AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
Exhibit
4.3
AMENDED
AND RESTATED INVESTOR RIGHTS AGREEMENT
THIS
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (this
“Agreement”)
is
made and entered into as of April 24, 2007,
by and
among (i) (a) China Security & Surveillance Technology, Inc., a Delaware
corporation (the “Company”),
(b)
China Safetech Holdings Limited, a wholly-owned subsidiary of the Company,
incorporated under the laws of British Virgin Islands (“Safetech”),
China
Security & Surveillance Technology (HK) Ltd., a wholly-owned subsidiary of
Safetech, incorporated under the laws of Hong Kong (“CSST
HK”)
and
and Chain Star Investments Ltd., a wholly-owned subsidiary of Safetech,
incorporated under the laws of Hong Kong (“Chain
Star”),
(c)
Golden Group Corporation (Shenzhen) Limited,
a
limited liability company organized and existing under the laws of the
People’s
Republic of China (the “PRC”)
and a
wholly-owned subsidiary of Safetech (“Golden”),
Shanghai Xxxxx Xxxx Digital Technology Co., Ltd., a limited liability company
organized and existing under the laws of the PRC and a wholly-owned subsidiary
of CSST HK (“Xxxxx
Xxxx”),
China
Security & Surveillance Technology (PRC), Inc., a
limited
liability company organized and existing under the laws of the PRC and a
wholly-owned subsidiary of the Company (“CSST
PRC”,
and
collectively with the Company, Safetech, CSST HK, Golden, and Xxxxx Xxxx, the
“Prior
Group Companies”),
Shanghai Xxxxx Xxxx Public Safety Prevention Technology Co., Ltd., a
limited
liability company organized and existing under the laws of the PRC and a seventy
percent (70%) owned subsidiary of Xxxxx Xxxx (“Xxxxx
Xxxx Public Safety”),
Shanghai Xxxxx Xxxx Digital Equipment Ltd., a
limited
liability company organized and existing under the laws of the PRC and a ninety
percent (90%) owned subsidiary of Xxxxx Xxxx (“Xxxxx
Xxxx Equipment”),
Shenzhen Hongtianzhi Electronics Co., Ltd., a
limited
liability company organized and existing under the laws of the PRC and a
wholly-owned subsidiary of Chain Star (“Hongtianzhi”),
Shenzhen Tongxing Shixun Technology Co., Ltd., a
limited
liability company organized and existing under the laws of the PRC and a seventy
percent (70%) owned subsidiary of Hongtianzhi (“Tongxing”),
Guangzhou Shixing Digital Technology Co., Ltd., a
limited
liability company organized and existing under the laws of the PRC and a seventy
percent (70%) owned subsidiary of Hongtianzhi (“Shixing,”and
collectively with the Prior Group Companies, Xxxxx Xxxx Equipment, Xxxxx Xxxx
Public Safety, Chain Star, Hongtianzhi and Tongxing, the “Group
Companies”),
(d)
Mr. Tu Xxx Xxxx (“Mr.
Tu”),
a
resident of the City of Hangzhou in the PRC, Ms. Xx Xxx Xxx (“Xx.
Xx”),
a
resident of the City of Shenzhen in the PRC and Whitehorse Technology Limited,
a
British Virgin Islands company wholly owned by Mr. Tu and the registered owner
of Mr. Tu’s equity interest in the Company (“Whitehorse”,
and
collectively with Mr. Tu and Xx. Xx, the “Controlling
Shareholders”)
and
(ii) Citadel Equity Fund Ltd. (“Citadel”).
Capitalized terms used herein but not otherwise defined herein shall have the
respective meanings set forth in the New Notes Purchase Agreement (as defined
below).
