SECURITIES PURCHASE AGREEMENT
Exhibit
2.1
This
Securities Purchase Agreement (this “Agreement”)
is dated as of September 10, 2007, by and among Universal Fog, Inc., a Delaware
corporation (the “Company”),
Xxxxxx Xxxxxxx, a citizen and resident of the state of Arizona (“Bontems”),
and Xxx, Xxx, a resident
and citizen of Harbin, Heilongjiang Province, People’s Republic of China (“Buyer”).
WHEREAS,
subject to the terms
and conditions set forth in this Agreement and pursuant to Section 4(1) and
4(2) of the Securities Act (as defined below), and Regulation S promulgated
under the Securities Act, Bontems desires to sell to Buyer, and Buyer desires
to
purchase from Bontems the (i) number of shares of Common Stock representing
at
least 51.53% of the total issued and outstanding shares of Common Stock of
the
Company on a fully diluted basis (the “Shares”), and (ii) 4,000,000 shares
of Convertible Preferred Stock (the “Preferred Stock”).
NOW,
THEREFORE, in
consideration of the mutual covenants contained in this Agreement, and for
other
good and valuable consideration the receipt and adequacy of which are hereby
acknowledged, the Company, Bontems and Buyer agree as follows:
ARTICLE
I.
DEFINITIONS
1.1 Definitions. In
addition to the terms defined elsewhere in this Agreement, for all purposes
of
this Agreement, the following terms have the meanings indicated in this
Section 1.1:
“Action”
shall have the meaning ascribed to such term in Section 3.1(i).
“Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with
a
Person as such terms are used in and construed under Rule 144.
“Asset
Purchase Agreement”
means that
certain asset purchase agreement dated the date hereof
pursuant to which the principals of the Company will acquire all of the assets
of the Company at a second phase closing, assume all the liabilities of the
Company at a first phase closing, and indemnify Buyer from and against any
and
all liabilities of the Company as such term is defined by generally accepted
accounting principles.
“Business
Day” means any day except Saturday, Sunday and any day which shall be a
federal legal holiday or a day on which banking institutions in the State
of
Delaware are authorized or required by law or other governmental action to
close.
“Closing”
means the closing of the purchase and sale of the Shares and the Preferred
Stock
pursuant to Section 2.1 on
September 10, 2007, or such other date as agreed to by the parties.
“Closing
Date” means the date of the Closing.
“Commission”
means the Securities and Exchange Commission.
“Common
Stock” means the Common Stock of the Company, par value $.0001 per share,
and any securities into which such Common Stock may hereafter 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
Counsel” means Xxxxxxx & Xxxx, X.X.
“Disclosure
Schedules” means the Disclosure Schedules attached hereto.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended.
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“Indemnified
Party” shall have the meaning ascribed to such term Section
5.13(b).
“Indemnifying
Party” shall have the meaning ascribed to such term in Section
5.13(b).
“Intellectual
Property Rights” shall have the meaning ascribed to such term in Section
3.1(n).
"Investor
Securities" means the Shares and the Preferred Stock.
“Liens”
means a lien, charge, security interest, encumbrance, right of first refusal
or
other restriction.
“Material
Adverse Effect” shall have the meaning ascribed to such term in Section 3.1(b).
“Material
Permits” shall have the meaning ascribed to such term in Section 3.1(l).
“Person”
means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other
entity
of any kind.
“Preferred
Stock” means those 4,000,000 shares of Convertible Preferred Stock, par
value $.0001, which are convertible into one share of common stock and which
are
insulated from the impact of a forward or reverse stock split or other
recapitalization.
“Purchase
Price” means the
aggregate sum of $500,000.00.
“Registration
Statement” means
that certain registration statement on Form SB-2 with a registration number
of
333-128831, and post-effective amendment No. 1 thereto, which was filed with
the
Commission on October 5, 2005 and extended by the Commission pursuant to
a post
effective order on July 13, 2007.
“Rule 144”
means Rule 144 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.
“SEC
Reports” shall have the meaning ascribed to such term in Section 3.1(g).
“Securities
Act” means the Securities Act of 1933, as amended.
“Shares”
means the shares of Common Stock purchased by Buyer pursuant to this
Agreement.
“Subsidiary”
shall have the meaning ascribed to such term in Section 3.1(a).
“Trading
Day” means (i) a day on which the Common Stock is traded on a
Trading Market, or (ii) if the Common Stock is not quoted on a Trading
Market, a day on which the Common Stock is quoted in the over-the-counter
market
as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding to its functions of reporting price);
provided, that in the event that the Common Stock is not listed or quoted
as set
forth in (i), and (ii) hereof, then Trading Day shall mean a Business
Day.
“Trading
Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the OTC Bulletin
Board.
“Transaction
Documents” means this Agreement and any and all other documents or
agreements executed in connection with the transactions contemplated
hereunder.
“Transaction
Securities” means the Shares and the Preferred Stock.
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ARTICLE
II.
PURCHASE
AND SALE
2.1 Closing. On
the terms and subject to the conditions set forth in this Agreement, at the
Closing, Bontems shall sell to Buyer and Buyer shall purchase from
Bontems subject to Section 2.3, (i) the number of Shares set forth
opposite Buyer’s name on the signature page hereto, and (ii) 4,000,000 shares of
Preferred Stock. Upon satisfaction of the conditions set forth in Section
2.2,
the Closing shall occur at the offices the Company located at 0000 Xxxxx
0xx
Xxxxxx,
Xxxxxxx, Xxxxxxx 00000, or such other location as the parties shall mutually
agree.
