SECURITIES PURCHASE AGREEMENT
EXECUTION
COPY
SECURITIES PURCHASE AGREEMENT
(the "Agreement"), dated
as of January 21, 2010, by and among A-Power Energy Generation Systems, Ltd., a
company organized under the laws of British Virgin Islands, with headquarters
located at Xx. 00 Xxxxxxxx Xxxx, Xxxxx Xxxxxxxx, Xxxxxxxx Liaoning Province,
China 110021 (the "Company") and the investors
listed on the Schedule of Buyers attached hereto (individually, a "Buyer" and collectively, the
"Buyers").
WHEREAS:
A. The
Company and each Buyer is executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by (i) Section 4(2) of
the Securities Act of 1933, as amended (the "1933 Act"), and Rule 506 of
Regulation D ("Regulation D") as
promulgated by the United States Securities and Exchange Commission (the "SEC") under the 1933 Act or
(ii) Rule 903 of Regulation S ("Regulation S") as
promulgated by the SEC under the 1933 Act.
B. Each
Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, (i) that aggregate number of the Company's
common shares, par value $0.0001 per share (the "Common Shares"), set forth
opposite such Buyer's name in column (3) on the Schedule of Buyers attached
hereto (which aggregate amount for all Buyers together shall be 5,777,932 Common
Shares and shall collectively be referred to herein as the "Shares"), (ii) Warrants, in
substantially the form attached hereto as Exhibit A (the "Series A Warrants"), representing the
right to acquire initially up to that number of additional Common Shares set
forth opposite such Buyer's name in column (4) on the Schedule of Buyers (as
exercised, collectively, the "Series A Warrant Shares") and (iii)
Warrants, in substantially the form attached hereto as Exhibit A (the "Series B Warrants," and together with
the Series A Warrants, the "Warrants"), representing the
right to acquire initially up to that number of additional Common Shares set
forth opposite such Buyer's name in column (5) on the Schedule of Buyers (as
exercised, collectively, the "Series B Warrant Shares," and together
with the Series A Warrant Shares, the "Warrant Shares").
C. Contemporaneously
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement, substantially in the
form attached hereto as Exhibit B (the "Registration Rights
Agreement"), pursuant to which the Company has agreed to provide certain
registration rights with respect to the Registrable Securities (as defined in
the Registration Rights Agreement) under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities
laws.
D. The
Shares, the Warrants and the Warrant Shares collectively are referred to herein
as the "Securities".
NOW, THEREFORE, the Company
and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF SHARES
AND WARRANTS.
(a) Purchase of Shares and
Warrants. Subject to the satisfaction (or waiver) of the
conditions set forth in Sections 6 and 7 below, the Company shall issue and sell
to each Buyer, and each Buyer severally, but not jointly, agrees to purchase
from the Company on the Closing Date (as defined below), (x) the number of
Shares as is set forth opposite such Buyer's name in column (3) on the Schedule
of Buyers attached hereto (which aggregate amount for all Buyers shall be
5,777,932), (y) Series A Warrants to acquire up to that number of Series A
Warrant Shares as is set forth opposite such Buyer's name in column (4) on the
Schedule of Buyers and (z) Series B Warrants to acquire up to that number of
Series B Warrant Shares as is set forth opposite such Buyer's name in column (5)
on the Schedule of Buyers (the "Closing").
(b) Closing. The
date and time of the Closing (the "Closing Date") shall be 10:00
a.m., New York City time, on the date hereof (or such other date and time as is
mutually agreed to by the Company and each Buyer) after notification of
satisfaction (or waiver) of the conditions to the Closing set forth in Sections
6 and 7 below, at the offices of Xxxxxxx Xxxx & Xxxxx LLP, 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000.
(c) Purchase
Price. The aggregate purchase price for the Shares and the
Warrants to be purchased by each such Buyer at the Closing (the "Purchase Price") shall be the
amount set forth opposite each Buyer's name in column (6) of the Schedule of
Buyers.
(d) Form of
Payment. On the Closing Date, (i) each Buyer shall pay its
Purchase Price to the Company for the Shares and the Warrants to be issued and
sold to such Buyer at the Closing (less, in the case of [ ], the amounts
withheld pursuant to Section 4(g)), by wire transfer of immediately available
funds in accordance with the Company's written wire instructions and
(ii) the Company shall deliver to each Buyer one or more share
certificates, evidencing the number of Shares such Buyer is purchasing as is set
forth opposite such Buyer's name in column (3) of the Schedule of Buyers along
with the Warrants (allocated in the amounts as such Buyer shall request) which
such Buyer is purchasing, in each case duly executed on behalf of the Company
and registered in the name of such Buyer or its designee.
2. BUYER'S REPRESENTATIONS AND
WARRANTIES. Each Buyer, severally and not jointly, represents
and warrants to the Company with respect to only itself that, as of the date
hereof and as of the Closing Date:
(a) No Public Sale or
Distribution. Such Buyer is (i) acquiring the Shares and the
Warrants and (ii) upon exercise of the Warrants will acquire the Warrant Shares
issuable upon exercise of the Warrants, in each case, for its own account and
not with a view towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered or exempted under the
1933 Act; provided, however, that by
making the representations herein, such Buyer does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act. Such Buyer
is acquiring the Securities hereunder in the ordinary course of its
business. Such Buyer does not presently have any agreement or
understanding, directly or indirectly, with any Person (as defined in Section
3(s)) to distribute any of the Securities.
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(b) Status of
Buyer. Such Buyer is either (i) a "qualified institutional
buyer" as that term is defined in Rule 144A under the 1933 Act or, (ii) if such
Buyer has indicated on its signature page to this Agreement that is purchasing
the Shares and the Warrants pursuant to Regulation S, not a "U.S. Person" as
such term is defined in Rule 902 of Regulation S. If such Buyer has
indicated on its signature page that it is purchasing the Shares and the
Warrants pursuant to Regulation S, such Buyer
(i) is acquiring the Shares and the Warrants in an offshore transaction in
accordance with Rule 903 of Regulation S,
(ii) is acquiring the Shares and the Warrants for such Buyer's own account,
(iii) is not and will not be a "distributor" as such term is defined in Rule 902
of Regulation S and (iv) understands that the Shares and the Warrants may
not, absent an applicable exemption, be transferred without registration and/or
qualification under the 1933 Act and applicable state securities laws and the
laws of any other applicable jurisdiction.
(c) Reliance on
Exemptions. Such Buyer understands that the Securities are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and such
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.
(d) Information. Such
Buyer and its advisors, if any, have been furnished with all materials relating
to the business, finances and operations of the Company and materials relating
to the offer and sale of the Securities that have been requested by such
Buyer. Such Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of and receive answers from the Company and to
obtain any additional information which the Company possesses or can acquire
without undue effort or expense, and all such questions have been answered to
the satisfaction of such Buyer. Neither such inquiries nor any other
due diligence investigations conducted by such Buyer or its advisors, if any, or
its representatives shall modify, amend or affect such Buyer's right to rely on
the Company's representations and warranties contained herein. Such
Buyer understands that its investment in the Securities involves a high degree
of risk. Such Buyer has sought such accounting, legal and tax advice
as it has considered necessary to make an informed investment decision with
respect to its acquisition of the Securities. Such Buyer understands
that the Placement Agent (as defined in Section 3(g)) has acted solely as the
agent of the Company in this offering of the Securities and such Buyer has not
relied on the business or legal advice of the Placement Agent or any of its
agents, counsel or affiliates in making its investment decision hereunder, and
confirms that none of such Persons has made any representations or warranties to
such Buyer in connection with the transactions contemplated herein.
(e) No Governmental
Review. Such Buyer understands that no United States federal
or state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities or the fairness or
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.
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(f) Transfer or
Resale. Such Buyer understands that except as provided in the
Registration Rights Agreement: (i) the Securities have not been and are not
being registered under the 1933 Act or any state securities laws, and may not be
offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) such Buyer shall have delivered to the Company an
opinion of counsel, in a form reasonably satisfactory to the Company, to the
effect that such Securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such registration, (C)
such Buyer provides the Company with reasonable assurance that such Securities
can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A
promulgated under the 1933 Act, as amended, (or a successor rule thereto)
(collectively, "Rule
144"), or (D) outside the United States in accordance with Regulation S
under the 1933 Act; (ii) any sale of the Securities made in reliance on Rule 144
may be made only in accordance with the terms of Rule 144 and further, if Rule
144 is not applicable, any resale of the Securities under circumstances in which
the seller (or the Person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 0000 Xxx) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC promulgated thereunder; and (iii) neither the Company nor any other Person
is under any obligation to register the Securities under the 1933 Act or any
state securities laws or to comply with the terms and conditions of any
exemption thereunder. Notwithstanding the foregoing, the Securities
may be pledged in connection with a bona fide margin account or other loan or
financing arrangement secured by the Securities and such pledge of Securities
shall not be deemed to be a transfer, sale or assignment of the Securities
hereunder, and no Buyer effecting a pledge of Securities shall be required to
provide the Company with any notice thereof or otherwise make any delivery to
the Company pursuant to this Agreement or any other Transaction Document (as
defined in Section 3(b)), including, without limitation, this Section
2(f).
(g) Legends.
(I) Regulation D Legends. Such Buyer
understands that the certificates or other instruments representing the Shares
and the Warrants (other than Shares and Warrants issued to the Buyers pursuant
to Regulation S) and, until such time as the resale of the Warrant Shares have
been registered under the 1933 Act as contemplated by the Registration Rights
Agreement, the share certificates representing the Shares and the Warrant
Shares, except as set forth below, shall bear any legend as required by the
"blue sky" laws of any state and a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of such
share certificates):
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[NEITHER THE ISSUANCE AND SALE
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH
THESE SECURITIES ARE EXERCISABLE HAVE BEEN][THE SECURITIES REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE COMPANY, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A, IF APPLICABLE, UNDER SAID ACT OR IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH REGULATION S OF THE SECURITIES
ACT OF 1933, AS AMENDED. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped or issue to such holder by electronic delivery at the applicable balance
account at The Depository Trust Company ("DTC"), if, unless otherwise
required by state securities laws, (i) such Securities are registered for resale
under the 1933 Act, (ii) in connection with a sale, assignment or other
transfer, such holder provides the Company with an opinion of counsel, in a form
reasonably satisfactory to the Company, to the effect that such sale, assignment
or transfer of the Securities may be made without registration under the
applicable requirements of the 1933 Act, (iii) the Securities can be sold,
assigned or transferred pursuant to Rule 144 or Rule 144A, if applicable; provided, that such
holder provides the Company with reasonable assurance that such Securities can
be sold, assigned or transferred pursuant to Rule 144 or Rule 144A, if
applicable, or (iv) if the Company is a "foreign issuer" within the meaning of
Regulation S of the 1933 Act and the Securities are being sold pursuant to
Regulation S, such legend may be removed by providing a declaration to the
Company that such shares may be sold pursuant to Regulation S.
(II) Regulation S Legends. Such
Buyer understands that the certificates or other instruments representing the
Shares and the Warrants (other than Shares and Warrants issued to the Buyers
pursuant to Regulation D) and, until the fortieth (40th) day
following the Closing Date (the "Distribution Compliance Period
Termination Date"), the share certificates representing the Shares and
the Warrant Shares, except as set forth below, shall bear a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of such share certificates):
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[THE
ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN][THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE BEEN] OFFERED IN AN OFFSHORE TRANSACTION TO
A PERSON WHO IS NOT A U.S. PERSON (AS DEFINED HEREIN) PURSUANT TO REGULATION S
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. [NEITHER THE ISSUANCE
AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES
INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN][THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO
REGISTERED, [THIS WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF A U.S. PERSON
AND NEITHER THIS WARRANT NOR THE SECURITIES FOR WHICH THIS WARRANT IS
EXERCISABLE MAY BE] [MAY NOT BE] OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE
UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN EACH CASE IN
ACCORDANCE WITH AN "OFFSHORE TRANSACTION" OR OTHERWISE IN ACCORDANCE WITH THE
PROVISIONS OF REGULATION S UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
OF 1933, AS AMENDED, AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.
