement.
10.8 Amendments and Waivers. Any term of this Agreement may be amended and the
observance of any term of this Agreement 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 Investor. No delay or omission to
exercise any right, power, or remedy accruing to the Investor, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. All remedies,
either under this Agreement, by law, or otherwise afforded to the Investor,
shall be cumulative and not alternative.
10.9 Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision(s) shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision(s) were so excluded and shall be enforceable in accordance with its
terms.
10.10 Entire Agreement. This Agreement, together with all exhibits and schedules
hereto, constitutes 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 with respect to the subject matter hereof.
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10.11 Further Assurances. From and after the date of this Agreement, upon the
request of the Investor or the Company, the Company and the Investor shall
execute and deliver such instruments, documents or other writings as may be
reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
THE COMPANY:
TENGTU INTERNATIONAL CORP.
By:
INVESTOR:
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Exhibit A
Form of Warrant
TENGTU INTERNATIONAL CORP.
COMMON STOCK WARRANT
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN
REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE OR CANADIAN PROVINCE, OR UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THIS WARRANT IS RESTRICTED AND MAY NOT BE
OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS.
Void after November 15, 2002 Right to Purchase ___________ shares of
Common Stock (subject to adjustment)
PREAMBLE
Tengtu International Corp., a Delaware corporation (the "Company"),
hereby certifies that, for value received, _________________________, the holder
hereof (the "Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company at any time or from time to time before 5:00 P.M. New
York time, on November 15, 2002, fully paid and nonassessable shares of the
Company's U.S. $.01 par value per share common stock (the "Common Stock"). The
purchase price per share (the "Purchase Price") shall be, in the event of a
purchase at any time during the period commencing on the date hereof and ending
on November 15, 2002, U.S.$1.20. The number of shares of Common Stock and the
amount of the Purchase Price are subject to adjustment as provided herein.
This warrant is the "Warrant" (this "Warrant"), evidencing the right
to purchase shares of Common Stock of the Company, issued pursuant to that
certain Stock Purchase Agreement dated November 15, 2001 (the "Stock Purchase
Agreement"), between the Company and the Holder. Capitalized terms used and not
otherwise defined herein shall have the meanings set forth for such terms in the
Stock Purchase Agreement. This Warrant evidences the right to purchase an
aggregate of ________________ shares of Common Stock of the Company, subject to
adjustment as provided in this Warrant.
As used herein, the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" includes any corporation which shall
succeed to or assume the obligations of the Company hereunder.
(b) The term "Common Stock" includes all stock of any class or
classes (however designated) of the Company, authorized on or after the date
hereof, the holders of which shall have the right, without limitation as to
amount, either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions on any
shares entitled to preference, and the holders of which shall ordinarily, in the
absence of contingencies, be entitled to vote for the election of a majority of
directors of the Company (even though the right so to vote has been suspended by
the happening of such a contingency).
(c) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other person (corporate
or otherwise) which the Holder of this Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of this Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 6 or otherwise.
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(d) The term "Registration Statement" means any registration
statement of the Company filed or to be filed with the SEC which covers any of
the Registrable Securities pursuant to the provisions of this Warrant, including
all amendments (including post-effective amendments) and supplements thereto,
all exhibits thereto and all material incorporated therein by reference.
(e) The term "SEC," "Securities and Exchange Commission" or
"Commission" refers to the Securities and Exchange Commission or any other
federal agency then administering the Securities Act.
(f) The term "Shares" means the Common Stock issued or issuable
upon exercise of this Warrant.
(g) The term "Securities Act" means the Securities Act of 1933,
as amended, or any successor federal statute, and the rules and regulations of
the Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time.
(h) The term "Securities Exchange Act" means the Securities
Exchange Act of 1934, as amended, or any successor federal statute, and the
rules and regulations of the Securities and Exchange Commission thereunder, all
as the same shall be in effect at the time.
1. Restricted Stock.
1.1 If, at the time of any transfer or exchange (other than a
transfer or exchange not involving a change in the beneficial ownership of this
Warrant or the Shares) of this Warrant or the Shares, this Warrant or the Shares
shall not be registered under the Securities Act, the Company will require, as a
condition of allowing such transfer or exchange, that the Holder or transferee
of this Warrant or the Shares, as the case may be, furnish to the Company an
opinion of counsel reasonably acceptable to the Company or a "no action" or
similar letter from the Securities and Exchange Commission to the effect that
such exercise transfer or exchange may be made without registration under the
Securities Act. In the case of such transfer or exchange and in the case of an
exercise of this Warrant if the Shares to be issued thereupon are not registered
pursuant to the Securities Act, the Company will require a written statement
that this Warrant or the Shares, as the case may be, are being acquired for
investment and not with a view to the distribution thereof. The certificates
evidencing the Shares issued on the exercise of this Warrant shall, if such
Shares are being sold or transferred without registration under the Securities
Act, bear a legend similar to the legend on the face page of this Common Stock
Purchase Warrant.
1.2 (a) The Company shall make and keep public information
available, as those terms are understood and defined in Rule 144 under the
Securities Act, at all times from and after 90 days following the effective date
of the first registration of the Company under the Securities Act of an offering
of its securities to the general public.
