SECURITIES PURCHASE AGREEMENT
This Securities
Purchase Agreement (the "Agreement"),
dated
as of November 5, 2007, by and among China BAK Battery, Inc, a Nevada
corporation, with headquarters located at BAK Industrial Park, No. 1 BAK Street,
Kuichong Town, Longgang District, Shenzhen, 518119, Republic of China (the
"Company"),
and
the investors listed on the Schedule of Buyers attached hereto (individually,
a
"Buyer"
and
collectively, the "Buyers").
A. The
Company and each Buyer is executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by 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.
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 shares of
the
Common Stock, par value $0.001 per
share, of the Company (the "Common
Stock"),
set
forth opposite such Buyer's name in column (3) on the Schedule of Buyers (which
aggregate amount for all Buyers together shall be 3,500,000 shares of Common
Stock and shall collectively be referred to herein as the "Common
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
A
(the
"Registration
Rights Agreement")
pursuant to which the Company has agreed to provide certain registration rights
with respect to the Common Shares, under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities
laws.
D. The
Common Shares are also referred to herein as the "Securities".
NOW,
THEREFORE,
the
Company and each Buyer hereby agree as follows:
1. |
PURCHASE
AND SALE OF COMMON SHARES.
|
(a) Purchase
of Common Shares.
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), the number of Common Shares as is set forth opposite such
Buyer's name in column (3) on the Schedule of Buyers (the "Closing").
The
Closing shall occur on the Closing Date at the offices of Xxxxxxx Xxxx &
Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
(b) Purchase
Price.
The
purchase price for the Common Shares to be purchased by each Buyer at the
Closing shall be the amount set forth opposite such Buyer’s name in column (4)
of the Schedule of Buyers (the "Purchase
Price")
which
shall be equal to the amount of $3.90 per Common Share.
(c) Closing
Date.
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).
(d) Form
of Payment.
On the
Closing Date, (i) each Buyer shall pay its respective Purchase Price to the
Company for the Common Shares to be issued and sold to such Buyer at the
Closing, 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 stock certificates, evidencing the number of Common
Shares such Buyer is purchasing as is set forth opposite such Buyer’s name in
column (3) of the Schedule of Buyers, all duly executed on behalf of the Company
and registered in the name of such Buyer.
2. |
BUYER'S
REPRESENTATIONS AND WARRANTIES.
|
Each
Buyer represents and warrants with respect to only itself that:
(a) No
Public Sale or Distribution.
Such
Buyer is acquiring the Common Shares in the ordinary course of business for
its
own account and not with a view towards, or for resale in connection with,
the
sale or distribution thereof, except pursuant to sales registered or exempted
under the 1933 Act and such Buyer does not have a present arrangement to effect
any distribution of the Securities to or through any person or entity;
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 to distribute any of the Securities.
(b) Accredited
Investor Status.
At the
time such Buyer was offered the Securities and at the date hereof it is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation
D.
Such Buyer is not a registered broker-dealer under Section 15 of the 1934 Act
(as defined below).
(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 which have been requested by such Buyer.
Such Buyer and its advisors, if any, have been afforded the opportunity to
ask
questions of the Company. 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
and such Buyer is able to afford a complete loss of such investment. 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.
2
(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.
(f) Transfer
or Resale.
Such
Buyer understands that except as provided in the Registration Rights Agreement:
(i) the Securities have not been and will not be 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 reasonably acceptable to
the
Company, in a generally acceptable form, 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, or (C) such Buyer provides the Company
with assurance reasonably acceptable to the Company 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"),
including customary seller and broker representation letters; (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 (as
defined in Section 3(s)) 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 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, if such Buyer pledges the Securities in
connection with a bona fide margin account or other loan secured by the
Securities, which shall be permitted hereunder, the Buyer effecting a pledge
of
Securities shall not 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 below), including, without limitation,
this Section 2(f); provided, that in order to make any sale, transfer or
assignment of Securities (including any sale, transfer or assignment that occurs
upon the exercise by the pledgee of any rights with respect to any such pledge
of the Securities), such Buyer and its pledgee must comply with the requirements
of this Agreement and must make any such disposition only in accordance with
or
pursuant to a registration statement or an exemption under the 1933 Act.
(g) Legends.
