EX-10.4
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is dated as of August
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__, 2004, by and among China World Trade Corporation (the "COMPANY"), and the
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purchasers listed on SCHEDULE 1 hereto (each a "PURCHASER" and collectively, the
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"PURCHASERS").
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WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(2) of the Securities Act (as defined below), and Rule 506
promulgated thereunder, the Company desires to issue and sell to the Purchasers,
and the Purchasers, severally and not jointly, desire to purchase from the
Company the (i) number of shares of Common Stock, and (ii) Series A Warrants set
forth opposite each Purchaser's name on SCHEDULE 1 hereto (collectively, the
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"SERIES A") subject to an option in favor of the Purchasers to purchase
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additional shares and receive additional warrants.
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 and each Purchaser agrees
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
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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(j).
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"AGENT SHARES" shall have the meaning ascribed to such term in
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Section 2.6 of this Agreement.
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"AGENT WARRANT AGREEMENT" shall mean the Placement Agent's Warrant
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Agreement dated as of the Closing Date.
"AGENT WARRANTS" shall have the meaning ascribed to such term in
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Section 2.6 of this Agreement.
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"AFFILIATE" means any Person that, directly or indirectly through one or
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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. With
respect to a Purchaser, any investment fund or managed account that is managed
on a discretionary basis by the same investment manager as such Purchaser will
be deemed to be an Affiliate of such Purchaser.
"BUSINESS DAY" means any day except Saturday, Sunday and any day which
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shall be a federal legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.
"CLOSING" means the closing of the purchase and sale of the Firm Shares
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and the Series A Warrants pursuant to Section 2.1 on August __, 2004, or such
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other date as agreed to by the parties.
"CLOSING DATE" means the date of the Closing.
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"COMMISSION" means the Securities and Exchange Commission.
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"COMMON STOCK" means the Common stock of the Company, par value $.001 per
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share, and any securities into which such Common stock may hereafter be
reclassified.
"COMMON STOCK EQUIVALENTS" means any securities of the Company or the
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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 The Law Offices of Xxxxxx Xxxxxx, P.A.
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"DISCLOSURE SCHEDULES" means the Disclosure Schedules attached hereto.
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"EFFECTIVE DATE" means the date that the Registration Statement is first
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declared effective by the Commission.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
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"FIRM SHARES" means the Shares issued pursuant to Section 2.1.
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"INDEMNIFIED PARTY" shall have the meaning ascribed to such term Section
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5.16(b).
"INDEMNIFYING PARTY" shall have the meaning ascribed to such term in
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Section 5.16(b).
"INTELLECTUAL PROPERTY RIGHTS" shall have the meaning ascribed to such term
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in Section 3.1(o).
"INVESTOR SECURITIES" means the Shares, the Warrants and the Warrant
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Shares.
"LIENS" means a lien, charge, security interest, encumbrance, right of
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first refusal or other restriction.
"MATERIAL ADVERSE EFFECT" shall have the meaning ascribed to such term in
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Section 3.1(b).
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"MATERIAL PERMITS" shall have the meaning ascribed to such term in Section
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3.1(m).
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"OPTION" shall have the meaning ascribed to such term in Section 2.8.
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"OPTION CLOSING DATE" means the date of the closing of the purchase and
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sale of the Option Shares and the Series B Warrants.
"OPTION PER SHARE PURCHASE PRICE" means $3.00, subject to adjustment for
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reverse or forward stock splits, stock dividends, stock combinations and other
similar transactions relating to the common stock that occur after the date of
this Agreement and before the Option Closing Date.
"OPTION SHARES" means the Shares issued pursuant to Section 2.8.
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"PER SHARE PURCHASE PRICE" means $1.50, subject to adjustment for reverse
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or forward stock splits, stock dividends, stock combinations and other similar
transactions relating to the Common Stock that occur after the date of this
Agreement and before the Closing.
"PERSON" means an individual or corporation, partnership, trust,
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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.
"PLACEMENT AGENT" means Xxxxxx Capital LLC.
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"REGISTRATION STATEMENT" means a registration statement meeting the
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requirements set forth in the Registration Rights Agreement and covering the
resale by the Purchasers of the Shares and the Warrant Shares and by the
Placement Agent of the Agent Shares.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement,
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dated as of the date of this Agreement, among the Company and each Purchaser, in
the form of EXHIBIT A hereto.
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"RULE 144" means Rule 144 promulgated by the Commission pursuant to the
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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
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Section 3.1(h).
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"SECURITIES ACT" means the Securities Act of 1933, as amended.
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"SERIES A WARRANTS" means the common stock purchase warrants in the form of
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EXHIBIT B-1 hereto issuable to each Purchaser at Closing; such Series A Warrants
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are exercisable to purchase up to the number of shares of Common Stock equal to
50% of the aggregate number of Shares to be issued to such Purchaser at the
Closing, which shall have an exercise price equal to $2.50 per share and be
exercisable for a period of five years.
"SERIES A WARRANT SHARES" means the shares of Common Stock issuable upon
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the exercise of the Series A Warrants.
"SERIES B WARRANTS" means the common stock purchase warrants in the form of
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EXHIBIT B-2 hereto issuable to each Purchaser at the Option Closing Date; such
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Series B Warrants are exercisable to purchase up to the number of shares of
Common Stock equal to 50% of the aggregate number of Shares to be issued to such
Purchaser at the Option Closing Date which shall have an exercise price equal to
$4.00 per share (subject to adjustment for reverse or forward splits, stock
dividends, stock combinations and similar transactions relating to the common
stock ussuable upon exercise of the Series B Warrants) and be exercisable for a
period of five years commencing on the Option Closing Date.