With
respect to the Shares and any Warrant Shares received upon the exercise of the
Warrants the legend set forth above shall be removed and the Company shall issue
to such holder replacement Securities by electronic delivery at the applicable
balance account at DTC promptly after the Distribution Compliance Period
Termination Date without any action required on behalf of the holder of such
Securities; provided, however, such legend
shall not be removed from the Warrants, until (i) such Securities are registered
for resale under the 1933 Act, (ii) in connection with a sale, assignment or
other transfer, such holder provides the Company with an opinion of counsel, in
a form reasonably satisfactory to the Company, to the effect that such sale,
assignment or transfer of the Securities may be made without registration under
the applicable requirements of the 1933 Act or (iii) the Securities can be sold,
assigned or transferred pursuant to Rule 144 or Rule 144A, if applicable; provided, further, that upon
electronic delivery of replacement Shares or Warrant Shares , the
legended Shares or Warrant Shares held by each applicable holder
shall be deemed cancelled, and upon receipt of the electronic delivery of the
replacement Shares or Warrant Shares, each such holder agrees to promptly
deliver the applicable legended Shares or Warrant Shares to the Company for
cancellation.
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The
Company shall be responsible for the fees of its transfer agent and all DTC fees
associated with such issuance. If the Company shall fail for any
reason or for no reason to issue to the holder of the Securities within three
(3) Trading Days (as defined in the Warrants) after the occurrence of any of (i)
through (iii) in the paragraph below the Regulation D legend in clause (I) above
or with respect to the Shares or Warrant Shares after the Distribution
Compliance Period Termination, a certificate without such legend to the holder
or to issue such Shares or Warrant Shares to such holder by electronic delivery
at the applicable balance account at DTC, and if on or after such Trading Day
the holder purchases (in an open market transaction or otherwise) Common Shares
to deliver in satisfaction of a sale by the holder of such Shares or Warrant
Shares that the holder anticipated receiving without legend from the
Company (a "Buy-In"),
then the Company shall, within three (3) Business Days after the holder's
request and in the holder's discretion, either (i) pay cash to the holder in an
amount equal to the holder's total purchase price (including brokerage
commissions and other reasonable out-of-pocket brokerage expenses, if any) for
the Common Shares so purchased (the "Buy-In Price"), at which point
the Company's obligation to issue and deliver such certificate to the Holder or
credit the Holder's balance account with DTC for such Common Shares shall
terminate, or (ii) promptly honor its obligation to deliver to the holder such
unlegended Shares or Warrant Shares or credit such Holder's balance
account with DTC as provided above and pay cash to the holder in an amount equal
to the excess (if any) of the Buy-In Price over the product of (A) such number
of Common Shares, times (B) the Closing Bid Price (as defined in the Warrants)
on the date of exercise.
(h) Validity;
Enforcement. This Agreement and the Registration Rights
Agreement have been duly and validly authorized, executed and delivered on
behalf of such Buyer and shall constitute the legal, valid and binding
obligations of such Buyer enforceable against such Buyer in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and
remedies.
(i) No
Conflicts. The execution, delivery and performance by such
Buyer of this Agreement and the Registration Rights Agreement and the
consummation by such Buyer of the transactions contemplated hereby and thereby
will not (i) result in a violation of the organizational documents of such Buyer
or (ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which such Buyer is a party, or (iii)
result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws)
applicable to such Buyer, except in the case of clauses (ii) and (iii) above,
for such conflicts, defaults, rights or violations which would not, individually
or in the aggregate, reasonably be expected to have a material adverse effect on
the ability of such Buyer to perform its obligations hereunder.
(j) Residency. Such
Buyer is a resident of that jurisdiction specified below its address on the
Schedule of Buyers.
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(k) Certain Trading
Activities. Such Buyer has not directly or indirectly, nor has
any Person acting on behalf of or pursuant to any understanding with such Buyer
which had knowledge of the transactions contemplated hereby and that (x) has or
shares discretion relating to such Buyer's investments and trading or
information concerning such Buyer's investments or (y) is subject to such
Buyer's review or input concerning such Person's investments or trading (the
foregoing, "Buyer Trading
Affiliates"), engaged in any sale or purchase in the securities of the
Company (including, without limitation, any Short Sales involving the Company's
securities) since the time that such Buyer was first contacted by the Company or
the Placement Agent regarding the investment in the Company contemplated herein
(the "Restricted
Period"). "Short Sales" include, without limitation, all "short sales" as
defined in Rule 200 promulgated under Regulation SHO under the Securities
Exchange Act of 1934, as amended (the "1934 Act") ("Regulation SHO") and all types
of direct and indirect stock pledges, forward sale contracts, options, puts,
calls, swaps and similar arrangements (including on a total return basis), and
sales and other transactions through non-U.S. broker dealers or foreign
regulated brokers (but shall not be deemed to include the location and/or
reservation of borrowable Common Shares). Notwithstanding the
foregoing, for the avoidance of doubt, nothing contained herein shall constitute
a representation or warranty, or preclude any actions, with respect to (i) the
satisfaction, during the Restricted Period, of any contractual arrangements
entered into prior to the Restricted Period and (ii) the identification of the
availability of, or securing of, available shares to borrow in order to effect
short sales or similar transactions in the future. Such Buyer is not
as of the date hereof, and will not be immediately following the Closing, a
"beneficial owner" (as defined pursuant to Rule 13d-3 of 0000 Xxx) of more than
10% of the Company's issued and outstanding Common Shares (calculated based on
the assumption that all Common Shares Equivalents (as defined in Section
4(n)(i)(1)) owned by such Buyer, whether or not presently exercisable or
convertible, have been fully exercised or converted (as the case may be) but
taking into account any limitations on exercise or conversion contained
therein).
(l) General
Solicitation. Such Buyer is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding
the Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or, to such Buyer's knowledge, any communications that
would constitute a general solicitation under Regulation D or "directed selling
efforts" under Regulation S.
3. REPRESENTATIONS AND
WARRANTIES OF THE COMPANY.
The
Company represents and warrants to each of the Buyers and the Placement Agent
that, as of the date hereof and as of the Closing Date:
(a) Organization and
Qualification. Each of the Company and its "Subsidiaries" (which for
purposes of this Agreement means any entity in which the Company, directly or
indirectly, owns a majority of the capital stock or holds a majority of the
equity or similar interest) are entities duly organized and validly existing in
good standing under the laws of the jurisdiction in which they are formed, and
have the requisite power and authorization to own their properties and to carry
on their business as now being conducted. Each of the Company and its
Subsidiaries is duly qualified as a foreign entity to do business and is in good
standing in every jurisdiction in which its ownership of property or the nature
of the business conducted by it makes such qualification necessary, except to
the extent that the failure to be so qualified or be in good standing would not
reasonably be expected to have a Material Adverse Effect. As used in
this Agreement, "Material
Adverse Effect" means any material adverse effect on the business,
properties, assets, operations, results of operations, condition (financial or
otherwise) or prospects of the Company and its Subsidiaries, individually or
taken as a whole, or on the transactions contemplated hereby or on the other
Transaction Documents or by the agreements and instruments to be entered into in
connection herewith or therewith, or on the authority or ability of the Company
to perform its obligations under the Transaction Documents. The
Company has no Subsidiaries except as set forth on Schedule
3(a). Notwithstanding the foregoing, the entities in which the
Company, directly or indirectly, owns any of the capital shares or holds an
equity or similar interest which are not Subsidiaries, taken as whole, do not
have operations, income or assets which are material to the Company and its
Subsidiaries taken as a whole. The Company hereby represents that
Shenyang Yixiang Wind Power Equipment Limited and Shenyang (Jinxiang) Gold Lucky
Electric Power Equipments Co., Ltd. ("Jinxiang") do not have any
operations, income or assets, except for $10,000,000 held by
Jinxiang..
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(b) Authorization; Enforcement;
Validity. The Company has the requisite power and authority to
enter into and perform its obligations under this Agreement, the Registration
Rights Agreement, the Voting Agreement (as defined in Section 4(q)), the Lock-Up
Agreements (as defined in Section 7(xiii)), the Irrevocable Transfer Agent
Instructions (as defined in Section 5(b)), the Warrants and each of the other
agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively, the "Transaction Documents") to
which the Company is a party and to issue the Securities in accordance with the
terms hereof and thereof. The execution and delivery of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby, including, without limitation, the
issuance of the Shares and the Warrants, the reservation for issuance and the
issuance of the Warrant Shares issuable upon exercise of the Warrants have been
duly authorized by the Company's Board of Directors and (other than (i) the
filing with the SEC of one or more Registration Statements in accordance with
the requirements of the Registration Rights Agreement, (ii) other filings as may
be required by state securities agencies, (iii) the filing with the Principal
Market of a "Notification: Listing of Additional Shares," (iv) the furnishing of
one or more reports on Form 6-K to the SEC as contemplated by Section 4(i) and
(vii) the filing of Form D as contemplated by Section 4(b)) no further filing,
consent, or authorization is required by the Company, its Board of Directors or
its shareholders. This Agreement and the other Transaction Documents
to which the Company is a party have been duly executed and delivered by the
Company, and constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
(c) Issuance of
Securities. The issuance of the Shares and the Warrants are
duly authorized and, upon issuance in accordance with the terms of the
Transaction Documents, shall be validly issued and free from all taxes, liens
and charges with respect to the issue thereof. A number of Common
Shares shall have been duly authorized and reserved and maintained for issuance
which equals or exceeds 130% of the aggregate of the maximum number of Common
Shares (the "Required Reserved
Amount") issuable upon exercise of the Warrants (without taking into
account any limitations on the exercise of the Warrants set forth in the
Warrants). Upon exercise and payment of the exercise price, unless
exercised pursuant to Cashless Exercise (as defined in the Warrants) in
accordance with the Warrants, the Warrant Shares when issued, will be validly
issued, fully paid and nonassessable and free from all preemptive or similar
rights, taxes, liens and charges with respect to the issue thereof, with the
holders being entitled to all rights accorded to a holder of Common
Shares. Assuming the accuracy of each of the representations and
warranties set forth in Section 2 of this Agreement, the offer and issuance by
the Company of the Securities is exempt from registration under the 1933
Act.
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(d) No
Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Shares and the Warrants and reservation for issuance and
issuance of the Warrant Shares) will not (i) result in a violation of any
memorandum of association, certificate of incorporation, certificate of
formation, any certificate of designations or other constituent documents of the
Company or any of its Subsidiaries, any shares or capital stock of the Company
or any of its Subsidiaries or the articles of association or bylaws of the
Company or any of its Subsidiaries or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) in any respect under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including foreign, federal and state securities laws and regulations and the
rules and regulations of The NASDAQ Global Select Market (the "Principal Market") and
applicable laws of the British Virgin Islands and of the People's Republic of
China ("China"))
applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or affected, except in
the case of clause (ii) or clause (iii) above, to the extent such conflicts,
defaults or violations could not reasonably be expected to have a Material
Adverse Effect.
(e) Consents. Except
as provided in Section 3(b), neither the Company nor any of its Subsidiaries is
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court, governmental agency or any regulatory or
self-regulatory agency or any other Person in order for it to execute, deliver
or perform any of its obligations under or contemplated by the Transaction
Documents, in each case in accordance with the terms hereof or
thereof. All consents, authorizations, orders, filings and
registrations which the Company is required to obtain prior to the Closing Date
pursuant to the preceding sentence have been obtained or effected on or prior to
the Closing Date, and the Company and its Subsidiaries are unaware of any facts
or circumstances that might prevent the Company from obtaining or effecting any
of the registration, application or filings pursuant to the preceding
sentence. The Company is not in violation of the listing requirements
of the Principal Market and has no knowledge of any facts that would reasonably
lead to delisting or suspension of the Common Shares in the foreseeable
future. The issuance by the Company of the Securities shall not have
the effect of delisting or suspending the Common Shares from the Principal
Market.