Such
Buyer understands that the certificates or other instruments representing the
Common Shares and, until such time as the resale of the Common Shares have
been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement, 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
stock certificates):
3
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
REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A 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
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 reasonably satisfactory to the Company, in a generally acceptable
form, 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
and that such legend is no longer required, or (iii) such holder provides the
Company with assurance reasonably acceptable to the Company, including customary
seller and broker representation letters, that the Securities can be sold,
assigned or transferred pursuant to Rule 144 or Rule 144A. 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 a certificate without such legend to the holder of such Securities or
to
issue such Securities to such holder by electronic delivery at the applicable
balance account at DTC, within three (3) Trading Days (as defined in the
Registration Rights Agreement) after all of the requirements of any of (i)
through (iii) above have been satisfied, and if on or after such third Trading
Day the holder purchases (in an open market transaction or otherwise) shares
of
Common Stock to deliver in satisfaction of a sale by the holder of such
Securities 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, if any)
for the shares of Common Stock so purchased (the "Buy-In
Price"),
at
which point the Company's obligation to deliver such unlegended Securities
shall
terminate (and if the Company has already delivered legended Securities, such
holder shall promptly return such Securities to the Company) or (ii) promptly
honor its obligation to deliver to the holder such unlegended Securities 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 shares of Common
Stock, times (B) the Closing Price on the date of the Buy-In. As used herein,
"Closing Price" shall mean, for any security as of any date, the last closing
trade price for such security on the Principal Market, as reported by Bloomberg
Financial Markets ("Bloomberg"),
or,
if the Principal Market begins to operate on an extended hours basis and does
not designate the closing trade price, as the case may be, then the last trade
price, respectively, of such security prior to 4:00:00 p.m., New York Time,
as
reported by Bloomberg, or, if the Principal Market is not the principal
securities exchange or trading market for such security, the last trade price
of
such security on the principal securities exchange or trading market where
such
security is listed or traded as reported by Bloomberg, or if the foregoing
do
not apply, the last trade price of such security in the over-the-counter market
on the electronic bulletin board for such security as reported by Bloomberg,
or,
if no last trade price is reported for such security by Bloomberg, the average
of the ask prices of any market makers for such security as reported in the
"pink sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.).
If the Closing Price cannot be calculated for a security on a particular date
on
any of the foregoing bases, the Closing Price of such security on such date
shall be the fair market value as mutually determined by the Company and the
Holder. If the Company and the Holder are unable to agree upon the fair market
value of such security, then such dispute shall be resolved pursuant to Section
22. All such determinations to be appropriately adjusted for any share dividend,
share split, share combination or other similar transaction during the
applicable calculation period.
4
(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.
(k) Prohibited
Transactions.
Since
the time that the Buyer was first approached by the Company or the Placement
Agent with respect to, or other first learned of, the transactions contemplated
hereby, neither such Buyer nor any Person acting on behalf of or pursuant to
any
understanding with such Buyer has, directly or indirectly, effected or agreed
to
effect any purchases or sales (including, without limitation, any short sale,
whether or not against the box, established any "put equivalent position" (as
defined in Rule 16a-1(h) under the Exchange Act)) with respect to the Common
Stock, granted any other right (including, without limitation, any put or call
option) with respect to the Common Stock or with respect to any security that
includes, relates to or derived any significant part of its value from the
Common Stock or otherwise sought to hedge its position in the Securities (but
not including any actions to secure available shares to borrow in order to
effect short sales or similar transactions in the future) (each, a "Prohibited
Transaction").
Prior
to the earliest to occur of (i) the termination of this Agreement or (ii) the
date of the 8-K Filing as described in Section 4(i), such Buyer shall not,
and
shall cause any Person acting on behalf of or pursuant to any understanding
with
such Buyer not to, engage, directly or indirectly, in a Prohibited
Transaction.
5
(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, to such Buyer's knowledge, or any other general
solicitation or general advertisement.
(m) Independent
Investment Decision.
Such
Buyer has independently evaluated the merits of its decision to purchase the
Securities pursuant to the Transaction Documents, and such Buyer confirms that
it has not relied on the advice of any other Buyer’s business and/or legal
counsel in making such decision. Such Buyer has not relied on the business
or
legal advice of Xxxx Capital Partners, LLC 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 by the Transaction
Documents.
(n) Arm’s
Length Purchaser.
Affiliate; Beneficial Owner. Buyer is acting solely in the capacity of arm's
length purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby. No Buyer is (i) an officer or director of
the
Company, (ii) an "affiliate" of the Company (as defined in Rule 144) or (iii)
a
"beneficial owner" of more than 10% of the shares of Common Stock (as defined
for purposes of Rule 13d-3 of the Securities Exchange Act of 1934, as amended
(the "1934 Act").
(o) Buyer
Status.