"SERIES B WARRANT SHARES" means the shares of Common Stock issuable upon
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the exercise of the Series B Warrants.
"SHARES" means the shares of Common Stock purchased by the Purchasers
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pursuant to this Agreement consisting of the Firm Shares and, if applicable, the
Option Shares.
"SUBSCRIPTION AMOUNT" means as to each Purchaser, the amount set forth
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below such Purchaser's signature block on the Signature Page of this Agreement
in United States Dollars and in immediately available funds.
"SUBSIDIARY" shall have the meaning ascribed to such term in Section
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3.1(a).
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"TRADING DAY" means (i) a day on which the Common Stock is traded on a
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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
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Common Stock is listed or quoted for trading on the date in question: the OTC
Bulletin Board, the American Stock Exchange, the New York Stock Exchange, the
Nasdaq National Market or the Nasdaq SmallCap Market.
"TRANSACTION DOCUMENTS" means this Agreement, the Registration Rights
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Agreement, the Warrants, the Placement Agent Warrant Agreement, the Agent
Warrant(s) and any and all other documents or agreements executed in connection
with the transactions contemplated hereunder.
"TRANSACTION SECURITIES" means the Shares, the Warrants, the Warrant
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Shares, the Agent Warrants and the Agent Shares.
"WARRANTS" means collectively the Series A Warrants and Series B Warrants
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issuable to each Purchaser at Closing.
"WARRANT SHARES" means the shares of Common Stock issuable upon exercise of
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the Series A Warrants and, if applicable, the Series B Warrants collectively.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. On the terms and subject to the conditions set forth in this
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Agreement, at the Closing, the Company shall sell and issue to each Purchaser
and each Purchaser shall purchase from the Company subject to Section 2.3, (i)
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the number of Firm Shares set forth opposite such Purchaser's name on SCHEDULE I
hereto, and (ii) a Series A Warrant for the corresponding number of Series
A Warrant Shares. Each Purchaser shall purchase from the Company, and the
Company shall issue and sell to each Purchaser, a number of Firm Shares equal to
such Purchaser's Subscription Amount divided by the Per Share Purchase Price.
The Series A Warrants shall be issued, without additional consideration, on the
basis of one Series A Warrant for each two Shares purchased. Upon satisfaction
of the conditions set forth in Section 2.2, the Closing shall occur at the
offices of Placement Agent, located at 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx,
Xxx Xxxx 00000, or such other location as the parties shall mutually agree.
2.2 Closing Conditions.
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(a) At the Closing, as a condition to the Purchaser's obligations hereunder,
the Company shall deliver or cause to be delivered to:
(i) each Purchaser, an irrevocable instruction letter to the Company's transfer
agent authorizing the issuance of a restricted stock certificate for such
number of Firm Shares set forth next to such Purchaser's name on SCHEDULE 1
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hereto purchased by each Purchaser;
(ii) subject to Section 2.3, each Purchaser, a Series A Warrant, registered in
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the name of such Purchaser, as duly executed by the Company, entitling such
Purchaser to purchase such amount of Warrant Shares as are set forth next
to such Purchaser's name on SCHEDULE 1 hereto;
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(iii)each Purchaser, the Registration Rights Agreement duly executed by the
Company;
(iv) each Purchaser, this Agreement duly executed by the Company;
(v) each Purchaser and the Placement Agent, a legal opinion from Company
Counsel in form and substance reasonably satisfactory to the Purchasers and
Placement Agent;
(vi) the Placement Agent, a certificate of the Chief Executive Officer of the
Company stating, among other things, that (i) all the conditions set forth
in Section 2.2 of this Agreement have been satisfied in all, (ii) except as
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set forth in any Schedule to this Agreement, since December 31, 2003, there
has been no event, condition or circumstance that has had or could
reasonably be expected to have a Material Adverse Effect, and (iii) the
Company has complied in all material respects with all its covenants and
agreements set forth in the Transaction Documents;
(vii)the Placement Agent, a certificate of the Secretary of the Company
containing, among other items true and complete copies of the resolutions
of the Board of Directors of the Company approving Transaction Documents,
Placement Agent compensation, the Offering and all documents and matters
relating thereto; And
(viii)evidence satisfactory to the Placement Agent that the Company has
completed the acquisition of 51% of the equity of Guangdong New Generation
Commercial Management Co. Ltd.
(b) at the Closing, as a condition to the Company's obligations hereunder,
each Purchaser shall deliver or cause to be delivered to the Company the
following:
(i) this Agreement duly executed by such Purchaser;
(ii) such Purchaser's payment for the Firm Shares and Series A Warrants being
purchased from the escrow account by wire transfer; and
(iii)the Registration Rights Agreement duly executed by such Purchaser.
(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 Purchasers' obligations
hereunder, there shall have been no Material Adverse Effect with respect to the
Company since the date hereof.
(e) from the date hereof to the Closing Date, and as a condition to the
Purchaser'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 Firm Shares and the Series A
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Warrants, all funds paid hereunder shall be deposited by the Company in escrow
with Continental Stock Transfer & Trust Company (the "ESCROW AGENT") pursuant to
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an escrow agreement by and among the Escrow Agent, the Company, and the
Placement Agent (the "ESCROW AGREEMENT"). On the Closing Date, the Escrow Agent
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shall deliver to the Purchasers the Firm Shares, Series A Warrants and the net
Purchase Price proceeds to the Company. The Escrow Agent shall also act as the
escrow agent in connection with the closing, if any, of the Option.