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1.2 (b) The Company shall file with the Commission in a timely
manner all required reports and other documents as the Commission may prescribe
under Section 13(a) or 15(d) of the Exchange Act.
1.2 (c) The Company shall furnish to the Holder of this Warrant
or the Shares designated by the Holder, forthwith upon request, (i) a written
statement by the Company as to its compliance with the reporting requirements
under the Securities Act (at any time from and after 90 days following the
effective date of the first registration statement of the Company for an
offering of its securities to the general public) and of the reporting
requirements of the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company, (iii) any other reports and documents necessary
to satisfy the information-furnishing condition to offers and sales under Rule
144A under the Securities Act, and (iv) such other reports and documents as the
Holder of this Warrant or the Shares reasonably requests to avail itself of any
rule or regulation of the Commission allowing the Holder to sell any such
securities without registration.
2. Exercise of Warrant.
2.1 Exercise in Full. The Holder of this Warrant may exercise it
in full by surrendering this Warrant, with the form of subscription at the end
hereof duly executed by the Holder, to the Company at its principal office. The
surrendered Warrant shall be accompanied by payment, in cash or by certified or
official bank check payable to the order of the Company, in the amount obtained
by multiplying the number of shares of Common Stock called for on the face of
this Warrant by the applicable Purchase Price.
2.2 Partial Exercise. This Warrant may be exercised in part by
surrender of this Warrant in the manner and at the place provided in Subsection
2.1 except that the amount of Common Stock obtained through the exercise shall
be calculated by multiplying (a) the number of shares of Common Stock called for
on the face of this Warrant as shall be designated by the Holder in the
subscription at the end hereof by (b) the Purchase Price. On any such partial
exercise, subject to the provisions of Section 2 hereof, the Company at its
expense will forthwith issue and deliver to, or upon the order of the Holder, a
new Warrant or Warrants of like tenor, in the name of the Holder, calling in the
aggregate on the face or faces thereof, for the number of shares of Common Stock
equal to the number of such shares called for on the face of this Warrant minus
the number of such shares designated by the Holder in the subscription at the
end hereof.
2.3 Company Acknowledgment. The Company will, at the time of the
exercise, exchange or transfer of this Warrant, upon the request of the Holder
acknowledge in writing its continuing obligation to afford to the Holder any
rights (including, without limitation, any right to registration of the Shares)
to which the Holder shall continue to be entitled after such exercise or
exchange in accordance with the provisions of this Warrant. If the Holder of
this Warrant shall fail to make any such request, such failure shall not affect
the continuing obligation of the Company to afford to the Holder any such
rights.
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3. Delivery of Stock Certificates, Etc., on Exercise. As soon as
practicable after the exercise of this Warrant, in full or in part, and in any
event within ten business (10) days thereafter, the Company, at its expense,
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder, a certificate or certificates
for the number of fully paid and nonassessable Shares to which the Holder shall
be entitled on such exercise. No fractional Share or scrip representing a
fraction of a Share will be issued on exercise, but the number of Shares
issuable shall be rounded to the nearest whole Share.
4. Adjustment for Reorganization, Consolidation, Merger, Etc.
4.1 Merger, Etc. If the Company shall (a) effect a
reorganization, (b) consolidate with or merge into any other person, or (c)
transfer all or substantially all of its properties or assets to any other
person under any plan or arrangement contemplating the dissolution of the
Company (any such transaction being hereinafter sometimes referred to as a
"Reorganization") then, in each such case, the Holder of this Warrant, on the
exercise hereof as provided in Section 2 at any time after the consummation or
effective date of such Reorganization (the "Effective Date"), shall receive, in
lieu of the Shares issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property (including cash) to
which the Holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if the Holder had so
exercised this Warrant, immediately prior thereto. The successor corporation in
any such Reorganization described in clause (b) or (c) above where the Company
will not be the surviving entity (the "Acquiring Company") must agree prior to
such Reorganization in a writing satisfactory in form and substance to the
Holder that this Warrant shall continue in full force and effect and the terms
hereof shall be applicable to the shares of stock and other securities and
property receivable on exercise after the consummation of such Reorganization,
and shall be binding upon the issuer of any such stock or other securities
(including, in the case of any transfer of properties or assets referred to
above, the person acquiring all or substantially all of the properties or assets
of the Company). If the Acquiring Company has not so agreed to continue this
Warrant, then the Company shall give 30 days' prior written notice to the Holder
of this Warrant of such Reorganization, during which 30-day period (the "Notice
Period") the Holder at its option and upon written notice to the Company shall
be able to (i) exercise this Warrant or any part thereof at an exercise price
(the "Discounted Exercise Price") equal to the then prevailing purchase price
hereunder discounted at the Discount Rate (as used herein the "Discount Rate"
shall mean the then prevailing interest rate on U.S. Treasury Notes issued on
(or immediately prior to) the date of such 30-day notice and maturing on
November 15, 2002 (or immediately prior thereto), such rate to be compounded
annually through November 15, 2002, and in no event to be less than 10%
annually); or (ii) on the Effective Date, the Holder of this Warrant shall be
paid an amount (the "Merger Profit Amount") equal to the difference between the
fair market value per share of Common Stock of the Company being purchased by
the Acquiring Company in the Reorganization and the Discounted Exercise Price
described in clause (i) above and the Warrant shall simultaneously expire. The
Merger Profit Amount shall be payable in the same form as the common
stockholders of the Company shall be paid by the Acquiring Company for their
shares of common stock of the Company. The fair market value of any noncash
property received from the Acquiring Company upon the Reorganization shall be
determined in good faith by the Board of Directors of the Company, as approved
by the Company's stockholders.
