PURCHASE AGREEMENT
THIS
PURCHASE AGREEMENT (“Agreement”)
is
made as of the 24th June, 2008 by and among Harbin Electric, Inc., a Nevada
corporation (the “Company”),
and
the Investors set forth on the signature pages affixed hereto (each an
“Investor”
and
collectively the “Investors”).
Recitals
A. The
Company and the Investors are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the
provisions of Regulation D (“Regulation
D”),
as
promulgated by the U.S. Securities and Exchange Commission (the “SEC”)
under
the Securities Act of 1933, as amended; and
B. The
Investors wish to purchase from the Company, and the Company wishes to sell
and
issue to the Investors, upon the terms and conditions stated in this Agreement
(the “Private
Placement”),
an
aggregate of up to 3.5 million shares of the Company’s Common Stock, par value
$0.00001 per share; and
C. Contemporaneous
with the closing of the Private Placement, the parties hereto will execute
and
deliver a Registration Rights Agreement, in the form attached hereto as Exhibit
A (the “Registration
Rights Agreement”),
pursuant to which the Company will agree to provide certain registration
rights
under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder, and applicable state securities laws.
Agreement
In
consideration of the mutual promises made herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the
parties hereto agree as follows:
1.1 Definitions.
In
addition to those terms defined above and elsewhere in this Agreement, for
the
purposes of this Agreement, the following terms shall have the meanings set
forth below:
“Affiliate”
means,
with respect to any Person, any other Person which directly or indirectly
through one or more intermediaries Controls, is controlled by, or is under
common control with, such Person.
“Agreement”
has
the
meaning set forth in the Preamble.
“Business
Day”
means
a
day, other than a Saturday or Sunday, on which banks in New York City are
open
for the general transaction of business.
“Closing”
has
the
meaning set forth in Section 2.1.
“Closing
Date”
has
the
meaning set forth in Section 3.1.
“Common
Stock”
means
the common stock, par value $0.00001 per share, of the Company, and any
securities into which the Common Stock may be reclassified.
“Common
Stock Equivalents”
means
any securities of the Company or the Subsidiaries which would entitle the
holder
thereof to acquire at any time Common Stock, including without limitation,
any
debt, preferred stock, rights, options, warrants or other instrument that
is at
any time convertible into or exchangeable for, or otherwise entitles the
holder
thereof to receive, Common Stock.
“Company”
has
the
meaning set forth in the Preamble.
“Company’s
Knowledge”
means
the actual knowledge of the executive officers (as defined in Rule 405 under
the
0000 Xxx) of the Company, after due inquiry.
“Confidential
Information”
means
trade secrets, confidential information and know-how (including but not limited
to ideas, formulae, compositions, processes, procedures and techniques, research
and development information, computer program code, performance specifications,
support documentation, drawings, specifications, designs, business and marketing
plans, and customer and supplier lists and related information).
“Control”
(including the terms “controlling”, “controlled by” or “under common control
with”) means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through
the
ownership of voting securities, by contract or otherwise.
“Disclosure
Schedules”
has
the
meaning set forth in Section 4.
“Environmental
Laws”
has
the
meaning set forth in Section 4.17.
“Evaluation
Date”
has
the
meaning set forth in Section 4.10.
“Intellectual
Property”
means
all of the following: (i) patents, patent applications, patent disclosures
and
inventions (whether or not patentable and whether or not reduced to practice);
(ii) trademarks, service marks, trade dress, trade names, corporate names,
logos, slogans and Internet domain names, together with all goodwill associated
with each of the foregoing; (iii) copyrights and copyrightable works; (iv)
registrations, applications and renewals for any of the foregoing; and (v)
proprietary computer software (including but not limited to data, data bases
and
documentation).
“Indemnified
Person”
has
the
meaning set forth in Section 8.3.
“Investor”
and
“Investors”
have
the meaning set forth in the Preamble.
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“Investment
Representations”
has
the
meaning set forth in Section 6.2(a).
“Losses”
has
the
meaning set forth in Section 8.2.
“Material
Adverse Effect”
means
a
material adverse effect on (i) the assets, liabilities, results of operations,
condition (financial or otherwise), or business of the Company and its
Subsidiaries taken as a whole, or (ii) the ability of the Company to perform
its
obligations under the Transaction Documents.
“Note
Purchase Agreement”
means
the Purchase Agreement dated August 29, 2006, among the Note Purchasers and
the
Company in respect of Guaranteed Senior Secured Floating Rate Notes due 2012
of
the Company and Warrants to Purchase 2,718,138 Shares of Common Stock of
the
Company and Guaranteed Senior Secured Floating Rate Notes due 2010 of the
Company and Warrants to Purchase 769,230 Shares of Common Stock of the
Company.
“Note
Purchasers”
means
Citadel Equity Fund Ltd and Xxxxxxx Xxxxx International.
“Person”
means
an individual, corporation, partnership, limited liability company, trust,
business trust, association, joint stock company, joint venture, sole
proprietorship, unincorporated organization, governmental authority or any
other
form of entity not specifically listed herein.
“Placement
Agent”
means
each of Xxxxxxx Xxxxx & Co. LLC and XXXX Capital Partners, LLC.
“Private
Placement”
has
the
meaning set forth in Recital B.
“Prohibited
Transactions”
has
the
meaning set forth in Section 5.11.
“Purchase
Price”
has
the
meaning set forth in Section 2.2.
“Registration
Rights Agreement”
has
the
meaning set forth in Recital C.
“Regulation
D”
has
the
meaning set forth in Recital A.
“Required
Investors”
means
Investors agreeing hereunder to purchase a majority of the Shares.
“SEC”
has
the
meaning set forth in Recital A.
“SEC
Filings”
has
the
meaning set forth in Section 4.6
“SEC
Reports”
means
all reports required to be filed by the Company under the 1933 Act and the
1934
Act since January 1, 2005.
3
“Shares”
means
the shares of Common Stock being purchased by the Investors
hereunder.
“Subsidiary”
of
any
Person means any “subsidiary” as defined in Rule 1-02(x) of Regulation S-X
promulgated by the SEC under the 1934 Act of such Person.
“Trading
Affiliates”
has
the
meaning set forth in Section 5.11.
“Transaction
Documents”
means
this Agreement and the Registration Rights Agreement.
“10-K”
has
the
meaning set forth in Section 4.6.
“1933
Act”
means
the Securities Act of 1933, as amended, or any successor statute, and the
rules
and regulations promulgated thereunder.
“1934
Act”
means
the Securities Exchange Act of 1934, as amended, or any successor statute,
and
the rules and regulations promulgated thereunder.
2. Purchase
and Sale of the Shares.
2.1 Subject
to the terms and conditions of this Agreement, on the Closing Date, each
of the
Investors shall severally, and not jointly, purchase, and the Company shall
sell
and issue to the Investors, the Shares in the respective amounts set forth
opposite the Investors’ names on the signature pages attached hereto in exchange
for the Purchase Price as specified in Section 2.2 below (the “Closing”).
2.2 Purchase
Price.
The
purchase price for the Shares to be purchased by each Investor at the Closing
shall be the amounts set forth opposite the Investors’ names on the signature
pages attached hereto (the “Purchase
Price”)
which
shall be equal to the amount of $14.13 per Share.
3. Closing.
3.1 Closing
Date.
The
Closing shall occur on the Closing Date at the offices of Loeb & Loeb LLP.