2.4 Certificates. Subject to Section 2.3 each Purchaser hereby authorizes
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and directs the Company, upon the Closing, to deliver certificates representing
the Firm Shares and Series A Warrants to be issued to such Purchaser pursuant to
this Agreement to each Purchaser's address indicated in this Agreement.
2.5 Return of Funds. Each Purchaser hereby authorizes and directs the
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Company and the Placement Agent to return any funds for purchases not accepted
by the Company to the same account from which the funds were drawn.
2.6 Expenses; Fees. Simultaneously with payment for and delivery of the
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Shares and Warrants, at the Closing and the Option Closing Date, as the case may
be, the Company shall: (i) pay to the Placement Agent a cash fee equal to ten
(10%) percent of the aggregate purchase price of the Shares and Warrants as and
when delivered by the Escrow Agent to the Purchasers (the "CASH FEE"); (ii)
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reimburse the Placement Agent for its actual out-of-pocket expenses incurred in
connection with the Offering, including, without limitation, the reasonable fees
and expenses of its legal counsel, not to exceed legal fees of $20,000; (iii)
pay all expenses in connection with the qualification of the Transaction
Securities under the blue sky laws of the states which the Placement Agent shall
designate, including filing fees and disbursements in connection with such blue
sky matters; (iv) pay certain fees to the Escrow Agent for acting as escrow
agent; and (v) issue to the Placement Agent five year non-cashless exercised
provisioned warrants (the "AGENT WARRANTS") to purchase such number of shares of
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Common Stock (the "AGENT SHARES") as shall equal ten (10%) percent of the
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aggregate number of (a) Shares sold in the Offering, and (b) Warrant Shares
issuable upon exercise of the Warrants as of the Closing, at a per share
exercise price equal to $2.50. The Company also agrees to pay the Placement
Agent a Cash Fee upon its receipt of proceeds, if any, upon the exercise of the
Series A Warrants and Series B Warrants by Purchasers.
2.7 Placement Agent. The Investor Securities are being offered on a
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"best-effort" basis by the Placement Agent. The Placement Agreement reserves
the right, but is under no obligation, to sell to its affiliates Shares and
Warrants on the terms provided herein.
2.8 Option. (a) The Company hereby grants each Purchaser an option (the
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"Option") to purchase that number of Option Shares equal to the number of Firm
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Shares received by such Purchaser on the Closing Date. Upon exercise of the
Option, the Purchaser shall receive without additional consideration, Series B
Warrants to purchase 50% of the Firm Shares. The Option may be exercised during
the period commencing on the date when the Registration Statement has been
declared effective or such condition has been waived, as the case may be, and
expiring 180 calendar days thereafter.
The Option may be exercised, from time to time, by sending the Notice of
Option Exercise attached hereto as Exhibit B-3 to the Company and the deposit
with the Escrow Agent of an amount equal to the Option Per Share Purchase Price
multiplied by the number of Option Shares being purchased.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth
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under the corresponding section of the Disclosure Schedules delivered
concurrently herewith, the Company hereby makes the following representations
and warranties as of the date hereof and as of the Closing Date to each
Purchaser:
(a) Subsidiaries. Other than as disclosed in the SEC Reports, the Company
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has no direct or indirect operating subsidiaries (a "SUBSIDIARY" and
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collectively, the "SUBSIDIARIES"). The Company owns, directly or indirectly, all
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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
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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").
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(c) Authorization; Enforcement; Validity. The Company has the requisite
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corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further corporate action is required by the Company
in connection therewith. Each Transaction Document has been (or upon delivery
will have been) duly executed by the Company and, when delivered in accordance
with the terms hereof, will constitute the valid and binding obligation of the
Company enforceable against the Company 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, and (iii) with
respect to the indemnification provisions set forth in the Registration Rights
Agreement, as limited by public policy.
(d) No Conflicts. The execution, delivery and performance of the Transaction
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Documents by the Company and the consummation by the Company 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
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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 the Company of the Transaction Documents, other than
the filing with the Commission of the Registration Statement, the application(s)
and approvals to each Trading Market for the listing of the Shares, Warrant
Shares and the Agent Shares for trading thereon in the time and manner required
thereby, applicable Blue Sky filings, and the filing of a current report on Form
8-K under the Exchange Act.
(f) Issuance of the Securities. All of the Transaction Securities have been
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duly authorized and, when issued and paid for in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free
and clear of all Liens. The Company has reserved from its duly authorized
capital stock such number of shares of Common Stock so as to permit the issuance
of the Shares, the Warrant Shares and the Agent Shares.
(g) Capitalization. Except as set forth in the SEC Reports, the
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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 pursuant to the exercise of employee stock options under the Company's
stock option plans and pursuant to the conversion or exercise of Common Stock
Equivalents outstanding on the date hereof. 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, 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 issue and sale of the Securities will not obligate the Company
to issue shares of Common Stock or other securities to any Person (other than
the Purchasers) 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.
(h) SEC Reports; Financial Statements. The Company has filed all reports
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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
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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
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"DISCLOSURE MATERIALS"). As of their respective dates, the SEC Reports complied
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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
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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.
(i) Material Changes. Since the date of the latest audited financial
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statements included within the SEC Reports, except as disclosed in the SEC
Reports, (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.
(j) Litigation. Except as disclosed in the SEC Reports or on Schedule 3.1(j)
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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
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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.
(k) Labor Relations. No material labor dispute exists or, to the knowledge
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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.