2.2 Closing
Conditions.
(a) At
the
Closing, as a condition to Buyer’s obligations hereunder, Bontems shall deliver
or cause to be delivered to:
(i) Buyer,
a
certificate or certificates for the number of shares of Common Stock set
forth
opposite the name of Buyer on the signature page hereof, duly endorsed in
blank
with a medallion signature guaranty;
(ii) subject
to Section 2.3,
Buyer, a certificate for 4,000,000 shares of Preferred Stock, duly endorsed
in
blank with a medallion signature guaranty;
(iii) Buyer,
this Agreement duly executed by the Company;
(iv) Buyer,
evidence satisfactory that the principals of the Company have acquired all
of
the assets and liabilities of the Company pursuant to the Asset Purchase
Agreement;
(v) Buyer,
evidence satisfactory that the Registration Statement has been withdrawn
pursuant to Rule 477 under the Securities Act.
(b) at
the
Closing, as a condition to Bontems’ obligations hereunder, Buyer shall deliver
or cause to be delivered to Bontems the following:
(i) this
Agreement duly executed by Buyer; and
(ii) Buyer’s
payment for the Shares and Preferred Stock being purchased from the escrow
account by wire transfer;
(c) at
the
Closing, as a condition to each party’s obligations hereunder, all
representations and warranties of each of the parties herein shall remain
true
and correct in all material respects as of the Closing Date.
(d) as
of the
Closing Date, as a condition to the Buyer’s obligations hereunder, there shall
have been no Material Adverse Effect (other than pursuant to the Asset Purchase
Agreement) with respect to the Company since the date hereof.
(e) from
the
date hereof to the Closing Date, and as a condition to the Buyer’s obligations,
(i) trading in the Common Stock shall not have been suspended by the Commission
(except for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to Closing); (ii) trading
in
securities generally shall not have been suspended or limited, or minimum
prices
shall not have been established on securities whose trades are reported by
such
service, or on any Trading Market; and (iii) no banking moratorium shall
have
been declared either by the United States or New York State
authorities.
2.3 Escrow
Provisions. Pending the sale of the Shares and the Preferred
Stock, all funds paid hereunder shall be deposited by Buyer in escrow with
Xxxxxxx & Xxxx, X.X. (the “Escrow Agent”) pursuant to an
escrow agreement by and among the Escrow Agent, Bontems, and Buyer
(the “Escrow
Agreement”). On the Closing Date, the Escrow Agent shall
deliver to the Buyer the Shares and Preferred Stock, and the balance of the
Purchase Price to Bontems.
2.4 Certificates. Subject
to Section 2.3
Buyer hereby authorizes and directs Bontems, upon the Closing, to deliver
certificates representing the Shares and Preferred Stock to Buyer pursuant
to
this Agreement to Buyer’s address indicated in this Agreement.
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ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES
3.1 Representations
and
Warranties of the Company. Except as set forth under the
corresponding section of the Disclosure Schedules delivered concurrently
herewith, the Company and Bontems, jointly and severally, hereby make the
following representations and warranties as of the date hereof and as of
the
Closing Date to Buyer:
(a) Subsidiaries.
Other
than as disclosed in the SEC Reports, the Company has no direct or indirect
subsidiaries (a “Subsidiary”
and collectively, the “Subsidiaries”).
The Company owns, directly or indirectly, all or the majority of the capital
stock of each Subsidiary free and clear of any Liens, and all the issued
and
outstanding shares of capital stock of each Subsidiary are validly issued
and
are fully paid, non-assessable and free of preemptive and similar
rights.
(b) Organization
and
Qualification. Each of the Company and the Subsidiaries is an entity duly
incorporated or otherwise organized, validly existing and in good standing
under
the laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite corporate power and authority to own and
use its
properties and assets and to carry on its business as currently conducted.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. Each of the Company and the Subsidiaries
is
duly qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary
(as applicable), except where the failure to be so qualified or in good standing
(as applicable), as the case may be, would not result in (i) a material
adverse effect on the legality, validity or enforceability of any Transaction
Document, (ii) a material adverse effect on the results of operations,
assets, business or financial condition of the Company and the Subsidiaries,
taken as a whole, or (iii) a material adverse effect on the Company’s
ability to perform in any material respect on a timely basis its obligations
under any Transaction Document (any of (i), (ii) or (iii), a “Material
Adverse Effect”).
(c) Authorization;
Enforcement;
Validity. The Company has the requisite corporate power and authority to
enter into and to consummate the transactions contemplated by each of the
Transaction Documents and Bontems has the authority to enter into and to
consummate the transactions contemplated by each of the Transactions Documents
and otherwise to carry out their obligations thereunder. The execution and
delivery of each of the Transaction Documents by the Company and Bontems
and the
consummation by them of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company and Bontems
and no
further corporate action or other action is required by the Company
or Bontems in connection therewith. Each Transaction Document has been (or
upon
delivery will have been) duly executed by the Company and Bontems and, when
delivered in accordance with the terms hereof, will constitute the valid
and
binding obligation of the Company and Bontems enforceable against the Company
and Bontems in accordance with its terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies.