(f) Acknowledgment Regarding
Buyer's Purchase of Securities. The Company acknowledges and
agrees that each Buyer is acting solely in the capacity of an arm's length
purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby and that no Buyer is (i) an officer or director
of the Company or any of its Subsidiaries, (ii) to the knowledge of the Company,
an "affiliate" of the Company or any of its Subsidiaries (as defined in Rule
144) or (iii) to the knowledge of the Company, a "beneficial owner" of more than
10% of the Common Shares (as defined for purposes of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended (the "1934 Act")). The
Company further acknowledges that no Buyer is acting as a financial advisor or
fiduciary of the Company or any of its Subsidiaries (or in any similar capacity)
with respect to the Transaction Documents and the transactions contemplated
hereby and thereby, and any advice given by a Buyer or any of its
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to such
Buyer's purchase of the Securities. The Company further represents to
each Buyer that the Company's decision to enter into the Transaction Documents
has been based solely on the independent evaluation by the Company and its
representatives.
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(g) No General Solicitation;
Placement Agent's Fees. Neither the Company, nor any of its
Subsidiaries or affiliates, nor any Person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with the offer or sale of the
Securities. The Company shall be responsible for the payment of any
placement agent's fees, financial advisory fees, or brokers' commissions (other
than for persons engaged by any Buyer or its investment advisor) relating to or
arising out of the transactions contemplated hereby, including, without
limitation, the fees set forth on Schedule 3(g) hereto. The Company
acknowledges that it has engaged Xxxxxxxxxxx &
Co. Inc, as placement agent (the "Placement Agent") and Xxxxxxx Xxxxx Far East Limited, as financial
advisor (the "Financial Advisor") connection with the sale of the
Securities. Other than the Placement Agent and the Financial Advisor, neither the Company
nor any of its Subsidiaries has engaged any placement agent or other agent in
connection with the sale of the Securities.
(h) No Integrated
Offering. None of the Company, its Subsidiaries, any of their
affiliates, and any Person acting on their behalf has, directly or indirectly,
made any offers or sales of any security or solicited any offers to buy any
security, under circumstances that would require registration of the issuance of
any of the Securities under the 1933 Act, whether through integration with prior
offerings or otherwise, or, cause this offering of the Securities (without
regard to any limitations on exercise of the Warrants, including, without
limitation, under Section 1(f)(i) of the Warrant) to require approval of
shareholders of the Company for purposes of the 1933 Act or any applicable
shareholder approval provisions, including, without limitation, under the rules
and regulations of any exchange or automated quotation system on which any of
the securities of the Company are listed or designated; it being understood that
if there is a Dilutive Issuance (as defined in the Warrants), such Dilutive
Issuance could cause the anti-dilution provisions set forth in Section 2(a) of
the Warrants to be limited in certain respects unless and until the Company
obtains Shareholder Approval (as defined in Section 4(p)). The
Company covenants and agrees that none of the Company, its Subsidiaries, their
affiliates and any Person acting on their behalf will take any action or steps
referred to in the preceding sentence that would require registration of the
issuance of any of the Securities under the 1933 Act or cause the offering of
the Securities to be integrated with other offerings for purposes of any such
applicable shareholder approval provisions.
(i) Dilutive
Effect. The Company understands and acknowledges that the
number of Warrant Shares issuable upon exercise of the Warrants will increase in
certain circumstances. The Company further acknowledges that its
obligation to issue the Warrant Shares upon exercise of the Warrants in
accordance with this Agreement and the Warrants is, in each case, is absolute
and unconditional regardless of the dilutive effect that such issuance may have
on the ownership interests of other shareholders of the
Company.
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(j) Application of Takeover
Protections; Rights Agreement. The Company and its board of
directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company's Memorandum of Association or
Articles of Association, or the laws of the jurisdiction of its formation which
is or could become applicable to any Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company's
issuance of the Securities and any Buyer's ownership of the
Securities. The Company has not adopted a shareholder rights plan or
similar arrangement relating to accumulations of beneficial ownership of Common
Shares or a change in control of the Company.
(k) SEC Documents; Financial
Statements. During the two (2) years prior to the date hereof,
the Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act (all of the foregoing filed prior to the date
hereof or prior to the date of the Closing, and all exhibits included therein
and financial statements, notes and schedules thereto and documents incorporated
by reference therein being hereinafter referred to as the "SEC
Documents"). The Company has delivered to the Buyers or their
respective representatives true, correct and complete copies of the SEC
Documents not available on the XXXXX system. As of their respective
filing dates, the SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading. As of their respective filing dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto as in effect at the time
of filing. Such financial statements have been prepared in accordance
with generally accepted accounting principles, consistently applied ("GAAP"), during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto, or (ii) in the case of unaudited interim statements, to
the extent they may exclude footnotes or may be condensed or summary statements)
and fairly present in all material respects the financial position of the
Company as of the dates thereof and the results of its operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). No other information provided by
or on behalf of the Company to the Buyers which is not included in the SEC
Documents, including, without limitation, information referred to in Section
2(d) of this Agreement or in the disclosure schedules to this Agreement,
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements therein not misleading, in the
light of the circumstance under which they are or were made.
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(l) Absence of Certain
Changes. Except as set forth in Schedule 3(l), since
December 31, 2008, there has been no material adverse change and no material
adverse development in the business, assets, properties, operations, condition
(financial or otherwise), results of operations or prospects of the Company or
its Subsidiaries. Except as disclosed in Schedule 3(l), since
December 31, 2008, neither the Company nor any of its Subsidiaries has (i)
declared or paid any dividends, (ii) sold any assets to a third party,
individually or in the aggregate, in excess of $100,000 outside of the ordinary
course of business or (iii) had capital expenditures, individually or in a
series of related payments in the aggregate, in excess of
$350,000. Neither the Company nor any of its Subsidiaries has taken
any steps to seek protection pursuant to any bankruptcy law nor does the Company
have any knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings or any actual knowledge of any fact which
would reasonably lead a creditor to do so. The Company and its
Subsidiaries, individually and on a consolidated basis, are not as of the date
hereof, and after giving effect to the transactions contemplated hereby to occur
at the Closing, will not be Insolvent (as defined below). For
purposes of this Section 3(l), "Insolvent" means, with respect
to any Person, (i) the present fair saleable value of such Person's assets is
less than the amount required to pay such Person's total Indebtedness (as
defined in Section 3(s)), (ii) such Person is unable to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) such Person intends to incur or
believes that it will incur debts that would be beyond its ability to pay as
such debts mature or (iv) such Person has unreasonably small capital with which
to conduct the business in which it is engaged as such business is now
conducted.
(m) No Undisclosed Events,
Liabilities, Developments or Circumstances. Except as set forth on Schedule 3(l), no event, liability, development or
circumstance has occurred or exists, or is reasonably expected to occur with
respect to the Company, its Subsidiaries or their respective business,
properties, prospects, operations or financial condition, that would be required
to be disclosed by the Company under applicable securities laws on a
registration statement on Form F-1 filed with the SEC relating to an issuance
and sale by the Company of its Common Shares and which has not been publicly
announced.
(n) Conduct of Business;
Regulatory Permits. Neither the Company nor any of its
Subsidiaries is in violation of any term of or in default under any certificate
of designations of any outstanding series of preferred shares of the Company,
its Memorandum of Association or Articles of Association or their organizational
charter or memorandum of association or certificate of incorporation or articles
of association or bylaws, respectively. Neither the Company nor any
of its Subsidiaries is in violation of any judgment, decree or order or any
statute, ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct
its business in violation of any of the foregoing, except, in all cases, for
possible violations which could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Without
limiting the generality of the foregoing, the Company is not in violation of any
of the rules, regulations or requirements of the Principal Market and has no
knowledge of any facts or circumstances that would reasonably lead to delisting
or suspension of the Common Shares by the Principal Market in the foreseeable
future. Since June 2, 2008 the Common Shares have been listed on the
Principal Market and from January 22, 2008 until June 2, 2008, the Common Shares
were listed on The NASDAQ Capital Market. During the two (2) years
prior to the date hereof, (i) trading in the Common Shares have not been
suspended by the SEC, The NASDAQ Capital Market or the Principal Market and (ii)
the Company has received no communication, written or oral, from the SEC or the
Principal Market regarding the suspension or delisting of the Common Shares from
the Principal Market. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, except where the failure to possess such certificates,
authorizations or permits would not have, individually or in the aggregate, a
Material Adverse Effect, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
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(o) Foreign Corrupt
Practices. Neither the Company, nor any of its Subsidiaries,
nor any director, officer, agent, employee or other Person acting on behalf of
the Company or any of its Subsidiaries has, in the course of its actions for, or
on behalf of, the Company or any of its Subsidiaries (i) used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; (ii) made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.
(p) Xxxxxxxx-Xxxxx
Act. The Company is in compliance with any and all applicable
requirements of the Xxxxxxxx-Xxxxx Act of 2002 that are effective as of the date
hereof, and any and all applicable rules and regulations promulgated by the SEC
thereunder that are effective as of the date hereof.
(q) Transactions With
Affiliates. Except as set forth on Schedule 3(q), none
of the officers, directors or employees of the Company or any of its
Subsidiaries is presently a party to any transaction with the Company or any of
its Subsidiaries in which the amount involved exceeds $300,000 individually or
in the aggregate (other than for ordinary course services as employees, officers
or directors), including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
such officer, director or employee or, to the knowledge of the Company or any of
its Subsidiaries, any corporation, partnership, trust or other entity in which
any such officer, director, or employee has a substantial interest or is an
officer, director, trustee or partner.
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(r) Equity
Capitalization. As of the date hereof, the maximum number of
shares the Company is authorized to issue consists of (i) 150,000,000 Common
Shares, of which as of the date hereof, 39,585,706 shares are issued and
outstanding, a number of shares equal to the Required Reserved Amount (as
defined in Section 3(c)) is reserved and maintained for the issuance of the
Warrant Shares, 2,000,000 shares are reserved and maintained for issuance
pursuant to the Company's share option and purchase plans, and 7,000,000 shares
are issuable to Xx. Xxxxxxxx Xx, the Chairman of the Board of Directors of the
Company and the Chief Executive Officer of the Company ("Xx. Xx"), upon the Company
achieving certain operating milestones pursuant to a stock purchase agreement
dated April 14, 2007, and no shares are reserved for issuance pursuant to
securities (other than the aforementioned options and the Warrants) exercisable
or exchangeable for, or convertible into, Common Shares and (ii) 1,000,000
preferred shares, par value $0.0001 per share, of which as of the date hereof,
none of such preferred shares are issued and outstanding. All of such
outstanding shares have been, or upon issuance will be, validly issued and are
fully paid and nonassessable. Except as disclosed in Schedule 3(r): (i)
none of the Company's shares are subject to preemptive rights or any other
similar rights or any liens or encumbrances suffered or permitted by the
Company; (ii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
shares or capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
shares or capital stock of the Company or any of its Subsidiaries; (iii) there
are no outstanding debt securities, notes, credit agreements, credit facilities
or other agreements, documents or instruments evidencing Indebtedness of the
Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound; (iv) there are no financing statements
securing obligations in any material amounts, either singly or in the aggregate,
filed in connection with the Company or any of its Subsidiaries; (v) there are
no agreements or arrangements under which the Company or any of its Subsidiaries
is obligated to register the sale of any of their securities under the 1933 Act
(except pursuant to the Registration Rights Agreement); (vi) there are no
outstanding securities or instruments of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities; (viii) the Company does not have any stock appreciation rights
or "phantom stock" plans or agreements or any similar plan or agreement; and
(ix) the Company and its Subsidiaries have no liabilities or obligations
required to be disclosed in the SEC Documents but not so disclosed in the SEC
Documents, other than those incurred in the ordinary course of the Company's or
any of its Subsidiary's' respective businesses and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect. The
Company has furnished or made available to the Buyers true, correct and complete
copies of the Company's Memorandum of Association, as amended and as in effect
on the date hereof (the "Memorandum of Association"),
and the Company's Articles of Association, as amended and as in effect on the
date hereof (the "Articles of
Association"), and the terms of all securities convertible into, or
exercisable or exchangeable for, Common Shares and the material rights of the
holders thereof in respect thereto.
