Contract
THE SECURITIES TO WHICH THIS SUBSCRIPTION AGREEMENT RELATES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. THEY SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT.
THE SECURITIES TO WHICH THIS SUBSCRIPTION AGREEMENT RELATES, ARE BEING OFFERED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS AND REGULATIONS. THEY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION.
THESE SECURITIES WILL CONSTITUTE “RESTRICTED SECURITIES” AS THAT TERM IS DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933. ACCORDINGLY, THEY WILL NOT BE READILY TRANSFERABLE, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION, THE AVAILABILITY OF WHICH MUST BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY.
NAME OF SUBSCRIBER:_______________________
SUBSCRIPTION AMOUNT: $________________
To:
China Clean Energy Resources, Ltd.
c/o Fujian Zhongde Technology Stock Co., Ltd.
Fulong Industry District
Longtian Town Fuqing City
Fujian, China 350315
Attn:
Xx. Xxx-ming Ou,
Chairman and Chief Executive Officer
This Subscription Agreement (this “Agreement”) is being delivered to the purchaser identified on the signature pages to this Agreement (each a “Subscriber”) in connection with his investment in China Clean Energy Resources, Ltd. (including its proposed publicly-traded successor company, the “Company”). The Company is conducting a private placement (the “Offering”) of 1,000,000 common shares (the “Shares”), at a purchase price of $1.00 per Share. All funds received in the Offering prior to the closing of the Offering (the “Closing”) shall be held in escrow by Frascona, Joiner, Goodman, & Xxxxxxxxxx, P.C. (the “Escrow Agent”) and, upon fulfillment of the other conditions precedent set forth herein, shall be released from escrow and delivered to the Company at which time the Shares subscribed for as further described below shall be delivered, subject to Section 9 hereof, to Subscriber.
1.
Subscription and Purchase Price
(a)
Subscription. Subject to the conditions set forth in Section 2 hereof, the Subscriber hereby subscribes for and agrees to purchase the number of Shares indicated on page 15 hereof on the terms and conditions described herein.
(b)
Purchase of Shares. The Subscriber understands and acknowledges that the purchase price to be remitted to the Company in exchange for the Shares shall be $1.00 per Share, for an aggregate purchase price as set forth on page 15 hereof (the “Aggregate Purchase Price”). The Subscriber’s delivery of this Agreement to the Company shall be accompanied by payment for the Shares subscribed for hereunder, payable in United States dollars, by check made payable to the order of “Frascona, Joiner, Goodman, & Xxxxxxxxxx, P.C., as Escrow Agent for China Clean Energy Resources, Ltd.,” or by wire transfer of immediately available funds delivered contemporaneously with the Subscriber’s delivery of this Agreement to the Company in accordance with the
instructions provided on Exhibit A. The Subscriber understands and agrees that, subject to Section 2 and applicable laws, by executing this Agreement, he, she or it is entering into a binding agreement.
2.
ACCEPTANCE, OFFERING TERM AND CLOSING PROCEDURES
(a)
Acceptance or Rejection. The obligation of the Subscriber to purchase the Shares shall be irrevocable, and the Subscriber shall be legally bound to purchase the Shares subject to the terms set forth in this Agreement. The Subscriber understands and agrees that the Company reserves the right to reject this subscription for the Shares in whole or part in any order at any time prior to the Closing of the purchase and sale of the Shares for any reason, notwithstanding the Subscriber’s prior receipt of notice of acceptance of the Subscriber’s subscription. In the event of rejection of this subscription by the Company in accordance with this Section 2, or the sale of the Shares is not consummated by the Company for any reason, this Agreement and any other agreement entered into between the Subscriber and the Company relating to this subscription shall thereafter have no force or effect, and the Company shall promptly return or cause to be returned to the Subscriber the purchase price remitted to the Escrow Agent, without interest thereon or deduction therefrom.
(b)
Offering Term. The subscription period for the Offering will begin as of October 10, 2006, and will terminate upon the occurrence of the earlier of (a) the 20th day thereafter, unless extended by the Company for up to two successive 5-day periods, or (b) the Company’s acceptance of subscriptions for 1,000,000 Shares offered and the receipt of payment therefor.
(c)
Closing. The Closing shall take place at the offices of Frascona, Joiner, Xxxxxxx & Xxxxxxxxxx, P.C., counsel to the Company at 0000 Xxxxx Xxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000 or such other place as determined by the Company. The Closing shall take place on a Business Day promptly following the satisfaction of the conditions set forth in Section 9 below, as determined by the Company. “Business Day” shall mean from the hours of 9:00 a.m. (Eastern Time) through 5:00 p.m. (Eastern Time) of a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required to be closed. The Shares purchased by the Subscriber will be delivered by the Company promptly following the Closing.
(d)
Acceptance or Rejection. Each Subscriber acknowledges and agrees that this Subscription Agreement and any other documents delivered in connection herewith will be held by the Company. In the event that this Subscription Agreement is not accepted by the Company for whatever reason, which the Company expressly reserves the right to do, this Subscription Agreement, the Aggregate Purchase Price received (without interest thereon) and any other documents delivered in connection herewith will be returned to the Subscriber at the address of the Subscriber as set forth in this Subscription Agreement. If this Subscription Agreement is accepted by the Company, the Company is entitled to treat the Aggregate Purchase Price received as an interest free loan to the Company until such time as the Subscription is accepted.
3.
INVESTOR’S REPRESENTATIONS AND WARRANTIES
The Subscriber hereby acknowledges, agrees with and represents and warrants to the Company and its affiliates, as follows:
(a)
The Subscriber has full power and authority to enter into this Agreement, the execution and delivery of which has been duly authorized, if applicable, and this Agreement constitutes a valid and legally binding obligation of the Subscriber.
(b)
The Subscriber acknowledges his, her or its understanding that the offering and sale of the Shares is intended to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), by virtue of Section 4(2) of the Securities Act and the provisions of Regulation D promulgated thereunder (“Regulation D”). In furtherance thereof, the Subscriber represents and warrants to the Company and its affiliates as follows:
(i)
The Subscriber realizes that the basis for the exemption from registration may not be available if, notwithstanding the Subscriber’s representations contained herein, the Subscriber is merely acquiring the Shares for a fixed or determinable period in the future, or for a market rise, or for sale if the market does not rise. The Subscriber does not have any such intention.