(d) No
Conflicts. The
execution, delivery and performance of the Transaction Documents by the Company
and Bontems and the consummation by Bontems of the transactions contemplated
thereby, do not and will not (i) conflict with or violate any provision of
the Company’s or any Subsidiary’s certificate or articles of incorporation,
certificates of designation (or similar document related to preferred stock),
bylaws and/or other organizational or charter documents, or (ii) conflict
with, or constitute a default (or an event that with notice or lapse of time
or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of
time
or both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise), or other understanding
to which the Company or any Subsidiary is a party or by which any property
or
asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected, except in the case of each
of
clauses (ii) and (iii), such as would not result in a Material Adverse
Effect.
(e) Filings,
Consents and
Approvals. The Company is not required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by Bontems of the Transaction Documents, other than
file a current report on Form 8-K under the Exchange Act.
(f) Capitalization. Except
as set forth in the SEC Reports, the capitalization of the Company is as
described in the Company’s most recent periodic report filed with the
Commission. Except as set forth in the SEC Reports, the Company has not issued
any capital stock since such filing other than shares pursuant to its
registration statement on Form SB-2. No Person has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents.
Except as a result of the purchase and sale of the Securities, for employee
stock options under the Company’s stock option plans, or otherwise as reflected
in the SEC Reports, there are no outstanding options, warrants (other than
the
Xxxx Warrant to purchase 2,000,000 shares of Common Stock), script rights
to
subscribe to, calls or commitments of any character whatsoever relating to,
or
securities, rights or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by which
the
Company or any Subsidiary is or may become bound to issue additional shares
of
Common Stock, or securities or rights convertible or exchangeable into shares
of
Common Stock. The sale of the Securities will not obligate Bontems to sell
shares of Common Stock or Preferred Stock other securities to any Person
(other
than Buyer) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under such
securities.
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(g) SEC
Reports; Financial
Statements. The Company has filed all reports required to be filed by it
under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or
Section 15(d) of
the Exchange Act, for the two (2) years preceding the date hereof (or such
shorter period as the Company was required by law to file such material)
(the
foregoing materials, including the exhibits thereto, being collectively referred
to herein as the “SEC
Reports” and, together with the Disclosure Schedules to this Agreement,
the “Disclosure
Materials”). As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities
Act
and the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, as applicable, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements and
the
rules and regulations of the Commission with respect thereto as in effect
at the
time of filing. Such financial statements have been prepared in accordance
with
generally accepted accounting principles applied on a consistent basis during
the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements or the
notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries as of
and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(h) Material
Changes.
Since the date of the latest audited financial statements included within
the
SEC Reports, except as disclosed in the SEC Reports and as contemplated by
the
Asset Purchase Agreement, (i) there has been no event, occurrence or
development that has had or that could reasonably be expected to result in
a
Material Adverse Effect, (ii) the Company has not incurred any material
liabilities (contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent with past
practice and (B) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its holders of Common Stock or
purchased, redeemed or made any agreements to purchase or redeem any shares
of
its capital stock and (v) the Company has not issued any equity securities
to any officer, director or Affiliate, except pursuant to the usual and ordinary
course of business and the existing Company stock option plans. The Company
does
not have pending before the Commission any request for confidential treatment
of
information.
(i) Litigation.
Except as
disclosed in the SEC Reports or on Schedule 3.1(i) hereto, there is no action,
suit, inquiry, notice of violation, proceeding or investigation pending or,
to
the knowledge of the Company, threatened against or affecting the Company,
any
Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency and/or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”)
which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents and/or the Transaction
Securities or (ii) could, if there were an unfavorable decision, have or
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any Subsidiary, nor, to the knowledge of the Company, any director
or officer thereof, except as disclosed in the SEC Reports, is or has been
the
subject of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary duty could
result in a Material Adverse Effect. Except as disclosed in the SEC
Reports, to the knowledge of the Company, there is not pending or contemplated
any investigation by the Commission and/or other entity involving the Company
or
any current or former director or officer of the Company. The Commission
has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.
(j) Labor
Relations. No
material labor dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company which could reasonably
be
expected to result in a Material Adverse Effect.
(k) Compliance.
Except as
disclosed in the SEC Reports, neither the Company nor any Subsidiary (i) is
in default under or in violation of (and no event has occurred that has not
been
waived that, with notice or lapse of time or both, would result in a default
by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement
or
instrument to which it is a party or by which it or any of its properties
is
bound (whether or not such default or violation has been waived), (ii) is
in violation of any order of any court, arbitrator or governmental body,
or
(iii) is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal,
state
and local laws applicable to its business, except in the case of clauses
(i),
(ii) and (iii) as would not result in a Material Adverse
Effect.
(l) Regulatory
Permits.
The Company and the Subsidiaries possess all certificates, authorizations
and
permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described
in the
SEC Reports, except where the failure to possess such permits would not have
or
reasonably be expected to result in a Material Adverse Effect (“Material
Permits”), and neither the Company nor any Subsidiary has received any
notice of proceedings relating to the revocation or modification of any Material
Permit.
(m) Title
to Assets. The
Company and the Subsidiaries have good and marketable title in fee simple
to all
real property owned by them that is material to the business of the Company
and
the Subsidiaries, taken as a whole, and good and marketable title in all
personal property owned by them that is material to the business of the Company
and the Subsidiaries, taken as a whole, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made
of
such property by the Company and the Subsidiaries and Liens for the payment
of
federal, state or other taxes, the payment of which is neither delinquent
nor
subject to penalties. Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases with which the Company and the Subsidiaries
are in material compliance.