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(s) Indebtedness and Other
Contracts. Except as disclosed in Schedule 3(s),
neither the Company nor any of its Subsidiaries (i) has any outstanding
Indebtedness (as defined below), (ii) is a party to any contract, agreement or
instrument, the violation of which, or default under which, by the other
party(ies) to such contract, agreement or instrument would reasonably be
expected to result in a Material Adverse Effect, (iii) is in violation of any
term of or in default under any contract, agreement or instrument relating to
any Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (iv) is a
party to any contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Company's officers, has or is
expected to have a Material Adverse Effect. Schedule 3(s)
provides a detailed description of the material terms of any such outstanding
Indebtedness. For purposes of this Agreement: (x) "Indebtedness" of any Person
means, without duplication (A) all indebtedness for borrowed money, (B) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services, including, without limitation, "capital leases" in
accordance with United States GAAP (other than trade payables entered into in
the ordinary course of business), (C) all reimbursement or payment obligations
with respect to letters of credit, surety bonds and other similar instruments,
(D) all obligations evidenced by notes, bonds, debentures or similar
instruments, including obligations so evidenced incurred in connection with the
acquisition of property, assets or businesses, (E) all indebtedness created or
arising under any conditional sale or other title retention agreement, or
incurred as financing, in either case with respect to any property or assets
acquired with the proceeds of such indebtedness (even though the rights and
remedies of the seller or bank under such agreement in the event of default are
limited to repossession or sale of such property), (F) all monetary obligations
under any leasing or similar arrangement which, in connection with GAAP,
consistently applied for the periods covered thereby, is classified as a capital
lease, (G) all indebtedness referred to in clauses (A) through (F) above secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable for
the payment of such indebtedness, and (H) all Contingent Obligations in respect
of indebtedness or obligations of others of the kinds referred to in clauses (A)
through (G) above; (y) "Contingent Obligation" means,
as to any Person, any direct or indirect liability, contingent or otherwise, of
that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto; and (z) "Person" means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization and a government or any department or
agency thereof, including in China.
(t) Absence of
Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by the Principal Market, any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries, the Common Shares or any of the Company's Subsidiaries or any
of the Company's or its Subsidiaries' officers or directors in their capacities
as such, except as set forth in Schedule 3(t). Except
as described therein, the matters set forth in Schedule 3(t) would
not would reasonably be expected to have a Material Adverse Effect.
(u) Insurance. The
Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the
Company nor any such Subsidiary has been refused any insurance coverage sought
or applied for and neither the Company nor any such Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have a
Material Adverse Effect.
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(v) Employee
Relations.
(i) Neither
the Company nor any of its Subsidiaries is a party to any collective bargaining
agreement or employs any member of a union. The Company and its
Subsidiaries believe that their relations with their employees are
good. No executive officer of the Company or any of its Subsidiaries
(as defined in Rule 501(f) of the 0000 Xxx) has notified the Company or any such
Subsidiary that such officer intends to leave the Company or any such Subsidiary
or otherwise terminate such officer's employment with the Company or any such
Subsidiary. No executive officer of the Company or any of its
Subsidiaries, to the knowledge of the Company or any of its Subsidiaries, is, or
is now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer, to the
Company's knowledge, does not subject the Company or any of its Subsidiaries to
any liability with respect to any of the foregoing matters.
(ii) The
Company and its Subsidiaries are in compliance with all federal, state, local
and foreign laws and regulations respecting labor, employment and employment
practices and benefits, terms and conditions of employment and wages and hours,
except where failure to be in compliance would not, either individually or in
the aggregate, reasonably be expected to result in a Material Adverse
Effect.
(w) Title. The Company
and its Subsidiaries have land use rights as permitted under China law with
respect to all real property and good and marketable title to all personal
property owned by them which is material to the business of the Company and its
Subsidiaries, in each case free and clear of all liens, encumbrances and defects
except such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and any of its Subsidiaries. Any real property and
facilities held under lease by the Company and any of its Subsidiaries are held
by them under valid, subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company and its Subsidiaries.
(x) Intellectual Property
Rights. The Company and its Subsidiaries own or possess
adequate rights or licenses to use all trademarks, trade names, service marks,
service xxxx registrations, service names, original works of authorship,
patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and other intellectual property
rights and all applications and registrations therefor ("Intellectual Property Rights")
necessary to conduct their respective businesses as now conducted, except for
any such Intellectual Property Rights the non-ownership or non-possession of
which would not reasonably be expected to result in a Material Adverse
Effect. All of the Company's material Intellectual Property Rights
and relevant applications therefor have been duly registered by the China Patent
and Trademark Office, or the equivalent offices of non-US jurisdictions, and
have been properly maintained in accordance with applicable law in China and
such other jurisdictions. None of the Company's material Intellectual
Property Rights have expired or terminated or have been abandoned or are
expected to expire or terminate or are expected to be abandoned, within three
years from the date of this Agreement. The Company does not have any
knowledge of any infringement by the Company or its Subsidiaries of Intellectual
Property Rights of others. There is no claim, action or proceeding
being made or brought, or to the knowledge of the Company or any of its
Subsidiaries, being threatened, against the Company or any of its Subsidiaries
regarding its material Intellectual Property Rights. Neither the
Company nor any of its Subsidiaries is aware of any facts or circumstances which
might give rise to any of the foregoing infringements or claims, actions or
proceedings. The Company and its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their Intellectual Property Rights.
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(y) Environmental
Laws. The Company and its Subsidiaries (i) are in compliance
with any and all Environmental Laws (as hereinafter defined), (ii) have received
all permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or approval
where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so
comply and receive any such permit, license or other approval could be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect. The term "Environmental Laws"
means, to the extent such laws apply to the Company or its
Subsidiaries, all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, or toxic
or hazardous substances or wastes (collectively, "Hazardous Materials") into the environment, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
(z) Subsidiary
Rights. The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or such Subsidiary.
(aa) Investment Company
Status. The Company is not, and upon consummation of the sale
of the Securities, and for so long any Buyer holds any Securities, will not be,
an "investment company," a company controlled by an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company" as such terms are defined in the Investment Company Act
of 1940, as amended.
(bb) Tax
Status. The Company and each of its Subsidiaries (i) has made
or filed all China and other foreign, U.S. federal and state income and all
other tax returns, reports and declarations required by any jurisdiction to
which it is subject, (ii) has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and (iii) has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply, except in each case where the failure to
file, pay or set aside would not reasonably be expected to have a Material
Adverse Effect. There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the officers
of the Company know of no basis for any such claim.
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(cc) Internal Accounting and
Disclosure Controls. The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain asset and liability accountability, (iii) access to assets
or incurrence of liabilities is permitted only in accordance with management's
general or specific authorization and (iv) the recorded accountability for
assets and liabilities is compared with the existing assets and liabilities at
reasonable intervals and appropriate action is taken with respect to any
difference. The Company maintains disclosure controls and procedures
(as such term is defined in Rule 13a-15 under the 0000 Xxx) that are effective
in ensuring that information required to be disclosed by the Company in the
reports that it files or submits under the 1934 Act is recorded, processed,
summarized and reported, within the time periods specified in the rules and
forms of the SEC, including, without limitation, controls and procedures
designed in to ensure that information required to be disclosed by the Company
in the reports that it files or submits under the 1934 Act is accumulated and
communicated to the Company's management, including its principal executive
officer or officers and its principal financial officer or officers, as
appropriate, to allow timely decisions regarding required
disclosure. Except as disclosed in the Company's annual report filing
on Form 20-F for fiscal year ended December 31, 2008, and the qualified report
that the Company expects to receive from its independent auditors in connection
with its annual report filing on Form 20-F for the fiscal year ended December
31, 2009, during the twelve months prior to the date hereof neither the Company
nor any of its Subsidiaries has received any notice or correspondence from any
accountant relating to any material weakness in any part of the system of
internal accounting controls of the Company or any of its
Subsidiaries.
(dd) Off Balance Sheet
Arrangements. There is no transaction, arrangement, or other
relationship between the Company and an unconsolidated or other off balance
sheet entity that is required to be disclosed by the Company in its 1934 Act
filings and is not so disclosed or that otherwise would be reasonably likely to
have a Material Adverse Effect.
(ee) Eligibility for
Registration. The Company is eligible to register the Shares
and the Warrant Shares for resale by the Buyers using Form F-3 promulgated under
the 1933 Act.
(ff) Transfer
Taxes. On the Closing Date, all stock transfer or other taxes
(other than income or similar taxes) which are required to be paid in connection
with the sale and transfer of the Securities to be sold to each Buyer hereunder
will be, or will have been, fully paid or provided for by the Company, and all
laws imposing such taxes will be or will have been complied with.
(gg) Manipulation of
Price. The Company has not, and to its knowledge no one acting
on its behalf has, (i) taken, directly or indirectly, any action designed to
cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) other than the Placement Agent, sold, bid for, purchased, or
paid any compensation for soliciting purchases of, any of the Securities, or
(iii) other than the Placement Agent, paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities of the
Company.
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(hh) Acknowledgement Regarding
Buyers' Trading Activity. It is understood and acknowledged by
the Company that (i) none of the Buyers has been asked to agree by the Company,
any of its Subsidiaries or any of their respective officers, directors,
employees or agents, nor has any Buyer agreed with the Company, any of its
Subsidiaries or any of their respective officers, directors, employees or
agents, to desist from purchasing or selling, long and/or short, securities of
the Company, or "derivative" securities based on securities issued by the
Company or to hold the Securities for any specified term; (ii) any Buyer, and
counter-parties in "derivative" transactions to which any such Buyer is a party,
directly or indirectly, presently may have a "short" position in the Common
Shares which was established (excluding the location and/or reservation of
borrowable Common Shares) prior to such Buyer's knowledge of the transactions
contemplated by the Transaction Documents, and (iii) each Buyer shall not be
deemed to have any affiliation with or control over any arm's length
counter-party in any "derivative" transaction. The Company further
understands and acknowledges that one or more Buyers may engage in hedging
and/or trading activities at various times during the period that the Securities
are outstanding and (b) such hedging and/or trading activities, if any, can
reduce the value of the existing shareholders' equity interest in the Company
both at and after the time the hedging and/or trading activities are being
conducted. The Company acknowledges that such aforementioned hedging
and/or trading activities do not constitute a breach of this Agreement, the
Warrants or any of the documents executed in connection herewith.
(ii) U.S. Real Property Holding
Corporation. The Company is not, has never been, and so long
as any Securities remain outstanding, shall not become, a U.S. real property
holding corporation within the meaning of Section 897 of the Internal Revenue
Code of 1986, as amended, and the Company shall so certify upon any Buyer's
request.
(jj) Bank Holding Company
Act. Neither the Company nor any of its Subsidiaries or
affiliates is subject to the Bank Holding Company Act of 1956, as amended (the
"BHCA") and to
regulation by the Board of Governors of the Federal Reserve System (the "Federal
Reserve"). Neither the Company nor any of its Subsidiaries or
affiliates owns or controls, directly or indirectly, five percent (5%) or more
of the outstanding shares of any class of voting securities or twenty-five
percent (25%) or more of the total equity of a bank or any entity
that is subject to the BHCA and to regulation by the Federal
Reserve. Neither the Company nor any of its Subsidiaries or
affiliates exercises a controlling influence over the management or policies of
a bank or any entity that is subject to the BHCA and to regulation by the
Federal Reserve.
(kk) No Additional
Agreements. The Company does not have any agreement or
understanding with any Buyer with respect to the transactions contemplated by
the Transaction Documents other than as specified in the Transaction
Documents.