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(ii)
The Subscriber realizes that the basis for exemption would not be available if the Offering is part of a plan or scheme to evade registration provisions of the 1933 Act or any applicable state or federal securities laws.
(iii)
The Subscriber is acquiring the Shares solely for the Subscriber’s own beneficial account, for investment purposes, and not with view to, or resale in connection with, any distribution of the Shares.
(iv)
The Subscriber has the financial ability to bear the economic risk of his, her or its investment, has adequate means for providing for their current needs and contingencies, and has no need for liquidity with respect to the investment in the Company;
(v)
The Subscriber and the Subscriber’s attorney, accountant, purchaser representative and/or tax advisor, if any (collectively, “Advisors”) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the prospective investment in the Shares. If other than an individual, the Subscriber also represents it has not been organized solely for the purpose of acquiring the Shares; and
(vi)
The Subscriber (together with his, her or its Advisors, if any) has received all documents requested by the Subscriber, if any, have carefully reviewed them and understand the information contained therein, prior to the execution of this Agreement.
(c)
The Subscriber is not relying on the Company or any of its employees, agents, sub-agents or advisors with respect to economic considerations involved in this investment. The Subscriber has relied on the advice of, or has consulted with, only his, her or its Advisors. Each Advisor, if any, is capable of evaluating the merits and risks of an investment in the Shares, and each Advisor, if any, has disclosed to the Subscriber in writing (a copy of which is annexed to this Agreement) the specific details of any and all past, present or future relationships, actual or contemplated, between the Advisor and the Company or any affiliate or sub-agent thereof.
(d)
The Subscriber represents, warrants and agrees that he, she or it will not sell or otherwise transfer the Shares without registration under the Securities Act or an exemption therefrom, and fully understands and agrees that the Subscriber must bear the economic risk of his, her or its purchase because, among other reasons, the Shares have not been registered under the Securities Act or under the securities laws of any state and, therefore, cannot be resold, pledged, assigned or otherwise disposed of unless they are subsequently registered under the Securities Act and under the applicable securities laws of such states, or an exemption from such registration is available. In particular, the Subscriber is aware that the Shares are “restricted securities,” as such term is defined in Rule 144 promulgated under the Securities Act (“Rule 144”), and they may not be sold pursuant to Rule 144 unless all of the conditions of Rule 144 are met. The Subscriber also understands that, except as otherwise provided in Section 5 hereof, the Company is under no obligation to register the Shares on his, her or its behalf or to assist them in complying with any exemption from registration under the Securities Act or applicable state securities laws. The Subscriber understands that any sales or transfers of the Shares are further restricted by state securities laws and the provisions of this Agreement.
(e)
No oral or written representations or warranties have been made to the Subscriber by the Company or any of its officers, employees, agents, sub-agents, affiliates, advisors or subsidiaries, other than any representations of the Company contained herein, and in subscribing for the Shares the Subscriber is not relying upon any representations other than those contained herein.
(f)
The Subscriber understands and acknowledges that his, her or its purchase of the Shares is a speculative investment that involves a high degree of risk and the potential loss of their entire investment and, in particular, acknowledges that the Company has a limited operating history and is engaged in a highly competitive business.
(g)
The Subscriber’s overall commitment to investments that are not readily marketable is not disproportionate to the Subscriber’s net worth, and an investment in the Shares will not cause such overall commitment to become excessive.
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(h)
The Subscriber understands and agrees that the certificates for the Shares shall bear substantially the following legend until (i) such Shares shall have been registered under the Securities Act and effectively disposed of in accordance with a registration statement that has been declared effective or (ii) in the opinion of counsel for the Company such Shares may be sold without registration under the Securities Act, as well as any applicable “blue sky” or state securities laws:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS. SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES AND MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FILED BY THE ISSUER WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION COVERING SUCH SECURITIES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED.
(i)
Neither the U.S. Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved the Shares or passed upon or endorsed the merits of the Offering. There is no government or other insurance covering any of the Shares.
(j)
The Subscriber and his, her or its Advisors, if any, have had a reasonable opportunity to ask questions of and receive answers from a person or persons acting on behalf of the Company concerning the offering of the Shares and the business, financial condition, results of operations and prospects of the Company, and all such questions have been answered to the full satisfaction of the Subscriber and his, her or its Advisors, if any.
(k)
The Subscriber is unaware of, is in no way relying on, and did not become aware of the offering of the Shares through or as a result of, any form of general solicitation or general advertising including, without limitation, any article, notice, advertisement or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or electronic mail over the Internet, in connection with the offering and sale of the Shares and is not subscribing for Shares and did not become aware of the offering of the Shares through or as a result of any seminar or meeting to which the Subscriber was invited by, or any solicitation of a subscription by, a person not previously known to the Subscriber in connection with investments in securities generally.
(l)
The Subscriber has taken no action which would give rise to any claim by any person for brokerage commissions, finders’ fees or the like relating to this Agreement or the transactions contemplated hereby.
(m)
The Subscriber is not relying on the Company or any of its employees, agents, or advisors with respect to the legal, tax, economic and related considerations of an investment in the Shares, and the Subscriber has relied on the advice of, or has consulted with, only his, her or its own Advisors.
(n)
The Subscriber acknowledges that any estimates or forward-looking statements or projections furnished by the Company to the Subscriber, were prepared by the management of the Company in good faith, but that the attainment of any such projections, estimates or forward-looking statements cannot be guaranteed by the Company or its management and should not be relied upon.
(o)
No oral or written representations have been made, or oral or written information furnished, to the Subscriber or his, her or its Advisors, if any, in connection with the offering of the Shares which are in any way inconsistent with the information contained herein.
(p)
(For ERISA plans only) The fiduciary of the ERISA plan (the “Plan”) represents that such fiduciary has been informed of an understands the Company’s investment objectives, policies and strategies, and that the decision to invest “plan assets” (as such term is defined in ERISA) in the Company is consistent with the provisions of ERISA that require diversification of plan assets and impose other fiduciary responsibilities. The Subscriber or Plan fiduciary (a) is responsible for the decision to invest in the Company; (b) is independent of the Company and any of its affiliates; (c) is qualified to make such investment decision; and (d) in making such
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decision, the Subscriber or Plan fiduciary has not relied primarily on any advice or recommendation of the Company or any of its affiliates.
