SECURITIES PURCHASE AGREEMENT
NF
Energy Saving Corporation
21-Jia
Bei Si Dong Road, Tie Xx Xx
Xxxxxxxx,
X. X. Xxxxx 000000
The
undersigned (the "Investor") hereby
confirms its agreement with you as follows:
1. This
Securities Purchase Agreement is made as of the date set forth below between NF
Energy Saving Corporation, a Delaware corporation (the "Company"), and the
Investor, which is one of _____ investors making an aggregate investment of
$_______.
2. The
Company and the Investor agree that the Investor will purchase from the Company
and the Company will issue and sell to the Investor (the “Sale”) a $_______
Senior Convertible Promissory Note (the “Note”), with an
initial conversion price of $3.00 for one share (a “Note Share”) of the
Company's Common Stock, par value $0.001 per share (the “Common Stock”). In
addition, at Closing, the Company will issue to the Investor that number of
warrants (“Warrants” and
together with the Note, the “Securities”) equal to
the aggregate principal amount of the Note subscribed for divided by six (6).
Each Warrant shall entitle the holder to purchase one share (a “Warrant Share”) of
the Company's Common Stock at an exercise price of $4.00 per share for a period
of 5 years commencing on the date of Closing (as defined in Section 2 of Annex I
attached hereto).
3. [Intentionally
omitted].
4. The
Company and the Investor agree that the purchase and sale of the Note is subject
to the Terms and Conditions for Purchase of the Securities attached hereto as
Annex I and
incorporated herein by reference as if fully set forth herein. Unless otherwise
requested by the Investor in Exhibit A, the Note
and Warrants issued to the Investor will be issued in the Investor's name and
address as set forth below. The form of Note and form of Warrant are attached
hereto as Exhibit
B and Exhibit
C, respectively.
5. The
Investor represents that, except as set forth below, (a) it has had no position,
office or other material relationship within the past three years with the
Company or its affiliates, (b) neither it, nor any group of which it is a member
or to which it is related, beneficially owns (including the right to acquire or
vote) any securities of the Company, and (c) neither it, nor any affiliate of
the Investor, has any direct or indirect affiliation or association with any
Finance and Regulatory Authority, Inc. ("FINRA") member.
Exceptions:
(If no
exceptions, write "none." If left blank, response will be deemed to be
"none.")
Please
confirm that the foregoing correctly sets forth the agreement between us by
signing in the space provided below for that purpose.
Dated
as of: __________, 2010
|
|
By:
____________________
|
|
Name:
Title:
|
|
Address:
|
|
AGREED
AND ACCEPTED:
NF
ENERGY SAVING CORPORATION
By:
|
||
Name:
Xxxx Xx
|
||
Title:
Chief Executive Officer
|
[SECURITIES
PURCHASE AGREEMENT SIGNATURE PAGE]
Annex
I
Terms
and Conditions for Purchase of Securities
1.
Agreement to Sell and Purchase
Securities.
1.1 Purchase and Sale. At the
Closing (as defined in Section 2), the
Company will sell to the Investor, and the Investor will purchase from the
Company, upon the terms and subject to the conditions set forth herein, for an
aggregate purchase price of $_______ (the “Purchase Price”), the
Note described in Paragraph 2 of the
Securities Purchase Agreement attached hereto (collectively with this Annex I and the other
exhibits attached hereto, this “Agreement” and
together with the Note and the Warrants, the “Transaction
Documents”), and the Investor will receive from the Company Warrants to
purchase that number of shares of Common Stock equal to the Purchase Price
divided by six (6).
1.2 Investor. The Investor must
execute and deliver a Securities Purchase Agreement, and must complete a
Certificate Questionnaire (in the form attached as Exhibit A hereto) and
an Investor Questionnaire (in the form attached as Exhibit D hereto) in
order to purchase the Securities.
1.3 Use of
Proceeds. The Company will use the net proceeds from the sale
of the Securities for working capital, capital expenditures and to finance
future acquisitions, if any.
2.
Delivery of the Units at
Closing. The completion of the purchase and sale of the
Securities (the “Closing”) shall occur
on a date mutually agreed upon by the Company and the Investor (the “Closing Date”), which
date shall not be later than February 26, 2010 as such date may be extended upon
the mutual agreement of the Company and the Investor (the “Outside Date”). At
the Closing, the Company shall deliver to the Investor a Note representing the
aggregate dollar amount of the Note set forth in Paragraph 2 of the
Securities Purchase Agreement, along with a Warrant to purchase the number of
shares of Common Stock equal to such Investor's Purchase Price divided by six
(6). In exchange for the delivery of the Securities, the Investor shall pay the
Purchase Price to the Company, net of all closing fees and expenses, by wire
transfer of immediately available funds pursuant to the Company's written
instructions.
The
Company's obligation to issue and sell the Securities to the Investor shall be
subject to the satisfaction of the following conditions, any one or more of
which may be waived by the Company: (a) prior receipt by the Company of a copy
of this Agreement executed by the Investor; (b) the accuracy of the
representations and warranties made by the Investor in this Agreement and the
fulfillment of the obligations of the Investor under this Agreement on or prior
to the Closing; and (c) the absence of any order, writ, injunction, judgment or
decree that questions the validity of the Transaction Documents or the right of
the Company or the Investor to enter into such Transaction Documents or to
consummate the transactions contemplated hereby and thereby.
The
Investor's obligation to purchase the Securities shall be subject to the
satisfaction of the following conditions, any one or more of which may be waived
by the Investor: (a) the accuracy of the representations and warranties made by
the Company in this Agreement on the date hereof and, if different, on the
Closing Date; (b) the execution and delivery by the Company of the Note and the
Warrant; (c) the fulfillment of the obligations of the Company under this
Agreement on or prior to the Closing; and (d) the absence of any order, writ,
injunction, judgment or decree that questions the validity of the Transaction
Documents or the right of the Company or the Investor to enter into
such Transaction Documents or to consummate the transactions contemplated hereby
and thereby.