WITNESSETH:
WHEREAS,
the Prior Group Companies, the Controlling Shareholders and Citadel have entered
into that certain investor
rights
agreement, dated as of February 16, 2007, as amended by that certain amendment
to the investor rights agreement by and among the same parties, dated as of
March 29, 2007 (the “Prior
Investor Rights Agreement”),
in
relation to the purchase from the Company by Citadel of US$60,000,000 1%
Guaranteed Senior Unsecured Convertible Notes due 2012 (the
“Prior
Notes”),
which
are convertible into the Company’s common stock, par value $.0001
(the
“Common
Stock”),
purchased and issued pursuant to that that certain notes purchase agreement,
dated as of February 16, 2007, by and among the
Prior
Group Companies and Citadel (the “Prior
Notes Purchase Agreement”),
and
that certain
indenture ,dated as of February 16, 2007, by and among the
Company, the other Prior Group Companies and The Bank of New York, as trustee
(the “Prior
Indenture”);
WHEREAS,
the Group Companies and Citadel have entered into that certain notes
purchase
agreement dated as of April 24, 2007 (the “New
Notes
Purchase
Agreement”),
pursuant to which the Company has agreed to issue to Citadel, and Citadel has
agreed to purchase from the Company, US$50,000,000 1%
Guaranteed Senior Unsecured Convertible Notes due 2012 (the
“New
Notes”,
and
together with the Prior Notes, the “Notes”),
which
are convertible into the Common
Stock, which are being issued pursuant to that certain Indenture dated as of
the
date hereof by and among the
Company, the other Group Companies and The Bank of New York, as trustee (the
“New
Indenture”,
and
together with the Prior Indenture, the “Indentures”);
WHEREAS,
in connection with the consummation of the transactions contemplated by the
New
Notes Purchase Agreement, the parties hereto desire to enter into this Agreement
to amend and restate in its entirety the Prior Investor Rights Agreement;
and
WHEREAS,
it is a
condition to the Closing under the New Notes Purchase Agreement that the parties
hereto shall have executed this Agreement.
NOW,
THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the
parties hereto, intending to be legally bound by this agreement, agree as
follows:
1. Representations
and Warranties of the Group Companies.
Each of
the Group Companies, jointly and severally, represents and warrants that:
1.1 Each
of
the Group Companies has full power and authority to make, enter into and carry
out the terms of this Agreement. This Agreement has been duly executed and
delivered by each Group Company and constitutes the legal, valid and binding
obligations of such Group Company enforceable against such Group Company in
accordance with its terms.
1.2 The
execution and delivery of this Agreement by each Group Company do not, and
the
performance of this Agreement by such Group Company will not: (i) conflict
with
or violate any law, rule, regulation, order, decree or judgment applicable
to
any Group Company or by which any Group Company or any of the properties of
any
Group Company is or may be bound or affected, or the Charter Documents of any
Group Company; (ii) result in or constitute (with or without notice or lapse
of
time) any breach of or default under any contract to which any Group Company
is
a party or by which any Group Company or any of the affiliates or properties
of
any Group Company is or may be bound or affected, or (iii) result in the
creation of any encumbrance or restriction on any of the shares of Common Stock
or equity interests in any other Group Company or properties of any Group
Company. The execution and delivery of this Agreement by each Group Company
do
not, and the performance of this Agreement by each Group Company will not,
require any consent or approval of any Person.
2. Representations
and Warranties of the Controlling Shareholders.
Each of
the Controlling Shareholders, jointly and severally, represents and warrants
that:
2.1 (i)
Whitehorse is the direct owner of record, free and clear of all Liens, of
11,000,000
shares
of Common
Stock, which constitutes 31.48%
of the
outstanding voting power of the Company’s capital stock, (ii) Xx. Xx is the
direct owner of record, free and clear of all Liens (except for the Lien already
provided to a third party by Xx. Xx on 2,044,126 shares of Common Stock (the
“Encumbered
Securities”)),
of
2,627,500
shares
of Common
Stock, which constitutes 7.52%
of the
outstanding voting power of the Company’s capital stock, and (iii) Mr. Tu is the
beneficial owner, free and clear of all Liens (except for the Lien on the
Encumbered Securities), of 13,627,500
shares
of Common
Stock (through the ownership by Whitehorse and Xx. Xx), which constitutes
39.00%
of the
outstanding voting power of the Company’s capital stock. Each of the Controlling
Shareholders has full power and authority to make, enter into and carry out
the
terms of this Agreement. This Agreement has been duly executed and delivered
by
each Controlling Shareholder and constitutes the legal, valid and binding
obligations of such Controlling Shareholder enforceable against such Controlling
Shareholder in accordance with its terms.