(q)
This Agreement is not enforceable by the Subscriber unless it has been accepted by the Company, and the Subscriber acknowledges and agrees that the Company reserves the right to reject any subscription for any reason.
(r)
The Subscriber will indemnify and hold harmless the Company and, where applicable, its directors, officers, employees, agents, advisors and shareholders, from and against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all fees, costs and expenses whatsoever reasonably incurred in investigating, preparing or defending against any claim, lawsuit, administrative proceeding or investigation whether commenced or threatened) arising out of or based upon any representation or warranty of the Subscriber contained herein or in any document furnished by the Subscriber to the Company in connection herewith being untrue in any material respect or any breach or failure by the Subscriber to comply with any covenant or agreement made by the Subscriber to the Company in connection therewith; provided, however, that such Subscriber shall not be liable for any loss, liability, claim, damage and expense whatsoever that in the aggregate exceeds such Subscriber’s Aggregate Purchase Price tendered hereunder.
(s)
The Subscriber is, and on each date on which the Subscriber continues to own restricted securities from the Offering, will be an “Accredited Investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act. In general, an “Accredited Investor” is deemed to be an institution with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $250,0000 or $300,000 jointly with their spouse. In connection with a subscription hereunder, the Subscriber will complete, execute and return the Statement of Accredited Investor attached hereto as Exhibit B certifying such status.
(t)
The Subscriber, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the Offering, and has so evaluated the merits and risks of such investment. The Subscriber has not authorized any person or entity to act as his Purchaser Representative (as that term is defined in Regulation D of the General Rules and Regulations under the Act) in connection with this transaction. The Subscriber is able to bear the economic risk of an investment in the Offering and, at the present time, is able to afford a complete loss of such investment.
(s)
The foregoing representations, warranties and agreements shall survive the Closing.
4.
THE COMPANY’S REPRESENTATIONS, WARRANTIES AND COVENANTS
The Company hereby acknowledges, agrees with and represents, warrants and covenants to each of the Subscriber, as follows:
(a)
The Company has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement has been duly authorized, executed and delivered by the Company and is valid, binding and enforceable against the Company in accordance with its terms.
(b)
The Shares to be issued to the Subscriber pursuant to this Agreement, when issued and delivered in accordance with the terms of this Agreement, will be duly and validly issued and will be fully paid and non-assessable.
(c)
Neither the execution and delivery nor the performance of this Agreement by the Company will conflict with the Company’s organizational materials, as amended to date, or result in a breach of any terms or provisions of, or constitute a default under, any material contract, agreement or instrument to which the Company is a party or by which the Company is bound.
(d)
After giving effect to the transactions contemplated by this Agreement and immediately after the Closing, the Company will have the outstanding capital stock as set forth on Exhibit B attached hereto.
(e)
Any information furnished by the Company in connection with the Offering is true and correct in all material respects as of its date.
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(f)
With respect to subscriptions accepted prior to the consummation of a reverse merger transaction with a publicly-traded company (the “Reverse Merger”), the Company will cause such publicly-traded company that will acquire by merger the business of the Company to assume this Agreement and the other subscription documents in the Offering.
(g)
The Company acknowledges and agrees that each of the Subscribers is acting solely in the capacity of an arm’s length purchaser with respect to the Shares and the transactions contemplated hereby. The Company further acknowledges that no Subscriber is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by any Subscriber or any of their respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental to the Purchasers’ purchase of the Securities. The Company further represents to each Subscriber that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.
(h)
The Company will indemnify and hold harmless the Subscriber and, where applicable, its directors, officers, employees, agents, advisors and shareholders, from and against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all fees, costs and expenses whatsoever reasonably incurred in investigating, preparing or defending against any claim, lawsuit, administrative proceeding or investigation whether commenced or threatened) arising out of or based upon any representation or warranty of the Company contained herein or in any document furnished by the Company to the Subscriber in connection herewith being untrue in any material respect or any breach or failure by the Company to comply with any covenant or agreement made by the Company to the Subscriber in connection therewith.
(i)
The foregoing representations, warranties and agreements shall survive the Closing.
5.
REGISTRATION RIGHTS
(a)
The Company shall prepare and file a registration statement (the “Registration Statement”) with the SEC covering the resale of the Shares by no later than 90 days after the Closing. The Company shall use its best efforts to have the Registration Statement declared effective by the SEC as soon as possible after the initial filing, and in any event no later than 180 days after the Closing, and agrees to use its best efforts to respond to any SEC comments or questions regarding the Registration Statement on or prior to the date which is 20 days from the date such comments or questions are received, but in any event not later than 30 days from the date such comments or questions are received. The Company will maintain the effectiveness of the Registration Statement from the date of the effectiveness of the Registration Statement until 12 months after that date; provided, however, that, if at any time or from time to time after the date of effectiveness of the Registration Statement, the Company notifies the Subscriber in writing of the existence of a Potential Material Event (as defined below), the Subscriber shall not offer or sell any of the Shares, or engage in any other transaction involving or relating to the Shares, from the time of the giving of notice with respect to a Potential Material Event until the Company notifies the Subscriber that such Potential Material Event either has been disclosed to the public or no longer constitutes a Potential Material Event; provided, further that, the Company may not suspend the right of the Subscriber pursuant to this Section 5(a) for more than 60 days in the aggregate. “Potential Material Event” means the possession by the Company of material information regarding a potential transaction not ripe for disclosure in a registration statement, which shall be evidenced by determinations in good faith by the Board of Directors of the Company that disclosure of such information in the registration statement would be detrimental to the business and affairs of the Company.