The date and time of the Closing (the “Closing
Date”)
shall
be 4:30 p.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 Investor).
3.2 Form
of Payment.
On the
Closing Date, (i) each Investor shall pay its respective Purchase Price to
the Company for the Shares to be issued and sold to such Investor 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 Investor, at the address set forth on the signature page attached hereto
by
such Investor, one or more stock certificates, free and clear of all restrictive
and other legends (except as expressly provided in Section 5.7 hereof),
evidencing the number of Shares such Investor is purchasing as is set forth
opposite such Investor’s name on the signature pages attached hereto, duly
executed on behalf of the Company and registered in the name of such Investor.
4
4. Representations
and Warranties of the Company.
The
Company hereby represents and warrants to the Investors that, except as set
forth in the schedules delivered herewith (collectively, the “Disclosure
Schedules”):
4.1 Organization,
Good Standing and Qualification.
Each of
the Company and its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry
on
its business as now conducted and to own its properties. Each of the Company
and
its Subsidiaries is duly qualified to do business as a foreign corporation
and
is in good standing in each jurisdiction in which the conduct of its business
or
its ownership or leasing of property makes such qualification or leasing
necessary unless the failure to so qualify has not and could not reasonably
be
expected to have a Material Adverse Effect. The Company’s Subsidiaries are
reflected on Schedule
4.1
hereto.
4.2 Authorization.
The
Company has full power and authority and has taken all requisite action on
the
part of the Company, its officers, directors and stockholders necessary for
(i)
the authorization, execution and delivery of the Transaction Documents, (ii)
authorization of the performance of all obligations of the Company hereunder
or
thereunder, and (iii) the authorization, issuance (or reservation for issuance)
and delivery of the Shares. The Transaction Documents constitute the legal,
valid and binding obligations of the Company, enforceable against the Company
in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability,
relating to or affecting creditors’ rights generally or by other equitable
principles of general application.
4.3 Capitalization.
Schedule
4.3
sets
forth as of the date of this Agreement (a) the authorized capital stock of
the
Company and each Subsidiary; (b) the number of shares of capital stock of
the
company and each Subsidiary issued and outstanding; (c) the number of shares
of
capital stock issuable pursuant to the Company’s or any Subsidiary’s stock
plans; and (d) the number of shares of capital stock issuable and reserved
for
issuance pursuant to securities exercisable for, or convertible into or
exchangeable for any shares of capital stock of the Company or any Subsidiary.
All of the issued and outstanding shares of the Company’s capital stock have
been duly authorized and validly issued and are fully paid, nonassessable
and
free of pre-emptive rights and were issued in full compliance with applicable
state and federal securities law and any rights of third parties. Except
as
described on Schedule
4.3,
all of
the issued and outstanding shares of capital stock of each Subsidiary have
been
duly authorized and validly issued and are fully paid, nonassessable and
free of
pre-emptive rights, were issued in full compliance with applicable state
and
federal securities law and any rights of third parties and are owned by the
Company, beneficially and of record, subject to no lien, encumbrance or other
adverse claim. Except as described on Schedule
4.3
or in
the SEC Reports, no Person is entitled to pre-emptive or similar statutory
or
contractual rights with respect to any securities of the Company or any
Subsidiary. Except as described on Schedule
4.3
or in
the SEC Reports, there are no outstanding warrants, options, convertible
securities or other rights, agreements or arrangements of any character under
which the Company or any of its Subsidiaries is or may be obligated to issue
any
equity securities of any kind and except as contemplated by this Agreement,
neither the Company nor any of its Subsidiaries is currently in negotiations
for
the issuance of any equity securities of any kind. Except as described on
Schedule
4.3
or in
the SEC Reports and except for the Registration Rights Agreement, there are
no
voting agreements, buy-sell agreements, option or right of first purchase
agreements or other similar agreements of any kind among the Company and
any of
the securityholders of the Company relating to the securities of the Company
held by them. Except as described on Schedule
4.3
or in
the SEC Reports, no Person has the right to require the Company to register
any
securities of the Company under the 1933 Act, whether on a demand basis or
in
connection with the registration of securities of the Company for its own
account or for the account of any other Person. Except as described on
Schedule
4.3
or in
the SEC Reports, all of the issued and outstanding shares of capital stock
or
other equity ownership interests of each Subsidiary are owned by the Company,
directly or indirectly, free and clear of any material liens, pledges, charges
and security interests and similar encumbrances. The Common Stock is registered
pursuant to Section 12(b) of the Securities Exchange Act of 1934 (“Exchange
Act”), as amended, and the Company has taken no action designed to, or which
to
its knowledge is likely to have the effect of, terminating the registration
of
the Common Stock under the Exchange Act, nor has the Company received any
notification that the SEC is contemplating terminating such registration.
The
Company has not, in the 12 months preceding the date hereof, received notice
from any stock exchange or market on which its Common Stock is traded to
the
effect that the Company is not in compliance with the requirements of such
exchange or market. The Company is, and expects to be, in compliance with
all of
the listing requirements of such exchange or market in the foreseeable future
5
Except
as
described on Schedule
4.3,
the
issuance and sale of the Shares hereunder will not obligate the Company to
issue
shares of Common Stock or other securities to any other Person (other than
the
Investors) and will not result in the adjustment of the exercise, conversion,
exchange or reset price of any outstanding security.
Except
as
described on Schedule
4.3,
the
Company does not have outstanding stockholder purchase rights or “poison pill”
or any similar arrangement in effect giving any Person the right to purchase
any
equity interest in the Company upon the occurrence of certain
events.
6
4.4 Valid
Issuance.
The
Shares have been duly and validly authorized and, when issued and paid for
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable, and shall be free and clear of all encumbrances and restrictions
(other than those created by the Investors), except for restrictions on transfer
set forth in the Transaction Documents or imposed by applicable securities
laws.
4.5 Consents.
Except
as disclosed on Schedule 4.5, the execution, delivery and performance by
the
Company of the Transaction Documents and the offer, issuance and sale of
the
Shares require no consent of, action by or in respect of, or filing with,
any
Person, governmental body, agency, or official other than filings that have
been
made pursuant to applicable state securities laws and post-sale filings pursuant
to applicable state and federal securities laws which the Company undertakes
to
file within the applicable time periods. Subject to the accuracy of the
representations and warranties of each Investor set forth in Section 5 hereof,
the Company has taken all action necessary to exempt (i) the issuance and
sale
of the Shares and (ii) the other transactions contemplated by the Transaction
Documents from the provisions of any shareholder rights plan or other “poison
pill” arrangement, any anti-takeover, business combination or control share law
or statute binding on the Company or to which the Company or any of its assets
and properties may be subject and any provision of the Company’s Articles of
Incorporation or By-laws that is or could reasonably be expected to become
applicable to the Investors as a result of the transactions contemplated
hereby,
including without limitation, the issuance of the Share and the ownership,
disposition or voting of the Shares by the Investors or the exercise of any
right granted to the Investors pursuant to this Agreement or the other
Transaction Documents.
4.6 Delivery
of SEC Filings; Business.
The
Company has made available to the Investors through the XXXXX system, true
and
complete copies of the Company’s most recent Annual Report on Form 10-KSB for
the fiscal year ended December 31, 2007 (the “10-K”),
and
all other reports filed by the Company pursuant to the 1934 Act since the
filing
of the 10-K and prior to the date hereof (collectively, the “SEC
Filings”).