(l) Compliance. Except as disclosed in the SEC Reports, neither the Company
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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.
(m) 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.
(n) 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.
(o) 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.
(p) Transactions With Affiliates and Employees. Except as set forth in the
--------------------------------------------
SEC Reports, 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.
(q) 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-K or 10-Q, as the case may be, is being
prepared.
(r) Certain Fees. Except for payments payable to the Placement Agent by the
-------------
Company and a 3% finder's fee payable to V3 Consulting, Inc., 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. The
Purchasers 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 a Purchaser made an agreement to make
any such payment.
(s) Private Placement. Assuming the accuracy of the Purchasers
------------------
representations and warranties set forth in Section 3.2, no registration under
-----------
the Securities Act is required for the offer and sale of the Investor Securities
by the Company to the Purchasers as contemplated hereby. The issuance and sale
of the Transaction Securities hereunder does not contravene the rules and
regulations of the Trading Market.
(t) Investment Company. The Company is not, and is not an Affiliate of, an
-------------------
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
(u) Listing and Maintenance Requirements. The Company has applied for
---------------------------------------
listing of its Common Stock, including all of the Transaction Securities on the
American Stock Exchange and has received no notice from the American Stock
Exchange that such Exchange does not intend to list such securities. The
Company has not, in the twelve (12) months preceding the date hereof, received
notice from any Trading Market on which the Common Stock is or has been listed
or quoted to the effect that the Company is not in compliance with the listing
or maintenance requirements of such Trading Market, other than a letter from the
Trading Market on which the Common Stock is or has been listed or quoted
notifying the Company that its securities would be delisted if the trading price
did not increase above One Dollar ($1.00) per share. The Company is, and has no
reason to believe that it will not in the foreseeable future continue to be, in
compliance with all such listing and maintenance requirements, other than
potential trading price issues concerning such Trading Market's rules and
regulations.
(v) 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 Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation the Company's issuance of
the Transaction Securities and the Purchasers' ownership of the Investor
Securities.
(w) No General Solicitation. Neither the Company, its Subsidiaries, any of
--------------------------
their affiliates nor any person acting on their behalf, has engaged in any form
of general solicitation or general advertising (within the meaning of Regulation
D under the Securities Act) in connection with the offer or sale of the
Transaction Securities.
(x) No Integrated Offering. Neither the Company, its Subsidiaries, any of
-------------------------
their affiliates nor any person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Transaction Securities under the Securities Act or cause the Offering to be
integrated with prior offerings by the Company for purposes of the Securities
Act or any applicable stockholder approval provisions, including without
limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or
designated. None of the Company, its Subsidiaries, their affiliates and any
person acting on their behalf will take any action or steps referred to in the
preceding sentence that would require registration of any of the Transaction
Securities under the Securities Act or cause the Offering to be integrated with
other offerings.
(y) Registration Rights. Except with respect to Purchasers and the
---------------------
Placement Agent and except as provided on Schedule 3.1(y) hereto, no person has
---------------
any right to cause the Company to effect the registration under the Securities
Act of any securities of the Company.
(z) Right of First Refusal. Except with regard to the Placement Agreement,
-------------------------
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.
(aa) Disclosure. The Company confirms that, neither the Company nor any
----------
other Person acting on its behalf has provided any of the Purchasers or their
agents or counsel with any information that constitutes or might constitute
material, non-public information. The Company understands and confirms that the
Purchasers will rely on the foregoing representations and covenants in effecting
transactions in securities of the Company. All disclosure provided to the
Purchasers 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.
(bb) Insurance. Each of the Company and its Subsidiaries maintain insurance
---------
of the types and in the amounts deemed adequate for its business, including, but
not limited to, product liability insurance, insurance covering real and
personal property owned or leased by the Company and its subsidiaries against
theft, damage, destruction, acts of vandalism and all other risks customarily
insured against, all of which insurance is in full force and effect.
(cc) Conduct of Business. Since December 31, 2003 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, 2003 and forming part of the SEC Reports, and current liabilities
incurred since December 31, 2003, 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, 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.
3.2 Representations and Warranties of the Purchasers. Each Purchaser hereby,
------------------------------------------------
for itself and for no other Purchaser, represents and warrants as of the date
hereof and as of the Closing Date to the Company, acknowledging that the Company
is relying upon the accuracy and completeness of the representations and
warranties set forth herein to, among other things, ensure that registration
under Section 5 of the Securities Act is not required in connection with the
sale of the Securities hereby, as follows:
(a) Organization; Authority. Such Purchaser, 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 such
Purchaser of the transactions contemplated by this Agreement has been duly
authorized by all necessary corporate or similar action on the part of such
Purchaser. Each Transaction Document to which it is a party has been duly
executed by such Purchaser, and when delivered by such Purchaser in accordance
with the terms hereof, will constitute the valid and legally binding obligation
of such Purchaser, enforceable against it in accordance with its terms.
(b) Investment Intent. Such Purchaser understands that the Investor
------------------
Securities are "restricted securities" and have not been registered under the
Securities Act or any applicable state securities law and is acquiring the
Investor Securities as principal for its own account for investment purposes.
(c) Purchaser Status. At the time such Purchaser was offered the Shares and
-----------------
Warrants, it was, and at the date hereof it is an "accredited investor" as
defined in Rule 501(a) under the Securities Act. Such Purchaser 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 Warrants offered hereby, each Purchaser has relied solely upon the
SEC Reports and the representation and warranties of the Company contained
herein. Each Purchaser 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 Purchaser.