(b)
If the Company fails to (i) file the Registration Statement with the SEC on or prior to 90 days after the Closing, (ii) obtain effectiveness of the Registration Statement by the SEC on or prior to 180 days after the Closing, or (iii) maintain effectiveness of the Registration Statement for 12 months after the date of effectiveness, the Company shall be obligated to pay damages to the Subscriber as follows: on the first day that the Company has failed to file, or to obtain or maintain the effectiveness of, the Registration Statement, as the case may be (the “First Determination Date”), the Company shall determine the Aggregate Purchase Price paid by the Subscriber. Within 30 days following the First Determination Date, the Company shall pay to the Subscriber, in immediately available funds, a sum equal to 1% of the Aggregate Purchase Price (the “Default Damages”). Default Damages shall also be payable upon the expiration of each month following the First Determination Date during which the Company has continued to fail to file, or to obtain or maintain the effectiveness of, the Registration Statement, as the case may be (the expiration date of each such month being a “Subsequent Determination Date”).
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The amount of Default Damages payable following each Subsequent Determination Date shall be determined and paid in accordance with this section on the same basis applicable to the First Determination Date; provided, however, that Default Damages previously paid to the Subscriber shall be excluded from the calculation of Default Damages; provided, further, that no Default Damages shall be payable by the Company hereunder for any defaults by the Company under this 5(b) that occur following the one year anniversary of the Closing.
(c)
If the Company fails to respond to the SEC, within 30 days after receipt, to any questions and comments from the SEC regarding the Registration Statement, the Company shall be obligated to pay Default Damages to the Subscriber. The 31st day that the Company has failed to respond to the SEC is termed the “Response Determination Date.” Within 30 days following the Response Determination Date, the Company shall pay the Subscriber Default Damages (which are equal to 1% of the Aggregate Purchase Price). Default Damages shall also be payable upon the expiration of each month following the Response Determination Date during which the Company has continued to fail to respond to the SEC (the expiration date of each such month being a “Subsequent Response Determination Date”). The amount of Default Damages payable following each Subsequent Response Determination Date shall be determined and paid in accordance with this section on the same basis applicable to the Response Determination Date; provided, however, that Default Damages previously paid to the Subscriber shall be excluded from the calculation of Default Damages; provided, further, that no Default Damages shall be payable by the Company hereunder for any defaults by the Company under this Section 5(c) that occur following the one year anniversary of the Closing.
(d)
The Company shall notify the Subscriber at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. At the request of the Subscriber, the Company shall also prepare, file and furnish to the Subscriber a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such shares, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. The Subscriber agrees not to offer or sell any shares covered by the Registration Statement after receipt of such notification until the receipt of such supplement or amendment.
(e)
The Company may request the Subscriber to furnish the Company such information with respect to the Subscriber and the Subscriber’s proposed distribution of the Shares pursuant to the Registration Statement as the Company may from time to time reasonably request in writing or as shall be required by law or by the SEC in connection therewith, and the Subscriber agrees to furnish the Company with such information.
(f)
Each of the Company and the Subscriber shall indemnify the other party hereto and their respective officers, directors, employees and agents against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) by the indemnifying party of a material fact contained in any prospectus or other document (including any related registration statement, notification or the like) incident to any registration of the type described in this Section 5, or any omission (or alleged omission) by the indemnifying party to state in any such document a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse such indemnified party for any legal and any other expenses reasonably incurred in connection with investigating and defending any such claim, loss, damage, liability or action; provided that no party will be eligible for indemnification hereunder to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission based upon written information furnished by such party for use in connection with such registration.
6.
ANTI-DILUTION PROTECTION
For a period of twelve (12) months following the Offering, in the event that the Company issues or grants any shares of any class of the Company’s common stock or any warrants or other convertible security pursuant to which shares of any class of the company’s common stock may be acquired at a price less than $1.00 per share, then the Company shall promptly issue additional shares of common stock to the purchaser in an amount sufficient that the subscription price paid hereunder, when divided by the total number of shares issued will result in an actual price paid by the purchaser per share of common stock equal to such lower price (this is intended to be a “full ratchet” adjustment). Such adjustment shall be made successively whenever such an issuance is made.
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7.
USE OF PROCEEDS
The Company shall use the proceeds from the Offering for working capital purposes.
8.
XXXXXXX XXXXXXX PROHIBITION; INDEMNITY; ESCROW RELEASE
(a)
Until the filing by the Company of a Current Report on Form 8-K with the SEC describing the Reverse Merger and the Offering, the Subscriber hereby agrees to (i) refrain from (A) engaging in any transactions with respect to the capital stock of the Company or securities exercisable or convertible into or exchangeable for any shares of capital stock of the Company, and (B) entering into any transaction which would have the same effect, or entering into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of the capital stock of the Company and (ii) indemnify and hold harmless the Company and its respective officers and directors, employees, agents, sub-agents, advisors and affiliates and each other person, if any, who controls any of the foregoing, against any loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any litigation commenced or threatened or any claim whatsoever) arising out of or based upon any violation of this Section 9 by the Subscriber.
(b)
The Subscriber agrees to indemnify and hold harmless the Company, the Escrow Agent and their respective officers and directors, employees, agents, sub-agents, advisors and affiliates and each other person, if any, who controls any of the foregoing, against any loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any litigation commenced or threatened or any claim whatsoever) arising out of or based upon any false representation or warranty by the Subscriber, or the Subscriber’s breach of, or failure to comply with, any covenant or agreement made by the Subscriber herein or in any other document furnished by the Subscriber to the Company, the Escrow Agent and their respective officers and directors, employees, agents, sub-agents, advisors and affiliates and each other person, if any, who controls any of the foregoing in connection with the Offering.
(c)
The Subscriber further agrees that in the event of any dispute, action, suit or other proceeding arising out of or in connection with this Agreement brought the Subscriber (or a transferee), the Subscriber (or transferee) shall pay the fees and expense of counsel to the Company. As used herein, the fees and expenses of counsel shall be deemed to mean the full and actual costs reasonably incurred in investigating, preparing or defending against any litigation commenced or threatened or any claim whatsoever, calculated on the basis of the usual fee charged by attorneys performing such services, and the actual out-of-pocket expenses incurred in the course of performing such investigation and legal services.