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4.2 Dissolution. Except as otherwise expressly provided in
Subsection 5.1, in the event of any dissolution of the Company following the
transfer of all or substantially all of its properties or assets, the Company,
prior to such dissolution, shall at its expense deliver or cause to be delivered
the stock and other securities and property (including cash, where applicable)
receivable by the Holder of this Warrant after the effective date of such
dissolution pursuant to this Section 4 to a bank or trust company having its
principal office in New York, New York, as trustee for the Holder of this
Warrant.
4.3 Continuation of Terms. Except as otherwise expressly provided
in Subsection 4.1, upon any reorganization, consolidation, merger or transfer
(and any dissolution following any transfer) referred to in this Section 4, this
Warrant shall continue in full force and effect and the terms hereof shall be
applicable to the shares of stock and other securities and property receivable
on the exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of any such
stock or other securities, including, in the case of any such transfer, the
person acquiring all or substantially all of the properties or assets of the
Company, whether or not such person shall have expressly assumed the terms of
this Warrant as provided in Section 4.1.
5. No Impairment. The Company will not, by amendment of its
certificate of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will, at all times, in good faith, assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holders of this
Warrant against dilution or other impairment. Without limiting the generality of
the foregoing, the Company (a) will not increase the par value of any shares of
stock receivable on the exercise of this Warrant above the amount payable
therefor on such exercise and (b) will at all times reserve and keep available
out of its authorized capital stock, solely for the purpose of issue upon
exercise of this Warrant as herein provided, such number of shares of Common
Stock as shall then be issuable upon exercise of this Warrant in full and shall
take all such action as may be necessary or appropriate in order that all shares
of Common Stock that shall be so issuable shall be duly and validly issued and
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof.
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6. No Dilution.
(a) In the event the Company shall pay a share dividend or other
distribution payable in shares of Common Stock, or the issued shares of Common
Stock shall be subdivided, combined or consolidated, by reclassification or
otherwise, into a greater or lesser number of shares of Common Stock, the
Purchase Price in effect immediately prior (and each Purchase Price in effect
subsequent) to such subdivision or combination shall, concurrently with the
effectiveness of such subdivision, combination or consolidation, be
proportionately adjusted. In the case of a share dividend or other distribution
payable in shares of Common Stock such adjustment shall occur as follows: the
Purchase Price that is then in effect (and in effect at any time thereafter)
shall be decreased or increased, as the case may be, as of the time of such
issuance, or in the event a record date is fixed, as of the close of business on
such record date, by multiplying or dividing the Purchase Price, as the case may
be, then (and therefore) in effect by a fraction (1) the numerator of which is
the total number of shares of issued Common Stock immediately prior to the time
of such issuance or the close of business on such record date, as the case may
be, and (2) the denominator of which is the total number of shares of issued
Common Stock immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution; provided, however, that, if such
record date is fixed and such dividend is not fully paid or if such distribution
is not fully made on the date fixed therefor, the Purchase Price shall be
recomputed accordingly as of the close of business on such record date and
thereafter the Purchase Price shall be adjusted to reflect the actual payment of
such dividend or distribution.
(b) Upon the occurrence of each adjustment of the Purchase Price
pursuant to this Section 6, the Company shall prepare a certificate setting
forth such adjustment and showing in detail the facts upon which such adjustment
is based.
(c) The form of this Warrant need not be changed because of any
change in the Purchase Price pursuant to this Section 6 and any Warrant issued
after such change may state the same Purchase Price and the same number of
shares of Common Stock as are stated in this Warrant as initially issued.
However, the Company may at any time in its sole discretion (which shall be
conclusive) make any change in the form of this Warrant that it may deem
appropriate and that does not affect the substance thereof. Any Warrant
thereafter issued or countersigned, whether in exchange or substitution for an
outstanding Warrant or otherwise, may be in the form as so changed.
(d) In case at any time after the date of this Warrant:
(i) The Company shall declare a dividend (or any other
distribution) on its shares of Common Stock payable otherwise than in cash out
of its earned surplus; or
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(ii) The Company shall authorize any reclassification of the
shares of its Common Stock, or any consolidation or merger to which it is a
party and for which approval of any shareholders of the Company is required, or
the sale or transfer of all or substantially all of its assets or all or
substantially all of its issued and outstanding stock; or
(iii) Events shall have occurred resulting in the voluntary and
involuntary dissolution, liquidation or winding up of the Company; then the
Company shall cause notice to be sent to the Holder at least twenty (20) days
prior (or ten (10) day prior in any case specified in clause (i) above, or on
the date of any case specified in clause (iii) above) to the applicable record
date hereinafter specified, a notice stating (1) the date on which a record is
to be taken or the purpose of such dividend, distribution or rights, or, if a
record is not to be taken, the date as of which the holders of shares of Common
Stock of record will be entitled to such dividend, distribution or rights are to
be determined or (2) the date on which such reclassification, consolidation,
merger, sale, transfer, initial public offering, dissolution, liquidation or
winding up is expected to become effective, and the date as of which it is
expected that holders of shares of Common Stock or record shall be entitled to
exchange their shares for securities or other property deliverable upon such
reclassification, consolidation, merger, sale transfer, dissolution, liquidation
or winding up. Failure to give any such notice of any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii) and
(iii) above.