2.2 The
execution and delivery of this Agreement by each Controlling Shareholder do
not,
and the performance of this Agreement by such Controlling Shareholder will
not:
(i) conflict with or violate any law, rule, regulation, order, decree or
judgment applicable to any Controlling Shareholder or by which any Controlling
Shareholder or any of the properties of any Controlling Shareholder is or may
be
bound or affected, or the Charter Documents of Whitehorse; (ii) result in or
constitute (with or without notice or lapse of time) any breach of or default
under any contract to which any Controlling Shareholder is a party or by which
any Controlling Shareholder or any of the affiliates or properties of any
Controlling Shareholder is or may be bound or affected, or (iii) result in
the
creation of any encumbrance or restriction on any of the shares of Common Stock
or equity interests in Whitehorse or properties of any Controlling Shareholder.
The execution and delivery of this Agreement by each Controlling Shareholder
do
not, and the performance of this Agreement by each Controlling Shareholder
will
not, require any consent or approval of any Person.
3. Covenants
and Agreements.
Unless
the context requires otherwise, each Group Company hereby, jointly and
severally, covenants and agrees, and Mr. Tu (with respect to Sections
3.2,
3.4
and
3.5
only)
covenants and agrees to cause each Group Company to do, as follows:
3.1 Inspection.
As long
as Citadel is the beneficial owner (as such term is defined in the Exchange
Act
and the rules and regulations promulgated thereunder (the “Beneficial
Owner”))
of
the Notes then outstanding (including the principal amount of the Notes
converted into shares of Common Stock as if such conversion had not taken place
and to the extent such shares of Common Stock are held by Citadel at the time
of
calculating such percentage), the principal amount of which is at least 25%
of
the principal amount of the Notes then outstanding (including the principal
amount of the Notes converted into shares of Common Stock as if such conversion
had not taken place and to the extent such shares of Common Stock are
beneficially owned by Citadel at the time of calculating such percentage) (the
“Minimum
Holdings”),
each
Group Company shall permit Citadel and any authorized representative thereof,
to
visit and inspect the properties of such Group Company, including its corporate
and financial records, to examine its records and make copies thereof and to
discuss its affairs, finances and accounts with its officers, at all such
reasonable times and as often as may be reasonably requested upon reasonable
notice, provided
that
such visits and inspections shall not unduly interrupt the daily operation
of
such Group Company. Each reference in this Agreement to ‘holds the Minimum
Holdings’ shall be construed as ‘is the Beneficial Owner of the Minimum
Holdings’. Citadel and its participating agents and representatives, in
exercising its rights of inspection hereunder, agrees to maintain the
confidentiality of all financial and other confidential information of such
Group Company acquired by them. If requested by such Group Company, Citadel,
in
exercising its rights under this Section
3.1
shall
execute a confidentiality agreement with such Group Company in such reasonable
form and substance as agreed between Citadel and such Group
Company.
3.2 FCPA.
Each of
the Group Companies and Mr. Tu (during the term while he serves as the Company’s
director, Chief Executive Officer or President) shall, and shall cause each
Group Company, any of the Company’s Subsidiaries and their respective management
to, (i) comply with the U.S. Foreign Corrupt Practices Act of 1977, as amended,
and the rules and regulations thereunder (the “FCPA”),
including, without limitation, not making use of the mails or any means or
instrumentality of interstate commerce corruptly in furtherance of an offer,
payment, promise to pay or authorization of the payment of any money, or other
property, gift, promise to give, or authorization of the giving of value to
any
“foreign official” (as the term is defined in the FCPA) or any foreign political
party or official thereof or any candidate for foreign political office, in
contravention of the FCPA, (ii) conduct each such company’s respective business
in compliance with the FCPA, and (iii) institute and maintain policies and
procedures designed to ensure, and which are reasonably expected to continue
to
ensure, continued compliance therewith.