1
In the
event that the Closing does not occur on or before the Outside Date as a result
of the Company's failure to satisfy any of the conditions set forth above (and
such condition has not been waived by the Investor), the Investor shall have no
further obligations hereunder. For purposes of this Agreement, "Business Day" shall
mean any day other than a Saturday, Sunday or other day on which the New York
Stock Exchange or commercial banks located in New York, New York are permitted
or required by law to close.
3.
Representations, Warranties and
Covenants of the Company. Except as set forth on Schedule 3 attached
hereto and incorporated herein by reference or in the SEC Reports (as defined
below), the Company hereby represents and warrants to, and covenants with, the
Investor as of the date hereof and the Closing Date, as follows:
3.1 Organization. The Company is
duly incorporated and validly existing in good standing under the laws of the
State of Delaware. The Company has full power and authority to own, operate and
occupy its properties and to conduct its business as presently conducted and is
registered or qualified to do business and in good standing in each jurisdiction
in which it owns or leases property or transacts business and where the failure
to be so qualified would have a material adverse effect upon the Company and its
subsidiaries as a whole or the business, financial condition, properties,
operations or assets of the Company and its subsidiaries as a whole or the
Company's ability to perform its obligations under the Transaction Documents in
all material respects (“Material Adverse
Effect”), and no proceeding has been instituted or to the knowledge of
the Company, threatened, in any such jurisdiction revoking, limiting or
curtailing, or seeking to revoke, limit or curtail, such power and authority or
qualification. The Company has no "subsidiaries" (as defined in Rule 405 under
the Securities Act of 1933, as amended (the “Securities
Act”)).
3.2 Due Authorization. The Company
has all requisite power and authority to execute, deliver and perform its
obligations under the Transaction Documents. The execution and delivery of the
Transaction Documents, and the consummation by the Company of the transactions
contemplated hereby, have been duly authorized by all necessary corporate action
and no further action on the part of the Company or its Board of Directors or
stockholders is required. The Transaction Documents have been validly executed
and delivered by the Company and constitute legal, valid and binding agreements
of the Company enforceable against the Company in accordance with their terms,
except to the extent (i) rights to indemnity and contribution may be limited by
state or federal securities laws or the public policy underlying such laws, (ii)
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and (iii) such enforceability may be subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
2
3.3 Non-Contravention. The
execution and delivery of the Transaction Documents, the issuance and sale of
the Securities to be sold by the Company under the Securities Purchase
Agreements, the fulfillment of the terms of the Transaction Documents and the
consummation of the transactions contemplated thereby, including the issuance of
the shares of Common Stock underlying the Note and Warrants (the “Note Shares” and
“Warrant
Shares,” respectively) in accordance with the respective terms and
conditions thereof, will not (A) result in a conflict with or constitute a
violation of, or default (with the passage of time or otherwise) under, (i) any
bond, debenture, note or other evidence of indebtedness, or any material lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument to which the Company or any subsidiary (each, a
"Subsidiary"
and collectively, the "Subsidiaries") is a
party or by which the Company or the Subsidiaries or their respective properties
are bound, (ii) the Certificate of Incorporation, Bylaws, or other
organizational documents of the Company, as amended, or (iii) any law,
administrative regulation, ordinance or order of any court or governmental
agency, arbitration panel or authority binding upon the Company or any
Subsidiary or their respective properties, which conflict, violation or default,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect, or (B) except for the liens created under the Note (and the
promissory note of like tenor issued to the other investor), result in the
creation or imposition of any lien, encumbrance, claim, security interest or
restriction whatsoever upon any of the material properties or assets of the
Company or the Subsidiaries or an acceleration of indebtedness pursuant to any
obligation, agreement or condition contained in any material bond, debenture,
note or any other evidence of indebtedness or any material indenture, mortgage,
deed of trust or any other agreement or instrument to which the Company or any
Subsidiary is a party or by which it is bound or to which any of the property or
assets of the Company is subject. No consent, approval, authorization or other
order of, or registration, qualification or filing with, any regulatory body,
administrative agency, or other governmental body is required for the execution
and delivery of the Transaction Documents by the Company, other than such as
have been made or obtained, and except for any filings required to be made under
federal or state securities laws.
3.4 Capitalization. The authorized
capital stock of the Company consists of 50,000,000 shares of Common Stock, of
which 13,291,387 shares are outstanding, and (ii) warrants to purchase 102,779
shares of Common Stock that are issued and outstanding. The Note Shares and the
Warrant Shares have been duly authorized and reserved for issuance, and when
issued in accordance with the terms of the Note or the Warrants, as the case may
be, will be duly and validly issued, fully paid and nonassessable, subject to no
lien, claim or encumbrance (except for any such lien, claim or encumbrance
created, directly or indirectly, by the Investor). The outstanding shares of
capital stock of the Company have been duly and validly issued and are fully
paid and nonassessable, have been issued in compliance with the registration
requirements of federal and state securities laws, and were not issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities. The Company owns all of the outstanding capital stock of
each Subsidiary, free and clear of all liens, claims and encumbrances. Other
than as set forth above, there are no outstanding rights (including, without
limitation, preemptive rights), warrants or options to acquire, or instruments
convertible into or exchangeable for, any unissued shares of capital stock or
other equity interest in the Company or any Subsidiary, or any contract,
commitment, agreement, understanding or arrangement of any kind to which the
Company or any Subsidiary is a party and providing for the issuance or sale of
any capital stock of the Company or of any Subsidiary, any such convertible or
exchangeable securities or any such rights, warrants or options. There are no
shareholders agreements, voting agreements or other similar agreements with
respect to the Common Stock to which the Company is a party.
3.5 Legal Proceedings. There is no
legal or governmental proceeding pending, or to the knowledge of the Company,
threatened, to which the Company or any Subsidiary is a party or of which the
business or property of the Company or any Subsidiary is subject that is
required to be disclosed and that is not so disclosed in the SEC Reports.
Neither the Company nor any Subsidiary is subject to any injunction, judgment,
decree or order of any court, regulatory body, administrative agency or other
government body.