The
SEC Filings are the only filings required of the Company pursuant to the
1934
Act for such period. The Company and its Subsidiaries are engaged in all
material respects only in the business described in the SEC Filings and the
SEC
Filings contain a complete and accurate description in all material respects
of
the business of the Company and its Subsidiaries, taken as a whole.
4.7 Use
of
Proceeds.
The net
proceeds of the sale of the Shares hereunder shall be used by the Company
to
repay debt, for working capital and general corporate purposes, including
to
finance potential acquisitions.
7
4.8 No
Material Adverse Change.
Since
December 31, 2007, except as identified and described in the SEC Filings
or as
described on Schedule
4.8,
there
has not been:
(i) any
change in the consolidated assets, liabilities, financial condition or operating
results of the Company from that reflected in the financial statements included
in the 10-K, except for changes in the ordinary course of business which
have
not and could not reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate;
(ii) any
declaration or payment of any dividend, or any authorization or payment of
any
distribution, on any of the capital stock of the Company, or any redemption
or
repurchase of any securities of the Company or any agreement to do any of
the
foregoing ;
(iii) any
material damage, destruction or loss, whether or not covered by insurance
to any
assets or properties of the Company or its Subsidiaries;
(iv) any
waiver, not in the ordinary course of business, by the Company or any Subsidiary
of a material right or of a material debt owed to it;
(v) any
satisfaction or discharge of any lien, claim or encumbrance or payment of
any
obligation by the Company or a Subsidiary, except in the ordinary course
of
business and which is not material to the assets, properties, financial
condition, operating results or business of the Company and its Subsidiaries
taken as a whole (as such business is presently conducted and as it is proposed
to be conducted);
(vi) any
change or amendment to the Company’s Articles of Incorporation or by-laws, or
material change to any material contract or arrangement by which the Company
or
any Subsidiary is bound or to which any of their respective assets or properties
is subject, except for changes in the ordinary course of business which have
not
and could not reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate;
(vii) any
material labor difficulties or labor union organizing activities with respect
to
employees of the Company or any Subsidiary;
(viii) any
material transaction entered into by the Company or a Subsidiary other than
in
the ordinary course of business;
(ix) the
loss
of the services of any key employee, or material change in the composition
or
duties of the senior management of the Company or any Subsidiary;
8
(x) the
loss
or threatened loss of any customer which has had or could reasonably be expected
to have a Material Adverse Effect; or
(xi) any
change to the Company’s current method of accounting.
4.9 SEC
Filings.
(a) At
the
time of filing thereof, the SEC Filings complied as to form in all material
respects with the requirements of the 1934 Act and did 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.
(b) Each
registration statement and any amendment thereto filed by the Company since
January 1, 2006 pursuant to the 1933 Act and the rules and regulations
thereunder, as of the date such registration statement or amendment became
effective, complied as to form in all material respects with the 1933 Act
and
did not contain any untrue statement of a material fact or omit to state
any
material fact required to be stated therein or necessary in order to make
the
statements made therein not misleading; and each prospectus filed pursuant
to
Rule 424(b) under the 1933 Act, as of its issue date and as of the closing
of
any sale of securities pursuant thereto did not contain any untrue statement
of
a material fact or omit to state any material fact required to be stated
therein
or necessary in order to make the statements made therein, in the light of
the
circumstances under which they were made, not misleading.
4.10 Internal
Controls.
The
Company and the Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed
in
accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures
(as
defined in 1934 Act Rules 13a-14 and 15d-14) for the Company and designed
such
disclosure controls and procedures to ensure that material information relating
to the Company, including the Subsidiaries, is made known to the certifying
officers by others within those entities, particularly during the period
in
which the Company’s most recently filed period report under the 1934 Act, as the
case may be, is being prepared. The Company’s certifying officers have evaluated
the effectiveness of the Company’s controls and procedures as of a date within
90 days prior to the filing date of the most recently filed periodic report
under the 1934 Act (such date, the “Evaluation
Date”).
The
Company presented in its most recently filed periodic report under the 1934
Act
the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no significant
changes in the Company’s internal controls (as such term is defined in Item
307(b) of Regulation S-K) or, to the Company’s Knowledge, in other factors that
could significantly affect the Company’s internal controls. The Company
maintains and will continue to maintain a standard system of accounting
established and administered in accordance with generally accepted accounting
principles in the United States (“GAAP”) and the applicable requirements of the
1934 Act. During the past 12 months prior to the date hereof, the Company
has
not received any notice of correspondence from any accountant and/or auditor
relating to any potential material weakness in any part of the system of
internal accounting controls of the Company.
9
4.11 No
Conflict, Breach, Violation or Default.
The
execution, delivery and performance of the Transaction Documents by the Company
and the issuance and sale of the Shares will not conflict with or result
in a
breach or violation of any of the terms and provisions of, or constitute
a
default under (i) the Company’s Articles of Incorporation or the Company’s
Bylaws, both as in effect on the date hereof (true and complete copies of
which
have been made available to the Investors through the XXXXX system), or (ii)(a)
any statute, rule, regulation or order of any governmental agency or body
or any
court, domestic or foreign, having jurisdiction over the Company, any Subsidiary
or any of their respective material assets or properties, or (b) any agreement
or instrument to which the Company or any Subsidiary is a party or by which
the
Company or a Subsidiary is bound or to which any of their respective assets
or
properties is subject, except, in the case of clauses (a) and (b) only, for
such
conflicts, breaches or violations as have not and could not reasonably be
expected to result in a Material Adverse Effect, individually or in the
aggregate.
4.12 Tax
Matters.
The
Company and each Subsidiary has timely prepared and filed all tax returns
required to have been filed by the Company or such Subsidiary with all
appropriate governmental agencies and timely paid all taxes shown thereon
or
otherwise owed by it and all such returns are true, complete and correct
in all
material respects . The charges, accruals and reserves on the books of the
Company in respect of taxes for all fiscal periods are adequate in all material
respects, and there are no material unpaid assessments against the Company
or
any Subsidiary nor, to the Company’s Knowledge, any basis for the assessment of
any additional taxes, penalties or interest for any fiscal period or audits
by
any federal, state or local taxing authority except for any assessment which
is
not material to the Company and its Subsidiaries, taken as a whole. All taxes
and other assessments and levies that the Company or any Subsidiary is required
to withhold or to collect for payment have been duly withheld and collected
and
paid to the proper governmental entity or third party when due. There are
no tax
liens or claims pending or, to the Company’s Knowledge, threatened against the
Company or any Subsidiary or any of their respective assets or property.
Except
as described on Schedule
4.12,
there
are no outstanding tax sharing agreements or other such arrangements between
the
Company and any Subsidiary or other corporation or entity.
10
4.13 Title
to Properties.
Except
as disclosed in the SEC Filings or as described on Schedule
4.13,
the
Company and each Subsidiary has good and marketable title to all real properties
and all other properties and assets owned by it, in each case free from liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or currently planned to be made thereof
by them; and except as disclosed in the SEC Filings, the Company and each
Subsidiary holds any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with
the
use made or currently planned to be made thereof by them.
4.14 Certificates,
Authorities and Permits.
The
Company and each Subsidiary possess adequate certificates, authorities or
permits issued by appropriate governmental agencies or bodies necessary to
conduct the business now operated by it except where the failure to so possess
has not had and could not reasonably be expected to have a Material Adverse
Effect, individually or in aggregate, and neither the Company nor any Subsidiary
has received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit that, if determined
adversely to the Company or such Subsidiary, could reasonably be expected
to
have a Material Adverse Effect, individually or in the aggregate.