Buyer
recognizes that investment in the Securities involves substantial risks. Buyer
has adequate means of providing for Buyer’s current financial needs and
contingencies, is able to bear the substantial economic risks of an investment
in the Securities for an indefinite period of time, has no need for liquidity
in
such investment and, at the present time, could afford a complete loss of such
investment. Buyer has such knowledge, skill and experience in business,
financial and investment matters so that it is capable of evaluating the merits
and risks of an investment in the Securities. Buyer has prior experience in
investing in “restricted securities” under Regulation D. The investment in the
Securities is consistent with Buyer's investment objectives. Buyer acknowledges
that it has had the opportunity to read the SEC Documents (as defined below)
including the risk factors contained therein, as well as other written materials
provided by the Company.
6
3. |
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
|
The
Company represents and warrants to each of the Buyers that:
(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 capital stock or holds an equity or similar interest (other
than ownership of less than 5% of securities of a publicly traded corporation))
are corporations duly organized and validly existing in good standing under
the
laws of the jurisdiction in which they are incorporated, and have the requisite
corporate power and authorization to own their properties and to carry on their
business as now being conducted, except as set forth in the Company's periodic
reports filed with the SEC.. Each of the Company and its Subsidiaries is duly
qualified as a foreign corporation 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, taken as a whole, or on the transactions
contemplated by this Agreement and 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 (as defined below). The Company
has
no Subsidiaries except as set forth on Schedule
3(a).
(b) Authorization;
Enforcement; Validity.
The
Company has the requisite corporate power and authority to enter into and
perform its obligations under this Agreement, the Registration Rights Agreement,
the Irrevocable Transfer Agent Instructions (as defined in Section 5 hereof),
and each of the other agreements entered into as of the date hereof or as of
the
Closing Date by the parties hereto in connection with the transactions
contemplated by this Agreement (collectively, the "Transaction
Documents")
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 Common Shares have been
duly
authorized by the Company's Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or its
stockholders. This Agreement and the other Transaction Documents 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
Common Shares are duly authorized and, upon issuance in accordance with the
terms hereof, shall be validly issued and free from all taxes, liens and charges
with respect to the issue thereof and the Common Shares shall be fully paid
and
nonassessable with the holders being entitled to all rights accorded to a holder
of Common Stock. Subject to the accuracy of each Buyer's compliance with the
representations, warranties, agreements, acknowledgments and understandings
of
each Buyer set forth in Section 2 hereof, the offer and issuance by the Company
of the Securities is exempt from registration under the 1933 Act.
7
(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 Common Shares)
will
not (i) result in a violation of the Certificate of Incorporation (as defined
below) or Bylaws (as defined below) 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) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any material
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 federal and state securities
laws and regulations and the rules and regulations of The NASDAQ Global Market
(the "Principal
Market")
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 each of clauses (ii) and (iii), such as do not, individually or
in
the aggregate have nor would reasonably be expected to result in a Material
Adverse Effect.
(e) Consents.
The
Company is not 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 other
than (i) the filing with the SEC of one or more registration statements in
accordance with the Registration Rights Agreement, (ii) filings required by
state securities laws, (iii) the filing of a Notice of Sale of Securities on
Form D with the SEC under Regulation D of the 1933 Act, (iv) the filings
required in accordance with Section 4(i) of this Agreement and (v) those that
have been made or obtained prior to the date of this Agreement. All
consents, authorizations, orders, filings and registrations which the Company
is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the Closing Date or will be obtained within the
applicable periods prescribed by applicable law and required by the Transaction
Documents. 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 Stock in the foreseeable future.
(f) Acknowledgment
Regarding Buyer's Purchase of Securities.
The
Company acknowledges and agrees, in reliance on each Buyer's representations
as
set forth in this Agreement, that each Buyer is acting solely in the capacity
of
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, (ii) an "affiliate" of the Company (as defined
in
Rule 144) or (iii) to the knowledge of the Company based solely upon a review
of
any Schedule 13D, Schedule 13G, Form 3, Form 4 or Form 5 filed with the SEC
by
such Buyers with respect to the Company, a "beneficial owner" of more than
10%
of the shares of Common Stock (as defined for purposes of Rule 13d-3 of the
1934
Act. The Company further acknowledges that no Buyer is acting as a financial
advisor or fiduciary of the Company (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.
8
(g) No
General Solicitation; Placement Agent's Fees.
Neither
the Company, nor any of its 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. The Company acknowledges that
it
has engaged Xxxx Capital Partners, LLC, as placement agent (the "Agent")
in
connection with the sale of the Securities. Other than the Agent, the Company
has not 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 any of the Securities under the 1933 Act or cause
this offering of the Securities to be integrated with prior offerings by the
Company for purposes of the 1933 Act or any applicable stockholder 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. 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 any
of
the Securities under the 1933 Act or cause the offering of the Securities to
be
integrated with other offerings.