3
3.6 No Violations. Neither the
Company nor any Subsidiary is in violation of its Certificate of Incorporation,
Bylaws or other organizational documents, as amended, or in violation of any
law, administrative regulation, ordinance or order of any court or governmental
agency, arbitration panel or authority applicable to the Company, which
violation, individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect, and neither the Company nor any Subsidiary is in
default (and there exists no condition which, with the passage of time or
otherwise, would constitute a default) in the performance of any bond,
debenture, note or any other evidence of indebtedness or any indenture,
mortgage, deed of trust or any other material agreement or instrument to which
the Company or any Subsidiary is a party or by which the Company or such
Subsidiary or their respective properties are bound, which default is reasonably
likely to have a Material Adverse Effect.
3.7 Governmental Permits, Etc.
Each of the Company and the Subsidiaries has all necessary franchises, licenses,
certificates and other authorizations from any foreign, federal, state or local
government or governmental agency, department or body that are currently
necessary for the operation of the business of the Company and the Subsidiaries
as currently conducted, except where the failure to currently possess such
franchises, licenses, certificates and other authorizations is not reasonably
likely to have a Material Adverse Effect.
3.8 Intellectual
Property.
(a)
Each of the Company and the Subsidiaries has ownership of, or a license or other
legal right to use, all material patents, copyrights, trade secrets, trademarks,
customer lists, designs, manufacturing or other processes, computer software,
systems, data compilation, research results or other proprietary rights used in
the business of the Company (collectively, "Intellectual
Property").
(b)
All material licenses or other material agreements under which (i) the Company
or any Subsidiary employs rights in Intellectual Property, or (ii) the Company
or any Subsidiary has granted rights to others in Intellectual Property owned or
licensed by the Company or any Subsidiary are in full force and effect, and
there is no default by the Company with respect thereto.
(c)
The Company has taken all steps reasonably required in accordance with sound
business practice and business judgment to establish and preserve the ownership
of all material Intellectual Property owned by the Company or any
Subsidiary.
(d)
To the knowledge of the Company, (i) the present business, activities and
products of the Company or any Subsidiary do not infringe upon any intellectual
property of any other person; (ii) neither the Company nor any Subsidiary is
making unauthorized use of any confidential information or trade secrets of any
person; and (iii) the activities of any of the employees of the Company or any
Subsidiary do not violate any agreements or arrangements related to confidential
information or trade secrets of third parties.
(e)
No proceedings are pending, or to the knowledge of the Company, threatened,
which challenge the rights of the Company or any Subsidiary to the use of
Intellectual Property.
3.9
Financial Statements. The
financial statements of the Company and the related notes contained in the SEC
Reports present fairly and accurately in all material respects the financial
position of the Company as of the dates therein indicated, and the results of
its operations, cash flows and the changes in shareholders' equity for the
periods therein specified, subject, in the case of unaudited financial
statements for interim periods, to normal year-end audit adjustments. Such
financial statements (including the related notes) have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis (“GAAP”)
at the times and throughout the periods therein specified.
4
3.10 No Material Adverse Change.
Except as disclosed in the SEC Reports or in any press releases issued by the
Company at least two Business Days prior to the date of this Agreement, since
January 1, 2007, there has not been (i) an event, circumstance or change that
has had or is reasonably likely to have a Material Adverse Effect, (ii) any
obligation incurred by the Company or any Subsidiary, direct or contingent, that
is material to the Company, (iii) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company, (iv) any loss or
damage (whether or not insured) to the physical property of the Company or any
Subsidiary which has had a Material Adverse Effect, or (v) any issuance of any
equity securities to any officer, director or affiliate, except pursuant to
existing Company stock option plans.
3.11 Reporting Status. The Company
has timely made all filings required under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), since
January 1, 2007 (the “SEC Reports”), and all of those documents complied in all
material respects with the SEC's requirements as of their respective filing
dates, and the information contained therein as of the respective dates thereof
did not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances under which they were made not
misleading.
3.12 Accountants. ZYCPA Company
Limited, who expressed their opinion with respect to the consolidated financial
statements in the Company's Annual Report on Form 10-K for the year ended
December 31, 2008, have advised the Company that they are, and to the knowledge
of the Company they are, independent accountants certified by and in good
standing with the Public Company Accounting Oversight Board as required by the
Securities Act and the rules and regulations promulgated
thereunder.
3.13 Contracts. Except for those
contracts that are substantially or fully performed or expired by their terms,
the contracts listed as exhibits to or described in the SEC Reports that are
material to the Company and all amendments thereto, are in full force and effect
on the date hereof, and neither the Company nor, to the Company's knowledge, any
other party to such contracts is in breach of or default under any of such
contracts, except for any breach that is not reasonably likely to have a
Material Adverse Effect.
3.14 Taxes. Each of the Company and
the Subsidiaries has filed all necessary federal, state and foreign income and
franchise tax returns and has paid or accrued all taxes shown as due thereon,
and the Company has no knowledge of a tax deficiency which has been asserted or
threatened against the Company or any Subsidiary.
3.15 Investment Company. The
Company is not an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for an investment company, within the
meaning of the Investment Company Act of 1940, as amended, and will not be
deemed an "investment company" as a result of the transactions contemplated by
this Agreement.
3.16 Prohibitions. Neither the
Company nor any person acting on its behalf or at its direction has in the past
taken any action to sell, offer for sale or solicit offers to buy any securities
of the Company which would bring the offer or sale of the Securities as
contemplated by this Agreement within the provisions of Section 5 of the
Securities Act.
5
3.17 Related Party Transactions.
Except as described in the SEC Reports, to the knowledge of the Company, no
transaction has occurred between or among the Company or any of its affiliates,
officers or directors or any affiliate or affiliates of any such officer or
director that requires disclosure pursuant to Section 13, 14 or 15(d) of the
Exchange Act.
3.18 Books and Records. The books,
records and accounts of the Company accurately and fairly reflect, in reasonable
detail, the transactions in, and dispositions of, the assets of, and the
operations of, the Company. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances 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 accordance with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
3.19 Uplisting. The
Company will use its reasonable best efforts to obtain a listing of its Common
Stock on either the NASDAQ Capital Market, the NYSE Amex or other U.S. national
securities exchange as soon as reasonably practicable (an “Uplisting”).