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(ll) Disclosure. The
Company confirms that neither it nor any other Person acting on its behalf has
provided any of the Buyers or their agents or counsel with any information that
constitutes or could reasonably be expected to constitute material, nonpublic
information other than the existence of the transactions contemplated by this
Agreement and the other Transaction Documents. The Company
understands and confirms that each of the Buyers will rely on the foregoing
representations made on the date hereof and as of the Closing Date in effecting
transactions in securities of the Company. All disclosure provided to
the Buyers regarding the Company, or any of its Subsidiaries, their business and
the transactions contemplated hereby, including the disclosure schedules to this
Agreement, furnished by or on behalf of the Company is true and correct and does
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not
misleading. Each press release issued by the Company or any of its
Subsidiaries during the twelve (12) months preceding the date of this Agreement
did not at the time of release contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. No event or circumstance has
occurred or information exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, prospects, operations or
financial conditions, which, under applicable law, rule or regulation, requires
public disclosure or announcement by the Company but which has not been so
publicly announced or disclosed, other than the occurrence of the Closing under
this Agreement. The Company acknowledges and agrees that no Buyer
makes or has made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in
Section 2.
(mm) China
Subsidiaries.
(i) Schedule 3(mm) sets
forth, for each Subsidiary that is incorporated in China, not including Hong
Kong (a "China
Subsidiary"), (i) the legal classification of such entity under the
applicable company laws and foreign investment laws of China, including true and
correct copies of the relevant currently effective business license by the
relevant China governmental approval authority for the location in which the
Subsidiary maintains an office or premises for business operations; (ii) the
total registered capital; (iii) the holders of record of the registered capital;
(iv) the authorized legal representative, directors, officers, legal address and
each business address, as well as the original China approval authority and
China governmental authority with current jurisdiction over the entity; and (v)
any agreements with respect to the registered capital, including outstanding
securities, contracts, commitments or arrangements granting any party the right
to obtain any equity ownership of the Subsidiary.
(ii) For
each China Subsidiary the holders of record of its registered capital have
contributed in full its subscribed share of the entity's registered capital
pursuant to the articles of association and, as applicable, relevant joint
venture contracts, and all such contributions have been verified and certified
by a Chinese registered public accountant according to applicable China law,
approved by all relevant China governmental authorities and fully paid, and
verification certificates have been issued to each such holder of record or
previous investor accordingly. All previous transfers or assignments
of registered capital have been approved by the relevant China governmental
authorities and all necessary corporate action.
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(iii) Each
Subsidiary incorporated in China is a limited liability company duly organized,
validly existing and in good standing under the applicable company laws and, as
applicable, the foreign investment laws of China, has, as applicable, the status
of a foreign investment enterprise, and is a legal person with all requisite
corporate power to own (to the extent permitted under the laws of China), lease
and operate its properties and to carry on its business as now being conducted
in each place where its business is conducted. Each China Subsidiary
and its business operations are in compliance with the terms and conditions of
its business license, joint venture contract (where applicable) and articles of
association. The construction of the China Subsidiary's operating
facilities and operation of its business is and has been in full compliance with
its relevant feasibility study and business license, as
applicable. Each Subsidiary has received all authorizations,
approvals, license, permits and other rights from China governmental authorities
necessary and appropriate for the continued operation of the Company's
business.
(iv) All
necessary approvals from China governmental authorities have been received to
ensure that each China Subsidiary will continue to enjoy, to the extent
permitted by applicable China law, all of the tax clearances, concessions and
other benefits available to such China Subsidiary prior to the Closing Date, or
otherwise available under applicable China law to foreign investment enterprises
similarly situated.
(v) Each
Subsidiary is and has been in compliance with applicable China laws relating to
its relationship to its employees or suppliers or to any governmental taxing or
customs authority, and relating to any other aspect of its
business. Each Subsidiary is in compliance with applicable China law
relating to anti-competitive practices, price fixing, and environmental matters,
respectively, and, to its knowledge, there are no proceedings pending or
threatened regarding any violation by it of applicable China law, including work
safety, environmental and employment laws.
(vi) Each
Subsidiary has obtained all required China product registrations for the
products related to its business.
(nn) Share Option Plans.
Each share option granted by the Company was granted (i) in accordance with the
terms of the applicable Company share option plan and (ii) with an exercise
price at least equal to the fair market value of the Common Shares on the date
such share option would be considered granted under GAAP of the United States
and applicable law. No share option granted under the Company's share option
plan has been backdated. The Company has not knowingly granted, and
there is no and has been no Company policy or practice to knowingly grant, share
options prior to, or otherwise knowingly coordinate the grant of share options
with, the release or other public announcement of material information regarding
the Company or its Subsidiaries or their financial results or
prospects.
(oo) Rule
144(i). For purposes of confirming the availability to the
Buyers of Rule 144 upon satisfaction of the requisite holding period, the
Company hereby represents and warrants that it (i) has ceased to be an issuer
described in Rule 144(i)(1)(i); (ii) is subject to the reporting requirements of
Section 13 or 15(d) of the 1934 Act; (iii) has filed all reports and other
materials required to be filed by Section 13 or 15(d) of the 1934 Act, as
applicable, during the preceding 12 months (or for such shorter period that the
Company was required to file such reports and materials), other than Form 8-K or
Form 6-K reports; and (iv) has filed current "Form 10 information" with the SEC
reflecting its status as an entity that is no longer an issuer described in Rule
144 (i)(1)(i) at least six months prior to the date hereof.
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(pp) Foreign
Issuer. The Company is a "foreign issuer" as defined in Rule
902 of Regulation S.
(qq) Regulation S
Offering. Assuming the accuracy
of each of the representations and warranties set forth in Section 2 of this
Agreement, the Securities offered and sold hereby by the Company to
the Buyers in reliance on Regulation S shall constitute a Category 2 offering of
securities pursuant to Rule 903 of Regulation S. The Company
acknowledges and agrees that as of the Distribution Compliance Distribution
Termination Date, (A) any Shares purchased hereunder pursuant to Regulation S
and (B) any Warrant Shares received after the
Warrants become exercisable and upon exercise of the Warrants purchased
hereunder pursuant to Regulation S in accordance with its terms will be
freely tradable on the Principal Market without any restrictions under
applicable securities laws, the rules and the regulations of the Principal
Market or otherwise. The Company acknowledges and agrees that on and after the
Warrant Listing Deadline (as defined in Section 4(f)(ii)), any Warrants
purchased hereunder pursuant to Regulation S will be freely tradable on the OTC
Bulletin Board without any restrictions under applicable securities laws, the
rules and the regulations of the OTC Bulletin Board or otherwise.
(rr) Patriot
Act.
(i) Neither the
Company nor any of its Subsidiaries (nor any of their affiliates) is subject to
sanctions of the United States government or in violation of any federal, state,
municipal or local laws, statutes, codes, ordinances, orders, decrees, rules or
regulations relating to terrorism or money laundering, including, without
limitation, Executive Order No. 13224 on Terrorist Financing, effective
September 24, 2001 (the "Executive Order") and the
Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56, the "Patriot Act"). Neither the
Company nor any of its Subsidiaries nor any of their affiliates is a "Prohibited Person," which term
is defined as follows:
(A) a
Person that is listed in the Annex to, or is otherwise subject to the provisions
of, the Executive Order;
(B) a
Person owned or controlled by, or acting for or on behalf of, any person or
entity that is listed in the Annex to, or is otherwise subject to the provisions
of, the Executive Order;
(C) a
Person with whom either party is prohibited from dealing or otherwise engaging
in any transaction by any terrorism or anti-money laundering Law, including the
Executive Order and the Patriot Act;
(D) a
Person who commits, threatens or conspires to commit or supports "terrorism" as
defined in the Executive Order; or
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(E) a
Person that is named as a "specially designated national and blocked person" on
the most current list published by the U.S. Treasury Department Office of
Foreign Asset Control at its official website,
xxxx://xxx.xxxxx.xxx?/xxxxxxx/xxxxxxxxxxx/xxxx/xxx/x00xxx.xxx or any replacement
website or other replacement official publication of such list.
(ii) Neither the
Company nor any of its Subsidiaries nor any of their affiliates is or will (x)
conduct any business or engage in making or receiving any contribution of funds,
goods or services to or for the benefit of any Prohibited Person, (y) deal in,
or otherwise engage in, any transaction relating to any property or interest in
property blocked pursuant to the Executive Order, or (z) engage in or conspire
to engage in any transaction that evades or avoids, or has the purpose of
evading or avoiding, or attempts to violate, any of the prohibitions set forth
in the Executive Order or the Patriot Act.
4. COVENANTS.
(a) Best
Efforts. Each party shall use its reasonable best efforts
timely to satisfy each of the covenants and the conditions to be satisfied by it
as provided in Sections 5, 6 and 7 of this Agreement.
(b) Form D and Blue
Sky. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to each
Buyer promptly after such filing. The Company shall, on or before the
Closing Date, take such action as the Company shall reasonably determine is
necessary in order to obtain an exemption for or to qualify the Securities for
sale to the Buyers at the Closing pursuant to this Agreement under applicable
securities or "Blue Sky" laws of the states of the United States (or to obtain
an exemption from such qualification), and shall provide evidence of any such
action so taken to the Buyers on or prior to the Closing Date. The
Company shall make all filings and reports relating to the offer and sale of the
Securities required under applicable securities or "Blue Sky" laws of the states
of the United States following the Closing Date.
(c) Reporting
Status. Until the date on which the Investors (as defined in
the Registration Rights Agreement) shall have sold all the Shares and Warrant
Shares and none of
the Warrants are outstanding (the "Reporting Period"), the
Company shall timely file all reports required to be filed with the SEC pursuant
to the 1934 Act, and the Company shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would no longer require or otherwise permit such
termination, and the Company shall take all actions necessary to maintain its
eligibility to register the Shares and the Warrant Shares for resale by the
Investors on Form F-3.
(d) Use of
Proceeds. The Company will use the proceeds from the sale of
the Securities for general corporate and for working capital purposes and in
connection with the announced acquisition and not for (i) the repayment of any
outstanding Indebtedness of the Company or any of its Subsidiaries or (ii) the
redemption or repurchase of any of its or its Subsidiaries' equity
securities.
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(e) Financial
Information. The Company agrees to send the following to each
Investor during the Reporting Period unless the following are filed with the SEC
through XXXXX and are available to the public through the XXXXX system,
(i) within one (1) Business Day after the filing thereof with the
SEC, a copy of its Annual Reports on Form 20-F, any Reports on Form 6-K and any
registration statements (other than on Form S-8) or amendments filed pursuant to
the 1933 Act, (ii) on the same day as the release thereof, facsimile or e-mailed
copies of all press releases issued by the Company or any of its Subsidiaries,
and (iii) copies of any notices and other information made available or given to
the shareholders of the Company generally, contemporaneously with the making
available or giving thereof to the shareholders. As used herein,
"Business Day" means any
day other than Saturday, Sunday or other day on which commercial banks in The
City of New York are authorized or required by law to remain
closed.
(f) Listing.
(i) The
Company shall promptly secure the listing of all of the Registrable Securities
(as defined in the Registration Rights Agreement) upon each national securities
exchange and automated quotation system, if any, upon which the Common Shares
are then listed (subject to official notice of issuance) and shall maintain such
listing of all Registrable Securities from time to time issuable under the terms
of the Transaction Documents on such national securities exchange or automated
quotation system. The Company shall maintain the authorization for
quotation of the Common Shares on the Principal Market. Neither the
Company nor any of its Subsidiaries shall take any action which would be
reasonably expected to result in the delisting or suspension of the Common
Shares on the Principal Market. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section
4(f).
(ii)
In addition, the Company shall take all necessary actions to cause the Warrants
to be listed for quotation on (A) the OTC Bulletin Board, including, without
limitation, using its reasonable best efforts to obtain the agreement of at
least one broker-dealer that is a member of the Financial Industry Regulatory
Authority to act as a market maker with respect to the Warrants, or (B) at the
Company's discretion, on any other Eligible Market (as defined in the Warrants),
in each case as soon as practicable, but in no event later than June 19, 2010
(the "Warrant Listing
Deadline"), and to maintain such listing until the earlier to occur of
(x) the expiration date of the Warrants and (y) such time as all of the Warrants
have been exercised in full. The Buyers shall use their reasonable
best efforts to assist the Company in complying with its obligations pursuant to
this Section 4(f)(ii), including, without limitation, providing such information
as is reasonably requested by the Company.