4.15 No
Labor Disputes.
No
material labor dispute with the employees of the Company or any Subsidiary
exists or, to the Company’s Knowledge, is imminent. There is no employment
related charge, complaint, grievance, investigation, unfair labor practice
claim
or inquiry of any kind, pending against the Company that could, individually
or
in the aggregate, have a Material Adverse Effect.
4.16 Intellectual
Property.
The
Company or its Subsidiaries own or have valid rights to use all patent,
copyright, trade secret, trademark or other proprietary rights that are used
in
the business of the Company and are material to the Company and its Subsidiaries
taken as a whole (collectively, “Intellectual
Property”).
Schedule
4.16
sets for
a list of all of the Intellectual Property used by the Company and its
Subsidiaries.
All
material licenses or other material agreements under which (i) the Company
or any Subsidiary is granted rights in Intellectual Property and (ii) the
Company or any Subsidiary has granted rights to others in Intellectual Property
owned or licensed by the Company or any Subsidiary, are in full force and
effect
and there is no material default by the Company or any Subsidiary
thereto.
No
proceedings have been instituted or are pending which challenge in a material
manner the rights of the Company or any Subsidiary in respect to the Company
or
any Subsidiary’s right to the use of the Intellectual Property. The Company and
each Subsidiary has the right to use, free and clear of material claims or
rights of other persons, all of its customer lists, designs, computer software,
systems, data compilations, and other information that are required for its
products or its business as presently conducted.
11
To
the
Company’s Knowledge, the present business, activities and products of the
Company and each Subsidiary do not infringe any intellectual property of
any
other person, except where such infringement would not have a Material Adverse
Effect. No material proceeding charging the Company or any Subsidiary with
infringement of any adversely held Intellectual Property has been filed.
The
Company has not received notice of or is not otherwise aware of any infringement
of or conflict with asserted rights of others with respect to any Intellectual
Property or of any facts or circumstances which would render any Intellectual
Property invalid or inadequate to protect the interests of the Company or
any
Subsidiary, and which infringement or conflict (if the subject of any
unfavorable decision, ruling or finding) or invalidity or inadequacy, singly
or
in the aggregate, would result in a Material Adverse Effect. To the Company’s
knowledge, there exists no third party unexpired patent or patent application
which includes claims that would be infringed by, or otherwise have a Material
Adverse Effect on the Company. To the Company’s Knowledge, the Company is not
making unauthorized use of any material confidential information or trade
secrets of any third party. To the Company’s Knowledge, the activities of the
Company or any Subsidiary or any employee on behalf of the Company or any
Subsidiary do not violate any material agreements or arrangements known to
the
Company which any such employees have with other persons, if any.
4.17 Environmental
Matters.
Neither
the Company nor any Subsidiary is in violation of any statute, rule, regulation,
decision or order of any governmental agency or body or any court, domestic
or
foreign, relating to the use, disposal or release of hazardous or toxic
substances or relating to the protection or restoration of the environment
or
human exposure to hazardous or toxic substances (collectively, “Environmental
Laws”),
owns
or operates any real property contaminated with any substance that is subject
to
any Environmental Laws, is liable for any off-site disposal or contamination
pursuant to any Environmental Laws, and is subject to any claim relating
to any
Environmental Laws, which violation, contamination, liability or claim has
had
or could reasonably be expected to have a Material Adverse Effect, individually
or in the aggregate; and there is no pending or, to the Company’s Knowledge,
threatened investigation that might lead to such a claim.
4.18 Litigation.
Except
as described on Schedule
4.18
or in
the SEC Reports, there are no pending actions, suits or proceedings against
or
affecting the Company, its Subsidiaries or any of its or their properties;
and
to the Company’s Knowledge, no such actions, suits or proceedings have been
threatened in writing.
4.19 Financial
Statements.
The
Company is in material compliance with all provisions of the Xxxxxxxx-Xxxxx
Act
of 2002 which are applicable to it as of the Closing Date. The Company maintains
disclosure controls and procedures (as such term is defined in Rule 13a-15(e)
under the Exchange Act) that are effective in ensuring that information required
to be disclosed by the Company in the reports that it files or submits under
the
Exchange 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 Exchange 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. The financial statements included
in
each SEC Filing present fairly, in all material respects, the consolidated
financial position of the Company as of the dates shown and its consolidated
results of operations and cash flows for the periods shown, and such financial
statements have been prepared in conformity with United States generally
accepted accounting principles applied on a consistent basis (except as may
be
disclosed therein or in the notes thereto, and, in the case of quarterly
financial statements, as permitted by Form 10-Q under the 1934 Act). Except
as
set forth in the financial statements of the Company included in the SEC
Filings
filed prior to the date hereof or as described on Schedule
4.19,
neither
the Company nor any of its Subsidiaries has incurred any liabilities, contingent
or otherwise, except those incurred in the ordinary course of business,
consistent (as to amount and nature) with past practices since the date of
such
financial statements, none of which, individually or in the aggregate, have
had
or could reasonably be expected to have a Material Adverse Effect.
12
4.20 Insurance
Coverage.
The
Company and each Subsidiary maintains in full force and effect insurance
coverage that is customary for comparably situated companies for the business
being conducted and properties owned or leased by the Company and each
Subsidiary, and the Company reasonably believes such insurance coverage to
be
adequate against all liabilities, claims and risks against which it is customary
for comparably situated companies to insure. There are not any claims that
any
insurance company is currently denying or defending under a reservation of
rights clause.
4.21 Brokers
and Finders.
No
Person will have, as a result of the transactions contemplated by the
Transaction Documents, any valid right, interest or claim against or upon
the
Company, any Subsidiary or an Investor for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Company, other than the Placement Agents.
Notwithstanding the foregoing, no Investor shall have any obligation with
respect to any fees or with respect to any claims made by or on behalf of
other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement or any agreement
relating thereto as a result of any action taken by the Company.
4.22 No
General Solicitation.
Neither
the Company nor, to the Company's Knowledge, any Person acting on its behalf
has
conducted any general solicitation or general advertising (as those terms
are
used in Regulation D) in connection with the offer or sale of any of the
Shares.
13
4.23 No
Integrated Offering.
Neither
the Company nor any of its Affiliates, nor any Person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any Company
security or solicited any offers to buy any security, under circumstances
that
would adversely affect reliance by the Company on Section 4(2) for the exemption
from registration for the transactions contemplated hereby or would require
registration of the Shares under the 1933 Act or that would require shareholder
approval of any securities exchange on which the Common Stock of the Company
is
listed or designated.
4.24 Private
Placement.
Subject
to the accuracy of the representations and warranties of the Investors contained
in Section 5, the offer and sale of the Shares to the Investors as contemplated
hereby is exempt from the registration requirements of the 1933
Act.
4.25 Questionable
Payments.
Neither
the Company nor any of its Subsidiaries nor, to the Company’s Knowledge, any of
their respective current or former stockholders, directors, officers, employees,
agents or other Persons acting on behalf of the Company or any Subsidiary,
has
on behalf of the Company or any Subsidiary or in connection with their
respective businesses: (a) used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity;
(b) made any direct or indirect unlawful payments to any governmental officials
or employees from corporate funds; (c) established or maintained any unlawful
or
unrecorded fund of corporate monies or other assets; (d) made any false or
fictitious entries on the books and records of the Company or any Subsidiary;
or
(e) made any unlawful bribe, rebate, payoff, influence payment, kickback
or
other unlawful payment of any nature.