7. Reporting Requirements. The Company shall provide written notice
to Holder of any "Ineffective Period," as defined below, within two days of the
commencement of any Ineffective Period. "Ineffective Period" shall mean any
period of time after the effective date of a registration statement covering
this Warrant or the Shares during the term hereof that such registration
statement or any supplemental or amended registration statement becomes
ineffective or unavailable for use for the sale or resale, as applicable, of any
or all of the Shares for any reason (or in the event the prospectus is not
current and deliverable).
8. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
9. Expenses. The Company agrees to pay any and all stamp, transfer
and other similar taxes payable or determined to be payable in connection with
the execution and delivery of this Warrant and the issuance of this Warrant.
10. Warrant Agent. The Company may, by written notice to the Holder
of this Warrant, appoint an agent having an office in New York, New York, or
U.S. Stock Transfer Corp. for the purpose of issuing Shares on the exercise of
this Warrants pursuant to Section 2, exchanging this Warrant pursuant to Section
6, and replacing this Warrant pursuant to Section 8, or any of the foregoing,
and thereafter any such issuance, exchange or replacement, as the case may be,
shall be made at such office by such agent.
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11. Remedies. The Company stipulates that the remedies at law of the
Holder of this Warrant, in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant, are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
12. Negotiability, Etc. This Warrant is issued upon the following
terms, to all of which the Holder or owner hereof, by the taking hereof,
consents and agrees:
(a) title to this Warrant may be transferred by endorsement (by the
Holder executing the form of assignment at the end hereof) and delivery in the
same manner as in the case of a negotiable instrument transferable by
endorsement and delivery;
(b) any person in possession of this Warrant, properly endorsed, is
authorized to represent himself as absolute owner hereof and is empowered to
transfer absolute title hereto by endorsement and delivery hereof to a bona fide
purchaser hereof for value; each prior taker or owner waives and renounces all
of his equities or rights in this Warrant in favor of each such bona fide
purchaser, and each such bona fide purchaser shall acquire absolute title hereto
and to all rights represented hereby; and
(c) until this Warrant is transferred on the books of the Company,
the Company may treat the registered holder hereof as the absolute owner hereof
for all purposes, notwithstanding any notice to the contrary.
13. Notice, Etc. All notices and other communications from the
Company to the Holder of this Warrant shall be mailed by first class registered
or certified airmail, postage prepaid, at such address as may have been
furnished to the Company in writing by the Holder.
14. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant is being delivered in the State of New York and shall be
construed and enforced in accordance with and governed by its laws. The headings
in this Warrant are for purposes of reference only, and shall not limit or
otherwise affect any of the terms hereof. This Warrant is being executed as an
instrument under seal. All nouns and pronouns used herein shall be deemed to
refer to the masculine, feminine or neuter, as the identity of the person or
persons to whom reference is made herein may require.
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15. Expiration. The right to exercise this Warrant shall expire at
5:00 P.M., New York time, on November 15, 2002.
Dated: November 15, 2001 TENGTU INTERNATIONAL CORP.
By:________________________
Name: Pak Xxxx Xxxxxx
Title: Chairman and Chief Executive Officer
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ATTACHMENT A
NOTICE OF EXERCISE
(To be Executed by the Registered Holder in order to Exercise the Warrant)
The undersigned holder hereby irrevocably elects to purchase ____
shares of Common Stock of Tengtu International Corp. (the "Company") pursuant to
the Common Stock Warrant void after November 15, 2002 issued by the Company
according to the conditions set forth in said warrant and as of the date set
forth below.*
Date of Exercise:
Number of Shares be Purchased: __________________________________________
Applicable Purchase Price:
Signature:
[Name]
Address:
* This original Warrant must accompany this Notice of Exercise.
Exhibit B
Schedule of Exceptions
Exhibit C
Exhibit D
-21-
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT dated as of November 15, 2001, is
made and entered into by and between Tengtu International Corp., a Delaware
corporation (the "Company"), and ______________________ (the "Investor").
WHEREAS, the Investor, and other investors, have agreed to purchase
from the Company, and the Company has agreed to issue to the Investor, and other
investors, shares of the Company's U.S. $.01 par value per share common stock
(the "Common Stock"), pursuant to Stock Purchase Agreements dated on the date
hereof (with respect to the Investor, the "Purchase Agreement" and with respect
to the investors, the "Purchase Agreements") by and between the Company and the
Investor, who is part of a group of investors (the "Investors") participating in
the purchase of a total of up to 25,000,000 shares of Common Stock for an
aggregate purchase price of up to U.S.