3.20 New Auditor. Within
ninety (90) days of an Uplisting, the Company shall have engaged an independent
public accounting firm (the "New Auditor")
agreeable to ARC China, Inc. (“ARC
China”).
3.21 New Hires. The
Company agrees to: (i) hire a full-time Investment Manager, who can communicate
in the English language fluently, and who is agreeable to ARC China; and (ii)
use its reasonable commercial efforts to, within 30 days of the Closing Date,
hire a US-based employee, who can communicate in the English language fluently
and who is agreeable to ARC China, to attend road shows and speak at conferences
and to investors about the Company.
3.22 Affiliate
Business. The Company agrees to cause its wholly-owned
subsidiary, LiaoNing Nengfa Weiye Energy Technology Co. LTD (“Nengfa Energy”), to
enter into a preferred provider agreement with Nengfa Weiye Tieling Valve
Joint-stock Co. Ltd. (“Tieling Valve”) as
soon as practicable, which preferred provider agreement is to provide that
Nengfa Energy shall have a right of first refusal with respect to all flow
control contracts obtained by Tieling Valve and that Tieling Valve’s aggregate
revenue on such contracts shall be capped at an average of 2.5% per each year of
the agreement..
3.23 Title to
Assets. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property owned by them (if any) and
good and marketable title in all personal property owned by them that is
material to the business of the Company and the Subsidiaries, in each case free
and clear of all liens, except for liens that do not materially affect the value
of such property and do not materially interfere with the use made and proposed
to be made of such property by the Company and the Subsidiaries and liens for
the payment of federal, state or other taxes, the payment of which is neither
delinquent nor subject to penalties. Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases with which the Company and the Subsidiaries
are in compliance.
6
3.24 Xxxxxxxx-Xxxxx; Internal Accounting
Controls. The Company is in material compliance with all
provisions of the Xxxxxxxx-Xxxxx Act of 2002 which are applicable to it as of
the Closing Date. The Company and the 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 accountability, (iii) access to assets is permitted only in accordance
with management’s general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
disclosure controls and procedures to ensure that information required to be
disclosed by the Company in the SEC Reports is recorded, processed, summarized
and reported, within the time periods specified in the SEC's rules and
forms. The Company’s certifying officers have evaluated the
effectiveness of the Company’s disclosure controls and procedures as of the end
of the period covered by the Company’s most recently filed periodic report under
the Exchange Act (such date, the “Evaluation
Date”). The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the Evaluation Date, there
have been no changes in the Company’s internal control over financial reporting
(as such term is defined in the Exchange Act) that has materially affected, or
is reasonably likely to materially affect, the Company’s internal control over
financial reporting.
3.25 Certain Fees. No
brokerage or finder’s fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other person with respect to the transactions
contemplated by the Transaction Documents. The Investor shall have no obligation
with respect to any fees or with respect to any claims made by or on behalf of
other persons for fees of a type contemplated in this Section 3.25 that may be
due in connection with the transactions contemplated by the Transaction
Documents.
3.26 Private
Placement. Assuming the accuracy of the Investor’s
representations and warranties set forth in Section 4, no
registration under the Securities Act is required for the offer and sale of the
Securities by the Company to the Investor as contemplated hereby.
3.27 Registration
Rights. Other than the piggyback registration rights of the
Investor set forth in the Note and Warrants, no person has any right to cause
the Company to effect the registration under the Securities Act of any
securities of the Company.
3.28 Solvency. Based on
the consolidated financial condition of the Company as of the Closing Date
before giving effect to the receipt by the Company of the proceeds from the sale
of the Securities hereunder: (i) the fair saleable value of the Company’s assets
exceeds the amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including known contingent
liabilities) as they mature, (ii) the Company’s assets do not constitute
unreasonably small capital to carry on its business as now conducted and as
proposed to be conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the Company, and
projected capital requirements and capital availability thereof, and (iii) the
current cash flow of the Company, together with the proceeds the Company would
receive, were it to liquidate all of its assets, after taking into account all
anticipated uses of the cash, would be sufficient to pay all amounts on or in
respect of its liabilities when such amounts are required to be paid. The
Company does not intend to incur debts beyond its ability to pay such debts as
they mature (taking into account the timing and amounts of cash to be payable on
or in respect of its debt). The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for reorganization or
liquidation under the bankruptcy or reorganization laws of any jurisdiction
within one year from the Closing Date. Schedule 3.28 sets
forth as of the date hereof all outstanding secured and unsecured Indebtedness
of the Company or any Subsidiary, or for which the Company or any Subsidiary has
commitments. For the purposes of this Agreement, “Indebtedness” means
(x) any liabilities for borrowed money or amounts owed in excess of $100,000
(other than trade accounts payable incurred in the ordinary course of business),
(y) all guaranties, endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same are or should be reflected in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (z) the present value of
any lease payments in excess of $100,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any Subsidiary is
in default with respect to any Indebtedness.
7
3.29 Foreign Corrupt
Practices. Neither the Company, nor to the knowledge of the
Company, any agent or other person acting on behalf of the Company, has: (i)
directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law or (iv) violated in any
material respect any provision of the Foreign Corrupt Practices Act of 1977, as
amended.
3.30 Furnishing of
Information. Until the Investor no longer owns any Securities,
the Company covenants to maintain the registration of the Common Stock under
Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to
the Exchange Act. As long as the Investor owns any Securities, if the Company is
not required to file reports pursuant to the Exchange Act, it will prepare and
furnish to the Investor and make publicly available in accordance with Rule
144(c) such information as is required for the Investor to sell the Securities
under Rule 144. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, to the extent
required from time to time to enable such person to sell such Securities without
registration under the Securities Act within the requirements of the exemption
provided by Rule 144.
3.31 Integration. The
Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities to the
Investor in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Investor.