4.26 Transactions
with Affiliates.
Except
as disclosed in the SEC Filings, none of the officers or directors of the
Company and, to the Company’s Knowledge, none of the employees of the Company is
presently a party to any transaction with the Company or any Subsidiary (other
than as holders of stock options and/or warrants, and for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of
real
or personal property to or from, or otherwise requiring payments to or from
any
officer, director or such employee or, to the Company’s Knowledge, any entity in
which any officer, director, or any such employee has a substantial interest
or
is an officer, director, trustee or partner.
4.27 Material,
Non-Public Information.
The
Company confirms that neither it nor, to the Company’s Knowledge, any of its
officers or directors nor any other Person acting on its or their behalf
has
provided, and it has not authorized any placement agent to provide any Investor
or its respective agents or counsel, and it will not provide, without the
prior
written consent of any Investor, with any information that it believes
constitutes or could reasonably be expected to constitute material, non-public
information except insofar as the existence, provisions and terms of the
Transaction Documents and the proposed transactions hereunder may constitute
such information, all of which will be disclosed by the Company in the press
release and Current Report on Form 8-K as contemplated by Section 9.7 hereof.
The Company understands and confirms that the Investors will rely on the
foregoing representations in effecting transactions in securities of the
Company. No event or circumstance has occurred or information exists with
respect to the Company or any of its Subsidiaries or its or their business,
properties, 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 are being
incorporated into an effective registration statement filed by the Company
under
the Securities Act), except for the announcement of this Agreement and related
transactions.
14
4.28 Manipulation
of Price.
The
Company has not, and to the Company’s Knowledge no one acting on its behalf has
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 Shares.
4.29 Acknowledgment
Regarding Investors’ Purchase of Securities.
The
Company acknowledges and agrees that each of the Investors is acting solely
in
the capacity of an arm’s length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby and thereby. The Company
further acknowledges that no Investor 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 thereby and any advice
given by any Investor or any of their respective representatives or agents
in
connection with the Transaction Documents and the transactions contemplated
thereby is merely incidental to the Investors’ purchase of the Shares.
4.30 Investment
Company.
The
Company is not, and as a result of the offer and sale of the Shares contemplated
herein will not be, required to register as an “investment company” under, and
as such term is defined in, the U.S. Investment Company Act of 1940, as amended,
in connection with or as a result of the offer and sale of the Shares.
4.31 Off
Balance Sheet Arrangements.
There
is no transaction, arrangement, or other relationship between the Company
and an
unconsolidated or other off balance sheet entity that is required to be
disclosed by the Company in its Exchange Act filings and is not so disclosed
or
that otherwise would be reasonably likely to have a Material Adverse Effect.
15
5. Representations
and Warranties of the Investors.
Each of
the Investors hereby severally, and not jointly, represents and warrants
to the
Company that:
5.1 Organization
and Existence.
The
Investor is a validly existing corporation, limited partnership or limited
liability company and has all requisite corporate, partnership or limited
liability company power and authority to invest in the Shares pursuant to
this
Agreement. Such Investor (if not an individual) has not been formed for the
specific purpose of acquiring the Shares. Such Investor has provided the
Company
with its jurisdiction of organization and its principal place of
business.
5.2 Authorization;
Non-contravention.
The
execution, delivery and performance by the Investor of the Transaction Documents
to which such Investor is a party have been duly authorized and will each
constitute the valid and legally binding obligation of the Investor, enforceable
against the Investor in accordance with their respective terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability, relating to or affecting creditors’
rights generally. The execution, delivery and performance of this Agreement
by
such Investor, and the consummation by such Investor of the transactions
contemplated hereby, do not (i) contravene or conflict with the organizational
documents of such Investor; nor (ii) constitute a violation of any provision
of
any federal, state, local or foreign law, rule, regulation, order or decree
applicable to such Investor.
5.3 Purchase
Entirely for Own Account.
The
Shares to be received by the Investor hereunder will be acquired for the
Investor’s own account, not as nominee or agent, and not with a view to the
resale or distribution of any part thereof in violation of the 1933 Act,
and the
Investor has no present intention of selling, granting any participation
in, or
otherwise distributing the same in violation of the 1933 Act. Such Investor
does
not have any agreement or understanding, whether or not legally binding,
direct
or indirect, with any other Person to sell or otherwise distribute the Shares.
The Investor is not a broker dealer registered with the SEC under the 1934
or an
entity engaged in a business that would require it to be so
registered.
5.4 Investment
Experience.
The
Investor acknowledges that it can bear the economic risk and complete loss
of
its investment in the Shares and has such knowledge and experience in financial
or business matters that it is capable of evaluating the merits and risks
of the
investment contemplated hereby. Such Investor understands that the purchase
of
the Shares involves substantial risk.
5.5 Disclosure
of Information.
The
Investor has had an opportunity to receive all additional information related
to
the Company requested by it and to ask questions of and receive answers from
the
Company regarding the terms and conditions of the issuance and sale of the
Shares and the business, properties, prospects and financial condition of
the
Company and to obtain any additional information requested and has received
and
considered all information such Investor deems relevant to make an informed
decision to purchase the Shares. The
Investor acknowledges that it has access to the SEC Reports, including the
SEC
Filings, through the XXXXX system.
Neither
such inquiries nor any other due diligence investigation conducted by the
Investor shall modify, amend or affect the Investor’s right to rely on the
Company’s representations and warranties contained in this
Agreement.
16
5.6 Restricted
Securities.
The
Investor understands that the Shares are characterized as “restricted
securities” under the U.S. federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering
and
that under such laws and applicable regulations such securities may be resold
without registration under the 1933 Act only in certain limited
circumstances.
5.7 Legends.
It is
understood that, except as provided below, certificates evidencing the Shares
may bear the following or any similar legend:
(a) “The
securities represented hereby have not been registered with the Securities
and
Exchange Commission or the securities commission of any state in reliance
upon
an exemption from registration under the Securities Act of 1933, as amended
(the
“Securities Act”) and accordingly may not be transferred unless (i) such
securities have been registered for sale pursuant to the Securities Act,
(ii)
such securities may be sold pursuant to Rule 144 without regard to the volume
limitations contained in Rule 144(e), or (iii) the Company has received an
opinion of counsel reasonably satisfactory to it that such transfer may lawfully
be made without registration under the Securities Act or qualification under
applicable state securities laws.”
(b) If
required by the authorities of any state in connection with the issuance
of sale
of the Shares, the legend required by such state authority.
5.8 Accredited
Investor.
The
Investor is an accredited investor as defined in Rule 501(a) of Regulation
D, as
amended, under the 0000 Xxx.
5.9 No
General Solicitation.
The
Investor did not learn of the investment in the Shares by means of any form
of
general or public solicitation or general advertising, or publicly disseminated
advertisements or sales literature, including (i) any advertisement, article,
notice or other communication published in any newspaper, magazine, or similar
media, or broadcast over television or radio, or (ii) any seminar or meeting
to
which such Investor was invited by any of the foregoing means of
communications.
5.10 Brokers
and Finders.
No
Person will have, as a result of the transactions contemplated by the
Transaction Documents, any valid right, interest or claim against or upon
the
Company, any Subsidiary or an Investor for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Investor.