(i) [Reserved]
(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 Certificate of Incorporation
or the laws of the State of Nevada 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 stockholder rights
plan or similar arrangement relating to accumulations of beneficial ownership
of
Common Stock or a change in control of the Company.
(k) SEC
Documents; Financial Statements.
Except
as set forth on Schedule
3(k),
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 and
schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the "SEC
Documents")
on
a
timely basis or has timely filed a valid extension of such time of filing and
has filed any such SEC Documents prior to the expiration of any such extension.
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. Except as set forth in Schedule 3(k), the SEC Documents as amended
to
date, comply 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, as amended to date, 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. Except
as
set forth on Schedule 3(k), as amended or restated to date, the financial
statements of the Company included in the SEC Documents comply as to form in
all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial
statements, as included in the SEC Documents as amended to date, have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, (ii)
in
the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements, or (iii) as specified
on
Schedule 3(k)) 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 regarding
the
Company, its Subsidiaries, or their respective businesses which is not included
in the SEC Documents, including, without limitation, information referred to
in
Section 2(d) of 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, in the light of the circumstance under which they are or were made,
not
misleading.
9
(l) Absence
of Certain Changes.
Except
as disclosed in Schedule
3(l)
or the
SEC Documents, since September 30, 2006, there has been no event, occurrence
or
development that has had or that would reasonably be expected to result in
a
Material Adverse Effect. Except as disclosed in Schedule
3(l)
or as
disclosed in the SEC Documents, since September 30, 2006, the Company has not
(i) declared or paid any dividends, (ii) sold any assets, individually or in
the
aggregate, in excess of $1,000,000 outside of the ordinary course of business
or
(iii) had capital expenditures, individually or in the aggregate, in excess
of
$1,000,000. The Company has not 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 is 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 (as defined in Section 3(s)) (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 and is proposed to be
conducted.
10
(m) No
Undisclosed Events, Liabilities, Developments or Circumstances.
No
event, liability, development or circumstance has occurred or exists, or is
contemplated to occur, with respect to the Company or 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 S-1 filed with the SEC
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly announced.
(n) Conduct
of Business; Regulatory Permits.
Neither
the Company nor its Subsidiaries is in violation of any term of or in default
under the Certificate of Incorporation or Bylaws or their organizational charter
or certificate of incorporation 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 its
Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct
its business in violation of any of the foregoing, except for possible
violations which would 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 Stock by the Principal Market in the foreseeable future. During the
one
year prior to the date hereof, (i) the Common Stock has been designated for
quotation or listed on the Principal Market, (ii) trading in the Common Stock
has not been suspended by the SEC or the Principal Market and (iii) the Company
has received no communication, written or oral, from the SEC or the Principal
Market regarding the suspension or delisting of the Common Stock from the
Principal Market. Except as disclosed in the SEC Documents, 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 reasonably be expected to
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.
(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
(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.
11
(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, except where the failure to be in compliance
would not reasonably be expected to result in a Material Adverse
Effect.
(q) Transactions
With Affiliates.
Except
as disclosed in the SEC Documents and except as set forth on Schedule 3(q),
none
of the officers, directors or employees of the Company is presently a party
to
any transaction of a value of $120,000 or greater with the Company or any of
its
Subsidiaries (other than for ordinary course services as employees, officers
or
directors) which would be required to be reported under Item 404 of Regulation
S-K, 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, 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.
(r) Equity
Capitalization.
The
number of shares and type of all authorized, issued and outstanding capital
stock of the Company and all shares of Common Stock reserved for issuance under
the Company's various option and incentive plans, is as specified in the SEC
Documents, as of the dates so specified. All of such outstanding shares have
been, or upon issuance will be, validly issued and are fully paid and
nonassessable. Except as set forth on Schedule
3(r)
or in
the SEC Documents: (i) no shares of the Company's capital stock 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 of 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 of 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 (as defined in Section 3(s)) 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 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 (as defined herein)
but not so disclosed in the SEC Documents, other than those incurred in the
ordinary course of the Company's or any Subsidiary's respective businesses
and
which, individually or in the aggregate, do not or would not reasonably be
expected to have a Material Adverse Effect. The Company has furnished or made
available to the Buyer upon such Buyer's request, true, correct and complete
copies of the Company's Certificate of Incorporation, as amended and as in
effect on the date hereof (the "Certificate
of Incorporation"),
and
the Company's Bylaws, as amended and as in effect on the date hereof (the
"Bylaws"),
and
the terms of all securities convertible into, or exercisable
or
exchangeable for, shares of Common Stock and the material rights of the holders
thereof in respect thereto.