(n) Patents
and
Trademarks. To the knowledge of the Company and each Subsidiary, the
Company and the Subsidiaries have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights that are necessary or material
for
use in connection with their respective businesses as described in the SEC
Reports and which the failure to so have would result in a Material Adverse
Effect (collectively, the “Intellectual
Property Rights”). Neither the Company nor any Subsidiary has received a
written notice that the Intellectual Property Rights used by the Company
or any
Subsidiary violates or infringes the rights of any Person. To the knowledge
of
the Company, all such Intellectual Property Rights are enforceable.
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(o) Transactions
With Affiliates
and Employees. Except as set forth in the SEC Reports and the Asset
Purchase Agreement, none of the officers, directors and/or employees of the
Company and the Subsidiaries are, to the knowledge of the Company, a party
to
any transaction with the Company or any Subsidiary (other than 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 knowledge of
the
Company, any entity in which any officer, director, or any such employee
has a
substantial interest or is an officer, director, trustee or partner, in each
case in excess of $60,000 other than (a) for payment of salary or
consulting fees for services rendered, (b) reimbursement for expenses
incurred on behalf of the Company and (c) for other employee benefits,
including stock option agreements under any stock option plan of the
Company.
(p) Internal
Accounting
Controls. The Company and each of its subsidiaries maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and
to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Company
and designed such disclosure controls and procedures to ensure that material
information relating to the Company, including its Subsidiaries, is made
known
to the certifying officers by others within those entities, particularly
during
the period in which the Company's Form 10-SB or 10-QSB, as the case may be,
is
being prepared.
(q) Certain
Fees. The
Company has not entered into an agreement to pay any brokerage or finder’s fees
or commissions to any person including, but not limited to, any broker,
financial advisor or consultant, finder, placement agent, investment banker,
bank or other Person with respect to the transactions contemplated by this
Agreement. Buyer shall have no obligation with respect to any fees or with
respect to any claims made by or on behalf of other Persons for fees of a
type
contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement, except to the extent Buyer made
an
agreement to make any such payment to Xxxxxx Xxxxx & Associates,
Inc.
(r) Regulation
S
Offering. Assuming the accuracy of Buyer’s Regulation S representations
and warranties set forth in Section 3.2(c),
no registration under the Securities Act is required for the offer and sale
of
the Investor Securities by Bontems to Buyer as contemplated hereby. The sale
of
the Investor Securities hereunder does not contravene the rules and regulations
of the Trading Market.
(s) Application
of Takeover
Protections. The Company and its Board of Directors have taken all
necessary action, if any is available, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Company's Certificate of Incorporation (or similar charter documents)
or the laws of its state of incorporation that is or could become applicable
to
the Buyer as a result of the Buyer and the Company fulfilling their obligations
or exercising their rights under the Transaction Documents, including without
limitation the Bontem’s sale of the Transaction Securities and Buyer’s ownership
of the Investor Securities.
(t) Registration
Rights. No person has any right to cause the Company to effect
the registration under the Securities Act of any securities of the
Company.
(u) Right
of First
Refusal. No person, firm or other business entity is a
party to any agreement, contract or understanding, written or oral entitling
such party to a right of first refusal with respect to offerings of securities
by the Company.
(v) Disclosure.
The
Company confirms that, neither the Company nor any other Person acting on
its
behalf has provided any of Buyer or their agents or counsel with any information
that constitutes or might constitute material, non-public information. The
Company understands and confirms that Buyer will rely on the foregoing
representations and covenants in effecting transactions in securities of
the
Company. All disclosure provided to Buyer regarding the Company, its business
and the transactions contemplated hereby, including the Disclosure Schedules
to
this Agreement, furnished by or on behalf of the Company are true and correct
and do not contain any untrue statement of a material fact or omit to state
any
material fact necessary in order to make the statements made therein, in
light
of the circumstances under which they were made, not misleading.
(w) Conduct
of
Business. Since December 31, 2006 and except as otherwise
stated in the SEC Reports, the Company has
not (a)
incurred any debts, obligations or liabilities, absolute, accrued, contingent
or
otherwise, whether due or to become due, except current liabilities incurred
in
the usual and ordinary course of business, having a Material Adverse Effect,
(b)
made or suffered any changes in its contingent obligations by way of guaranty,
endorsement (other than the endorsement of checks for deposit in the usual
and
ordinary course of business), indemnity, warranty or otherwise, (c) discharged
or satisfied any liens other than those securing, or paid any obligation
or
liability other than, current liabilities shown on the balance sheet dated
as at
December 31, 2006 and forming part of the SEC Reports, and current liabilities
incurred since December 31, 2006, in each case in the usual and ordinary
course
of business, (d) mortgaged, pledged or subjected to lien any of its assets,
tangible or intangible, (e) sold, transferred or leased any of its assets
except
in the usual and ordinary course of business, (f) cancelled or compromised
any
debt or claim, or waived or released any right, of material value, (g) suffered
any physical damage, destruction or loss (whether or not covered by insurance)
adversely affecting the properties or business of the Company, (h) entered
into
any transaction other than in the usual and ordinary course of business except
for this Agreement and the related agreements referred to herein, (i)
encountered any labor difficulties or labor union organizing activities,
(j)
made or granted any wage or salary increase or entered into any employment
agreement, (k) issued or sold any shares of capital stock or other securities
or
granted any options with respect thereto (except pursuant to the Registration
Statement), or modified any equity security of the Company, (l)
declared or paid any dividends on or made any other distributions with respect
to, or purchased or redeemed, any of its outstanding equity securities, (m)
suffered or experienced any change in, or condition affecting, its condition
(financial or otherwise), properties, assets, liabilities, business operations
or results of operations other than changes, events or conditions in the
usual
and ordinary course of its business, having (either by itself or in conjunction
with all such other changes, events and conditions) a Material Adverse Effect,
(n) made any change in the accounting principles, methods or practices followed
by it or depreciation or amortization policies or rates theretofore adopted,
or
(o) entered into any agreement or otherwise obligated itself, to do any of
the
foregoing.