(d)
The Subscriber acknowledges that the Company may act on behalf of the Subscribers, solely for the sake of convenience, in connection with confirmation to the Escrow Agent that the closing has occurred and thereby direct the Escrow Agent to disburse the Subscribers’ subscription funds held in escrow to the Company at such time. In doing so, however, the Company makes no representation or warranty to the Subscribers with respect to any due diligence investigations concerning the Company, all of which shall be and remain the Subscriber’s own responsibility.
9.
Conditions to Acceptance of Subscription
The Company’s right to accept the subscription of the Subscriber is conditioned upon satisfaction of the following conditions precedent on or before the date the Company accepts such subscription (any or all of which may be waived by the Subscriber in his, her or its sole discretion):
(a)
As of the Closing, no legal action, suit or proceeding shall be pending which seeks to restrain or prohibit the transactions contemplated by this Agreement.
(b)
The representations and warranties of the Company contained in this Agreement shall have been true and correct on the date of this Agreement and shall be true and correct as of the Closing as if made on the date of the Closing.
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10.
Notices to Subscribers
(a)
THE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES LAWS OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF ANY INFORMATION FURNISHED IN CONNECTION WITH THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
(b)
THE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT, AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. SUBSCRIBERS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
11.
Reverse Merger Power of Attorney
The Subscriber understands that the Company plans to enter into a Reverse Merger. The Reverse Merger, if consummated, will result in the exchange of the Shares that are owned by the Subscriber for shares of the common stock of the publicly traded company (“Pubco”) that will acquire the business of the Company (the “Share Exchange”). The Subscriber understands that the Company has conditioned its acceptance of his subscription to purchase the Shares upon his willingness to agree to the Reverse Merger and Share Exchange. Therefore, the Subscriber hereby authorizes and empowers the Company’s Chief Executive Officer and Chief Financial Officer, and each of them, to act as his attorneys and proxies for the purpose of: (i) exchanging the Shares for shares of Pubco’s common stock at the same ratio that all other Company stockholders exchange their equity securities for shares of Pubco’s common stock, (ii) executing and delivering such documentation and taking such other actions as may be required to effect the Reverse Merger and taking any actions as may be necessary to effectuate the Share Exchange, including but not limited to, instructing the transfer agent to cancel the Shares and executing, on behalf of the Subscriber, such documents as may be necessary to effectuate the exchange if the Subscriber fails to deliver the stock certificate for cancellation, or fails to execute any other documentation required to effectuate the exchange, within 15 days after the expiration of the Share Exchange; and (iii) voting in favor of the adoption, approval, execution and delivery by the Company of such agreements, contracts and documents (including, but not limited to, any amendment to the Company’s organizational materials, if required) and the taking of any other actions requiring stockholder approval as may be required or deemed appropriate by the Company’s Chief Executive Officer to consummate the Reverse Merger and related Share Exchange.
12.
Miscellaneous Provisions
(a)
Modification. Neither this Agreement, nor any provisions hereof, shall be waived, modified, discharged or terminated except by an instrument in writing signed by the party against whom any waiver, modification, discharge or termination is sought.
(b)
Survival. The representations and warranties of the Subscriber and the Company made in this Agreement shall survive the execution and delivery of this Agreement and the delivery of the Shares.
(c)
Notices. Any party may send any notice, request, demand, claim or other communication hereunder to the Subscriber at the address set forth on the signature page of this Agreement or to the Company at the address set forth above using any means (including personal delivery, expedited courier, messenger service, fax, ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication will be deemed to have been duly given unless and until it actually is received by the intended recipient. Any party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other parties written notice in the manner herein set forth.
(d)
Binding Effect. Except as otherwise provided herein, this Agreement shall be binding upon, and inure to the benefit of, the parties to this Agreement and their heirs, executors, administrators, successors, legal representatives and assigns. If the Subscriber is more than one person or entity, the obligation of the Subscriber
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shall be joint and several and the agreements, representations, warranties and acknowledgments contained herein shall be deemed to be made by, and be binding upon, each such person or entity and his or its heirs, executors, administrators, successors, legal representatives and assigns. This Agreement sets forth the entire agreement and understanding between the parties as to the subject matter thereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them.
(e)
Assignability. This Agreement is not transferable or assignable by the Subscriber. This Agreement shall be transferable or assignable by the Company to a proposed publicly-traded successor company.
(f)
Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflicts of law principles.
(g)
Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
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ANTI-MONEY LAUNDERING PROVISIONS
The USA PATRIOT Act | What is money laundering? | How big is the problem and why is it important? |
The USA PATRIOT Act is designed to detect, deter, and punish terrorists in the United States and abroad. The Act imposes new anti-money laundering requirements on brokerage firms and financial institutions. Since April 24, 2002, firms have been required to have new, comprehensive anti-money laundering programs. To help you understand theses efforts, we want to provide you with some information about money laundering and our steps to implement the USA PATRIOT Act. | Money laundering is the process of disguising illegally obtained money so that the funds appear to come from legitimate sources or activities. Money laundering occurs in connection with a wide variety of crimes, including illegal arms sales, drug trafficking, robbery, fraud, racketeering, and terrorism. | The use of the U.S. financial system by criminals to facilitate terrorism or other crimes could taint our financial markets. According to the U.S. State Department, one recent estimate puts the amount of worldwide money laundering activity at $1 trillion a year. |
What are we required to do to eliminate money laundering? | |
Under new rules required by the USA PATRIOT Act, our anti-money laundering program must designate a special compliance officer, set up employee training, conduct independent audits, and establish policies and procedures to detect and report suspicious transactions and ensure compliance with the new laws. | As part of our required program, we may ask you to provide various identification documents or other information. Until you provide the information or documents we need, we may not be able to effect any transactions for you. |
PATRIOT ACT REQUIREMENTS
The Patriot Act requires us to obtain the following information from you to detect and prevent the misuse of the world financial system.
1.
In the space provided below, please provide details of where monies were transferred from to the Company in relation to your subscription for Shares.
COUNTRY | NAME OF BANK/FINANCIAL INSTITUTION | CONTACT NAME/PHONE NUMBER AT BANK/FINANCIAL INSTITUTION | NAME OF ACCOUNTHOLDER | ACCOUNT NUMBER |
|
|
|
|
|
|
|
|
|
|
If the country from which the monies were transferred appears in the Approved Country List below, please go to number 3. If the country does not appear, please go to number 2.