12
(s) Indebtedness
and Other Contracts.
Except
as disclosed in Schedule
3(s)
or in
the SEC Documents, 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 reasonably
be expected to 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. 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 (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 generally accepted
accounting principles, 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.
13
(t) Absence
of Litigation.
Except
as set forth on Schedule
3(t)
or in
the SEC Documents, there is no material 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, the
Common Stock or any of its Subsidiaries or any of the Company's or the Company's
Subsidiaries' officers or directors, whether of a civil or criminal nature
or
otherwise. The matters set forth on Schedule
3(t)
would
not 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. Except as set forth
on
Schedule
3(u), neither
the Company nor any Subsidiary has been refused any insurance coverage sought
or
applied for. Neither the Company nor any 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 reasonably be
expected to have a Material Adverse Effect.
(v) Employee
Relations.
(i) Except
as
otherwise disclosed in the SEC Documents, 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, 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 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.
Except
as disclosed in the SEC Documents, the Company and its Subsidiaries have valid
land use rights under the laws of the People's Republic of China 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. Except as disclosed in the SEC Documents, 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.
14
(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, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and other intellectual property
rights ("Intellectual
Property Rights")
necessary to conduct their respective businesses as described in the SEC
Documents and which the failure to so have would, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect. None of the Company's Intellectual Property Rights have expired or
terminated, or are expected to expire or terminate 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. Except as disclosed in the SEC Documents, there is no material claim,
action or proceeding being made or brought, or to the knowledge of the Company,
being threatened, against the Company or any of its Subsidiaries regarding
its
Intellectual Property Rights. The Company is unaware 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.
(y) Environmental
Laws.
Except
as disclosed in the SEC Documents, the Company and its Subsidiaries (i) are
in
compliance in all material respects 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 would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect. The term
"Environmental
Laws"
means
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.
15
(aa) Tax
Status.
The
Company and each of its Subsidiaries (i) has made or filed all federal, foreign
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. 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.
(bb) 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 generally accepted accounting principles 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 except as disclosed
in
the SEC Documents, 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. During the twelve months prior to the date hereof neither the
Company nor any of its Subsidiaries have received any notice or correspondence
from any accountant relating to any potential material weakness not disclosed
in
the SEC Documents in any part of the system of internal accounting controls
of
the Company or any of its Subsidiaries.
(cc) Off
Balance Sheet Arrangements.
Except
as disclosed in the SEC Documents, 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
Exchange Act filings and is not so disclosed or that otherwise would be
reasonably likely to have a Material Adverse Effect.
(dd) 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
Agent sold, bid for, purchased, or paid any compensation for soliciting
purchases of, any of the Securities, or (iii) other than the Agent paid or
agreed to pay to any person any compensation for soliciting another to purchase
any other securities of the Company.
16
(ee) 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.
(ff) Investment
Company Status.
The
Company is not, and upon consummation of the sale of the 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.
(gg) Acknowledgement
Regarding Buyers' Trading Activity.
Except
as is set forth in Section 2(k), it is understood and acknowledged by the
Company (i) that none of the Buyers have been asked by the Company or its
Subsidiaries to agree, nor has any Buyer agreed with the Company or its
Subsidiaries, 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) that
any
Buyer, and counterparties in "derivative" transactions to which any such Buyer
is a party, directly or indirectly, presently may have a "short" position in
the
Common Stock, and (iii) that each Buyer shall not be deemed to have any
affiliation with or control over any arm's length counterparty in any
"derivative" transaction. The Company further understands and acknowledges
that
(a) 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
stockholders' 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 or any of the documents executed in connection
herewith. The Company is not aware of any of the aforementioned hedging and/or
trading activities of any of the Buyers. The Company may not be informed of,
and
will not monitor, any such aforementioned hedging and/or trading activities
by
one or more Buyers in the future.
(hh) 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 Buyer's request.
(ii) 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 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.
17
(jj) 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.
(kk) Disclosure.
The
Company confirms that neither it nor any other Person acting on its behalf
has
provided any of the Buyers or their respective agents or counsel with any
information that constitutes or could reasonably be expected to constitute
material, nonpublic information, except for information that is required to
be
disclosed in a current report on Form 8-K by the Company pursuant to Section
4(i) hereto. The Company understands and confirms that each of the Buyers will
rely on the foregoing representations in effecting transactions in securities
of
the Company. All disclosure provided to the Buyers regarding the Company, its
business and the transactions contemplated hereby, including the Schedules
to
this Agreement, furnished by or on behalf of the Company are true and correct
and do 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 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 are made, not misleading. No event
or circumstance has occurred or information exists with respect to the Company
or any Subsidiary or either of its or their respective 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 (assuming for this purpose
that the Company's reports filed under the Exchange Act of 1934, as amended,
are
being incorporated into an effective registration statement filed by the Company
under the 1933 Act). 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.