17
5.11 Prohibited
Transactions.
Since
the time the Investor learned of the Private Placement, neither the Investor
nor
any Affiliate of such Investor that (i) has or had knowledge of the transactions
contemplated hereby, (ii) has or shares discretion relating to such Investor’s
investments or trading or information concerning such Investor’s investments,
including in respect of the Securities, or (iii) is subject to such Investor’s
review or input concerning such Affiliate’s investments or trading
(collectively, “Trading
Affiliates”),
directly or indirectly, effected or agreed to effect any short sale, whether
or
not against the box, established any “put equivalent position” (as defined in
Rule 16a-1(h) under the 0000 Xxx) 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 Shares (each, a “Prohibited
Transaction”).
Such
Investor shall not, and shall cause its Trading Affiliates not to, engage,
directly or indirectly, in a Prohibited Transaction during the period from
the
date hereof until such time as (i) the transactions contemplated by this
Agreement are first publicly announced or (ii) this Agreement is terminated
pursuant to Section
6.3
hereof.
Such Investor acknowledges that the representations and warranties contained
in
this Section 5.11 are being made for the benefit of all Investors as well as
the
Company and that each of the other Investors shall have an independent right
to
assert any claims against any Investor arising out of any breach or violation
of
the provisions of this Section 5.11.
6. Conditions
to Closing.
6.1 Conditions
to the Investors’ Obligations.
The
obligation of the Investors to purchase the Shares at the Closing is subject
to
the fulfillment to the Investors’ satisfaction, on or prior to the Closing Date,
of the following conditions, any of which may be waived by an Investor (as
to
itself only):
(a) The
representations and warranties made by the Company in Section 4 hereof qualified
as to materiality shall be true and correct at all times prior to and on the
Closing Date, except to the extent any such representation or warranty expressly
speaks as of an earlier date, in which case such representation or warranty
shall be true and correct as of such earlier date, and, the representations
and
warranties made by the Company in Section 4 hereof not qualified as to
materiality shall be true and correct in all material respects at all times
prior to and on the Closing Date, except to the extent any such representation
or warranty expressly speaks as of an earlier date, in which case such
representation or warranty shall be true and correct in all material respects
as
of such earlier date. The Company shall have performed in all material respects
all obligations and conditions herein required to be performed or observed
by it
on or prior to the Closing Date.
(b) The
Company shall have obtained any and all consents, permits, approvals,
registrations and waivers necessary for consummation of the purchase and sale
of
the Shares and the consummation of the other transactions contemplated by the
Transaction Documents, all of which shall be in full force and
effect.
18
(c) The
Company shall have executed and delivered the Registration Rights
Agreement.
(d) No
judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order
of
or by any governmental authority, shall have been issued, and no action or
proceeding shall have been instituted by any governmental authority, enjoining
or preventing the consummation of the transactions contemplated hereby or in
the
other Transaction Documents.
(e) The
Company shall have delivered a Certificate, executed on behalf of the Company
by
its Chief Executive Officer or its Chief Financial Officer, dated as of the
Closing Date, certifying to the fulfillment of the conditions specified in
subsections (a), (b) and (d) of this Section 6.1.
(f) The
Company shall have delivered a Certificate, executed on behalf of the Company
by
its Secretary, dated as of the Closing Date, certifying the resolutions adopted
by the Board of Directors of the Company approving the transactions contemplated
by this Agreement and the other Transaction Documents and the issuance of the
Shares, certifying the current versions of the Articles of Incorporation and
Bylaws of the Company and certifying as to the signatures and authority of
persons signing the Transaction Documents and related documents on behalf of
the
Company.
(g) The
Placement Agents shall have received a comfort letter from Xxxxx Xxxxxxxx Xxxxx
Xxxxxx and Xxxxxx LLP, the independent auditors of the Company, dated as of
the
Closing Date, in form and substance reasonably acceptable to the Placement
Agents and addressing financial statements included in SEC Filings since January
1, 2008.
(h) The
Investors shall have received opinions from Loeb & Loeb LLP, the Company’s
securities counsel, Xxxxxx Xxxxxx & Xxxxxxx, the Company’s Nevada counsel
and Jingtian & Gongcheng, the Company’s PRC counsel, each dated as of the
Closing Date, in the form set forth in Exhibit A hereto.
(i) No
stop
order or suspension of trading shall have been imposed by the SEC or any other
governmental or regulatory body with respect to public trading in the Common
Stock.
(j) No
statute, rule, regulation, executive order, decree, ruling, injunction, action,
proceeding or interpretation shall have been enacted, entered, promulgated,
endorsed or adopted by any court or governmental authority of competent
jurisdiction or any self-regulatory organization or trading market or the staff
of any of the foregoing, having authority over the matters contemplated hereby
which questions the validity of, or challenges or prohibits the consummation
of,
any of the transactions contemplated by this Agreement.
19
6.2 Conditions
to Obligations of the Company.
The
Company’s obligation to sell and issue the Shares at the Closing is subject to
the fulfillment to the satisfaction of the Company as of the Closing Date of
the
following conditions, any of which may be waived by the Company:
(a) The
representations and warranties made by the Investors in Section 5 hereof, other
than the representations and warranties contained in Sections 5.3, 5.4, 5.5,
5.6, 5.7, 5.8 and 5.9 (the “Investment
Representations”),
shall
be true and correct in all material respects when made, and shall be true and
correct in all material respects on the Closing Date with the same force and
effect as if they had been made on and as of said date. The Investment
Representations shall be true and correct in all respects when made, and shall
be true and correct in all respects on the Closing Date with the same force
and
effect as if they had been made on and as of said date. The Investors shall
have
performed in all material respects all obligations and conditions herein
required to be performed or observed by them on or prior to the Closing
Date.
(b) The
Investors shall have executed and delivered the Registration Rights
Agreement.
(c) The
Investors shall have delivered the Purchase Price to the Company.
(d) No
statute, rule, regulation, executive order, decree, ruling, injunction, action,
proceeding or interpretation shall have been enacted, entered, promulgated,
endorsed or adopted by any court or governmental authority of competent
jurisdiction or any self-regulatory organization or trading market or the staff
of any of the foregoing, having authority over the matters contemplated hereby
which questions the validity of, or challenges or prohibits the consummation
of,
any of the transactions contemplated by this Agreement.
(e) Either
(i) the closing price as quoted on the Nasdaq market on the Closing Date shall
be no greater than $15.70 or (ii) the Company shall have received a written
waiver or written confirmation from the Note Purchasers in respect of the Right
of First Offer arising under the Note Purchase Agreement.
20
6.3 Termination
of Obligations to Effect Closing; Effects.
(a) The
obligations of the Company, on the one hand, and the Investors, on the other
hand, to effect the Closing shall terminate as follows:
(i) Upon
the
mutual written consent of the Company and the Investors;
(ii) By
the
Company if any of the conditions set forth in Section 6.2 shall have become
incapable of fulfillment, and shall not have been waived by the
Company;
(iii) By
an
Investor (with respect to itself only) if any of the conditions set forth in
Section 6.1 shall have become incapable of fulfillment, and shall not have
been
waived by the Investor; or
(iv) By
either
the Company or any Investor (with respect to itself only) if the Closing has
not
occurred on or prior to June 30, 2008;
provided,
however, that, except in the case of clause (i) above, the party seeking to
terminate its obligation to effect the Closing shall not then be in breach
of
any of its representations, warranties, covenants or agreements contained in
this Agreement or the other Transaction Documents if such breach has resulted
in
the circumstances giving rise to such party’s seeking to terminate its
obligation to effect the Closing.