$25,000,000;
WHEREAS, in order to induce Investors to enter into Purchase
Agreements, the Purchase Agreements require that the Company enter into this
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. REQUESTED REGISTRATIONS.
1.1 REGISTRATION REQUESTS.
1.1.1 INITIAL REGISTRATION REQUEST. On a date to be determined by the
Company but in any event no later than thirty (30) days following the last
closing under the Purchase Agreements, the Company shall be deemed to have
received a written request for a Requested Registration (as defined below) from
the Investors and Investor with respect to all Registrable Securities.
1.1.2 The Company may include in such registration other securities
of the same class as the Registrable Securities for sale for its own account or
for the account of any other person. Neither the Company nor any of its
shareholders shall have the right to include any of the Company's securities
(other than Registrable Securities) in a registration statement to be filed as
part of a Requested Registration unless (i) such securities are of the same
class as the Registrable Securities, (ii) the holders of a majority of the
Registrable Securities covered by such registration statement consent to such
inclusion in writing, unless the Company is required to include such securities
pursuant to a pre-existing agreement and (iii) if such Requested Registration is
an underwritten offering, the Company or such shareholders, as applicable, agree
in writing to sell their securities on the same terms and conditions as apply to
the Registrable Securities being sold. If any shareholders of the Company (other
than the holders of Registrable Securities in such capacity) register securities
of the Company in the Requested Registration in accordance with this Section,
such holders shall pay the fees and expenses of their counsel and their Pro Rata
share, on the basis of the respective amounts of the securities included in such
registration on behalf of each such Owner, of the Registration Expenses if the
Registration Expenses for such registration are not paid by the Company for any
reason.
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1.2 REGISTRATION STATEMENT FORM. The Company may, if permitted by
law, effect any Requested Registration by the filing of a registration statement
on the applicable form. It is intended that this be deemed a "shelf
registration" permitting the Owners of the Registrable Securities to sell from
time to time so long as the Registration Statement remains in effect or is kept
current.
1.3 REGISTRATION EXPENSES. The Company will pay all Registration
Expenses incurred in connection with the Requested Registration.
2. REGISTRATION PROCEDURES. If and whenever the Company is required to use its
best efforts to effect the registration of any Registrable Securities under the
Act pursuant to Section 1 or Section 2, the Company will use its best efforts to
effect the registration to permit the record owners of the Registrable
Securities to sell in accordance with the provisions of the Act. Without
limiting the foregoing, the Company in each such case will, as expeditiously as
possible:
2.1 prepare and file with the Commission (in the case of a Requested
Registration, not later than one hundred fifty (150) days after the Registration
Request as defined in Section 1.1.1 the requisite registration statement to
effect such registration and use its best efforts to cause such registration
statement to become effective as soon as possible, provided that as far in
advance as practical before filing such registration statement or any amendment
thereto, the Company will furnish to the owners of the Registrable Securities or
their designees (the "Owners") copies of reasonably complete drafts of all such
documents proposed to be filed (including exhibits) and will consider in good
faith comments with respect to any such drafts made by the Owners and, without
limiting the foregoing, any such Owner shall have the opportunity to object to
any information pertaining solely to such Owner that is contained therein and
the Company will make the corrections reasonably requested by such Owner with
respect to such information prior to filing any such registration statement or
amendment;
2.2 prepare and file with the Commission such amendments and
supplements to such registration statement and any prospectus used in connection
therewith as may be necessary to maintain the effectiveness of such registration
statement and to comply with the provisions of the Act with respect to the
disposition of all Registrable Securities covered by such registration
statement, in accordance with the intended methods of disposition thereof, until
the earlier of (i) such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement and (ii) two years after the
date of the Purchase Agreements;
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2.3 promptly notify each Owner:
2.3.1 when such registration statement or any prospectus used in
connection therewith, or any amendment or supplement thereto, has been filed
and, with respect to such registration statement or any post-effective amendment
thereto, when the same has become effective;
2.3.2 of any written comments from the Commission with respect to any
filing and of any written request by the Commission for amendments or
supplements to such registration statement or prospectus;
2.3.3 of the notification to the Company by the Commission of its
initiation of any proceeding with respect to the issuance by the Commission of,
or of the issuance by the Commission of, any stop order suspending the
effectiveness of such registration statement; and
2.3.4 of the receipt by the Company of any notification with respect
to the suspension of the qualification of any Registrable Securities for sale
under the applicable securities or blue sky laws of any jurisdiction;
2.4 furnish to each seller of Registrable Securities covered by such
registration statement such number of conformed copies of such registration
statement and of each amendment and supplement thereto (in each case including
all exhibits and documents incorporated by reference), such number of copies of
the prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 promulgated under the Act relating to such Owner's
Registrable Securities, and such other documents, as such seller may reasonably
request to facilitate the disposition of its Registrable Securities;
2.5 use its best efforts to register or qualify all Registrable
Securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as each Owner shall reasonably request, to
keep such registration or qualification in effect for so long as such
registration statement remains in effect, and take any other action which may be
reasonably necessary or advisable to enable such Owner to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
Owner, except that the Company shall not for any such purpose be required (i) to
qualify generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this Paragraph 2.5 be obligated
to be so qualified, (ii) to subject itself to taxation in any such jurisdiction
solely by reason of such registration or qualification or (iii) to consent to