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(g) Fees. The
Company shall reimburse [ ] (a Buyer) or its designee(s) (in addition to any
other expense amounts paid to any Buyer or its counsel prior to the date of this
Agreement) for all reasonable costs and expenses incurred in connection with the
transactions contemplated by the Transaction Documents (including all reasonable
legal fees and disbursements in connection therewith, documentation and
implementation of the transactions contemplated by the Transaction Documents and
due diligence in connection therewith) in an amount not to exceed $90,000 (such amount to include all unpaid
legal fees and expenses incurred by [ ] and payable to Xxxxxxx Xxxx & Xxxxx
LLP prior to the date hereof with respect to prior proposed transactions between
the Company and [ ] similar to the transactions contemplated hereby),
which amount may be withheld by [
]from its Purchase Price at the Closing. The Company shall be
responsible for the payment of any placement agent's fees, financial advisory
fees, or broker's commissions (other than for Persons engaged by any Buyer)
relating to or arising out of the transactions contemplated hereby, including,
without limitation, any fees or commissions as set forth on Schedule 3(g)
hereto. The Company shall pay, and hold each Buyer harmless against,
any liability, loss or expense (including, without limitation, reasonable
attorney's fees and out-of-pocket expenses) arising in connection with any claim
relating to any such payment. Except as otherwise set forth in the
Transaction Documents, each party to this Agreement shall bear its own expenses
in connection with the sale of the Securities to the Buyers.
(h) Pledge of
Securities. The Company acknowledges and agrees that the
Securities may be pledged by an Investor in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a
transfer, sale or assignment of the Securities hereunder except as may otherwise
be required under applicable securities laws, and no Investor effecting a pledge
of Securities shall be required to provide the Company with any notice thereof
or otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document, including, without limitation, Section 2(f) hereof;
provided that an Investor and its pledgee shall be required to comply with the
provisions of Section 2(f) hereof in order to effect a sale, transfer or
assignment of Securities to such pledgee. The Company hereby agrees
to execute and deliver such documentation as a pledgee of the Securities may
reasonably request in connection with a pledge of the Securities to such pledgee
by an Investor.
(i) Disclosure of Transactions
and Other Material Information. On or before 8:30 a.m., New
York City time, on January 21, 2010, the Company shall issue a press release
(the "Press Release")
reasonably acceptable to the Buyers disclosing all material terms of the
transactions contemplated by the Transaction Documents and file a Current Report
on Form 6-K describing the material terms of the transactions contemplated by
the Transaction Documents in the form required by the 1934 Act and attaching the
material Transaction Documents (including, without limitation, this Agreement,
the form of Warrant, the form the Registration Rights Agreement, the form of
Voting Agreement and the form of Lock-Up Agreement as exhibits to such filing)
(including all attachments, the "6-K Filing"). From
and after the filing of the 6-K Filing with the SEC, no Buyer shall be in
possession of any material, nonpublic information received from the Company, any
of its Subsidiaries or any of their respective officers, directors, employees or
agents, that is not disclosed in the Press Release. The Company shall
not, and shall cause each of its Subsidiaries and its and each of their
respective officers, directors, employees and agents, not to, provide any Buyer
with any material, nonpublic information regarding the Company or any of its
Subsidiaries from and after the issuance of the Press Release with the SEC
without the prior express written consent of such Buyer. If a Buyer
has, or believes it has, received any such material, nonpublic information
regarding the Company or any of its Subsidiaries from the Company or a "person"
acting on behalf of the Company" within the meaning of Rule 101(c) of Regulation
FD in breach of the immediately preceding sentence, it may provide the Company
with written notice thereof. If the Company and its counsel agree
that such information is material, nonpublic information, the Company shall,
within two (2) Trading Days of receipt of such notice, make public disclosure of
such material, nonpublic information (the "MNPI
Disclosure"). In the event the Company fails to make the MNPI
Disclosure, in addition to any other remedy provided herein or in the
Transaction Documents, a Buyer shall have the right to make a public disclosure,
in the form of a press release, public advertisement or otherwise, of such
material, nonpublic information without the prior approval by the Company, its
Subsidiaries, or any of its or their respective officers, directors, employees
or agents. No Buyer shall have any liability to the Company, its
Subsidiaries, or any of its or their respective officers, directors, employees,
shareholders or agents for any such disclosure. Subject to the
foregoing, neither the Company, its Subsidiaries nor any Buyer shall issue any
press releases or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of any Buyer, to make any press release or other
public disclosure with respect to such transactions (i) in substantial
conformity with the 6-K Filing and contemporaneously therewith and (ii) as is
required by applicable law and regulations (provided that in the case of clause
(i) each Buyer shall be consulted by the Company in connection with any such
press release or other public disclosure prior to its
release). Without the prior written consent of any applicable Buyer,
neither the Company nor any of its Subsidiaries or affiliates shall disclose the
name of such Buyer in any filing (other than in the exhibits to the 6-K Filing),
announcement, release or otherwise, except as otherwise required by any law,
rule or regulation applicable to the Company after consultation with such
Buyer.
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(j) Variable
Securities. For so long as any Warrants remain outstanding,
the Company shall not, in any manner, issue or sell any rights, warrants or
options to subscribe for or purchase Common Shares or directly or indirectly
convertible into or exchangeable or exercisable for Common Shares at a price
which varies or may vary with the market price of the Common Shares, including
by way of one or more reset(s) to any fixed price unless the conversion,
exchange or exercise price of any such security cannot be less than the then
applicable Exercise Price (as defined in the Warrants) with respect to the
Common Shares into which any Warrant is exercisable.
(k) Corporate
Existence. So long as any Buyer beneficially owns any
Securities, the Company shall maintain its corporate existence and shall not be
party to any Fundamental Transaction (as defined in the Warrants) unless the
Company is in compliance with the applicable provisions governing Fundamental
Transactions set forth in the Warrants.
(l) Reservation of
Shares. So long as any Buyer owns any Securities, the Company
shall take all action necessary to at all times have authorized, and reserved
and maintained for the purpose of issuance, no less than 130% of the sum of the
number of Common Shares issuable upon exercise of the Warrants then outstanding
(without taking into account any limitations on the exercise of the Warrants set
forth in the Warrants). If at any time the number of Common Shares
authorized and reserved and maintained for issuance is not sufficient to meet
the Required Reserved Amount, the Company will promptly take all corporate
action necessary to authorize and reserve and maintain for issuance a sufficient
number of shares, including, without limitation, calling a special meeting of
shareholders to authorize additional shares to meet the Company's obligations
under Section 3(c), in the case of an insufficient number of authorized shares,
obtain shareholder approval of an increase in such authorized number of shares
of the Company in favor of an increase in the authorized shares of the Company
to ensure that the number of authorized shares is sufficient to meet the
Required Reserved Amount.
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(m) Conduct of
Business. The business of the Company and its Subsidiaries
shall not be conducted in violation of any law, ordinance or regulation of any
governmental entity, except where such violations would not result, either
individually or in the aggregate, in a Material Adverse Effect.
(n) Additional Issuances of
Securities.
(i)
For purposes of this Section 4(n), the following definitions
shall apply.
(1) "Common Shares Equivalents" means,
collectively, Options and Convertible Securities.
(2) "Convertible Securities" means
any stock or securities (other than Options) convertible into or exercisable or
exchangeable for Common Shares.
(3) "Options" means any rights,
warrants or options to subscribe for or purchase Common Shares or Convertible
Securities.
(ii) From
the date hereof until thirty (30) days after the date when all Registrable
Securities (as defined in the Registration Rights Agreement) have been
registered, the Company will not, directly or indirectly, offer, sell, grant any
option to purchase, or otherwise dispose of (or announce any offer, sale, grant
or any option to purchase or other disposition of) any of its or its
Subsidiaries' equity or equity equivalent securities, including without
limitation any debt, preferred stock or other instrument or security that is, at
any time during its life and under any circumstances, convertible into or
exchangeable or exercisable for Common Shares or Common Shares Equivalents (any
such offer, sale, grant, disposition or announcement being referred to as a
"Subsequent
Placement").
(iii)
The restrictions contained in subsection (ii) of this
Section 4(n) shall not apply in connection with the issuance of any Excluded
Securities (as defined in the Warrants).
(o) Public
Information. At any time during the period commencing from the
six (6) month anniversary of the Closing Date and ending, if a registration
statement is not available for the resale of all of the Registrable Securities,
at such time that all of the Securities may be sold without restriction or
limitation pursuant to Rule 144 and without the requirement to be in compliance
with Rule 144(c)(1), if the Company shall fail for any reason to satisfy the
current public information requirement under Rule 144(c) (a "Public Information Failure")
then, as partial relief for the damages to any holder of Securities by reason of
any such delay in or reduction of its ability to sell the Securities (which
remedy shall not be exclusive of any other remedies available at law or in
equity), the Company shall pay to each such holder an amount in cash equal to
one and one-half percent (1.5%) of the aggregate Purchase Price of such holder's
Securities on the day of a Public Information Failure and on every thirtieth day
(pro rated for periods totaling less than thirty days) thereafter until the
earlier of (i) the date such Public Information Failure is cured and (ii) such
time that such public information is no longer required pursuant to Rule
144. The payments to which a holder shall be entitled pursuant to
this Section 4(o) are referred to herein as "Public Information Failure
Payments." Public Information Failure Payments shall be paid
on the earlier of (I) the last day of the calendar month during which such
Public Information Failure Payments are incurred
and (II) the third Business Day after the event or failure giving rise to the
Public Information Failure Payments is
cured. In the event the Company fails to make Public Information
Failure Payments in
a timely manner, such Public Information Failure Payments shall bear
interest at the rate of 1.5% per month (prorated for partial months) until paid
in full.
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(p) Shareholder Approval.
The Company shall provide each shareholder entitled to vote at a special or
annual meeting of shareholders of the Company (the "Shareholder Meeting"), which
shall be called and held as promptly as practicable after the date hereof, but
in no event later than October 31, 2010 (the "Shareholder Meeting
Deadline"), a proxy statement, in a form reasonably acceptable to the
Buyers meeting the requirements of the laws of the British Virgin Islands after
review by Xxxxxxx Xxxx & Xxxxx LLP at the expense of the Company, not to
exceed $5,000, soliciting each such shareholder's affirmative vote at the
Shareholder Meeting for approval of resolutions (the "Resolutions") providing for
the issuance of all of the Securities as described in the Transaction Documents
in accordance with applicable law, the provisions of the Articles of Association
and the rules and regulations of the Principal Market (such affirmative approval
being referred to herein as the "Shareholder Approval" and the
date such approval is obtained, the "Shareholder Approval Date"),
and the Company shall use its reasonable best efforts to solicit its
shareholders' approval of such Resolutions and to cause the Board of Directors
of the Company to recommend to the shareholders that they approve the
Resolutions. The Company shall be obligated to seek to obtain the
Shareholder Approval by the Shareholder Meeting Deadline. If, despite
the Company's reasonable best efforts, the Shareholder Approval is not obtained
at the Shareholder Meeting, the Company shall cause an additional Shareholder
Meeting to be held each calendar quarter thereafter until Shareholder Approval
is obtained.
(q) Voting
Agreement. The Company shall use its reasonable best efforts
to effectuate the transactions contemplated by the Voting Agreement,
substantially in the form attached hereto as Exhibit C (the "Voting Agreement"), executed
by the Company, Xx. Xx and Xx. Xxxx X. Xxx ("Xx. Xxx" and, collectively
with Xx. Xx, the "Principal
Shareholders"). The Company shall not amend or waive any
provision of the Voting Agreement and shall enforce the provisions of the Voting
Agreement in accordance with its terms. If the Principal Shareholders breach any
provisions of the Voting Agreement, the Company shall promptly use its
reasonable best efforts to seek specific performance of the terms of the Voting
Agreement in accordance with Section 4.02 thereof. In addition, if
the Company receives any notice from the Principal Shareholders pursuant to the
Voting Agreement, the Company shall promptly, but in no event later than two (2)
Business Days, deliver a copy of such notice to each Buyer.