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6
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3.2 Representations
and
Warranties of Buyer. Buyer hereby represents and warrants as of the date
hereof and as of the Closing Date to the Company and Bontems, acknowledging
that
the Company and Bontems are relying upon the accuracy and completeness of
the
representations and warranties set forth herein:
(a) Organization;
Authority. Buyer, if not a natural person, is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction
of its
organization with full right, corporate or partnership power and authority
to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations thereunder. The execution,
delivery and performance by Buyer of the transactions contemplated by this
Agreement has been duly authorized by all necessary corporate or similar
action
on the part of Buyer. Each Transaction Document to which it is a party has
been
duly executed by Buyer, and when delivered by Buyer in accordance with the
terms
hereof, will constitute the valid and legally binding obligation of Buyer,
enforceable against it in accordance with its terms.
(b) Investment
Intent.
Buyer understands that the Investor Securities are “restricted securities” and
have not been registered under the Securities Act or any applicable state
securities law and it is acquiring the Investor Securities as principal for
its
own account for investment purposes.
(c) Regulation
S
Representations, Warranties and
Covenants. Buyer represents and warrants to, and
covenants with, the Company and Bontems, as follows:
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(1)
|
Buyer
is not a U.S. person and is not acquiring the shares of common
stock of
UFOG for the account or for the benefit of any U.S. person and
is not a
U.S. person who purchased the shares of common stock in a transaction
that
did not require registration under the Securities
Act.
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(2)
|
Buyer
agrees to resell such common stock only in accordance with the
provisions
of Regulation S, pursuant to registration under the Securities
Act, or
pursuant to an available exemption from
registration.
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(3)
|
Buyer
agrees not to engage in hedging transactions with regard to such
securities unless in compliance with the Securities
Act.
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(4)
|
Buyer
consents to the certificate for the shares of common stock of UFOG
to
contain a legend to the effect that transfer is prohibited except
pursuant
to registration under the Securities Act, or pursuant to an available
exemption from registration, and that hedging transactions involving
the
shares of common stock may not be conducted unless in compliance
with the
Securities Act.
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(5)
|
Buyer
acknowledges that the Company has agreed to refuse to register
any
transfer of the shares of common stock not made pursuant to registration
under the Securities Act, or pursuant to an available exemption
from
registration.
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(6)
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Buyer
covenants and represents and warrants in favor of the Company that
all of
the representations and warranties set forth herein shall be true
and
correct at the time of Closing as if made on that
date.
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(d) Buyer
Status. At the
time Buyer was offered the Shares and Preferred Stock, it was, and at the
date
hereof it is an “accredited investor” as defined in Rule 501(a) under
the Securities Act. Buyer is not, and is not required to be, registered as
a
broker-dealer under Section 15 of the Exchange Act. In making an investment
decision as to whether to purchase the Shares and Preferred Stock offered
hereby, Buyer has relied solely upon the SEC Reports and the representation
and
warranties of the Company contained herein. Buyer has had the
opportunity to ask questions of, and receive answers from, representatives
of
the Company concerning the Company and the officers and all such questions
have
been asked and answered by the Company to the satisfaction of the
Buyer.
(e) Experience
of Buyer.
Buyer, 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 prospective investment
in the
Investor Securities, and has so evaluated the merits and risks of such
investment. Buyer is able to bear the economic risk of an investment in the
Investor Securities and, at the present time, is able to afford a complete
loss
of such investment.
(f) General
Solicitation. Buyer is not purchasing the Shares and Preferred
Stock as a result of any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or similar
media
or broadcast over television or radio or presented at any seminar or any
other
general solicitation or general advertisement.
(g) No
Conflicts. Neither
the execution and delivery of this Agreement and/or any Transaction Document,
nor the consummation of the Transactions contemplated hereby, will violate
any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency,
or
court to which Buyer is subject or any provision of its organizational documents
or other similar governing instruments.
(h) No
Advice. Buyer
understands that nothing in this Agreement or any other materials presented
to
Buyer in connection with the purchase and sale of the Investor Securities
constitutes legal, tax or investment advice. Buyer has consulted such legal,
tax
and investment advisors as it, in its sole discretion, has deemed necessary
or
appropriate in connection with its purchase of the Investor
Securities.
(i) No
Litigation, Etc.
There is no action, suit, proceeding, judgment, claim or investigation pending
or, to the knowledge of the Buyer, threatened against the Buyer which could
reasonably be expected in any manner to challenge or seek to prevent, enjoin,
alter or materially delay any of the transactions contemplated by the
Transaction Documents.
(j) Approvals.