3.3 PFIC.
No
Group Company shall become a “passive foreign investment company” within the
meaning of Section 1297 of the U.S. Internal Revenue Code of 1986.
3.4 OFAC.
Neither
any Group Company nor, to the knowledge of any Group Company, any director,
officer, agent, employee, Affiliate or Person acting on behalf of any Group
Company is currently subject to any U.S. sanctions administered by the Office
of
Foreign Assets Control of the U.S. Treasury Department (“OFAC”);
and
no Group Company shall, and Mr. Tu (during the term while he serves as the
Company’s director, Chief Executive Officer or President) shall cause each Group
Company not to, directly or indirectly use the proceeds of the sale of the
Notes, or lend, contribute or otherwise make available such proceeds to any
Subsidiary, joint venture partner or other Person or entity, towards any sales
or operations in Cuba, Iran, Syria, Sudan, Myanmar or any other
country sanctioned by OFAC or for the purpose of financing the activities of
any
Person currently subject to any U.S. sanctions administered by
OFAC.
3.5 Money
Laundering Laws.
Each of
the Group Companies shall, and Mr. Tu (during the term while he serves as the
Company’s director, Chief Executive Officer or President) shall cause each Group
Company to, conduct its operations at all times in compliance with the money
laundering statutes of applicable jurisdictions, the rules and regulations
thereunder and any related or similar rules, regulations or guidelines, issued,
administered or enforced by any applicable governmental agency.
3.6 New
Issuances or Sales to Third Parties.
The
Company shall not issue or sell any Common Stock or securities or options
exercisable, exchangeable or convertible into Common Stock to a purchaser that
is not an Affiliate of Citadel or the Company, if the issuance or sale price
of
such securities (as appropriately adjusted taking into account applicable
exercise or conversion prices) is not greater than (i) 90% of the closing price
of the Common Stock on the Trading Market as of the date of closing of such
issuance or sale or (ii) the simple
arithmetic average of the closing prices of the Common Stock on
the
Trading Market for
the
twenty Trading Days preceding the date of closing of such issuance or sale.
Notwithstanding the foregoing, the prohibitions in the immediately preceding
sentence shall not apply to (x) issuance pursuant to the Company’s employee
stock plan or (y) in connection with the Acquisitions.
In
this
Agreement,
“Acquisitions”
means
the acquisitions of Shenzhen Hongtianzhi Electronics Co., Ltd., Wuhan Higheasy
Electronic Technology Co., Changzhou Minking Electronic Co., Ltd., Shenzhen
Huiruitong Electrical Appliance Co., Ltd. and Vorx Telecommunications Co.,
Ltd.
(in Beijing);
“Trading
Day”
means
(x) if the applicable security is quoted on the Nasdaq National Market, a day
on
which trades may be made thereon, (y) if the applicable security is listed
or
admitted for trading on the American Stock Exchange, New York Stock Exchange
or
another national securities exchange, a day on which the American Stock
Exchange, New York Stock Exchange or another national securities exchange is
open for business, or (z) if the applicable security is not so listed, admitted
for trading or quoted, any day other than a Saturday or Sunday or a day on
which
banking institutions in the State of New York are authorized or obligated by
law
or executive order to close; and
“Trading
Market”
means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the Nasdaq Capital Market, the American
Stock Exchange, the New York Stock Exchange, the Nasdaq Global Market, the
Nasdaq Global Select Market or the OTC Bulletin Board;
3.7 Outstanding
Number of Common Stock.
Until
the maturity of the Notes, the Company shall not (i) have more than 60,000,000
shares of Common Stock outstanding at any time or (ii) issue any new class
of
Equity Securities of the Company.