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Approved Country List:
Argentina Australia Bermuda Belgium Brazil British Virgin Islands Canada Denmark Finland France | Germany Gibraltar Guernsey Hong Kong Iceland Ireland Isle of Man Italy Japan Jersey | Liechtenstein Luxembourg Mexico Netherlands New Zealand Norway Panama Portugal Singapore | Spain Switzerland Turkey United Kingdom United States |
2.
If subscription monies were transferred to the Company from any country other than on the Approved Country List (see above), please provide the following documentation to the Company (all copies should be in English and certified as being “true and correct copies of the original” by a notary public of the jurisdiction of which you are resident).
(a)
For Individuals:
(i)
evidence of name, signature, date of birth and photographic identification,
(ii)
evidence of permanent address, and
(iii)
where possible, a reference from a bank with whom the individual maintains a current relationship and has maintained such relationship for at least two years
(b)
For Companies:
(i)
a copy of its certificate of incorporation and any change of name certificate,
(ii)
a certificate of good standing,
(iii)
a register or other acceptable list of directors and officers,
(iv)
a properly authorized mandate of the company to subscribe in the form, for example, of a certified resolution which includes naming authorized signatories,
(v)
a description of the nature of the business of the company,
(vi)
identification, as described above for individuals, for at least two directors and authorized signatories,
(vii)
a register of members or list of shareholders holding a controlling interest, and
(viii)
identification, as described above, for individuals who are beneficial owners of corporate shareholders which hold 10% or more of the capital share of the company.
(c)
For Partnerships and Unincorporated Businesses:
(i)
a copy of any certificate of registration and a certificate of good standing, if registered,
(ii)
identification, as described above, for individuals and, where relevant, companies constituting a majority of the partners, owners or managers and authorized signatories,
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(iii)
a copy of the mandate from the partnership or business authorizing the subscription in the form, for example, of a certified resolution which includes naming authorized signatories, and
(iv)
a copy of constitutional documents (formation and partnership agreements).
(d)
For Trustees:
(i)
identification, as described above, for individuals or companies (as the case may be) in respect of the trustees,
(ii)
identification, as described above for individuals, of beneficiaries, any person on whose instructions or in accordance with whose wishes the trustee/nominee is prepared or accustomed to act and the settlor of the trust, and
(iii)
evidence of that nature of the duties or capacity of the trustee.
3.
The Company is also required to verify the source of funds. To this end, summarize the underlying source of the funds remitted to us (for example, where subscription monies were the profits of business (and if so please specify type of business), investment income, savings, etc.).
Source of Funds |
|
ANTI-MONEY LAUNDERING ACT
WIRING FUNDS: Due to the Anti-Money Laundering Act, the Company must grant approval prior to funds being wired from any account other than National Financial Services (NFS) or an XXX Custodial Account. Thus, please adhere to the following procedure:
A.
Complete Sections 1 through 3 in the Patriot Act Requirements section above, as applicable, utilizing the information for the bank from which the wire will originate.
B.
Attach a copy of your “Letter of Instruction” or other wire instructions showing your name, financial institution name (where wire will originate), account number, wire amount, and wire instructions (escrow agent information such as ABA routing number, escrow account number etc) – this must be signed and dated.
C.
If monies will be wired from an account not matching the name on this Subscription Agreement, additional documentation is necessary (please contact Xxxxx Xxxx at the Company for assistance).
D.
Submit Subscription Agreement to the Company for processing and compliance approval.
E.
Upon notification of approval from the Company, wire funds.
F.
The Company will obtain wire confirmation from escrow agent. If wire confirmation does NOT show account number of wire origination, additional documentation will be required.
WIRING FUNDS IN ADVANCE OF COMPLIANCE APPROVAL IS PROHIBITED
- 13 -
PRIVACY POLICY
It is the policy of the Company to respect the privacy of all Subscribers. The Company does not disclose any nonpublic personal information about Subscribers to anyone, except as required or permitted by law and to effect, administer, or enforce transactions requested by Subscribers in the ordinary processing, servicing or maintaining their accounts. Furthermore, the Company does not reserve the right to disclose Subscriber’s nonpublic personal information in the future without first notifying the Subscriber of a change in privacy policy and providing a convenient opportunity for Subscriber to opt out of information sharing with nonaffiliated third parties.
Under the USA PATRIOT Act of 2001 (Public Law 107-56)(together with all rules and regulations promulgated hereunder, the “Patriot Act”), the Company and/or your broker may be required or requested to disclose to one or more regulatory and/or law enforcement bodies certain information regarding transactions relating to your account involving transactions with foreign entities and individuals, other transactions in your account as required in the Patriot Act and other activities described in the Patriot Act as “suspicious activities.” Neither the Company nor your broker shall have any obligation to advise you of any such disclosures or reports made in compliance with the Patriot Act.
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ALL SUBSCRIBERS MUST COMPLETE THIS PAGE
IN WITNESS WHEREOF, the Subscriber has executed this Agreement on the ____ day of ____________ 2006.
________________________ | x $1.00 for each Share | = $_____________________. |
Shares subscribed for |
| Aggregate Purchase Price |
Manner in which Title is to be held (Please Check One):
1. | ___ | Individual | 7. | ___ | Trust/Estate/Pension or Profit sharing Plan Date Opened:______________ |
2. | ___ | Joint Tenants with Right of Survivorship | 8. | ___ | As a Custodian for ________________________________ Under the Uniform Gift to Minors Act of the State of ________________________________ |
3. | ___ | Community Property | 9. | ___ | Married with Separate Property |
4. | ___ | Tenants in Common | 10. | ___ | Xxxxx |
5. | ___ | Corporation/Partnership/ Limited Liability Company | 11. | ___ | Tenants by the Entirety |
6. | ___ | XXX |
|
|
|
ALTERNATIVE DISTRIBUTION INFORMATION
To direct distribution to a party other than the registered owner, complete the information below. YOU MUST COMPLETE THIS SECTION IF THIS IS AN XXX INVESTMENT.
Name of Firm (Bank, Brokerage, Custodian):
Account Name:
Account Number:
Representative Name:
Representative Phone Number:
Address:
City, State, Zip:
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IF MORE THAN ONE SUBSCRIBER, EACH SUBSCRIBER MUST SIGN.