8
3.32 Indemnification of
Investor. The Company agrees to indemnify and hold the
Investor and its directors, officers, shareholders, members, partners,
employees, agents, successors and permitted assigns (and any other persons with
a functionally equivalent role of a person holding such titles notwithstanding a
lack of such title or any other title), each person who controls such Investor
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, shareholders, agents, members,
partners or employees (and any other Persons with a functionally equivalent role
of a person holding such titles notwithstanding a lack of such title or any
other title) of such controlling person (each, an “Investor Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such Investor Party may suffer or incur as a result of or
relating to (a) any breach of any of the representations, warranties, covenants
or agreements made by the Company in this Agreement or in the other Transaction
Documents or (b) any action instituted against an Investor in any capacity, or
any of them or their respective affiliates, by any stockholder of the Company
who is not an affiliate of such Investor, with respect to any of the
transactions contemplated by the Transaction Documents (unless such action is
based upon a breach of such Investor’s representations, warranties or covenants
under the Transaction Documents to which it is a party or any agreements or
understandings such Investor may have with any such stockholder or any
violations by the Investor of state or federal securities laws or any conduct by
such Investor which constitutes fraud, gross negligence, willful misconduct or
malfeasance). If any action shall be brought against any Investor
Party in respect of which indemnity may be sought pursuant to this Agreement,
such Investor Party shall promptly notify the Company in writing, and the
Company shall have the right to assume the defense thereof with counsel of its
own choosing reasonably acceptable to the Investor Party. Any
Investor Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Investor Party except to the extent that
(i) the employment thereof has been specifically authorized by the Company in
writing, (ii) the Company has failed after a reasonable period of time to assume
such defense and to employ counsel or (iii) in such action there is, in the
reasonable opinion of such separate counsel, a material conflict on any material
issue between the position of the Company and the position of such Investor
Party, in which case the Company shall be responsible for the reasonable fees
and expenses of no more than one such separate counsel. The Company
will not be liable to any Investor Party under this Agreement (y) for any
settlement by a Investor Party effected without the Company’s prior written
consent, which shall not be unreasonably withheld or delayed; or (z) to the
extent, but only to the extent that a loss, claim, damage or liability is
attributable to any Investor Party’s breach of any of the representations,
warranties, covenants or agreements made by such Investor Party in this
Agreement or in the other Transaction Documents to which it is a party or from
such Investor Party’s fraud, gross negligence, willful misconduct or
malfeasance.
3.33 Reservation and Listing of
Securities. The Company shall maintain a reserve from its duly
authorized shares of Common Stock for issuance of the Notes Shares and Warrant
Shares in such amount as may then be required to fulfill its obligations in full
under the Note and Warrants.
9
4.
Representations, Warranties and
Covenants of the Investor.
4.1 Investor Knowledge and Status.
The Investor represents and warrants to, and covenants with, the Company that:
(i) the Investor is an "accredited investor" as defined in Regulation D under
the Securities Act, is knowledgeable, sophisticated and experienced in making,
and is qualified to make decisions with respect to, investments in securities
presenting an investment decision similar to that involved in the purchase of
the Securities, and has requested, received, reviewed and considered all
information it deemed relevant in making an informed decision to purchase the
Securities; (ii) the Investor understands that the Securities are “restricted
securities” and have not been registered under the Securities Act and is
acquiring the Securities in the ordinary course of its business and for its own
account for investment only, has no present intention of distributing any of the
Securities and has no arrangement or understanding with any other persons
regarding the distribution of the Securities; (iii) the Investor understands
that the Note Shares and Warrant Shares (together the “Underlying
Securities”) will be “restricted securities” when issued and will not
have been registered under the Securities Act and will be acquiring the
Underlying Securities in the ordinary course of its business and for its own
account for investment only, has no present intention of distributing any of the
Underlying Securities and has no arrangement or understanding with any other
persons regarding the distribution of the Underlying Securities (iv) the
Investor will not, directly or indirectly, offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the Securities nor any of the Underlying
Securities except in compliance with the Securities Act, applicable state
securities laws and the respective rules and regulations promulgated thereunder;
(v) the Investor has completed the Investor Questionnaire attached hereto as
Exhibit F for
use in preparation of the Registration Statement to be filed on Form S-1 (or any
similar or successor form with the SEC (the “Registration Statement”)) and for
determining the availability of state "Blue Sky" exemptions and the answers
thereto are true and correct as of the date hereof and will be true and correct
as of the Closing Date; (vi) the Investor will notify the Company promptly of
any change in any of such information until such time as the Investor has sold
all of its registrable securities or until the Company is no longer required to
keep the Registration Statement effective; and (vii) the Investor has, in
connection with its decision to purchase the Securities, relied upon the
representations and warranties of the Company contained herein and the
information contained in the SEC Reports. The Investor understands that the
issuance of the Securities to the Investor has not been registered under the
Securities Act, or registered or qualified under any state securities law, in
reliance on specific exemptions therefrom, which exemptions may depend upon,
among other things, the representations made by the Investor in this Agreement.
No person is authorized by the Company to provide any representation that is
inconsistent with or in addition to those contained herein or in the SEC
Reports, and the Investor acknowledges that it has not received or relied on any
such representations.
4.2 Transfer of Shares. The
Investor agrees that it will not make any sale, transfer or other disposition of
the Note, the Note Shares, the Warrants or the Warrant Shares (a "Disposition") other
than Dispositions that are made pursuant to the Registration Statement in
compliance with any applicable prospectus delivery requirements or that are
exempt from registration under the Securities Act.
4.3 Power and Authority. The
Investor represents and warrants to the Company that (i) the Investor has full
right, power, authority and capacity to enter into this Agreement and to
consummate the transactions contemplated hereby and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement,
and (ii) this Agreement constitutes a valid and binding obligation of the
Investor enforceable against the Investor in accordance with its terms, except
to the extent (i) rights to indemnity and contribution may be limited by state
or federal securities laws or the public policy underlying such laws, (ii) such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and (iii) such enforceability may be subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
4.4 Short Position. From the
earlier of (i) 30 days prior to the date hereof and (ii) the date the Investor
learned of the Sale, neither the Investor nor any affiliate has directly or
indirectly established or agreed to establish, nor will the Investor or any
affiliate directly or indirectly establish or agree to establish, any hedge,
"put equivalent position" (as defined in Rule 16a-1 under the Exchange Act) or
other position in the Common Stock that is outstanding on the Closing Date and
that is designed to or could reasonably be expected to lead to or result in a
Disposition by the Investor or any other person or entity. For purposes hereof,
a "hedge or other position" includes, without limitation, effecting any short
sale or having in effect any short position (whether or not such sale or
position is against the box and regardless of when such position was entered
into) or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to the Common Stock or with
respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from the
Common Stock. The Investor acknowledges that this representation is made for the
benefit of the Company, which may assert claims arising out of the breach of
this Section
4.4.