In
this
Agreement, “Equity
Securities”
means,
with respect to any Person, any and all shares of Capital Stock of such Person,
securities of such Person convertible into, or exchangeable or exercisable
for,
such shares, and options, warrants or other rights to acquire such shares and
any securities that represent the right to receive the Equity
Securities.
3.8 Other
Covenants.
As
long
as Citadel is the Beneficial Owner of the Minimum Holdings, each Group Company
hereby covenants and agrees as follows:
(a) No
Group
Company shall change the substantive responsibilities of Mr. Tu as a member
of
the management of such Group Company and its Subsidiaries, or substitute any
other Person to perform the substantive responsibilities of Mr. Tu as such
member of management as they are performed as of the date hereof, other than
in
the case of incapacity of Mr. Tu.
(b) No
Group
Company shall amend, alter, waive or repeal any provision of such Group
Company’s or its Subsidiaries’ certificate of incorporation, memorandum and
articles of association or any other organizational or constitutional documents
of such Group Company or its Subsidiaries in a manner that would have a material
adverse effect on the interests of Citadel.
4. Right
of First Refusal for Future Securities Offerings.
4.1 Issuance
Notice.
As long
as Citadel is the Beneficial Owner of the Minimum Holdings, subject to the
terms
and conditions of this Section
and applicable securities laws, if, following the date hereof and until December
31, 2010, the Company proposes to issue or sell any securities to a purchaser
or
purchasers that are not an Affiliate of the Company (the “Proposed
Third Party Purchaser”),
the
Company shall, (i) not less than three (3) business days prior to the
consummation of such issuance or sale in the case of a proposed public offering
of Equity Securities of the Company, and (ii) not less than fifteen (15)
business days prior to the consummation of such issuance or sale in the case
of
all other issuances and sales of securities of the Company, offer such
securities to Citadel by sending written notice (an “Issuance
Notice”)
to
Citadel, which shall state (a)
the
identity of the Proposed Third Party Purchaser, (b) a description of the
securities to be issued or sold, including detailed terms of such securities,
(c) the amount of the securities proposed to be issued to the Proposed Third
Party Purchaser (the “Offered
New Securities”);
(d)
the proposed purchase price for the Offered Securities (the “Issuance
Price”);
and
(e) the terms and conditions of such proposed sale.
The
Issuance Notice shall also certify that the Company has received a firm offer
from the Proposed Third Party Purchaser and in good faith believes a binding
agreement for the Offered New Securities is obtainable on the terms set forth
in
the Issuance Notice. The Issuance Notice shall also include a copy of any
written proposal, term sheet or letter of intent or other agreement or
understanding relating to the Offered New Securities and proof satisfactory
to
the Company that the Offered New Securities will not violate any applicable
securities laws. Upon delivery of the Issuance Notice, such offer shall be
irrevocable unless and until the rights of first refusal provided for herein
shall have been waived or shall have expired.
4.2 Option;
Exercise.
By
notification to the Company (i) within three (3) business days after the
Issuance Notice is given in the case of a proposed public offering of Equity
Securities of the Company, and (ii) within fifteen (15) business after the
Issuance Notice is given in the case of all other issuances and sales of
securities of the Company, Citadel may elect to purchase or otherwise acquire,
at the price and on the terms specified in the Issuance Notice, up to all of
the
Offered New Securities.
The
closing of any sale pursuant to this Section
4.2
shall
occur within sixty (60) days after the date on which such notification is given
by Citadel.
Citadel
shall be entitled to apportion the rights of first refusal hereby granted to
it
among itself and its Affiliates in such proportions as it deems
appropriate.