The
execution, delivery and performance by Buyer of this Agreement and the
Transaction Documents to which it is a party, and the consummation of the
transactions set forth herein require no material action by or in respect
of, or
material filing with, any governmental body, agency, official or authority,
by
Buyer other than (i) any filings, authorizations, consents and approvals
as may
be required under the Xxxx-Xxxxx-Xxxxxx Improvements Act of 1976, as amended;
(ii) the filing by Buyer with the Commission of such reports under the Exchange
Act as may be required in connection with this Agreement, the Transaction
Documents and the transactions contemplated hereby, and (iii) any filings
required by the securities or blue sky laws of the various states.
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7
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The
Company and Bontems acknowledge and agree that Buyer does not make or has
not
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2 and
Section
4.1.
ARTICLE
IV.
OTHER
AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) The
Investor Securities may only be disposed of in compliance with state and
federal
securities laws.
(b) Buyer
agrees to the imprinting of a legend on any of the Investor Securities in
the
following form:
THESE
SECURITIES 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 OFFERED OR SOLD EXCEPT PURSUANT TO
AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. HEDGING TRANSACTIONS INVOLVING THE SHARES AND COMMON STOCK INTO
WHICH
THE PREFERRED STOCK IS CONVERTIBLE MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE
WITH THE SECURITIES ACT.
4.2 Furnishing
of
Information. Until the date Buyer does not own any Investor
Securities, the Company covenants and agrees to timely file (or obtain
extensions in respect thereof and file within the applicable grace period)
all
reports required to be filed by the Company after the date hereof pursuant
to
the Exchange Act. Upon the request of any such holder of Investor
Securities, the Company shall deliver to such holder a written certification
of
a duly authorized officer as to whether it has complied with the preceding
sentence. Until the date that Buyer does not own any Investor Securities,
if the
Company is not required to file reports pursuant to the Exchange Act, it
will
prepare and furnish to Buyer and make publicly available in accordance with
Rule 144(c) such information as is required for Buyer to sell any
Shares and Preferred Stock under Rule 144. The Company further covenants
and agrees that it will take such further action as any holder of Investor
Securities may reasonably request, all to the extent required from time to
time
to enable such person to sell any Shares and Preferred Stock without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.
4.3 Non-Public
Information. The Company covenants and agrees that neither it
nor any other Person acting on its behalf will provide Buyer or its agents
or
counsel with any information that the Company believes constitutes material
non-public information, unless prior thereto Buyer shall have executed a
written
agreement regarding the confidentiality and use of such information. The
Company
understands and confirms that Buyer shall be relying on the foregoing
representations in effecting transactions in securities of the
Company.
4.4 Reimbursement.
If any
Buyer becomes involved in any capacity in any proceeding by or against any
Person who is a stockholder of the Company (except as a result of sales,
pledges, margin sales and similar transactions by Buyer to or with any current
stockholder), solely as a result of Buyer's acquisition of the Securities
under
this Agreement, and provided any such person has complied with all laws,
rules
and regulations and is not in breach of any of its representations, warranties,
or agreements made in any of the Transaction Documents, the Company will
reimburse Buyer for its reasonable legal and other expenses (including the
cost
of any investigation preparation and travel in connection therewith) incurred
in
connection therewith, as such expenses are incurred. The reimbursement
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same
terms
and conditions to any Affiliates of Buyer who are actually named in such
action,
proceeding or investigation, and partners, directors, agents, employees and
controlling persons (if any), as the case may be, of Buyer and any
such Affiliate, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Company, Buyer
and any such Affiliate and any such Person. The Company also agrees that
neither
Buyer nor any such Affiliates, partners, directors, agents, employees or
controlling persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company solely as a result
of
acquiring the Securities under this Agreement, provided such person has complied
with all laws, rules and regulations and is not in breach of any of its
representations, warranties and agreements made in any of the Transaction
Documents.
4.5 Reservation
of Common
Stock. As of the date hereof, the Company has reserved and the
Company shall continue to reserve and keep available at all times, free of
preemptive rights, a sufficient number of shares of Common Stock for the
purpose
of enabling the Company to sell the Shares, and issue the shares of common
stock
issuable upon conversion of the Preferred Stock.
4.6 Listing
of Common
Stock. The Company hereby agrees to use its best efforts to
maintain the listing of the Common Stock on its current Trading Market, and
promptly file with the Trading Market to list the shares issuable upon
conversion of the Preferred Stock on the Trading Market. The Company further
agrees, if the Company applies to have the Common Stock traded on any other
Trading Market, it will include in such application the
Shares, common stock issuable upon conversion of the Preferred Stock,
and will take such other action as is necessary or desirable in the opinion
of
Buyer to cause the Shares and common stock issuable upon conversion of the
Preferred Stock to be listed on such other Trading Market as promptly as
possible. The Company will take all action reasonably necessary to continue
the
listing and trading of its Common Stock on its current Trading Market and
will
use its best efforts to comply in all material respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the
Trading
Market.
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8
-
4.7 Indemnification
by
Buyer. Buyer agrees to indemnify and hold harmless the Company, and its
officers, directors, agents, representatives, shareholders and employees
and
each of their respective affiliates, and Bontems, in his individual capacity,
from and against any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys' fees and costs
of
investigation that any such party may suffer or incur which are caused by
or
arise out of (i) any material misrepresentation or material breach or default
in
the performance by it of any covenant or agreement made by it in this Agreement
or in any of the Transaction Documents; (ii) any material misrepresentation
or
material breach of warranty or representation made by it in this Agreement
or in
any of the Transaction Documents or, (iii) any cause of action, suit or claim
brought or made against such Indemnified Party and arising out of or resulting
from the execution, delivery, performance or enforcement of the Transaction
Documents executed pursuant hereto by any of the Indemnified
Parties. Notwithstanding anything to the contrary provided herein or
elsewhere, the liability of Buyer under this Section 4.7 shall
be
limited to the amount paid by Buyer pursuant hereto to purchase the Investor
Securities, and the procedures and timing for indemnification by Buyer under
this Section
4.7 shall follow the procedures and provisions of Sections
5.13(b) and
(c), mutatismutandis,
with
respect to indemnification by the Company of the Buyer.