10
4.5 No Investment, Tax or Legal
Advice. The Investor understands that nothing in the SEC Reports, this
Agreement, or any other materials presented to the Investor in connection with
the purchase and sale of the Securities constitutes legal, tax or investment
advice. The Investor has consulted such legal, tax and investment advisors as
it, in its sole discretion, has deemed necessary or appropriate in connection
with its purchase of the Securities.
4.6 Confidential Information. The
Investor covenants that from the date hereof it will maintain in confidence all
material non-public information regarding the Company received by the Investor
from the Company, including the receipt and content of any Suspension Notice (as
defined in the Registration Rights Agreement) until such information (a) becomes
generally publicly available other than through a violation of this provision by
the Investor or its agents or (b) is required to be disclosed in legal
proceedings (such as by deposition, interrogatory, request for documents,
subpoena, civil investigation demand, filing with any governmental authority or
similar process); provided, however, that before making any disclosure in
reliance on this Section 4.6, the
Investor will give the Company prior written notice specifying the circumstances
giving rise thereto and will furnish only that portion of the non-public
information which is legally required and will exercise its commercially
reasonable efforts to ensure that confidential treatment will be accorded any
non-public information so furnished. The Investor will not trade, or provide
material non-public information about the Company to any other party who may or
does trade, the Company’s securities when the Investor is in possession of
material non-public information about the Company.
4.7 Due Diligence Review. As part,
and only part, of its due diligence review, the Investor acknowledges that it
has reviewed the Company’s audited financial statements for fiscal years ended
December 31, 2007 and 2008.
4.8 Additional Acknowledgement.
The Investor acknowledges that it has independently evaluated the merits of the
transactions contemplated by this Agreement, that it has independently
determined to enter into the transactions contemplated hereby, that it is not
relying on any advice from or evaluation by any other person, that it is relying
solely upon the representations and warranties of the Company set forth in this
Agreement in making its investment decision, and that it is not acting in
concert with any other person in making its purchase of the Securities
hereunder. The Investor acknowledges that the Investor has not taken any actions
that would deem the Investor to be a member of a "group" for purposes of Section
13(d) of the Exchange Act.
5. Transfer
Restrictions; Legends. Certificates
evidencing the Note, Note Shares, the Warrants and the Warrant Shares (the
“Legended Shares” shall each
bear any legend as required by the "blue sky" laws of any state and a
restrictive legend in substantially the following form, until such time as they
are not required:
11
[NEITHER THESE SECURITIES NOR THE
SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES HAVE BEEN
REGISTERED] [THESE
SECURITIES HAVE NOT BEEN REGISTERED] UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), 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 OR (B) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS AS EVIDENCED
BY A LEGAL OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS
TRANSFER AGENT OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
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
Company acknowledges and agrees that an Investor may from time to time pledge,
and/or grant a security interest in, some or all of the Legended Shares in
connection with applicable securities laws, pursuant to a bona fide margin
agreement in compliance with a bona fide margin loan. Such a pledge would not be
subject to approval or consent of the Company and no legal opinion of legal
counsel to the pledgee, secured party or pledgor shall be required in connection
with the pledge, but such legal opinion shall be required in connection with a
subsequent transfer or foreclosure following default by the Investor transferee
of the pledge. No notice shall be required of such pledge, but the Investor's
transferee shall promptly notify the Company of any such subsequent transfer or
foreclosure. The Investor acknowledges that the Company shall not be responsible
for any pledges relating to, or the grant of any security interest in, any of
the Legended Shares or for any agreement, understanding or arrangement between
the Investor and its pledgee or secured party. At the appropriate Investor's
expense, the Company will execute and deliver such reasonable documentation as a
pledgee or secured party of Legended Shares may reasonably request in connection
with a pledge or transfer of such Legended Shares, including the preparation and
filing of any required prospectus supplement under Rule 424(b)(3) of the
Securities Act or other applicable provision of the Securities Act to
appropriately amend the list of selling stockholders thereunder.
6. Public
Statements. The Company agrees to disclose on a Current Report
on Form 8-K the consummation of the sale of the Securities and the material
terms thereof, including pricing, which shall be filed with the SEC within two
Business Days after the Closing. The Company will not issue any public
statement, press release or any other public disclosure listing the Investor as
a purchaser of the Securities without the Investor's prior written consent,
except as may be required by applicable law or rules of any exchange on which
the Company's securities are listed.
7.
Notices. All
notices, requests, consents and other communications hereunder shall be in
writing, shall be delivered (A) if within the United States, by first-class
registered or certified airmail, or nationally recognized overnight express
courier, postage prepaid, or by facsimile, or (B) if from outside the United
States, by International Federal Express (or comparable service) or facsimile,
and shall be deemed given (i) if delivered by first-class registered or
certified mail domestic, upon the Business Day received, (ii) if delivered by
nationally recognized overnight carrier, one Business Day after timely delivery
to such carrier, (iii) if delivered by International Federal Express (or
comparable service), two Business Days after timely delivery to such carrier,
(iv) if delivered by facsimile, upon electric confirmation of receipt and shall
be addressed as follows, or to such other address or addresses as may have been
furnished in writing by a party to another party pursuant to this
paragraph:
12
(a)
if to the Company, to:
|
NF
Energy Saving Corporation
21-Jia
Bei Si Dong Road, Tie Xi Qu
Shenyang,
P. R. China 110021
Attention:
Mr. Xxxx Xx
Facsimile:
(8624) 2354-0536
|
with
a copy to:
|
Golenbock
Xxxxxxx Assor Xxxx & Xxxxxx LLP
000
Xxxxxxx Xxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention:
Xxxxxx X. Xxxxxxx, Esq.