INDIVIDUAL SUBSCRIBERS MUST COMPLETE PAGE 16.
SUBSCRIBERS WHICH ARE ENTITIES MUST COMPLETE PAGE 17.
EXECUTION BY NATURAL PERSONS
_____________________________________________________________________________ Exact Name in Which Title is to be Held | ||
_________________________________ Name (Please Print) |
| _________________________________ Name of Additional Purchaser |
_________________________________ Residence: Number and Street |
| _________________________________ Address of Additional Purchaser |
_________________________________ City, State and Zip Code |
| _________________________________ City, State and Zip Code |
_________________________________ Social Security Number |
| _________________________________ Social Security Number |
_________________________________ Telephone Number |
| _________________________________ Telephone Number |
_________________________________ Fax Number (if available) |
| ________________________________ Fax Number (if available) |
_________________________________ E-Mail (if available) |
| ________________________________ E-Mail (if available) |
__________________________________ (Signature) |
| ________________________________ (Signature of Additional Purchaser) |
ACCEPTED this ___ day of _________ 2006, on behalf of the Company. | ||
| By: _________________________________ Name: | |
|
| |
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EXECUTION BY SUBSCRIBER WHICH IS AN ENTITY
(Corporation, Partnership, LLC, Trust, Etc.)
_____________________________________________________________________________ Name of Entity (Please Print) | |
Date of Incorporation or Organization: | |
State of Principal Office: | |
Federal Taxpayer Identification Number: ____________________________________________ Office Address ____________________________________________ City, State and Zip Code ____________________________________________ Telephone Number ____________________________________________ Fax Number (if available) ____________________________________________ E-Mail (if available) | |
| By: _________________________________ |
[seal] Attest: _________________________________ (If Entity is a Corporation) | _________________________________ _________________________________ Address |
|
|
ACCEPTED this ____ day of __________ 2006, on behalf of the Company. | |
| By: _________________________________ |
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INVESTOR QUESTIONNAIRE
Instructions: Check all boxes below which correctly describe you.
o
You are (i) a bank, as defined in Section 3(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), (ii) a savings and loan association or other institution, as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in an individual or fiduciary capacity, (iii) a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (iv) an insurance company as defined in Section 2(13) of the Securities Act, (v) an investment company registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”), (vi) a business development company as defined in Section 2(a)(48) of the Investment Company Act, (vii) a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301 (c) or (d) of the Small Business Investment Act of 1958, as amended, (viii) a plan established and maintained by a state, its political subdivisions, or an agency or instrumentality of a state or its political subdivisions, for the benefit of its employees and you have total assets in excess of $5,000,000, or (ix) an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and (1) the decision that you shall subscribe for and purchase shares of common stock (the “Shares”), is made by a plan fiduciary, as defined in Section 3(21) of ERISA, which is either a bank, savings and loan association, insurance company, or registered investment adviser, (2) you have total assets in excess of $5,000,000 and the decision that you shall subscribe for and purchase the Shares is made solely by persons or entities that are accredited investors, as defined in Rule 501 of Regulation D promulgated under the Securities Act (“Regulation D”) or (3) you are a self-directed plan and the decision that you shall subscribe for and purchase the Shares is made solely by persons or entities that are accredited investors.
o
You are a private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940, as amended.
o
You are an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation, Massachusetts or similar business trust or a partnership, in each case not formed for the specific purpose of making an investment in the Shares and with total assets in excess of $5,000,000.
o
You are a director or executive officer of China Clean Energy Resources, Ltd.
o
You are a natural person whose individual net worth, or joint net worth with your spouse, exceeds $1,000,000 at the time of your subscription for and purchase of the Shares.
o
You are a natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with your spouse in excess of $300,000 in each of the two most recent years, and who has a reasonable expectation of reaching the same income level in the current year.
o
You are a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Shares, whose subscription for and purchase of the Shares is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D.
o
You are an entity in which all of the equity owners are persons or entities described in one of the preceding paragraphs.
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Check all boxes below which correctly describe you.
With respect to this investment in Shares of the Company, your:
Investment Objectives:
x Aggressive Growth
x Speculation
Risk Tolerance:
o Low Risk
o Moderate Risk
x High Risk
Are you associated with a NASD Member Firm?
o Yes
o No
Your initials (purchaser and co-purchaser, if applicable) are required for each item below:
____ ____
I/We understand that this investment is not guaranteed.
____ ____
I/We are aware that this investment is not liquid.
____ ____
I/We are sophisticated in financial and business affairs and are able to evaluate the risks and merits of an investment in this offering.
____ ____
I/We confirm that this investment is considered “high risk.” (This type of investment is considered high risk due to the inherent risks including lack of liquidity and lack of diversification. Success or
failure of private placements such as this is dependent on the corporate issuer of these securities and is outside the control of the investors. While potential loss is limited to the amount invested, such loss is possible.)
The Subscriber hereby represents and warrants that all of its answers to this Investor Questionnaire are true as of the date of its execution of the Subscription Agreement pursuant to which it purchased Shares of the Company.
___________________________________ Signature of Purchaser (Entities please provide signature of Purchaser’s duly authorized signatory.) ___________________________________ Name of Signatory (Entities only) ___________________________________ Title of Signatory (Entities only) |
___________________________________ Signature of Co-Purchaser |
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VERIFICATION OF INVESTMENT ADVISOR/BROKER
I state that I am familiar with the financial affairs and investment objectives of the investor named above and reasonably believe that a purchase of the securities is a suitable investment for this investor and that the investor, either individually or together with his or her purchaser representative, understands the terms of and is able to evaluate the merits of this offering. I acknowledge:
(a)
that I have reviewed Subscription Agreement and forms of securities presented to me, and attachments (if any) thereto;
(b)
that the Subscription Agreement and attachments thereto have been fully completed and executed by the appropriate party; and
(c)
that the subscription will be deemed received by the Company upon acceptance of the Subscription Agreement.
Deposit securities from this offering directly to purchaser’s account?