(d) Experience of Such Purchaser. Each Purchaser, 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. Such Purchaser 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.
(e) General Solicitation. Such Purchaser is not purchasing the Shares and
---------------------
Warrants 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.
(f) Compliance with the Securities Laws. Such Purchaser agrees to comply
---------------------------------------
with the requirements of Regulation M, if applicable, with respect to the resale
of the Shares by the Purchaser. Such Purchaser hereby confirms its
understanding that it may not cover short sales made prior to the Effective Date
with shares of Common Stock registered for resale on the Registration Statement.
(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 Purchaser is subject or any
provision of its organizational documents or other similar governing
instruments.
(h) No Advice. Purchaser understands that nothing in this Agreement or any
----------
other materials presented to Purchaser in connection with the purchase and sale
of the Investor Securities constitutes legal, tax or investment advice.
Purchaser 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 Purchaser, threatened
against the Purchaser 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 the Purchaser 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 the Purchaser 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 the
Purchaser 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.
(k) Placement Agent. Each Purchaser agrees that neither the Placement Agent
-----------------
nor any of its respective directors, officers, affiliates, employees or agents
shall be liable to the Purchaser for any action taken or omitted to be taken by
it in connection therewith, except for willful misconduct or gross negligence.
The Company acknowledges and agrees that each Purchaser 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. In connection with any transfer of Investor
Securities other than pursuant to an effective registration statement, pursuant
to Rule 144(k), pursuant to Rule 144 (if customary documentation is provided
satisfactory to legal counsel to the Company), or in connection with a pledge as
contemplated in Section 4.1(b) hereof, the Company may require the transferor
---------------
thereof to provide to the Company an opinion of counsel selected by the
transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration of such transferred Investor Securities under the Securities Act.
As a condition of transfer, any such transferee shall agree in writing to be
bound by the terms of this Agreement and shall have the rights of a Purchaser
under this Agreement and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required by this
Section 4.1(b), 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. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE
SECURITIES ACT.
The Company acknowledges and agrees that a Purchaser may from time to time
pledge pursuant to a bona fide margin agreement with a registered broker-dealer
or grant a security interest in some or all of the Investor Securities to a
financial institution that is an "accredited investor" as defined in Rule 501(a)
under the Securities Act and, if required under the terms of such arrangement,
such Purchaser may transfer pledged or secured Investor Securities to the
pledgees or secured parties. Such a pledge or transfer would not be subject to
approval of the Company and no legal opinion of legal counsel of the pledgee,
secured party or pledgor shall be required in connection with the grant of the
pledge. Further, no notice shall be required of grant of the pledge. At the
appropriate Purchaser's expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Transaction Securities
may reasonably request in connection with a pledge or transfer of the Investor
Securities, including the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) under the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of selling
stockholders thereunder. Notwithstanding anything to the contrary, any such
pledgee shall not be entitled to any rights under any of the Transaction
Documents unless and until such pledgee executes a written agreement to be bound
by Purchasers' obligations under the Transaction Documents.
(c) Subject to compliance with all laws, rules and regulations including,
but not limited to, the Securities Act and the Exchange Act, certificates
evidencing the Shares and Warrant Shares shall not contain any legend (including
the legend set forth in Section 4.1(b)), (i) following any sale of the
--------------
Shares or Warrant Shares pursuant to a registration statement (including the
Registration Statement) covering the resale of such security, or (ii) following
any sale of the Shares or Warrant Shares pursuant to Rule 144, or (iii) if such
Shares or Warrant Shares are eligible for sale under Rule 144(k) and appropriate
documentation is provided satisfactory to legal counsel to the Company, or (iv)
if such legend is not required under applicable regulation of the Securities Act
(including judicial interpretations and pronouncements issued by the Staff of
the Commission). Subject to compliance with all laws, rules and regulations
including, but not limited to, the Securities Act and the Exchange Act, the
Company shall cause its counsel to issue a legal opinion to the Company's
transfer agent promptly after the Effective Date if required by the Company's
transfer agent to effect the removal of the legend hereunder. If all or any
portion of a Warrant is exercised at a time when there is an effective
registration statement to cover the resale of the Warrant Shares, such Warrant
Shares shall be issued free of all legends. The Company agrees that at such
time as such legend is no longer required under and pursuant to this Section
-------
4.1(c), it will, upon written request from the Purchaser and following the
-----
submission to the Company counsel of such materials as shall be reasonably
requested by such counsel therefore, no later than four (4) Trading Days
following the delivery by a Purchaser to the Company or the Company's transfer
agent of a certificate representing Shares and/or Warrant Shares, as the case
may be, issued with a restrictive legend, deliver or cause to be delivered to
such Purchaser (i) a certificate representing such securities that is free from
all restrictive and other legends, or (ii) in lieu of delivering physical
certificates representing the Shares and/or Warrant Shares, and provided that
the Company's transfer agent is participating in the Depository Trust Company
("DTC") Fast Automated Securities Transfer (or FAST) program, upon request of
---
the Purchaser, the Company shall use its reasonable commercial efforts to cause
its transfer agent to electronically transmit the Shares and/or Warrant Shares
by crediting the account of the Purchaser's prime broker with DTC through its
Deposit Withdrawal Agent Commission (or DWAC) system. The Company may not make
any notation on its records or give instructions to any transfer agent of the
Company that enlarge the restrictions on transfer set forth in this Section.
(d) Each Purchaser severally and not jointly agrees that the removal of the
restrictive legend from certificates representing the Shares and the Warrant
Shares as set forth in this Section 4.1 is predicated upon the Company's
------------
reliance that the Purchaser will sell any Investor Securities pursuant to either
the registration requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption therefrom.