4.8 Reporting
Obligations. So long as Buyer beneficially owns any Investor
Securities, the Company shall continue to file or furnish pursuant to the
Exchange Act or the Securities Act, and the Company shall use commercially
reasonable best efforts to maintain its status as an issuer required to file
such reports under the Exchange Act.
4.9 No
Assets or Liabilities at
Closing. Bontems represents, warrants and agrees with Buyer
that as of the conclusion of the First Phase Closing and the Second Phase
Closing under the Asset Purchase Agreement, the Company shall have no “assets”
or “liabilities” (other than the Humankind and affiliate assets and liabilities)
as such terms are defined by generally accepted accounting principles
consistently applied. It is the intention of the parties that all of
the assets and liabilities of the Company shall have been transferred from
the
Company to the principals of the Company (or a company which they control)
at
the Second Phase Closing and First Phase Closing, respectively. In
addition, Bontems represents, warrants and agrees with Buyer that as of the
Closing, the stock of Universal Fog, Inc., an Arizona corporation, shall
be
conveyed to the principals of the Company (or a company which they control),
and
all of the liabilities (as previously defined) of Universal Fog, Inc., an
Arizona corporation, shall have been assumed by such principals or their
corporation, and such principals or their corporation shall, jointly and
severally, indemnify and hold harmless the Buyer against any all liabilities
of
the Company and Universal Fog, Inc., an Arizona corporation.
4.10 Cancellation
of Convertible
Preferred Stock. The parties agree that the 4,000,000 shares
of Convertible Preferred Stock shall be cancelled by the Company upon receipt
by
Buyer, and the Buyer shall caused to be issued 1,938,800 shares of common
stock
to Bontems, and 2,061,200 shares of common stock to the Buyer within two
weeks
of the date hereof.
ARTICLE
V.
MISCELLANEOUS
5.1 Fees
and Expenses.
Except as otherwise set forth in this Agreement, each party shall pay the
fees
and expenses of its advisers, counsel, accountants and other experts, if
any,
and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this
Agreement. Bontems shall pay all stamp and other taxes and duties
levied in connection with the sale of the Securities.
5.2 Entire
Agreement. The
Transaction Documents, together with any exhibits and any schedules thereto,
contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral
or
written, with respect to such matters, which the parties acknowledge have
been
merged into such documents, exhibits and schedules.
5.3 Notices.
Any and all
notices or other communications or deliveries required or permitted to be
provided hereunder shall be in writing and shall be deemed given and effective
on (a) the next Business Day, if sent by U.S. nationally recognized
overnight courier service for next day priority delivery, or (b) upon
actual receipt by the party to whom such notice is required to be given.
The
address for such notices and communications to the Company and Bontems shall
be
as set forth below and for Buyer shall be as set forth on the signature pages
attached hereto.
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|
If
to the Company:
|
Universal
Fog, Inc.
0000
Xxxxx 0xx
Xxxxxx
Xxxxxxx,
Xxxxxxx 00000
Attn:
Xxxxxx Xxxxxxx
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|
If
to Bontems:
|
c/o
Universal Fog, Inc.
0000
Xxxxx 0xx
Xxxxxx
Xxxxxxx,
Xxxxxxx 00000
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9
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5.4 Amendments;
Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment,
by
the Company, Bontems and Buyer or, in the case of a waiver, by the party
against
whom enforcement of any such waiver is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall
be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof,
nor
shall any delay or omission of either party to exercise any right hereunder
in
any manner impair the exercise of any such right.
5.5 Construction. The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
5.6 Successors
and
Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns. The Company
and Bontems may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of Buyer. Buyer, however, may assign any
or
all of its Investor Securities and/or rights under this Agreement to any
Person,
provided such transferee agrees in writing to be bound, with respect to the
transferred Investor Securities and otherwise, by the provisions hereof that
apply to Buyer.
5.7 No
Third-Party
Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns
and is
not for the benefit of, nor may any provision hereof be enforced by, any
other
Person.
5.8 Governing
Law. This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of Delaware without regard to the conflicts of laws principles
thereof. The parties hereto hereby irrevocably agree that any suit or proceeding
arising directly and/or indirectly pursuant to or under this Agreement, shall
be
brought solely in a federal or state court located in the City of Wilmington,
State of Delaware. By its execution hereof, the parties hereby covenant and
irrevocably submit to the in personam jurisdiction
of the federal and state courts located in the City of Wilmington, State
of
Delaware and agree that any process in any such action may be served upon
any of
them personally, or by certified mail or registered mail upon them or their
agent, return receipt requested, with the same full force and effect as if
personally served upon them in Wilmington, Delaware. The parties hereto waive
any claim that any such jurisdiction is not a convenient forum for any such
suit
or proceeding and any defense or lack of in personam jurisdiction with
respect thereto. In the event of any such action or proceeding, the party
prevailing therein shall be entitled to payment from the other party hereto
of
its reasonable counsel fees and disbursements.