(r) Lock-Up. The
Company shall not amend or waive any provision of any of the Lock-Up Agreements
except to extend the term of the lock-up period.
(s) No Refusal or Delay to
Transfer Shares. Notwithstanding Section 11 of the Company's
Articles of Association, the Company hereby covenants not to refuse or delay the
registration of a share transfer with respect to transfers of the Securities by
any Buyer (or any of its successors or assigns) to any other Person,
so long as such transfer is in compliance with Section 2(f)
hereof.
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(t) Shares Freely
Tradable. With respect to each Buyer that purchases Shares
hereunder pursuant to Regulation S or that receives Warrant Shares upon the
exercise of a Warrant issued pursuant to Regulation S in accordance with the
terms of such Warrant, the Company hereby covenant and agrees that it shall not
include any restrictive legend on any such Shares or Warrant Shares after the
Distribution Compliance Period Termination Date, and will promptly remove any
such restrictive legend on any such Shares or Warrant Shares after the
Distribution Compliance Period Termination Date upon request without requiring
any legal opinion from any such Buyer to do so.
(u) Closing
Documents. On or prior to thirty (30) calendar days after the
Closing Date, the Company agrees to deliver, or cause to be delivered, to each
Buyer and Xxxxxxx Xxxx & Xxxxx LLP executed copies of the Transaction
Documents, Securities and other document required to be delivered to any party
pursuant to Section 7 hereof or otherwise.
5. REGISTER; TRANSFER AGENT
INSTRUCTIONS.
(a) Register. The
Company shall maintain at its principal executive offices (or such other office
or agency of the Company as it may designate by notice to each holder of
Securities), a register for the Shares and the Warrants in which the Company
shall record the name and address of the Person in whose name the Shares and the
Warrants have been issued (including the name and address of each transferee),
the number of Shares held by such Person, the number of Warrant Shares issuable
upon exercise of the Warrants held by such Person. The Company shall
keep the register open and available at all times during business hours for
inspection of any Buyer or its legal representatives.
(b) Transfer Agent
Instructions. The Company shall issue irrevocable instructions
to its transfer agent, and any subsequent transfer agent, to issue certificates
or credit shares to the applicable balance accounts at the DTC, registered in
the name of each Buyer or its respective nominee(s), for the Shares and the
Warrant Shares issued at the Closing or upon exercise of the Warrants in such
amounts as specified in such amounts as specified from time to time by each
Buyer to the Company upon exercise of the Warrants in the form of Exhibit D (the "Irrevocable Transfer Agent
Instructions"). The Company warrants that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this Section
5(b), and stop transfer instructions to give effect to Section 2(f) hereof, will
be given by the Company to its transfer agent, and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the other Transaction
Documents. If a Buyer effects a sale, assignment or transfer of the
Securities in accordance with Section 2(f), the Company shall permit the
transfer and shall promptly instruct its transfer agent to issue one or more
certificates or credit shares to the applicable balance accounts at DTC in such
name and in such denominations as specified by such Buyer to effect such sale,
transfer or assignment. In the event that such sale, assignment or
transfer involves the Shares, Warrants or the Warrant Shares sold, assigned or
transferred pursuant to an effective registration statement or pursuant to Rule
144, the transfer agent shall issue such Securities to the Buyer, assignee or
transferee, as the case may be, without any restrictive legend. In
the event that such sale, assignment or transfer involves the Shares or the
Warrant Shares sold, assigned or transferred pursuant to Regulation S, the
transfer agent shall issue such Shares or Warrant Shares, as the case may be, to
the Buyer, assignee or transferee, as the case may be, without any restrictive
legend after the Distribution Compliance Period Termination Date. The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to a Buyer. Accordingly, the Company acknowledges
that the remedy at law for a breach of its obligations under this Section 5(b)
will be inadequate and agrees, in the event of a breach or threatened breach by
the Company of the provisions of this Section 5(b), that a Buyer shall be
entitled, in addition to all other available remedies, to an order and/or
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
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6. CONDITIONS TO THE COMPANY'S
OBLIGATION TO SELL.
The
obligation of the Company hereunder to issue and sell the Shares and the related
Warrants to each Buyer at the Closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion by providing each Buyer with prior
written notice thereof:
(i) Such
Buyer shall have executed each of the Transaction Documents to which it is a
party and delivered the same to the Company.
(ii) Such
Buyer shall have delivered to the Company the Purchase Price (less, in the case
of [ ], the amounts
withheld, if any, pursuant to Section 4(g)) for the Shares and the related
Warrants being purchased by such Buyer at the Closing by wire transfer of
immediately available funds pursuant to the wire instructions provided by the
Company.
(iii) The
representations and warranties of such Buyer shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
specific date which shall be true and correct as of such specified date), and
such Buyer shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Buyer at or prior to the Closing
Date.
7. CONDITIONS TO EACH BUYER'S
OBLIGATION TO PURCHASE.
The
obligation of each Buyer hereunder to purchase the Shares and the related Warrants
at the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that these conditions are for each
Buyer's sole benefit and may be waived by such Buyer at any time in its sole
discretion by providing the Company with prior written notice
thereof:
(i) The
Company shall have duly executed and delivered to such Buyer (A) each of the
Transaction Documents, (B) the Shares (allocated in such amounts as such Buyer
shall request), being purchased by such Buyer at the Closing pursuant to this
Agreement and (C) the related Warrants (allocated in such amounts as such Buyer
shall request) being purchased by such Buyer at the Closing pursuant to this
Agreement.
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(ii) Such
Buyer shall have received (A) the opinion of the New York Office of Xxxxx &
XxXxxxxx LLP, the Company's outside United States counsel, dated as of the
Closing Date and addressed to the Buyers and the Placement Agent, in the form
attached hereto as Exhibit E-1, (B) the
opinion of Xxxxxx and Calder, the Company's British Virgin Islands outside
counsel, dated as of the Closing Date and addressed to the Buyers and the
Placement Agent, in the form attached hereto as Exhibit E-2, (C) the
opinion of the Hong Kong Office of Xxxxx XxXxxxxx LLP, the Company's outside
Hong Kong counsel, dated as of the Closing Date and addressed to the Buyers and
the Placement Agent, in the form attached hereto as Exhibit E-3, (D) the
opinion of Guantao Law Firm, the Company's outside People's Republic of China
counsel, dated as of the Closing Date and addressed to the Buyers and the
Placement Agent, in the form attached hereto as Exhibit E-4 and (E)
the opinion of the New York Office of Xxxxx & XxXxxxxx LLP, the Company's
outside United States counsel, dated as of the Closing Date and addressed to the
Buyers and the Placement Agent, in substantially the form of Exhibit E-5 attached
hereto, to the effect that the Securities issued pursuant to Regulation S
hereunder may be resold in the United States without registration after the
Distribution Compliance Period Termination Date.
(iii) The
Company shall have delivered to such Buyer a copy of the Irrevocable Transfer
Agent Instructions, in the form of Exhibit D
attached hereto, which instructions shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
(iv) The
Company shall have delivered to such Buyer a certificate evidencing the
formation and good standing of the Company and each of its Subsidiaries in such
entity's jurisdiction of formation issued by the Secretary of State (or
comparable office) of such jurisdiction, as of a date within ten (10) days of
the Closing Date.
(v) The
Company shall have delivered to such Buyer a certificate evidencing the
Company's qualification as a foreign corporation and good standing issued by the
Secretary of State (or comparable office) of each jurisdiction in which the
Company conducts business, as of a date within ten (10) days of the Closing
Date.
(vi) The
Company shall have delivered to such Buyer a certified copy of the Memorandum of
Association as certified by the Registrar of Corporate Affairs of the British
Virgin Islands within ten (10) days of the Closing Date.
(vii) The
Company shall have delivered to such Buyer a certificate, executed by the
Secretary of the Company and dated as of the Closing Date, as to (i) the
resolutions consistent with Section 3(b) as adopted by the Company's Board of
Directors in a form reasonably acceptable to such Buyer, (ii) the Memorandum of
Association and (iii) the Articles of Association, each as in effect at the
Closing, in the form attached hereto as Exhibit F.
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(viii) The
representations and warranties of the Company shall be true and correct in all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date which shall be true and correct as of such specified date)
and the Company shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company
at or prior to the Closing Date. Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as of
the Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer in the form attached hereto as Exhibit
G.
(ix) The
Company shall have delivered to such Buyer a letter from the Company's transfer
agent certifying the number of Common Shares outstanding as of a date within
five days of the Closing Date.
(x) The
Common Shares (I) shall be designated for quotation or listed on the Principal
Market and (II) shall not have been suspended, as of the Closing Date, by the
SEC or the Principal Market from trading on the Principal Market nor shall
suspension by the SEC or the Principal Market have been threatened, as of the
Closing Date, either (A) in writing by the SEC or the Principal Market or (B) by
falling below the minimum listing maintenance requirements of the Principal
Market.
(xi) The
Company shall have obtained all governmental, regulatory or third party consents
and approvals, if any, necessary for the sale of the Securities required to be
obtained prior to Closing; provided, that the Company shall submit the application for
listing of additional shares to the Principal Market within five (5) days after
Closing.
(xii) The
Voting Agreement shall have been executed and delivered to such Buyer by the
Company and each of the Principal Shareholders.
(xiii) The
Company shall have delivered to each Buyer a lock-up agreement in the form
attached hereto as Exhibit H executed
and delivered by each of Xx. Xx and Xx. Xxx (collectively, the "Lock Up
Agreements").
(xiv) The
Company shall have delivered to such Buyer such other documents relating to the
transactions contemplated by this Agreement as such Buyer or its counsel may
reasonably request.
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8. TERMINATION. In
the event that the Closing shall not have occurred with respect to a Buyer on or
before five (5) Business Days from the date hereof due to the Company's or such
Buyer's failure to satisfy the conditions set forth in Sections 6 and 7 above
(and the nonbreaching party's failure to waive such unsatisfied condition(s)),
the nonbreaching party shall have the option to terminate this Agreement with
respect to such breaching party at the close of business on such date without
liability of any party to any other party; provided, however, that if this
Agreement is terminated pursuant to this Section 8, the Company shall remain
obligated to reimburse the non-breaching Buyers for the expenses described in
Section 4(g) above.
9. MISCELLANEOUS.
(a) Governing Law; Jurisdiction;
Jury Trial. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address for such notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. The Company hereby appoints C T Corporation System,
with offices at 000 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as its agent for
service of process in New York. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any manner permitted by
law. EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
(b) Counterparts. This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party. In
the event that any signature is delivered by facsimile transmission or by an
e-mail which contains a portable document format (.pdf) file of an executed
signature page, such signature page shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if the
signature were an original.
(c) Headings. The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
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(d) Severability. If
any provision of this Agreement is prohibited by law or otherwise determined to
be invalid or unenforceable by a court of competent jurisdiction, the provision
that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable,
and the invalidity or unenforceability of such provision shall not affect the
validity of the remaining provisions of this Agreement so long as this Agreement
as so modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal obligations of
the parties or the practical realization of the benefits that would otherwise be
conferred upon the parties. The parties will endeavor in good faith
negotiations to replace the prohibited, invalid or unenforceable provision(s)
with a valid provision(s), the effect of which comes as close as possible to
that of the prohibited, invalid or unenforceable provision(s).