4.2 Furnishing of Information. Until the date no Purchaser owns 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 no Purchaser owns any Investor Securities, if the Company is not
required to file reports pursuant to the Exchange Act, it will prepare and
furnish to the Purchasers and make publicly available in accordance with Rule
144(c) such information as is required for the Purchasers to sell any Shares and
Warrant Shares 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 Warrant Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.
4.3 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of any of the Transaction Securities in a manner that would require the
registration under the Securities Act of the sale of the Investor Securities to
the Purchasers or that would be integrated with the offer or sale of the
Investor Securities for purposes of the rules and regulations of any Trading
Market.
4.4 Securities Laws Disclosure; Publicity. The Company shall use its best
efforts to by 9:00 a.m., Eastern Daylight Time, on the first Business following
this Agreement issue a press release (which shall be followed by a Form 8-K
filing within one (1) Business Day of the Closing) and, in any event, by the end
of business on the Business Day following the Closing issue a press release
(which shall be followed by a Form 8-K filing within two (2) Business Days
thereafter), in either case disclosing the transactions contemplated hereby and
make such other filings and notices in the manner and time required by the
Commission. The Company and the Placement Agent shall consult with each other in
issuing any press releases with respect to the transactions contemplated hereby,
and neither the Company nor the Placement Agentshall issue any such press
release or otherwise make any such public statement without the prior consent of
the Company, with respect to any press release of the Placement Agent, or
without the prior consent of the Placement Agent, with respect to any press
release of the Company, which consent shall not unreasonably be withheld or
delayed, except if such disclosure is required by law, in which case the
disclosing party shall promptly provide the other party with prior notice of
such public statement or communication. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of any Purchaser, or include the
name of any Purchaser in any filing with the Commission or any regulatory agency
or Trading Market, without the prior written consent of such Purchaser, except
(i) as required by federal securities law in connection with the registration
statement contemplated by the Registration Rights Agreement and (ii) to the
extent such disclosure is required by law or Trading Market regulations, in
which case the Company shall provide the Purchasers with prior notice of such
disclosure permitted under subclause (i) or (ii).
4.5 Shareholders Rights Plan. No claim will be made or enforced by the
Company or any other Person that any Purchaser is an "Acquiring Person" under
any shareholders rights plan or similar plan or arrangement in effect or
hereafter adopted by the Company, or that any Purchaser could be deemed to
trigger the provisions of any such plan or arrangement, by virtue of receiving
Investor Securities under the Transaction Documents or under any other agreement
between the Company and the Purchasers.
4.6 Non-Public Information.The Company covenants and agrees that neither it
nor any other Person acting on its behalf will provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.
4.7 Use of Proceeds. The Company covenants and agrees that all of the net
proceeds that it receives from the sale of the Shares and Warrants pursuant to
this Agreement, although distributed, allocated and expended by the Company in
its sole discretion, shall be used for general working capital and corporate
purposes.
4.8 Reimbursement. If any Purchaser 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 such
Purchaser to or with any current stockholder), solely as a result of such
Purchaser'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 such Purchaser 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 the Purchasers 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 the Purchasers 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, the Purchasers and
any such Affiliate and any such Person. The Company also agrees that neither the
Purchasers 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.
4.9 Form D and Blue Sky. The Company shall file a Form D with respect to the
-------------------
Transaction Securities as required under Regulation D under the Securities Act
and, upon written request, provide a copy thereof to the Placement Agent for
distribution to the Purchasers promptly after such filing. The Company shall, on
or before the Closing, take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for or to qualify any
Transaction Securities for sale to the Purchasers and/or the Placement Agent
pursuant to this Agreement under applicable securities or "Blue Sky" laws of the
states of the United States, and shall provide evidence of any such action so
taken to the Purchasers on or prior to the Closing by providing copies of such
filings to the Placement Agent. The Company shall make all filings and reports
relating to the offer and sale of the Transaction Securities required under
applicable securities or "Blue Sky" laws of the states of the United States
following the Closing.
4.10 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 issue the Shares, the Warrant Shares
and the Agent Shares.
4.11 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 applicable Shares,
Warrant Shares and Agent Shares 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, Warrant Shares
and Agent Shares and will take such other action as is necessary or desirable in
the opinion of the Purchasers to cause the Shares, Warrant Shares and Agent
Shares 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.
4.12 Indemnification by the Purchasers. Each of the Purchasers severally and
---------------------------------
not jointly agrees to indemnify and hold harmless the Company and its officers,
directors, agents, representatives, shareholders and employees and each of their
respective affiliates, 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 each Purchaser under this Section 4.10 shall be limited to the
------------
amount paid by the Purchaser pursuant hereto to purchase the Investor
Securities, and the procedures and timing for indemnification by the Purchasers
under this Section 4.10 shall follow the procedures and provisions of Sections
------------ --------
5.16(b) and (c), mutatis mutandis, with respect to indemnification by the
---------------- ------- --------
Company of the Purchasers.
4.13 Reporting Obligations. So long as any Purchaser 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. In addition, during such same period if
the Company's Common Stock is traded on the American Stock Exchange or any other
national exchange, the Company shall take all actions necessary to continue to
meet the "registrant eligibility" requirements set forth in the general
instructions to Form S-3 or any successor form thereto, to continue to be
eligible to register the resale of the Shares, the Warrant Shares and the Agent
Shares under the Securities Act on such Form.