4.3 If
less
than all of the Offered New Securities are elected to be purchased or acquired
as provided in Section
4.2,
the
Company may, during the thirty (30) day period following the expiration of
the
3-day period as set forth in Section
4.2(i)
or the
15-day period as set forth in Section
4.2(ii)
herein,
as the case may be, offer and sell the remaining unsubscribed portion of such
securities to the Proposed Third Party Purchaser in the Issuance Notice at
a
price not less than, and upon terms no more favorable to the Proposed Third
Party Purchaser than, those specified in the Issuance Notice. If the Company
does not enter into an agreement for the sale of such securities within such
period, or if such agreement is not consummated within thirty (30) days after
the execution thereof, the right of first refusal provided hereunder shall
be
deemed to be revived and such securities shall not be offered to a third party
unless first reoffered to Citadel in accordance with this Section.
5. Limitations
on the Conversion of the Notes Held by Citadel.
5.1 Subject
to Section
5.3,
notwithstanding any provision in any of the Indentures, the Company shall not
effect any conversion of the Notes, and Citadel shall not have the right to
convert any portion of the Notes held by it, to the extent that after giving
effect to such conversion, Citadel (together with its Affiliates) would
beneficially own in excess of 9.99% of the number of shares of Common Stock
outstanding immediately after giving effect to such conversion (the
“Conversion
Limitation”).
For
purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by Citadel and its Affiliates shall include the number of
shares of Common Stock issuable upon conversion of such Notes with respect
to
which the determination of such sentence is being made, but shall exclude the
number of shares of Common Stock which would be issuable upon (A) conversion
of
the remaining, nonconverted portion of any Notes beneficially owned by Citadel
or any of its Affiliates and (B) exercise or conversion of the unexercised
or
nonconverted portion of any other securities of the Company subject to a
limitation on conversion or exercise analogous to the limitation contained
herein beneficially owned by Citadel or any of its Affiliates. Except as set
forth in the preceding sentence, for purposes of this Section, beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange
Act. For purposes of this Section, in determining the number of outstanding
shares of Common Stock, Citadel may rely on the number of outstanding shares
of
Common Stock as reflected in (x) the Company’s most recent annual, quarterly or
current report on Form 10-K, 10-Q or Form 8-K, respectively, as the case may
be;
(y) a more recent public announcement by the Company or (z) any other notice
by
the Company setting forth the number of shares of Common Stock outstanding.
For
any reason at any time, upon the written or oral request of Citadel, the Company
shall within two business days confirm orally and in writing to Citadel the
number of shares of Common Stock then outstanding. In any case, the number
of
outstanding shares of Common Stock shall be determined after giving effect
to
the conversion or exercise of securities of the Company, including any Notes,
by
Citadel or its Affiliates since the date as of which such number of outstanding
shares of Common Stock was reported.
5.2 Subject
to Section
5.3,
by not
less than sixty-one (61) days’ prior written notice to the Company, Citadel may,
at its election, increase or decrease the Conversion Limitation to any other
percentage not in excess of 9.99% specified in such notice, and the Conversion
Limitation shall continue to apply until such sixty-first day (or such later
date, as determined by Citadel, as may be specified in such notice).
5.3 The
Conversion Limitation shall not apply to beneficial ownership percentage
resulting from any conversion made pursuant to the mandatory conversion
provisions in the Indenture under Section 14.07 therein.
6. Indemnification.
6.1 In
addition to all rights and remedies available to Citadel at law or in equity,
each of the Group Companies shall jointly and severally indemnify Citadel,
and
its Affiliates, stockholders, officers, directors, employees, agents,
representatives, successors and permitted assigns (collectively, the
“Indemnified
Parties”)
and
save and hold each of them harmless against and pay on behalf of or reimburse
such party as and when incurred for any loss (including, without limitation,
diminutions in value), liability, demand, claim, action, cause of action, cost,
damage, deficiency, tax, penalty, fine or expense, whether or not arising out
of
any claims by or on behalf of any third party, including interest, penalties,
reasonable attorneys’ fees and expenses and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing (collectively,
“Losses”)
which
any such party may suffer, sustain or become subject to, as a result of, in
connection with, relating or incidental to or by virtue of:
(i) any
misrepresentation or breach of a representation or warranty on the part of
any
of the Group Companies herein;
(ii) any
nonfulfillment or breach of any covenant or agreement on the part of any of
the
Group Companies herein; or
(iii) any
action, demand, proceeding, investigation or claim by any third party
(including, without limitation, governmental agencies) against or affecting
any
Group Company and/or its Affiliates or Subsidiaries which, if successful, would
give rise to or evidence the existence of or relate to a breach of (A) any
of
the representations or warranties at the time made or (B) covenants of any
of
the Group Companies.