(e) Entire Agreement;
Amendments. This Agreement and the other Transaction Documents
supersede all other prior oral or written agreements between the Buyers, the
Company, their affiliates and Persons acting on their behalf with respect to the
matters discussed herein, and this Agreement, the other Transaction Documents
and the instruments referenced herein and therein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the Required Holders, and any amendment to this Agreement made in
conformity with the provisions of this Section 9(e) shall be binding on all
Buyers and holders of Securities, as applicable. No provision hereof
may be waived other than by an instrument in writing signed by the party against
whom enforcement is sought. No such amendment shall be effective to
the extent that it applies to less than all of the holders of the applicable
Securities then outstanding. No consideration shall be offered or
paid to any Person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration also
is offered to all of the parties to the Transaction Documents, holders of Shares
or holders of the Warrants, as the case may be. The Company has not,
directly or indirectly, made any agreements with any Buyers relating to the
terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents. Without
limiting the foregoing, the Company confirms that, except as set forth in this
Agreement, no Buyer has made any commitment or promise or has any other
obligation to provide any financing to the Company or otherwise.
(f) Notices. Any
notices, consents, waivers or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been delivered: (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of transmission
is mechanically or electronically generated and kept on file by the sending
party); or (iii) one Business Day after deposit with an overnight courier
service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications
shall be:
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If to the
Company:
Xx. 00
Xxxxxxxx Xxxx
Xxxxx
Xxxxxxxx
Xxxxxxxx,
Xxxxxxxx Xxxxxxxx, Xxxxx 000000
|
Telephone:
|
00-00-00000000
|
|
Facsimile:
|
00-00-00000000
|
|
Attention:
|
Xxxx
Xxx
|
With a
copy (for informational purposes only) to:
Xxxxx
& XxXxxxxx LLP
0000
Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx,
Xxx Xxxx 00000
|
Telephone:
|
(000)
000-0000
|
|
Facsimile:
|
(000)
000-0000
|
|
Attention:
|
Xxxx
Xxxxx, Esq.
|
If to the
Transfer Agent:
Continental
Stock Transfer & Trust Company
00
Xxxxxxx Xxxxx
Xxx Xxxx,
Xxx Xxxx 00000
|
Telephone:
|
(000)
000-0000
|
|
Facsimile:
|
(000)
000-0000
|
|
Attention:
|
Account
Administration: A-Power Energy Generation Systems, Ltd.
|
If to a
Buyer, to its address and facsimile number set forth on the Schedule of Buyers,
with copies to such Buyer's representatives as set forth on the Schedule of
Buyers,
with a
copy (for informational purposes only) to:
Xxxxxxx
Xxxx & Xxxxx LLP
000 Xxxxx
Xxxxxx
Xxx Xxxx,
Xxx Xxxx 00000
|
Telephone:
|
(000)
000-0000
|
|
Facsimile:
|
(000)
000-0000
|
|
Attention:
|
Xxxxxxx
X. Xxxxx, Esq.
|
|
E-mail:
|
xxxxxxx.xxxxx@xxx.xxx
|
or to
such other address and/or facsimile number and/or to the attention of such other
Person as the recipient party has specified by written notice given to each
other party five (5) days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by an overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above,
respectively.
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Any
document shall be deemed to have been duly served if marked for the attention of
the agent for service of process at its address (as set forth in Section 9(a))
or such other address in the United States as may be notified to the party
wishing to serve the document and delivered in accordance with the notice
provisions set forth in this Section 9(f).
If the
Company's agent for service of process at any time ceases for any reason to act
as such, the Company shall appoint a replacement agent having an address for
service in the United States and shall notify each Buyer in writing of the name
and address of the replacement agent. Failing such appointment and
notification, each Buyer shall be entitled by notice to the Company to appoint a
replacement agent to act on the Company's behalf. The provisions of
this Section 9(f) applying to service on an agent for service of process apply
equally to service on a replacement agent.
(g) Successors and
Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns, including
any purchasers of the Shares or the Warrants. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Required Holders, including by way of a Fundamental
Transaction (unless the Company is in compliance with the applicable provisions
governing Fundamental Transactions set forth in the Warrants). A
Buyer may assign some or all of its rights hereunder without the consent of the
Company, in which event such assignee shall be deemed to be a Buyer hereunder
with respect to such assigned rights.
(h) No Third Party
Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except that (i) the Placement Agent is an
intended third party beneficiary of the Company's representations and warranties
set forth in Section 3 hereof, and (ii) the Placement Agent shall be an
addressee of the legal opinions identified in Section 7(ii)
hereof.
(i) Survival. Unless
this Agreement is terminated under Section 8, the representations and warranties
of the Company and the Buyers contained in Sections 2 and 3, and the agreements
and covenants set forth in Sections 4, 5 and 9 shall survive the
Closing. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
(j) Further
Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
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(k) Indemnification. In
consideration of each Buyer's execution and delivery of the Transaction
Documents and acquiring the Securities thereunder and in addition to all of the
Company's other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless each Buyer and each other holder of
the Securities and all of their shareholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons' agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against
any and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents, (b) any breach of any covenant, agreement
or obligation of the Company contained in the Transaction Documents or (c) any
cause of action, suit or claim brought or made against such Indemnitee by a
third party (including for these purposes a derivative action brought on behalf
of the Company) and arising out of or resulting from (i) the execution,
delivery, performance or enforcement of the Transaction Documents, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, (iii) any
disclosure made by such Buyer pursuant to Section 4(i), or (iv) the status of
such Buyer or holder of the Securities as an investor in the Company pursuant to
the transactions contemplated by the Transaction Documents, provided, however,
that the Company's obligations under this Section 9(k) with respect to
Indemnified Liabilities referred to in the preceding clauses (a) through (c) and
incurred under the Registration Rights Agreement shall be limited to the
Indemnified Liabilities for which indemnity is expressly provided pursuant to
Section 6 of the Registration Rights Agreement. To the extent that
the foregoing undertaking by the Company may be unenforceable for any reason,
the Company shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities that is permissible under applicable
law. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 9(k)
shall be the same as those set forth in Section 6 of the Registration Rights
Agreement.
(l) No Strict
Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any
party.
(m) Remedies. Each
Buyer and each holder of the Securities shall have all rights and remedies set
forth in the Transaction Documents and all rights and remedies which such
holders have been granted at any time under any other agreement or contract and
all of the rights which such holders have under any law. Any Person
having any rights under any provision of this Agreement shall be entitled to
enforce such rights specifically (without posting a bond or other security), to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights granted by law. Furthermore, the Company
recognizes that in the event that it fails to perform, observe, or discharge any
or all of its obligations under the Transaction Documents, any remedy at law may
prove to be inadequate relief to the Buyers. The Company therefore
agrees that the Buyers shall be entitled to seek temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages and without posting a bond or other security.
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(n) Rescission and Withdrawal
Right. Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) the Transaction Documents,
whenever any Buyer exercises a right, election, demand or option under a
Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Buyer may rescind or
withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.
(o) Payment Set
Aside. To the extent that the Company makes a payment or
payments to the Buyers hereunder or pursuant to any of the other Transaction
Documents or the Buyers enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including, without limitation, any
bankruptcy law, foreign, state or federal law, common law or equitable cause of
action), then to the extent of any such restoration the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.
(p) Independent Nature of
Buyers' Obligations and Rights. The obligations of each Buyer
under any Transaction Document are several and not joint with the obligations of
any other Buyer, and no Buyer shall be responsible in any way for the
performance of the obligations of any other Buyer under any Transaction
Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be
deemed to constitute the Buyers as, and the Company acknowledges that the Buyers
do not so constitute, a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Buyers are in any way
acting in concert or as a group, and the Company shall not assert any such claim
with respect to such obligations or the transactions contemplated by the
Transaction Documents and the Company acknowledges that the Buyers are not
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Company
acknowledges and each Buyer confirms that it has independently participated in
the negotiation of the transaction contemplated hereby with the advice of its
own counsel and advisors. Each Buyer shall be entitled to
independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement or out of any other Transaction Documents,
and it shall not be necessary for any other Buyer to be joined as an additional
party in any proceeding for such purpose.
(q)
Currency. Unless
otherwise indicated, all dollar amounts referred to in this Agreement are in
United States Dollars. All amounts owing under this Agreement or any
Transaction Document shall be paid in US dollars. All amounts
denominated in other currencies shall be converted in the US dollar equivalent
amount in accordance with the Exchange Rate on the date of
calculation. "Exchange Rate" means, in
relation to any amount of currency to be converted into US dollars pursuant to
this Agreement, the US dollar exchange rate as published in The Wall Street
Journal on the relevant date of calculation.
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(r)
Judgment
Currency.
(i)
If for the purpose of obtaining or enforcing judgment against the Company in any
court in any jurisdiction it becomes necessary to convert into any other
currency (such other currency being hereinafter in this Section 9(r) referred to
as the "Judgment
Currency") an amount due in US Dollars under this Agreement, the
conversion shall be made at the Exchange Rate prevailing on the Business Day
immediately preceding:
(1)
the date of actual payment of the amount due, in the case of any proceeding in
the courts of New York or in the courts of any other jurisdiction that will give
effect to such conversion being made on such date: or
(2)
the date on which the foreign court determines, in the case of any proceeding in
the courts of any other jurisdiction (the date as of which such conversion is
made pursuant to this Section being hereinafter referred to as the "Judgment Conversion
Date").
(ii) If
in the case of any proceeding in the court of any jurisdiction referred to in
Section 9(r)(i)(2) above, there is a change in the Exchange Rate prevailing
between the Judgment Conversion Date and the date of actual payment of the
amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of US Dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
(iii) Any
amount due from the Company under this provision shall be due as a separate debt
and shall not be affected by judgment being obtained for any other amounts due
under or in respect of this Agreement.
[Signature
Page Follows]
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IN WITNESS WHEREOF, each Buyer
and the Company have caused their respective signature page to this Securities
Purchase Agreement to be duly executed as of the date first written
above.
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COMPANY:
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A-POWER
ENERGY GENERATION
SYSTEMS,
LTD.
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By:
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Name:
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Title:
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[Signature
Page to Securities Purchase Agreement]
IN WITNESS WHEREOF, each Buyer
and the Company have caused their respective signature page to this Securities
Purchase Agreement to be duly executed as of the date first written
above.
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BUYERS:
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||
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By:
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By:
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||
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Name:
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Title:
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Please
check the following box if you are
purchasing
the Shares and Warrants pursuant
to
Regulation S ¨
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||
[Signature
Page to Securities Purchase Agreement]
SCHEDULE
OF BUYERS
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(1)
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(2)
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(3)
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(4)
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(5)
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(6)
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(7)
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||||||||||||||||||
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Buyer
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Address and
Facsimile Number
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Number of Shares
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Number of Series A
Warrant Shares
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Number of Series
B
Warrant Shares
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Purchase Price
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Legal Representative's Address
and Facsimile Number
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||||||||||||||||||
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TOTAL
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|||||||||||||||||||||||
EXHIBITS
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Exhibit
A
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Form
of Series A & B Warrant
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Exhibit
B
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Form
of Registration Rights Agreement
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Exhibit
C
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Form
of Voting Agreement
|
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Form
D
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Form
of Irrevocable Transfer Agent
Instructions
|
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Exhibit
E-1
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Form
of Opinion of Company's U.S.
Counsel
|
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Exhibit
E-2
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Form
of Opinion of Company's BVI Counsel
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Exhibit
E-3
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Form
of Opinion of Company's Hong Kong
Counsel
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Exhibit
E-4
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Form
of Opinion of Company's China
Counsel
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Exhibit
E-5
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Form
of Regulation S Opinion of Company's U.S.
Counsel
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Exhibit
F
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Form
of Secretary's Certificate
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Exhibit
G
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Form
of Officer's Certificate
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Exhibit
H
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Form
of Lock-Up Agreement
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SCHEDULES
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Schedule
3(a)
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Subsidiaries
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Schedule 3(g)
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No General Solicitation; Placement Agent's
Fees
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Schedule
3(l)
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Absence
of Certain Changes
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Schedule
3(q)
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Transactions
with Affiliates
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Schedule
3(r)
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Equity
Capitalization
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Schedule
3(s)
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Indebtedness
and Other Contracts
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Schedule
3(t)
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Absence
of Litigation
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Schedule
3(nn)
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China
Subsidiaries
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