4. |
COVENANTS.
|
(a) Best
Efforts.
Each
party shall use its 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, on or before the Closing Date, shall 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.
18
(c) Reporting
Status.
Until
the earlier of (i) the date on which the Investors (as defined in the
Registration Rights Agreement) shall have sold all the Common Shares (ii) the
date when all Securities may be sold by the Investors without volume
restrictions pursuant to Rule 144(k) (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 otherwise permit such termination.
(d) Use
of
Proceeds.
The
Company will use the proceeds from the sale of the Securities for general
corporate purposes, including general and administrative expenses, in connection
with acquisitions and for repayment of indebtedness, but not for the redemption
or repurchase of any of its or its Subsidiaries' equity securities.
(e) Financial
Information.
The
Company agrees to send the following to each Investor during the Reporting
Period (i) unless the following are filed with the SEC through XXXXX and are
available to the public through the XXXXX system, within one (1) Business Day
after the filing thereof with the SEC, a copy of its Annual Reports on Form
10-K, its Quarterly Reports on Form 10-Q, any Current Reports on Form 8-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
copies or email 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 stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the
stockholders. 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.
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 Stock
is
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. The Company shall maintain the Common Stock's
authorization for listing 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 Stock on the Principal
Market. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4(f).
(g) Fees.
The
Company shall reimburse Xxxxxx
Bay Capital Overseas Fund, Ltd. (a
Buyer)
or its designee(s) (in addition to any other expense amounts paid to any Buyer
prior to the date of this Agreement) for all reasonable legal fees, costs,
expenses and disbursements incurred in connection with the transactions
contemplated by the Transaction Documents which amount shall not exceed $15,000
and may be withheld by such Buyer 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 payable to the
Agent. 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.
19
(h) Pledge
of Securities.
The
Company acknowledges and agrees that the Securities may be pledged by an
Investor (as defined in the Registration Rights Agreement) 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, 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) of this Agreement; provided that in order to make any sale,
transfer or assignment of Securities (including any sale, transfer or assignment
that occurs upon the exercise by the pledgee of any rights with respect to
any
such pledge of the Securities), such Buyer and its pledgee must comply with
the
requirements of this Agreement and must make any such disposition only in
accordance with or pursuant to a registration statement or an exemption under
the 1933 Act. 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.
The
Company shall, on or before 8:30 a.m., New York City time, on the first Business
Day after the date of this Agreement, issue a press release (the "Press
Release")
reasonably acceptable to the Buyers disclosing all material terms of the
transactions contemplated hereby and (B) file
a
Current Report on Form 8-K describing the 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 (and all schedules to this Agreement) and the Registration Rights
Agreement) as exhibits to such filing (including all attachments, the
"8-K
Filing").
From
and after the issuance of the Press Release, no Buyer shall be in possession
of
any material, nonpublic information received from the Company, any of its
Subsidiaries or any of its 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 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
filing of the Press Release without the 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,
any of its Subsidiaries or any of the respective officers, directors, or agents,
other than as required in writing by such Buyer, it may provide the Company
with
written notice thereof. The Company shall, within five (5) Trading Days of
receipt of such notice, make public disclosure of such material, nonpublic
information. 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 8-K Filing and contemporaneously
therewith and (ii) as is required by applicable law and regulations, including
the applicable rules and regulations of the Principal Market (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, announcement, release or otherwise, unless such
disclosure is required by law, regulation.
20
(j) Additional
Registration Statements.
Until
the date that is forty-five (45) days from the Effective Date (as defined in
the
Registration Rights Agreement), the Company will not file a registration
statement (other than on Form S-8 or solely to register shares of Common Stock
issued pursuant to an acquisition with non-affiliated third parties on an arm's
length basis, the primary purpose of which is not to raise additional capital
(the
"Acquisition
Shares"))
under
the
1933 Act relating to securities that are not the Securities. Until the Effective
Date, the Company will not file a registration statement under the 1933 Act
relating to Acquisition Shares.
(k) Additional
Issuances of Securities.
(i) For
purposes of this Section 4(m), the following definitions shall
apply.
(1) "Common
Stock 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 Stock.
(3) "Options"
means
any rights, warrants or options to subscribe for or purchase Common Stock or
Convertible Securities.