general service of process in any jurisdiction;
2.6 furnish to each Requesting Owner a signed counterpart, addressed
to such Owner (and the underwriters, if any), of
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2.6.1 an opinion of counsel for the Company, dated the effective date
of such registration statement (or, if such registration includes an
underwritten Public Offering, dated the date of any closing under the
underwriting agreement), and
2.6.2 a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an underwritten
Public Offering, dated the date of any closing under the underwriting
agreement), signed by the independent public accountants who have certified the
Company's financial statements included in such registration statement, in each
case covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to the underwriters in underwritten public
offerings of securities;
2.7 notify each Owner covered by such registration statement, at any
time when a prospectus relating thereto is required to be delivered under the
Act, of the happening of any event as a result of which any prospectus included
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and at the request of
any such Owner promptly prepare and furnish to such Owner a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
2.8 otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its
securityholders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months, but not more than eighteen
(18) months, beginning with the first full calendar month after the effective
date of such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Act and Rule 158 promulgated thereunder (or
any successor provision);
2.9 provide a transfer agent and registrar for all Registrable
Securities covered by such registration statement not later than the effective
date of such registration statement; and
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2.10 use its best efforts to cause all Registrable Securities covered
by such registration statement to be listed, upon official notice of issuance,
on any securities exchange on which any of the securities of the same class as
the Registrable Securities are then listed. The Company may require each Owner
of Registrable Securities as to which any registration is being effected to, and
each such Owner, as a condition to including Registrable Securities in such
registration, shall furnish the Company with such information and affidavits
regarding such Owner and the distribution of such securities as the Company may
from time to time reasonably request in writing in connection with such
registration. Each Owner of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from the Company of the
happening of any event of the kind described in Paragraph 2.7, such Owner will
forthwith discontinue such Owner's disposition of Registrable Securities
pursuant to the registration statement relating to such Registrable Securities
until such Owner's receipt of the copies of the supplemented or amended
prospectus contemplated by Paragraph 2.7 and, if so directed by the Company,
will deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such Owner's possession of the prospectus
relating to such Registrable Securities current at the time of receipt of such
notice. In the event the Company shall give any such notice, the period referred
to in Paragraph 2.2 shall be extended by a number of days equal to the number of
days during the period from and including the giving of notice pursuant to
Paragraph 2.7 and to and including the date when each Owner of any Registrable
Securities covered by such registration statement shall receive the copies of
the supplemented or amended prospectus contemplated by Paragraph 2.7.
3. INDEMNIFICATION.
3.1 INDEMNIFICATION BY THE COMPANY. The Company shall, to the full
extent permitted by law, indemnify and hold harmless each seller of Registrable
Securities included in any registration statement filed in connection with a
Requested Registration its general or limited partners, directors, officers,
employees, agents and each other Person, if any, who controls any such seller
within the meaning of the Act, against any losses, claims, damages, expenses or
liabilities, joint or several (together, "Losses"), to which such seller or any
such partner, director, officer, employee, agent or controlling Person may
become subject under the Act or otherwise, insofar as such Losses (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein (in the case of a prospectus, in the light of the
circumstances under which they were made) not misleading, and the Company will
reimburse such seller and each such partner, director, officer, employee, agent
and controlling Person for any legal or any other expenses reasonably incurred
by them in connection with investigating or defending any such Loss (or action
or proceeding in respect thereof); provided that the Company shall not be liable
in any such case to the extent that any such Loss (or action or proceeding in
respect thereof) arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such seller. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
such seller or any such partner, director, officer, employee, agent or
controlling Person, and shall survive the transfer of such securities by such
seller.
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3.2 INDEMNIFICATION BY THE SELLERS. Each Owner of Registrable
Securities which are included or are to be included in any registration
statement filed in connection with the Requested Registration, as a condition to
including Registrable Securities in such registration statement, shall, to the
full extent permitted by law, indemnify and hold harmless the Company, its
directors, officers, employees, agents and each other Person, if any, who
controls the Company within the meaning of the Act, against any Losses to which
the Company or any such director, officer, employee, agent or controlling Person
may become subject under the Act or otherwise, insofar as such Losses (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any such registration statement, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of a prospectus, in the
light of the circumstances under which they were made) not misleading, if such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon written information furnished to the Company by such
seller or seller's agent, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement; provided, however, that the obligation to
provide indemnification pursuant to this Section 3.2 shall be several, and not
joint and several, among such indemnifying parties on the basis of the number of
Registrable Securities included in such registration statement and the aggregate
amount which may be recovered from any Owner of Registrable Securities pursuant
to the indemnification provided for in this Section 3.2 in connection with any
registration and sale of Registrable Securities shall be limited to the total
proceeds received by such Owner from the sale of such Registrable Securities.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director, officer,
employee, agent or controlling Person and shall survive the transfer of such
securities by such seller.