(b) In
the
event of termination by the Company or any Investor of its obligations to effect
the Closing pursuant to this Section 6.3, written notice thereof shall forthwith
be given to the other Investors and the other Investors shall have the right
to
terminate their obligations to effect the Closing upon written notice to the
Company and the other Investors. Nothing in this Section 6.3 shall be deemed
to
release any party from any liability for any breach by such party of the terms
and provisions of this Agreement or the other Transaction Documents or to impair
the right of any party to compel specific performance by any other party of
its
obligations under this Agreement or the other Transaction
Documents.
7. Covenants
and Agreements of the Company.
7.1 Reports.
The
Company will furnish to such Investors and/or their assignees such information
relating to the Company and its Subsidiaries as from time to time may reasonably
be requested by such Investors and/or their assignees; provided, however, that
the Company shall not disclose material nonpublic information to the Investors,
or to advisors to or representatives of the Investors, unless prior to
disclosure of such information the Company identifies such information as being
material nonpublic information and provides the Investors, such advisors and
representatives with the opportunity to accept or refuse to accept such material
nonpublic information for review and any Investor wishing to obtain such
information enters into an appropriate confidentiality agreement with the
Company with respect thereto.
21
7.2 No
Conflicting Agreements.
The
Company will not take any action, enter into any agreement or make any
commitment that would conflict or interfere in any material respect with the
Company’s obligations to the Investors under the Transaction
Documents.
7.3 Compliance
with Laws.
The
Company will comply in all material respects with all applicable laws, rules,
regulations, orders and decrees of all governmental authorities, except for
any
noncompliance that does not have a Material Adverse Effect.
7.4 Listing
of Shares and Related Matters.
The
Company shall list the Shares on any stock exchange or market (other than any
OTC market) on which its Common Stock is traded within 30 days of the date
on
which the initial registration statement to be filed by the Company in
accordance with the terms of the Registration Rights Agreement has been declared
effective by the SEC.
7.5 Termination
of Covenants.
The
provisions of Sections 7.1 through 7.3 shall terminate and be of no further
force and effect on the date on which the Company’s obligations under the
Registration Rights Agreement to register or maintain the effectiveness of
any
registration covering the Registrable Securities (as such term is defined in
the
Registration Rights Agreement) shall terminate.
7.6 Removal
of Legends.
Upon
the earlier of (i) the resale of the Shares pursuant to an effective
registration statement under the 1933 Act or (ii) the date the Shares may be
sold pursuant to Rule 144 without regard to the volume limitations contained
in
Rule 144(e), the Company shall, upon an Investor’s written request, promptly
cause certificates evidencing the Investor’s Shares to be replaced with
certificates which do not bear such restrictive legends. When the Company is
required to cause unlegended certificates to replace previously issued legended
certificates, if unlegended certificates are not delivered to an Investor within
five (5) Business Days of submission by that Investor of legended certificate(s)
to the Company’s transfer agent together with a representation letter in
customary form, the Company shall be liable to the Investor for liquidated
damages in an amount equal to 1% of the aggregate purchase price of the Shares
evidenced by such certificate(s) for each thirty (30) day period (or
pro
rata
for any
portion thereof) beyond such five (5) Business Day that the unlegended
certificates have not been so delivered.
22
8. Survival
and Indemnification.
8.1 Survival.
The
representations, warranties, covenants and agreements contained in this
Agreement shall survive the Closing of the transactions contemplated by this
Agreement for a period of two years after the Closing.
8.2 Indemnification.
The
Company agrees to indemnify and hold harmless each Investor and its Affiliates
and their respective directors, officers, employees and agents from and against
any and all losses, claims, damages, liabilities and expenses (including without
limitation reasonable attorney fees and disbursements and other expenses
incurred in connection with investigating, preparing or defending any action,
claim or proceeding, pending or threatened and the costs of enforcement thereof)
(collectively, “Losses”)
to
which such Person may become subject as a result of any breach of
representation, warranty, covenant or agreement made by or to be performed
on
the part of the Company under the Transaction Documents, and will reimburse
any
such Person for all such amounts as they are incurred by such
Person.
8.3 Conduct
of Indemnification Proceedings.
Promptly after receipt by any Person (the “Indemnified
Person”)
of
notice of any demand, claim or circumstances which would or might give rise
to a
claim or the commencement of any action, proceeding or investigation in respect
of which indemnity may be sought pursuant to Section 8.2, such Indemnified
Person shall promptly notify the Company in writing and the Company shall assume
the defense thereof, including the employment of counsel reasonably satisfactory
to such Indemnified Person, and shall assume the payment of all fees and
expenses; provided,
however,
that
the failure of any Indemnified Person so to notify the Company shall not relieve
the Company of its obligations hereunder except to the extent that the Company
is materially prejudiced by such failure to notify. In any such proceeding,
any
Indemnified Person shall have the right to retain its own counsel, but the
fees
and expenses of such counsel shall be at the expense of such Indemnified Person
unless: (i) the Company and the Indemnified Person shall have mutually agreed
to
the retention of such counsel; or (ii) in the reasonable judgment of counsel
to
such Indemnified Person representation of both parties by the same counsel
would
be inappropriate due to actual or potential differing interests between them.
The Company shall not be liable for any settlement of any proceeding effected
without its written consent, which consent shall not be unreasonably withheld,
but if settled with such consent, or if there be a final judgment for the
plaintiff, the Company shall indemnify and hold harmless such Indemnified Person
from and against any loss or liability (to the extent stated above) by reason
of
such settlement or judgment. Without the prior written consent of the
Indemnified Person, which consent shall not be unreasonably withheld, the
Company shall not effect any settlement of any pending or threatened proceeding
in respect of which any Indemnified Person is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party, unless
such settlement includes an unconditional release of such Indemnified Person
from all liability arising out of such proceeding.
23
9. Miscellaneous.
9.1 Successors
and Assigns.
This
Agreement may not be assigned by any Investor without the prior written consent
of the Company provided, however, that an Investor may assign its rights and
delegate its duties hereunder in whole or in part to an Affiliate or to a third
party acquiring some or all of its Shares in a private transaction without
the
prior written consent of the Company or the other Investors; provided, that
such
transferee agrees in writing to be bound by the terms, provisions and conditions
of this Agreement, and such transfer is in compliance with all of the terms
and
provisions of this Agreement and permitted by federal and state securities
laws;
and, provided, further, that no such assignment or obligation shall affect
the
obligations of such Investor hereunder. The provisions of this Agreement shall
inure to the benefit of and be binding upon the respective permitted successors
and assigns of the parties. Nothing in this Agreement, express or implied,
is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
9.2 Execution
and Counterparts.
This
Agreement may be executed in two or more counterparts, all of which when taken
together 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, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission or by e-mail delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
facsimile or “.pdf” signature page were an original thereof.
9.3 Titles
and Subtitles.
The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this
Agreement.