(ii) From
the
date hereof until ninety days after the Effective Date (as defined in the
Registration Rights Agreement) (the
"Trigger
Date"),
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 shares of Common Stock or Common Stock 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(m) shall not apply
in connection with the issuance of any Excluded Securities. As used herein,
"Excluded Securities" shall mean, any Common Stock, Option or Convertible
Securities issued or issuable: (i) in connection with any stock benefit plan
which has been approved by the Board of Directors of the Company, pursuant
to
which the Company's securities may be issued to any employee, officer,
consultant or director for services provided to the Company and (ii) upon
exercise of or conversion of any Options or Convertible Securities which are
outstanding on the day immediately preceding the Subscription Date (the
"Existing Options and Convertible Securities"), provided that the terms of
such
Existing Options and Convertible Securities are not amended, modified or changed
on or after the Subscription Date.
21
(l) 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 reasonably be expected to result, either individually
or in the aggregate, in a Material Adverse Effect.
(m) Closing
Documents.
On or
prior to fourteen (14) calendar days after the Closing Date, the Company agrees
to deliver, or cause to be delivered, to each Buyer and Xxxxxxx Xxxx & Xxxxx
LLP a complete closing set of the Transaction Documents, Securities and any
other document required to be delivered to any party pursuant to Section 7
hereof or otherwise.
5. |
REGISTER;
TRANSFER AGENT INSTRUCTIONS.
|
(a) Register.
For so
long as the Common Shares remain certificated the Company (or the Company's
transfer agent) shall maintain a register for the Common Shares, in which the
name and address of the Person in whose name the Common Shares have
been
issued is recorded (including the name and address of each transferee), the
number of Common Shares held by such Person. The Company shall make the register
available during business hours for inspection upon the reasonable request
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 DTC, registered in the name of each Buyer or
its
respective nominee(s), for the Common Shares issued at the Closing, in the
form
of Exhibit
B
attached
hereto (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(g) 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(g), 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 Common 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. 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.
22
6. |
CONDITIONS
TO THE COMPANY'S OBLIGATION TO SELL.
|
The
obligation of the Company hereunder to issue and sell the Common Shares 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:
(a) Such
Buyer shall have executed each of the Transaction Documents to which it is
a
party and delivered the same to the Company.
(b) Such
Buyer shall have delivered to the Company the Purchase Price (less, in the
case
of Xxxxxx
Bay Capital Management LP,
the
amounts withheld pursuant to Section 4(g)) for the Common Shares being purchased
by such Buyer and each other Buyer at the Closing by wire transfer of
immediately available funds pursuant to the wire instructions provided by the
Company.
(c) 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.
(d) Each
Buyer shall have completed, executed and delivered a Selling Stockholder
Questionnaire in the form attached to the Registration Rights Agreement as
Annex
II.
7. |
CONDITIONS
TO EACH BUYER'S OBLIGATION TO PURCHASE.
|
The
obligation of each Buyer hereunder to purchase the Common Shares 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:
(a) The
Company shall have executed and/or delivered, as applicable, to such Buyer
(i)
each of the Transaction Documents and (ii) the Common Shares being purchased
by
such Buyer at the Closing pursuant to this Agreement, the Common Shares to
be
represented by one or more certificates, as the Buyer shall
request.
(b) Such
Buyer shall have received the opinion of Xxxxxx Xxxx Xxxxx Raysman & Xxxxxxx
LLP, the Company's outside counsel ("Company
Counsel"),
dated
as of the Closing Date, in substantially the form of Exhibit
C attached
hereto.
(c) The
Company shall have delivered to such Buyer a copy of the Irrevocable Transfer
Agent Instructions, in the form of Exhibit
C
attached
hereto, which instructions shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
23
(d) The
Company shall have delivered to such Buyer a certificate evidencing the
incorporation and good standing of the Company and each of its operating
Subsidiaries in such corporation's state of incorporation issued by the
Secretary of State of such state of incorporation as of a date within 10 days
of
the Closing Date.
(e) 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 and is required to so qualify, as of a date within
10
days of the Closing Date.
(f) The
Common Stock (I) shall be 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.
(g) The
Company shall have delivered to such Buyer a certified copy of the Certificate
of Incorporation as certified by the Secretary of State of the State of Nevada
within 10 days of the Closing Date.
(h) 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 Certificate
of
Incorporation and (iii) the Bylaws, each as in effect at the Closing, in the
form attached hereto as Exhibit
D.
(i) The
representations and warranties of the Company shall be true and correct 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 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
or Chief Financial 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
E.
(j) The
Company shall have obtained all governmental, regulatory or third party consents
and approvals, if any, necessary for the sale of the Common Shares.
(k) 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.
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,
this 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.
24
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 Xxxxxx Xxxx Xxxxx Raysman & Xxxxxxx LLP
with offices at 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 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;
provided that a facsimile signature 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, not a facsimile signature.