3.3 NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding Paragraph 3.1 or 3.2, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party
pursuant to such paragraphs, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under the preceding paragraphs 3.1 or 3.2, except to the extent
that the indemnifying party is materially prejudiced by such failure to give
notice. In case any such action is brought against an indemnified party, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation; provided that the
indemnified party may participate in such defense at the indemnified party's
expense; and provided further, that the indemnified party or indemnified parties
shall have the right to employ one counsel to represent it or them if, in the
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reasonable judgment of the indemnified party or indemnified parties, it is
advisable for it or them to be represented by separate counsel by reason of
having legal defenses which are different from or in addition to those available
to the indemnifying party, and in that event the reasonable fees and expenses of
such one counsel shall be paid by the indemnifying party. If the indemnifying
party is not entitled to, or elects not to, assume the defense of a claim, it
will not be obligated to pay the fees and expenses of more than one counsel for
the indemnified parties with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between such
indemnified party and any other indemnified parties with respect to such claim,
in which event the indemnifying party shall be obligated to pay the fees and
expenses of such additional counsel for the indemnified parties or counsels. No
indemnifying party shall consent to entry of any judgment or enter into any
settlement without the consent of the indemnified party which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation. No indemnifying party shall be subject to any liability for any
settlement made without its consent, which consent shall not be unreasonably
withheld.
3.4 CONTRIBUTION. If the indemnity and reimbursement obligation
provided for in any paragraph of this Section is unavailable or insufficient to
hold harmless an indemnified party in respect of any Losses (or actions or
proceedings in respect thereof) referred to therein, then the indemnifying party
shall contribute to the amount paid or payable by the indemnified party as a
result of such Losses (or actions or proceedings in respect thereof) in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and the indemnified party on the other hand in connection
with statements or omissions which resulted in such Losses, as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the indemnifying party or the indemnified
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The parties
hereto agree that it would not be just and equitable if contribution pursuant to
this paragraph were to be determined by Pro Rata allocation or by any other
method of allocation which does not take account of the equitable considerations
referred to in the first sentence of this paragraph. The amount paid by an
indemnified party as a result of the Losses referred to in the first sentence of
this paragraph shall be deemed to include any legal and other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any Loss which is the subject of this paragraph. No indemnified
party guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from the indemnifying party
if the indemnifying party was not guilty of such fraudulent misrepresentation.
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3.5 OTHER INDEMNIFICATION. Indemnification similar to that specified
in the preceding paragraphs of this Section (with appropriate modifications)
shall be given by the Company and each seller of Registrable Securities with
respect to any required registration or other qualification of securities under
any Federal or state law or regulation of any Governmental or Regulatory
Authority other than the Act. The provisions of this Section shall be in
addition to any other rights to indemnification or contribution which an
indemnified party may have pursuant to law, equity, contract or otherwise.
4. COVENANTS RELATING TO REGULATION S. The Company will file reports in
compliance with the Exchange Act, will comply with all rules and regulations of
the Commission applicable in connection with the use of Regulation S and take
such other actions and furnish such Owner with such other information as such
Owner may request in order to avail itself of such regulation of the Commission
allowing such Owner to sell any Registrable Securities without registration, and
will, at its expense, forthwith upon the request of any Owner of Registrable
Securities, deliver to such Owner a certificate, signed by the Company's
principal financial officer, stating:
4.1 the Company's name, address and telephone number (including area
code),
4.2 the Company's IRS identification number,
4.3 the Company's Commission file number,
4.4 the number of shares of each class of stock outstanding as shown
by the most recent report or statement published by the Company, and
4.5 whether the Company has filed the reports required to be filed
under the Exchange Act for a period of at least ninety (90) days prior to the
date of such certificate and in addition has filed the most recent annual report
required to be filed thereunder.
5. DEFINITIONS.
5.1 Except as otherwise specifically indicated, the following terms
will have the following meanings for all purposes of this Agreement:
5.1.1 "Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
5.1.2 "Board of Directors" means the Board of Directors of the
Company.
5.1.3 "Commission" means the United States Securities and Exchange
Commission, or any successor governmental agency or authority.
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5.1.4 "Common Stock" means the Common Stock, par value $.01 per
share, of the Company, as constituted on the date hereof, and any stock into
which such Common Stock shall have been changed or any stock resulting from any
reclassification of such Common Stock..
5.1.5 "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
5.1.6 "NASD" means the National Association of Securities Dealers.
5.1.7 "Person" means any natural person, corporation, general
partnership, limited partnership, proprietorship, other business organization,
trust, union or association.
5.1.8 "Public Offering" means any offering of Common Stock to the
public, either on behalf of the Company or any of its shareholders, pursuant to
an effective registration statement under the Act.
5.1.9 "Registration Expenses" means all expenses incident to the
Company's performance of or compliance with its obligations under this Agreement
to effect the registration of Registrable Securities in a Requested
Registration, including without limitation, all registration, filing, securities
exchange listing and NASD fees, all registration, filing, qualification and
other fees and expenses of complying with securities or blue sky laws, all word
processing, duplicating and printing expenses, messenger and delivery expenses,
the fees and disbursements of counsel for the Company and of its independent
public accountants, including the expenses of any special audits or "cold
comfort" letters required by or incident to such performance and compliance,
premiums and other costs of policies of insurance against liabilities arising
out of the Public Offering of the Registrable Securities being registered and
any fees and disbursements of underwriters customarily paid by issuers or
sellers of securities, but excluding underwriting discounts and commissions, the
fees and disbursements of counsel retained by the Owners of the Registrable
Securities being registered and transfer taxes, if any, in respect of
Registrable Securities, which shall be payable by each Owner thereof, provided
that, in any case where Registration Expenses are not to be borne by the
Company, such expenses shall not include salaries of the Company personnel or
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expenses relating to liability insurance required by underwriters of the Company
or other expenses for the preparation of financial statements or other data
normally prepared by the Company in the ordinary course of its business or which
the Company would have incurred in any event.