9.4 Notices.
Unless
otherwise provided, any notice required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given as hereinafter
described (i) if given by personal delivery, then such notice shall be deemed
given upon such delivery, (ii) if given by telex or telecopier or electronic
mail, then such notice shall be deemed given upon receipt of confirmation of
complete transmittal, (iii) if given by mail, then such notice shall be deemed
given upon the earlier of (A) receipt of such notice by the recipient or (B)
three days after such notice is deposited in first class mail, postage prepaid,
and (iv) if given by an internationally recognized overnight air courier, then
such notice shall be deemed given one business day after delivery to such
carrier. All notices shall be addressed to the party to be notified at the
address as follows, or at such other address as such party may designate by
ten
days’ advance written notice to the other party:
24
If
to the
Company:
Xx.
0, Xx
Xxxx Xx Xx, Xx Ping Lu Xx Xxxxx Xx
Xxxxxx
Xxx Xx Xx, Xxxxxx, Xxxxx 000000
Fax:
00
000 0000-0000
Email:
xxxxx@xxxxxxxxxxxxxx.xxx
Attention:
Xxxxxxx Xxxx
with
a
copy to:
Loeb
& Loeb LLP
000
Xxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Fax:
(000) 000-0000
Email:
xxxxx@xxxx.xxx
Attention:
Xxxxxx X. Xxxx, Esq.
If
to the
Investors:
to
the
addresses set forth on the signature pages hereto.
9.5 Expenses.
The
parties hereto shall pay their own costs and expenses in connection
herewith.
9.6 Amendments
and Waivers.
Any
term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the Required Investors. Any amendment or waiver effected in accordance
with
this paragraph shall be binding upon each holder of any Shares purchased under
this Agreement at the time outstanding, each future holder of all such Shares,
and the Company.
9.7 Publicity.
By 8:30
a.m. (New York City time) on the trading day immediately following the Closing
Date, the Company shall issue a press release disclosing the consummation of
the
transactions contemplated by this Agreement. No later than the third trading
day
following the Closing Date, the Company will file a Current Report on Form
8-K
attaching the press release described in the foregoing sentence as well as
copies of the Transaction Documents. In addition, the Company will make such
other filings and notices in the manner and time required by the SEC.
Notwithstanding the foregoing, the Company shall not publicly disclose the
name
of any Investor, or include the name of any Investor in any filing with the
SEC
(other than the Registration Statement and any exhibits to filings made in
respect of this transaction or in accordance with periodic filing requirements
under the 0000 Xxx) or any regulatory agency, without the prior written consent
of such Investor, except to the extent that the Company reasonably determines
that such disclosure is required by law or trading market regulations, in which
case the Company shall provide the Investors with prior notice of such
disclosure.
25
9.8 Severability.
Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof but shall be interpreted as if it were written so as to be
enforceable to the maximum extent permitted by applicable law, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereby waive any provision of law
which
renders any provision hereof prohibited or unenforceable in any
respect.
9.9 Entire
Agreement.
This
Agreement, including the Exhibits and the Disclosure Schedules, and the other
Transaction Documents constitute the entire agreement among the parties hereof
with respect to the subject matter hereof and thereof and supersede all prior
agreements and understandings, both oral and written, between the parties with
respect to the subject matter hereof and thereof
9.10 Third
Party Beneficiary.
Each of
the Investors and the Company agree that each Placement Agent is an express
third party beneficiary of the representations, warranties, covenants and
agreements of the Company and the Investors in this Agreement. Each Placement
Agent shall be entitled to rely on such representations, warranties, covenants
and agreements and recover its damages for any breach hereof.
9.11 Further
Assurances.
The
parties shall execute and deliver all such further instruments and documents
and
take all such other actions as may reasonably be required to carry out the
transactions contemplated hereby and to evidence the fulfillment of the
agreements herein contained.
9.12 Governing
Law; Consent to Jurisdiction; Waiver of Jury Trial.
This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York without regard to the choice of law principles
thereof. Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the courts of the State of New York located in New York County
and the United States District Court for the Southern District of New York
for
the purpose of any suit, action, proceeding or judgment relating to or arising
out of this Agreement and the transactions contemplated hereby. Service of
process in connection with any such suit, action or proceeding may be served
on
each party hereto anywhere in the world by the same methods as are specified
for
the giving of notices under this Agreement. Each of the parties hereto
irrevocably consents to the jurisdiction of any such court in any such suit,
action or proceeding and to the laying of venue in such court. Each party hereto
irrevocably waives any objection to the laying of venue of any such suit, action
or proceeding brought in such courts and irrevocably waives any claim that
any
such suit, action or proceeding brought in any such court has been brought
in an
inconvenient forum. EACH
OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
CONSULTED SPECIFICALLY AS TO THIS WAIVER.
26
9.13 Independent
Nature of Investors’ Obligations and Rights.
The
obligations of each Investor under any Transaction Document are several and
not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Shares pursuant to the Transaction Documents has been made by such
Investor independently of any other Investor. Nothing contained herein or in
any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association,
a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents.
Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Shares or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to independently protect and enforce
its rights, including, without limitation, the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Investors
has been provided with the same Transaction Documents for the purpose of closing
a transaction with multiple Investors and not because it was required or
requested to do so by any Investor.
9.14 Limitation
of Liability.
Notwithstanding anything herein to the contrary, the Company acknowledges and
agrees that the liability of an Investor arising directly or indirectly, under
any Transaction Document of any and every nature whatsoever shall be satisfied
solely out of the assets of such Investor, and that no trustee, officer, other
investment vehicle or any other Affiliate of such Investor or any investor,
shareholder or holder of shares of beneficial interest of such a Investor shall
be personally liable for any liabilities of such Investor.
[Signature
Page Follows]
27
IN
WITNESS WHEREOF, the parties have executed this Agreement or caused their duly
authorized officers to execute this Agreement as of the date first above
written.
|
The
Company:
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
28
|
The
Investors:
|
[ |
]
|
|
|
By:
|
|||
|
Name:
|
|||
|
Title:
|
|||
|
Aggregate
Purchase Price: $______________
|
|||
|
Number
of Shares: _____________________
|
|||
|
Fax:
|
|||
|
Email:
|
|||
|
with
a copy to:
|
|||
|
Attn:
_________________________________________, Esq.
|
|||
|
Telephone:
|
|||
|
Email:
|
|||
29
| [ |
]
|
||
|
By:
|
|||
|
Name:
|
|||
|
Title:
|
|||
|
Aggregate
Purchase Price: $______________
|
|||
|
Number
of Shares: _____________________
|
|||
|
Fax:
|
|||
|
Email:
|
|||
|
with
a copy to:
|
|||
|
Attn:
_________________________________________, Esq.
|
|||
|
Telephone:
|
|||
|
Email:
|
|||
30
| [ |
]
|
||
|
By:
|
|||
|
Name:
|
|||
|
Title:
|
|||
|
Aggregate
Purchase Price: $______________
|
|||
|
Number
of Shares: _____________________
|
|||
|
Fax:
|
|||
|
Email:
|
|||
|
with
a copy to:
|
|||
|
Attn:
_________________________________________, Esq.
|
|||
|
Telephone:
|
|||
|
Email:
|
|||
31
| [ |
]
|
||
|
By:
|
|||
|
Name:
|
|||
|
Title:
|
|||
|
Aggregate
Purchase Price: $______________
|
|||
|
Number
of Shares: _____________________
|
|||
|
Fax:
|
|||
|
Email:
|
|||
|
with
a copy to:
|
|||
|
Attn:
_________________________________________, Esq.
|
|||
|
Telephone:
|
|||
|
Email:
|
|||
32
Exhibit
A
– Form of Legal Opinions
33