(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.
(d) Severability.
If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
25
(e) Entire
Agreement; Amendments.
This
Agreement supersedes 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 and the instruments
referenced herein 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 holders of Common Shares representing at least a majority
of
the amount of the Common Shares, or, if prior to the Closing Date, the Buyers
listed on the Schedule of Buyers as being obligated to purchase at least a
majority of the amount of the Common Shares. 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 Common Shares 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 and holders of Common Shares, 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:
If
to the
Company:
China
BAK Battery, Inc.
XXX
Xxxxxxxxxx Xxxx Xx 0 XXX Xxxxxx
Kuichong
Street Longgang District
Shenzhen,
518119
Republic
of China
Phone:
00
000 0000 0000
Fax:
00
000 0000 0000
Attention:
|
Xxxx
Xxxx
|
Email:
|
xxx@xxx.xxx.xx
|
With
a
copy (for informational purposes only) to:
26
Xxxxxx
Xxxx Xxxxx Raysman & Xxxxxxx LLP
000
Xxxxxx Xxxxxx, X.X.
Xxxxxxxxxx,
X.X. 00000
Attention:
Xxxxx X. Xxxxxxxxxx, Esq.
Telephone:
|
(000)
000-0000
|
Facsimile:
|
(000)
000-0000
|
Email:
|
xxxxxxxxxxx@xxxxxx.xxx
|
If
to the
Transfer Agent:
Securities
Transfer Corporation
0000
Xxxxxx Xxxxxxx Xxxxx 000
Xxxxxx,
Xxxxx 00000
Telephone:
|
(000)
000-0000
|
Facsimile:
|
(000)
000-0000
|
Attention:
|
Xxxxxxx
Xxx
|
Email:
|
xxx@xxxxxxxxxxx.xxx
|
If
to a
Buyer, to its address, facsimile number and email address 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.
|
Email:
|
xxxxxxx.xxxxx@xxx.xxx
|
or
to
such other address, facsimile number and/or email address 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.
(g) 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.
27
(h) 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 Common
Shares. The Company shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the holders of Common Shares
representing at least a majority of the number of the Common Shares, including
by merger or consolidation. 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.
(i) 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.
(j) 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, the agreements
and
covenants set forth in Sections 4, 5 and 9 shall survive the Closing and the
delivery of the Securities. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
(k) 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.
(l) 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 stockholders, 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 or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents
or
any other certificate, instrument or document contemplated hereby or thereby
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 or any other
certificate, instrument or document contemplated hereby or thereby, (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, or (iii) the
status of such Buyer or holder of the Securities as an investor in the Company,
except, in each case, solely to the extent arising out of the gross negligence,
fraud or other intentional misconduct by Indemnitee, any material
misrepresentation or material breach of any representation or warranty or made
by the Indemnitee in the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby, or material breach of
any
covenant, agreement or obligation of the Indemnitee contained in the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby. 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 which 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.
28
(m) 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.
(n) 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.
(o) 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
(p) 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.
29
(q) 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 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 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. 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.
(r) Judgment
Currency.
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").
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.
30
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]
31
IN
WITNESS WHEREOF,
each
Buyer and the Company have caused its respective signature page to this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY:
|
||
CHINA BAK BATTERY, INC. | ||
|
|
|
By: | ||
Name: |
||
Title |
[Signature
Page to Securities Purchase
Agreement]
IN
WITNESS WHEREOF,
each
Buyer and the Company have caused its respective signature page to this
Securities Purchase Agreement to be duly executed as of the date first written
above.
NAME OF INVESTOR | ||
|
|
|
By: | ||
Name:
Title:
|
||
Investment Amount: $ ________________________ | ||
Tax
ID No.:_________________________________
|
||
ADDRESS FOR NOTICE | ||
c/o:_______________________________________ | ||
Street:_____________________________________ | ||
City/State/Zip:_______________________________ | ||
Attention:__________________________________ | ||
Tel:_______________________________________ | ||
Fax:_______________________________________ | ||
DELIVERY INSTRUCTIONS
(if
different from above)
|
||
c/o:_______________________________________ | ||
Street:_____________________________________ | ||
City/State/Zip:_______________________________ | ||
Attention:__________________________________ | ||
Tel:_______________________________________
|
[Signature
Page to Securities Purchase Agreement]
SCHEDULE
OF BUYERS
(1)
|
(2)
|
(3)
|
(4)
|
(5)
|
Buyer
|
Address
and
Facsimile
Number
|
Number
of Common Shares
|
Purchase
Price
|
Legal
Representative's Address and Facsimile Number
|