Facsimile:
(000) 000-0000
|
(b)
if to the Investor, at its address on the signature page to the
Securities Purchase Agreement.
8.
Amendments;
Waiver. This Agreement may not be modified or amended except pursuant to
an instrument in writing signed by the Company and the Investor. Any waiver of a
provision of this Agreement must be in writing and executed by the party against
whom enforcement of such waiver is sought.
9.
Headings. The
headings of the various sections of this Agreement have been inserted for
convenience of reference only and shall not be deemed to be part of this
Agreement.
10. Entire Agreement;
Severability. This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof and
supersedes all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written relating to the
subject matter hereof. If any provision contained in this Agreement is
determined to be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
11. Governing Law; Submission to
Jurisdiction. This Agreement shall be governed by and
construed and enforced in accordance with the law of the State of Delaware,
without giving effect to conflict of laws. The parties hereby agree that any
action, proceeding or claim against it arising out of, or relating in any way to
this Agreement shall be brought and enforced in the courts of the State of New
York or of the United States of America in the Southern District of New York,
and irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The parties hereby waive any objection to such exclusive jurisdiction
and that such courts represent an inconvenient forum. Any process or summons to
be served upon a party may be served by transmitting a copy thereof by
registered or certified mail, return receipt requested, postage prepaid,
addressed to it at the address for notices set forth in this Agreement. Such
mailing shall be deemed personal service and shall be legal and binding upon
such party in any action, proceeding or claim. The parties agree that the
prevailing party(ies) in any such action shall be entitled to recover from the
other party(ies) all of its reasonable attorneys’ fees and expenses relating to
such action or proceeding and/or incurred in connection with the preparation
therefore.
12. Counterparts. This Agreement
may be executed in two or more counterparts, each of which shall constitute an
original, but all of which, when taken together, shall constitute but one
instrument, and shall become effective when one or more counterparts have been
signed by each party hereto and delivered to the other parties.
13
13. Successors and
Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns. Neither party
may assign this Agreement or any rights or obligations hereunder without the
prior written consent of the other party (other than by merger).
14. Fees and
Expenses. Except as expressly set forth in the funds flow
memorandum dated as of the date hereof or the Transaction Documents to the
contrary, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all transfer agent fees,
stamp taxes and other taxes and duties levied in connection with the delivery of
any Securities to the Investor.
15. Survival. Sections 3, 4, 6, 10 and 12-14 shall survive
the Closing and the delivery of the Securities for the applicable statute of
limitations.
16. Severability. If
any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
17. Remedies. In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of the Investor and the Company will be
entitled to specific performance under the Transaction Documents. The
parties agree that monetary damages may not be adequate compensation for any
loss incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agrees to waive and not to assert in any action
for specific performance of any such obligation the defense that a remedy at law
would be adequate.
[Remainder
of This Page Intentionally Left Blank]
14
EXHIBIT
A
NF
ENERGY SAVING CORPORATION
CERTIFICATE
QUESTIONNAIRE
Pursuant
to Section 4 of
the Agreement, please provide us with the following information:
1.
|
The
exact name in which your Note and Warrants are to be registered (this is
the name that will appear on your stock certificate(s) for the Note Shares
and the Warrant Shares). You may use a nominee name if
appropriate:
|
||
2.
|
If
a nominee name is listed in response to Item 1 above, the relationship
between the Investor and such nominee:
|
||
3.
|
The
mailing address of the registered holder listed in response to Item 1
above:
|
||
4.
|
The
Social Security Number or Tax Identification Number of the registered
holder listed in the response to Item 1 above:
|
Note: If
the registered holder does not have a Social Security or Tax Identification
Number, please provide a copy of the registered holder's passport, or if an
entity, a copy of the passport of one of the registered holder's
principals.
A-1
EXHIBIT
B
NF
ENERGY SAVING CORPORATION
FORM
OF NOTE
Attached
hereto.
B-1
EXHIBIT
C
NF
ENERGY SAVING CORPORATION
FORM
OF WARRANT
Attached
hereto.
C-1
EXHIBIT
D
NF
ENERGY SAVING CORPORATION
INVESTOR
QUESTIONNAIRE
(All
information will be treated confidentially)
To: NF
Energy Saving Corporation
The
undersigned hereby acknowledges the following:
This
Investor Questionnaire ("Questionnaire") must
be completed by a potential investor in connection with the offer and sale of a
Senior Convertible Promissory Note (the “Note”), and warrants
(“Warrants”) to
purchase shares of Common Stock, par value $0.001 per share (“Common Stock”), of NF
Energy Saving Corporation (the "Company"). The Note
and Warrants (together the “Securities”) are
being offered and sold by the Company without registration under the Securities
Act of 1933, as amended (the "Securities Act"), and
the securities laws of certain states, in reliance on the exemptions contained
in Section 4 of the Securities Act and on Regulation D promulgated thereunder
and in reliance on similar exemptions under applicable state laws. The Company
must determine that a potential investor meets certain suitability requirements
before offering or selling the Securities to such investor. The purpose of this
Questionnaire is to assure the Company that the investor will meet the
applicable suitability requirements. The information supplied by the undersigned
will be used in determining whether the undersigned meets such criteria, and
reliance upon the private offering exemption from registration is based in part
on the information herein supplied.
This
Questionnaire does not constitute an offer to sell or a solicitation of an offer
to buy any security. The undersigned's answers will be kept strictly
confidential. However, by signing this Questionnaire the undersigned will be
authorizing the Company to provide a completed copy of this Questionnaire to
such parties as the Company deems appropriate in order to ensure that the offer
and sale of the Securities will not result in a violation of the Securities Act
or the securities laws of any state and that the undersigned otherwise satisfies
the suitability standards applicable to the investor of the Securities. All
potential investors must answer all applicable questions and complete, date and
sign this Questionnaire. The undersigned shall print or type its responses and
attach additional sheets of paper if necessary to complete its answers to any
item.
A.