If “Yes,” please indicate the account number : _____________________________________
_____________________________________
____________________________________
Broker/Dealer
Account Executive
_____________________________________
____________________________________
(Name of Broker/Dealer)
(Signature)
_____________________________________
____________________________________
(Street Address of Broker/Dealer Office)
(Print Name)
_____________________________________
____________________________________
(City of Broker/Dealer Office) (State) (Zip)
(Representative I.D. Number)
_____________________________________
____________________________________
(Telephone Number of Broker/Dealer Office)
(Date)
_____________________________________
____________________________________
(Fax Number of Broker/Dealer Office)
(E-mail Address of Account Executive)
- 20 -
Exhibit A
Escrow Account Wire Instructions
Account Name: Frascona, Joiner, Xxxxxxx and Xxxxxxxxxx Holding Trust Account
Bank:
Colorado Business Bank
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
ABA Number: 000000000
Account Number: 0000000
Reference: China Clean Energy Resources, 19672-1
EXHIBIT B
Statement of Accredited Investor
To:
China Clean Energy Resources, Ltd.
c/o Fujian Zhongde Technology Stock Co., Ltd.
Fulong Industry District
Longtian Town Fuqing City
Fujian, China 350315
Attn:
Xx. Xxx-ming Ou,
Chairman and Chief Executive Officer
Ladies and Gentlemen:
The undersigned hereby refers to the Subscription Agreement executed and delivered to China Clean Energy Resources, Ltd. (the “Company”) by the undersigned as of the date herewith. In connection with the subscription thereunder by the undersigned to purchase securities of the Company, the undersigned hereby represents and warrants to you that such individual or entity meets at least one of the tests listed on the attached Exhibit I for an “accredited investor” (as such term is defined under Regulation D promulgated pursuant to the Securities Act of 1933, as amended).
Dated: October __, 2006
Very truly yours,
___________________________________
Name of Individual #1 or Entity
___________________________________
Authorized Signature
___________________________________
Name of Individual #2, if applicable
___________________________________
Authorized Signature
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EXHIBIT I TO STATEMENT OF ACCREDITED INVESTOR
ACCREDITED INVESTOR STATUS
NOTE:
“Accredited Investors” are accorded special status under the U.S. federal securities laws. Individuals who hold certain positions with an issuer or its affiliates, or who have certain minimum individual income or certain minimum net worth (each as described below) may qualify as Accredited Investors. Partnerships, corporations or other entities may qualify as Accredited Investors if they fulfill certain financial and other standards or if all of their equity owners have incomes and/or net worth which qualify them individually as Accredited Investors, and trusts may qualify as Accredited Investors if they meet certain financial and other tests (as described below).
You may qualify as an Accredited Investor under Regulation D promulgated under the Securities Act of 1933 (the “1933 Act”) if you meet any of the following tests:
FOR INDIVIDUALS ONLY
1.
You are a director or an executive officer of China Clean Energy Resources, Ltd. An “executive officer” is the president, any vice president in charge of a principal business unit, division or function (such as sales, administration or finance), any other officer who performs a policy-making function or any other person who performs similar policy-making functions for China Clean Energy Resources, Ltd.
OR
2.
You had individual income (exclusive of any income attributable to your spouse) of more than $200,000 in each of the two most recent fiscal years, and reasonably expect to have an individual income in excess of $200,000 in the current year, or your spouse and you had a joint income in excess of $300,000 in each of the two most recent fiscal years, and you reasonably expect to have a joint income in excess of $300,000 in the current year. For purposes hereof, income means adjusted gross income, as reported for federal income tax purposes, increased by the following amounts: (i) the amount of any tax exempt interest income under Section 103 of the Internal Revenue Code (the “Code”) received, (ii) the amount of losses claimed as a limited partner in a limited partnership as reported on Schedule E of Form 1040, (iii) any deduction claimed for depletion under Section 611 of the Code or (iv) any amount by which income has been reduced in arriving at adjusted gross income pursuant to the provisions of Section 1202 of the Code. In determining personal income, however, unrealized capital gains should not be included.
OR
3.
You have an individual net worth, or your spouse and you have a combined net worth in excess of $1,000,000. For purposes of this statement, “net worth” means the excess of total assets at fair market value, including home, home furnishings and automobiles, over total liabilities.
FOR TRUSTS ONLY
4.
The Trust has total assets in excess of $5,000,000, was not formed for the specific purpose of acquiring securities of China Clean Energy Resources, Ltd., and the purchase of such securities is directed by a person with such knowledge and experience in financial and business matters that he is capable of evaluating the risks and merits of the prospective investment in such securities.
FOR CORPORATIONS, PARTNERSHIPS OR OTHER PURCHASING ENTITIES
5.
Any corporation, partnership, limited liability company or limited liability partnership not formed for the specific purpose of acquiring securities of China Clean Energy Resources, Ltd., with total assets in excess of $5,000,000.
OR
6.
All equity owners of the purchasing entity are Accredited Investors.
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EXHIBIT C
Capital Stock of China Clean Energy Resources, Ltd. Immediately After The Closing (Including the Closing of the Reverse Merger and the Offering)
|
| Percentage of Total |
TAIMING OU | 4,958,450 | 23.612% |
XXX XXXX | 3,518,900 | 16.757% |
XXXXXXX XX | 2,399,250 | 11.425% |
XXXX XXXX | 1,279,600 | 6.093% |
YUN HE | 1,119,650 | 5.332% |
XXXXX XXXX | 1,119,650 | 5.332% |
RIWEN XUE | 959,700 | 4.570% |
XXXXXX XXXXX | 639,800 | 3.047% |
Xxxxxx Xxx | 408,333 | 1.944% |
Xxxxxx Xxxx-Xx Xxxx | 408,333 | 1.944% |
Xxxx Xxxxx | 204,167 | 0.972% |
Xxxxx Xxxxx | 204,167 | 0.972% |
Xxxxxx Xxxxx | 175,000 | 0.833% |
AVENNDI, LLC | 5,000 | 0.024% |
Westminster Securities Corp. | 200,000 | 0.952% |
Pubco shareholders | 2,400,000 | 11.429% |
The Subscribers as a Group | 1,000,000 | 4.762% |
|
|
|
Total Company Common Stock | 21,000,000 | 100.000% |
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