4.14 Purchase Price Adjustment.
---------------------------
(a) FirmShares. Other than the Excepted Issuances, defined below, if at any
----------
time from the Closing Date until the first anniversary thereof, the Company
shall offer, issue or agree to issue any shares of common stock to any person or
entity at a price per share which shall be less than the Per Share Purchase
Price, without the consent of each Purchaser holding Shares, the Company shall
issue, for each such occasion, additional shares of Common Stock to each
Purchaser so that the average Per Share Purchase Price of the shares of Common
Stock issued to the Purchaser (only if the Common Stock is still owned by the
Purchaser) is equal to such other lower price per share.
(b) OptionShares. If a Purchaser has exercised the Option, then at any time
------------
after from Closing Date Closing Date until the first anniversary thereof, the
Company shall offer, issue or agree to issue any shares of common stock, other
than Excepted Issuances, to any person or entity at a price per share which is
greater than the Per Share Purchase Price but less than the Option Per Share
Purchase Price, without the consent of each Option Purchaser holding Option
Shares, the Company shall issue, for each such occasion, additional shares of
Common Stock to each Purchaser so that the average Option Per Share Purchase
Price of the shares of Common Stock issued to the Option Purchaser (only if the
Common Stock is still owned by the Purchaser) is equal to such other lower price
per share.
If the Company shall offer, issue or agree to issue any shares of common
stock, other than Excepted Issuances, to any person or entity at a price per
share which is less than the Per Share Purchase Price, without the consent of
each Option Purchaser holding Option Shares, the Company shall issue, for each
such occasion, additional shares of Common Stock to each Purchaser so that the
average Option Per Share Purchase Price of the shares of Common Stock issued to
the Option Purchaser (only if the Common Stock is still owned by the Purchaser)
is equal to the percentage reduction between the Per Share Purchase Price and
such other lower price per share. For example, if the Company issued shares at
$.75, the percentage reduction between the Per Share Purchase Price ($1.50) and
the new lower price would be 50%. Accordingly, the Option Purchaser would
receive that number of additional shares of Common Stock so that the average
Option Per Share Purchase Price of the shares of Common Stock issued to the
Option Purchaser would equal $2.00 per share from the initial per share price of
$4.00.
(c) Option PriceAdjustment. If a Purchaser has not exercised the Option,
-----------------------
then at any time after from Closing Date until the first anniversary thereof,
the Company shall offer, issue or agree to issue any shares of common stock,
other than Excepted Issuances, to any person or entity at a price per share
which is greater than the Per Share Purchase Price but less than the Option Per
Share Purchase Price, without the consent of each Purchaser, the Option Per
Share Purchase Price shall be adjusted to equal to such other lower price per
share.
If the Company shall offer, issue or agree to issue any shares of common
stock, other than Excepted Issuances, to any person or entity at a price per
share which is less than the Per Share Purchase Price, without the consent of
each Purchaser, the Company shall issue, the Option Per Share Purchase Price
shall be adjusted to equal to the percentage reduction between the Per Share
Purchase Price and such other lower price per share.
(d) Maximum Exercise of Rights. In the event the exercise of the rights
-----------------------------
described in this Section 14.4 would result in the issuance to the Purchaser of
an amount of common stock of the Company that would cause the Purchaser's
beneficially ownership in the Company to exceed 4.99% after giving effect to
such issuance, the issuance of such additional shares of common stock of the
Company to such Purchaser shall be, at each such Purchaser's discretion,
deferred in whole or in part until such time as such Purchaser is able to
beneficially own such shares of common stock without exceeding 4.99% of the then
issued and outstanding common stock of the Company from the initially set
$4.00 per share.
(e) Registration Rights. All shares issued pursuant to this Section 4.14
--------------------
which are issued prior to the effective date of the Registration Statement shall
have the mandatory registration rights set forth in Section 2 the Registration
Rights Agreement. All shares issued pursuant to this Section 4.14 which are
issued after the effective date of the Registration Statement shall have the
piggyback registration rights set forth in Section 6(e) of the Registration
Rights Agreement.
For purposes of this Section 14.4 "EXCEPTED ISSUANCES" shall mean the sale
or issuance of common stock except in connection with (i) the granting of
options to employees, officers, directors or consultants of the Company pursuant
to any stock option plan or other written compensatory agreement, or (ii) the
exercise of any security issued by the Company in connection with the offer and
sale of the Company's securities pursuant to the Purchase Agreement (including
any securities issued as compensation in connection therewith), or (iii) the
exercise of or conversion of any convertible securities, options or warrants
issued and outstanding on the date hereof, provided such securities have not
been amended since the date hereof, or (iv) the issuance of securities in
connection with acquisitions, joint ventures, arrangements related to the
Company's operations and strategic relationships, or other strategic
investments, the primary purpose of which is not to raise capital.
The delivery to the Purchaser of the additional shares of Common Stock
shall be not later than the closing date of the transaction giving rise to the
requirement to issue additional shares of Common Stock.
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; provided, however, that the Company shall pay a maximum of $20,000
for the aggregate fees and expenses of counsel to the Placement Agent. The
Company 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 the exhibits
-----------------
and 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 shall be
as set forth below and for each Purchaser shall be as set forth on the signature
pages attached hereto.