5.9 Survival.
The
representations, warranties, agreements and covenants contained herein shall
survive the Closing and delivery of the Shares and Preferred Stock for a
period
of twelve (12) months.
5.10 Execution.
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, 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 signature page were an original
thereof.
5.11 Severability.
If any
provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and
the
parties will attempt to agree upon a valid and enforceable provision that
is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
5.12 Remedies.
In addition
to being entitled to exercise all rights provided herein or granted by law,
including recovery of damages, Buyer, the Company and Bontems will be entitled
to specific performance under the Transaction Documents. The parties agree
that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of obligations described in the foregoing sentence and
hereby agrees to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
5.13 Indemnification
by the
Company and Bontems. The Company and Bontems shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless Buyer, the officers,
directors, agents and employees of it, each Person who controls Buyer (within
the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, agents and employees of each such
controlling Person, to the fullest extent permitted by applicable law, from
and
against any and all losses, claims, damages, liabilities, costs (including,
without limitation, reasonable attorneys' fees) and expenses (including the
cost
(including without limitation, reasonable attorneys’ fees) and expenses relating
to an Indemnified Party’s (as defined below) actions to enforce the provisions
of this Section
5.13) (collectively, “Losses”),
as incurred, to the extent arising out of or relating to (i) any material
misrepresentation or material breach of any representation or warranty made
by
the Company or Bontems in the Transaction Documents, or, (ii) any material
breach of any covenant, agreement or obligation of the Company or Bontems
contained in the Transaction Documents, or (iii) any cause of action, suit
or
claim brought or made against such Indemnified Party and arising out of or
resulting from the execution, delivery, performance or enforcement of the
Transaction Documents executed pursuant hereto by any of the Indemnified
Parties. If the indemnification provided for in this Section 5.13 is held
by a court of competent jurisdiction to be unavailable to an Indemnified
Party
with respect to any Losses, then the Indemnifying Party (as defined below),
in
lieu of indemnifying such Indemnified Party hereunder, shall contribute to
the
amount paid or payable by such Indemnified Party as a result of Losses in
such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the actions or omissions that resulted in such Losses as well as any
other
relevant equitable considerations. The Company and Bontems shall
notify Buyer promptly of the institution, threat or assertion of any proceeding
of which the Company or Bontems is aware in connection with the transactions
contemplated by this Agreement.
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10
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(a) Conduct
of Indemnification
Proceedings. If any proceeding shall be brought or asserted against any
Person entitled to indemnity hereunder (an “Indemnified
Party”), such Indemnified Party shall promptly notify the Company (the
“Indemnifying
Party”) in writing, and the Indemnifying Party shall have the right to
assume the defense thereof, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all fees and expenses
incurred in connection with defense thereof; provided, however,
that the
failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally judicially determined
by a court of competent jurisdiction (which determination is not subject
to
appeal or further review) that such failure shall have materially and adversely
prejudiced the Indemnifying Party.
An
Indemnified Party shall have the right to employ separate counsel in any
such
proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (1) the Indemnifying Party has agreed in writing to pay such fees
and
expenses; (2) the Indemnifying Party shall have failed promptly to assume
the
defense of such proceeding and to employ counsel reasonably satisfactory
to such
Indemnified Party in any such proceeding; or (3) the named parties to any
such
proceeding (including any impleaded parties) include both such Indemnified
Party
and the Indemnifying Party, and such Indemnified Party shall have been advised
by counsel that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing
that
it elects to employ separate counsel at the expense of the Indemnifying Party,
the Indemnifying Party shall not have the right to assume the defense thereof
and the reasonable fees and expenses of one separate counsel for all Indemnified
Parties in any matters related on a factual basis shall be at the expense
of the
Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such proceeding affected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall,
without
the prior written consent of the Indemnified Party, effect any settlement
of any
pending proceeding in respect of which any Indemnified Party is a party,
unless
such settlement includes an unconditional release of such Indemnified Party
from
all liability on claims that are the subject matter of such
proceeding.
(b) Timing
of
Payments. All reasonable fees and expenses of the Indemnified
Party (including reasonable fees and expenses to the extent incurred in
connection with investigating or preparing to defend such proceeding in a
manner
not inconsistent with this Section 5.13 shall
be
paid to the Indemnified Party, as incurred, within ten (10) Trading Days
of
written notice thereof to the Indemnifying Party; provided, however,
that the
Indemnified Party shall promptly reimburse the Indemnifying Party for that
portion of such fees and expenses applicable to such actions for which such
Indemnified Party is not entitled to indemnification hereunder, determined
based
upon the relative faults of the parties.
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11
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IN
WITNESS WHEREOF, the
parties hereto have caused this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.
UNIVERSAL
FOG, INC.
By:
/s/
Xxxxxx Xxxxxxx
Xxxxxx
Xxxxxxx
Chief
Executive Officer
XXXXXX
XXXXXXX
/s/ XXXXXX
XXXXXXX
(In
His Individual
Capacity)
-
12
-
BUYER
SIGNATURE PAGE
XXX,
XXX
/s/
XXX,
XXX
(In
His
Individual Capacity)
No.
33 An
Xxxx Xxx, Xxx Xx Qu, Harbin, Heilongjiang Province, PRC.
Address
Aggregate
Number of Shares: 22,000,545
Dollar
Amount of Shares: $ 500,000
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13
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