5.1.10 "Registrable Securities" means (i) shares of Common Stock
issued to the Investors under the Purchase Agreements, (ii) shares of Common
Stock issuable upon exercise of warrants granted to Investors in connection with
the Purchase Agreements, and (ii) any additional shares of Common Stock issued
or distributed by way of a dividend, stock split or other distribution in
respect of shares of Common Stock referred to in clause (i), or acquired by way
of any rights offering or similar offering made in respect of shares of Common
Stock referred to in Clause (i). As to any particular Registrable Securities,
once issued such securities shall cease to be Registrable Securities when (i) a
registration statement with respect to the sale of such securities shall have
become effective under the Act and such securities shall have been disposed of
in accordance with such registration statement, (ii) they shall have been
distributed to the public pursuant to Regulation S or (iii) they shall have
ceased to be outstanding.
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5.1.11 Regulation S" means Regulation S promulgated by the Commission
under the Act, and any successor provision thereto.
5.1.12 "Transferee" means all Persons acquiring shares of Common
Stock from an Investor.
6. MISCELLANEOUS.
6.1 NOTICES. All notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by facsimile, as follows: If to
the Company:________________. If to Investor:
______________________________________, Attention:_____________, Facsimile No.:
____________________. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopier or e-mail to the designated recipient. Any party hereto may change
its designee and address or facsimile number for that designee for notices and
other communications hereunder by notice to the other parties hereto.
6.2 ENTIRE AGREEMENT. This Agreement supersedes all prior discussions
and agreements between the parties with respect to the subject matter hereof,
and contains the sole and entire agreement between the parties hereto with
respect to the subject matter hereof.
6.3 AMENDMENT. This Agreement may be amended, supplemented or
modified only by a written instrument (which may be executed in any number of
counterparts) duly executed by or on behalf of each of the Company and the
Owners of two-thirds (2/3) or more of the Registrable Securities then
outstanding or subject to issuance.
6.4 WAIVER. Subject to Paragraph 6.5, any term or condition of this
Agreement may be waived at any time by the party that is entitled to the benefit
thereof, but no such waiver shall be effective unless set forth in a written
instrument duly executed by or on behalf of the party waiving such term or
condition. No waiver by any party of any term or condition of this Agreement, in
any one or more instances, shall be deemed to be or construed as a waiver of the
same term or condition of this Agreement on any future occasion.
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6.5 CONSENTS AND WAIVERS BY OWNERS. Any consent of the Owners of
Registrable Securities pursuant to this Agreement, and any waiver by the Owners
of Registrable Securities of any provision of this Agreement, shall be in
writing (which may be executed in any number of counterparts) and may be given
or taken by the Owners of Registrable Securities of two-thirds (2/3) or more of
the Registrable Securities then outstanding or subject to issuance, and any such
consent or waiver so given or taken will be binding on all the Owners.
6.6 NO THIRD PARTY BENEFICIARY. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person other
than any Person entitled to indemnification under Section 3.
6.7 SUCCESSORS AND ASSIGNS. The registration rights contained in this
Agreement shall be transferable by any Owner of Registrable Securities to any
Person that acquires Registrable Securities from such Owner (excluding any
Person that acquires such Registrable Securities in a transaction pursuant to
which such securities cease to be Registrable Securities).
6.8 HEADINGS. The headings used in this Agreement have been inserted
for convenience of reference only and do not define or limit the provisions
hereof.
6.9 INVALID PROVISIONS. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
6.10 REMEDIES. Except as otherwise expressly provided for herein, no
remedy conferred by any of the specific provisions of this Agreement is intended
to be exclusive of any other remedy, and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or otherwise. The
election of any one or more remedies by any party hereto shall not constitute a
waiver by any such party of the right to pursue any other available remedies.
Damages in the event of breach of this Agreement by any party hereto or any of
their respective successors or permitted assigns would be difficult, if not
impossible, to ascertain, and it is therefore agreed that each such Person, in
addition to and without limiting any other remedy or right it may have, will
have the right to an injunction or other equitable relief in any court of
competent jurisdiction, enjoining any such breach, and enforcing specifically
the terms and provisions hereof and each party hereto, on its own behalf and
behalf of its respective successors and permitted assigns, hereby waives any and
all defenses it may have on the ground of lack of jurisdiction or competence of
the court to grant such an injunction or other equitable relief. The existence
of this right will not preclude any such Person from pursuing any other rights
and remedies at law or in equity which such Person may have.
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6.11 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
6.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
TENGTU INTERNATIONAL CORP. _____________________________
By:____________________________ By:_____________________________
Name: Pak Xxxx Xxxxxx
Title: Chief Executive Officer Title:
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