If to the Company:
China World Trade Corporation
4th Floor, Goldilcon Digital Network Center
000 Xxxx Xxxx Xxxx,
Xxxxxx Xxxxxxxx 000000
People's Republic of China
Facsimile: 8620-3878-1515
Attn: Xxxx Xxx
With a copy to:
Xxxxxxx Xxxx
Rm 1217 12th Floor
The Xxxxxxxxxx Xxxxx
00 Xxxxxxxxxx Xxxxx
Xxxx Xxxx
Facsimile: 000-0000-0000
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 and each Purchaser 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 may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser. Any Purchaser, 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 the "Purchasers."
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 New York 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, County and State of New York. 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, County and State of New
York 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 New York City. 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
Warrants 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 Replacement of Investor Securities. If any certificate or instrument
-------------------------------------
evidencing any Investor Securities is mutilated, lost, stolen or destroyed, the
Company shall issue or cause to be issued in exchange and substitution for and
upon cancellation thereof, or in lieu of and substitution therefor, a new
certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity, if requested. The applicants for a new certificate or
instrument under such circumstances shall also pay any reasonable third-party
costs associated with the issuance of such replacement Investor Securities.
5.13 Remedies. In addition to being entitled to exercise all rights provided
--------
herein or granted by law, including recovery of damages, each of the Purchasers
and the Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
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.
5.14 Payment Set Aside. To the extent that the Company makes a payment or
-------------------
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall, to the
extent permissible under applicable law, be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
5.15 Independent Nature of Purchasers' Obligations and Rights. The
--------------------------------------------------------------
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser 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
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser represents that it has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents. The Company has elected to provide all Purchasers with the same terms
and Transaction Documents for the convenience of the Company and not because it
was required or requested to do so by the Purchasers.
5.16 Indemnification by the Company.
---------------------------------
(a) The Company shall, notwithstanding any termination of this Agreement,
indemnify and hold harmless each Purchaser, the officers, directors, agents and
employees of each of them, each Person who controls any such Purchaser (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 5.16) (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 in the
Transaction Documents, or, (ii) any material breach of any covenant, agreement
or obligation of the Company 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
-------
5.16 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 shall notify the
Purchasers promptly of the institution, threat or assertion of any proceeding of
which the Company is aware in connection with the transactions contemplated by
this Agreement.
(b) 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.
(c) 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 5.16 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.
(Remainder of Page Intentionally Left Blank)
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.
CHINA WORLD TRADE CORPORATION
By: /s/ Xxxx X.X. Xxx
---------------
Xxxx X.X. Xxx
Chief Executive Officer and Vice Chairman
PURCHASERS SIGNATURE PAGE
________________________________________
By:_____________________________________
Name:
Title:
________________________________________
Address
________________________________________
Facsimile Number
________________________________________
Tax Id #:
SUBSCRIPTION AMOUNT:$__________________
________________________________________
By:_____________________________________
Name:
Title:
________________________________________
Address
________________________________________
Facsimile Number
________________________________________
Tax Id #:
SUBSCRIPTION AMOUNT:$__________________
________________________________________
By:_____________________________________
Name:
Title:
________________________________________
Address
________________________________________
Facsimile Number
________________________________________
Tax Id #:
SUBSCRIPTION AMOUNT:$__________________
INDEX OF EXHIBITS AND SCHEDULES
-------------------------------
EXHIBITS
--------
Exhibit A - Form of Registration Rights Agreement
------------
Exhibit B-1 - Form of Series A Warrant
------------
Exhibit B-2 Form of Series B Warrant
------------
Exhibit B-3 Notice of Option Exercise
------------
SCHEDULES
---------
Schedule 1 - List of Purchasers and Amounts
-----------
Schedule 3.1(j) - Litigation
----------------
Schedule 3.1(y) Form SB-2 Selling Stockholders
----------------
EXHIBIT A
---------
FORM OF REGISTRATION RIGHTS AGREEMENT
-------------------------------------
EXHIBIT B-1
-----------
FORM OF SERIES A WARRANT
------------------------
EXHIBIT B-2
-----------
FORM OF SERIES B WARRANT
------------------------
EXHIBIT B-3
-----------
NOTICE OF OPTION EXERCISE
-------------------------
To: China World Trade Corporation
1. The undersigned hereby elects to exercise the Option to purchase ________
additional Firm Shares of China World Trade Corporation pursuant to the
terms of the Securities Purchase Agreement, and tenders herewith payment of
the exercise price in full, together with all applicable transfer taxes, if
any.
2. Payment shall take the form of (check applicable box) in lawful money of
the United States; or
The Firm Shares and the Series B Warrant shall be delivered to the
following:
3. Accredited Investor. The undersigned is an "accredited investor" as
--------------------
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.
[PURCHASER]
By:________________________________________
Name:
Title:
SCHEDULE 1
----------
LIST OF PURCHASERS AND AMOUNTS
------------------------------
Name of Purchaser Amount of Shares and Warrant Shares
------------------- ----------------------------------------
Purchased
---------
1.__________________________ _____ Shares ______ Series A Warrant Shares
______
2.__________________________ _____ Shares ______Series A Warrant Shares
______
3.__________________________ _____ Shares ______Series A Warrant Shares
______
4.__________________________ _____ Shares ______Series A Warrant Shares
______
5.__________________________ _____ Shares ______Series A Warrant Shares
______
6.__________________________ _____ Shares ______Series A Warrant Shares
______
7.__________________________ _____ Shares ______Series A Warrant Shares
______
8.__________________________ _____ Shares ______Series A Warrant Shares
______
------
SCHEDULE 3.1 (Y)
----------------
FORM SB-2 SELLING STOCKHOLDERS
------------------------------
SCHEDULE 3.1 (J)
----------------
LITIGATION
[TO COME FROM XXXXXX]