Background
Information
Name:
|
_____________________________________________________________________
|
Business
Address:
|
_____________________________________________________________________
|
(Number
and Street); (City) (State); (Zip Code)
|
|
Telephone
Number:
|
(_____)
______________________________________________________________
|
Residence
Address:
|
_____________________________________________________________________
|
_____________________________________________________________________
|
|
(Number
and Street); (City) (State); (Zip
Code)
|
D-1
Telephone Number:
|
(_____)
_______________________________________________________
|
Age:
_________________
|
Citizenship:
___________________
|
Where
registered to vote:
______________________
|
If a
corporation, partnership, limited liability company, trust or other
entity:
Type
of
entity:
|
_____________________________________________________________________
|
State
of
formation:_____________________________
|
Date
of
formation::_____________________________
|
Social Security or Taxpayer
Identification No. __________________________________
Send all
correspondence to (check one): ____________Residence Address ____________
Business Address
B.
Status as Accredited
Investor
The
undersigned is an "accredited investor" as such term is defined in Regulation D
under the Securities Act, because at the time of the sale of the Shares the
undersigned falls within one or more of the following categories (Please initial
one or more, as applicable):
_____ (1)
a bank as defined in Section 3(a)(2) of the Securities Act, or a savings and
loan association or other institution as defined in Section 3(a)(5)(A) of the
Securities Act whether acting in its individual or fiduciary capacity; a broker
or dealer registered pursuant to Section 15 of the Securities Exchange Act of
1934; an insurance company as defined in Section 2(13) of the Securities Act; an
investment company registered under the Investment Company Act of 1940 or a
business development company as defined in Section 2(a)(48) of that act; a Small
Business Investment Company licensed by the U.S. Small Business Administration
under Section 301(c) or (d) of the Small Business Investment Act of 1958; a plan
established and maintained by a state, its political subdivisions, or any agency
or instrumentality of a state or its political subdivisions for the benefit of
its employees, if such plan has total assets in excess of $5,000,000; an
employee benefit plan within the meaning of the Employee Retirement Income
Security Act of 1974 if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of such act, which is either a bank, savings and loan
association, insurance company, or registered investment adviser, or if the
employee benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with the investment decisions made solely by persons that
are accredited investors;
_____ (2)
a private business development company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940;
_____ (3)
an organization described in Section 501(c)(3) of the Internal Revenue Code of
1986, as amended, as a corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the Shares
offered, with total assets in excess of $5,000,000;
D-2
_____ (4)
a natural person whose individual net worth, or joint net worth with that
person's spouse, at the time of such person's purchase of the Shares exceeds
$1,000,0001;
_____ (5)
a natural person who had an individual income in excess of $200,000 in each of
the two most recent years or joint income with that person's spouse in excess of
$300,000 in each of those years and has a reasonable expectation of reaching the
same income level in the current year;
_____ (6)
a trust, with total assets in excess of $5,000,000, not formed for the specific
purpose of acquiring the Shares offered, whose purchase is directed by a
sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D;
and
_____ (7)
an entity in which all of the equity owners are accredited investors (as defined
above).
C.
Representations
The
undersigned hereby represents and warrants to the Company as
follows:
1.
Any purchase of the Securities would be solely for the account of the
undersigned and not for the account of any other person or with a view to any
resale, fractionalization, division, or distribution thereof.
2.
The information contained herein is complete and accurate and may be
relied upon by the Company, and the undersigned will notify the Company
immediately of any material change in any of such information occurring prior to
the closing, if any, with respect to the purchase of the Securities by the
undersigned or any co-Investor.
3.
There are no suits, pending litigation, or claims against the undersigned that
could materially affect the net worth of the undersigned as reported in this
Questionnaire.
4.
The undersigned acknowledges that there may occasionally be times when the
Company, based on the advice of its counsel, determines that it must suspend the
use of the Prospectus forming a part of the Registration Statement (as such
terms are defined in the Securities Purchase Agreement to which this
Questionnaire is attached) until such time as an amendment to the Registration
Statement has been filed by the Company and declared effective by the Securities
and Exchange Commission or until the Company has amended or supplemented such
Prospectus. The undersigned is aware that, in such event, the Securities will
not be subject to ready liquidation, and that any Securities purchased by the
undersigned would have to be held during such suspension. The overall commitment
of the undersigned to investments which are not readily marketable is not
excessive in view of the undersigned's net worth and financial circumstances,
and any purchase of
the Securities will not cause such commitment to become excessive. The
undersigned is able to bear the economic risk of an investment in the
Securities.
1 As used
in this Questionnaire, the term "net worth" means the excess of total assets
over total liabilities. In computing net worth for the purpose of subsection
(4), the principal residence of the investor must be valued at cost, including
cost of improvements, or at recently appraised value by a professional
appraiser. In determining income, the investor should add to the investor's
adjusted gross income any amounts attributable to tax exempt income received,
losses claimed as a limited partner in any limited partnership, deductions
claimed for depreciation, contributions to an XXX or XXXXX retirement plan,
alimony payments, and any amount by which income from long-term capital gains
has been reduced in arriving at adjusted gross income.
D-3
5.
The undersigned has carefully considered the potential risks relating to
the Company and a purchase of the Securities and fully understands that the
Securities are speculative investments which involve a high degree of risk of
loss of the undersigned's entire investment. Among others, the undersigned has
carefully considered each of the risks described in the Company's Annual Report
on Form 10-K for the year ended December 31, 2008.
6.
The following is a list of all states and other jurisdictions in which
blue sky or similar clearance will be required in connection with the
undersigned's purchase of the Securities:
________________________________________
________________________________________
________________________________________
The
undersigned agrees to notify the Company in writing of any additional states or
other jurisdictions in which blue sky or similar clearance will be required in
connection with the undersigned's purchase of the Shares.
IN
WITNESS WHEREOF, the undersigned has executed this Questionnaire this ____ day
of February, 2010, and declares under oath that it is truthful and
correct.
Investor
Name:
|
||
Investor
Signature:
|
||
Name:
Title:
(required
for an Investor that is a
corporation,
partnership, trust or
other
entity)
|
D-4