6.2 In
addition to all rights and remedies available to Citadel at law or in equity,
each of the Controlling Shareholders shall jointly and severally indemnify
the
Indemnified Parties and save and hold each of them harmless against and pay
on
behalf of or reimburse such party as and when incurred for any Losses which
any
such party may suffer, sustain or become subject to, as a result of, in
connection with, relating or incidental to or by virtue of:
(i) any
misrepresentation or breach of a representation or warranty under Sections 2.1
and
2.2
herein
of a Controlling Shareholder; or
(ii) any
action, demand, proceeding, investigation or claim by any third party
(including, without limitation, governmental agencies) against or affecting
a
Controlling Shareholder which, if successful, would give rise to or evidence
the
existence of or relate to a breach of any such representations or warranties
at
the time made of a Controlling Shareholder.
6.3 Notwithstanding
the foregoing, and subject to the following sentence, upon judicial
determination, which is final and no longer appealable, that the act or omission
giving rise to the indemnification hereinabove provided resulted primarily
out
of or was based primarily upon the Indemnified Party’s gross negligence, fraud
or willful misconduct (unless such action was based upon the Indemnified Party’s
reliance in good faith upon any of the representations, warranties, covenants
or
promises made by any Group Company or Controlling Shareholder herein) by the
Indemnified Party, neither any Group Company nor any Controlling Shareholder,
as
the case may be, shall be responsible for any Losses sought to be indemnified
in
connection therewith, and each of the Group Companies or the Controlling
Shareholders, as the case may be, shall be entitled to recover from the
Indemnified Party all amounts previously paid in full or partial satisfaction
of
such indemnity, together with all costs and expenses of such Group Company
or
Controlling Shareholder, as the case may be, reasonably incurred in effecting
such recovery, if any.
6.4 All
indemnification rights hereunder shall survive indefinitely, regardless of
any
investigation, inquiry or examination made for or on behalf of, or any knowledge
of Citadel and/or any of the other Indemnified Parties.
6.5 The
indemnity obligations that each of the Group Companies and the Controlling
Shareholders has under this Section shall be in addition to any liability that
such Group Company and the Controlling Shareholder may otherwise
have.
6.6 Without
limiting the generality of the foregoing paragraphs in this Section
6,
each of
the Group Companies and Mr. Tu will, jointly and severally, agree to indemnify,
defend and hold harmless the Indemnified Parties from and against (i) any and
all losses (including without limitation, losses arising from or as a result
of
a decrease in the value of the Company or the value of the Common Stock or
the
Notes) incurred by any member of the Indemnified Parties and (ii) any and all
claims, actions or causes of action, assessments, demands, damages, judgments,
settlements, liabilities, costs and expenses (including, without limitation,
interest, penalties and attorneys’ and accounting fees and expenses) of any
nature whatsoever, asserted against or imposed upon any member of the
Indemnified Parties, in each case, by reason of or resulting from any breach
or
violation (whether such breach or violation was due to actions taken or failure
to take actions, in whole or in part, prior to or after the date hereof) of
laws, rules, regulations or orders of any governmental authority by any of
the
Group Companies, the Subsidiaries, the Controlling Shareholders or other former
or current shareholders of any Group Company (except in the case of such other
former or current shareholders, only to the extent that any such breach or
violation would have a Material Adverse Effect or a material adverse effect
on
the value of the Company, or the value of the Conversion Shares or the
Notes).
7. Miscellaneous.
7.1 Termination.
Except
for Sections
6
and
7,
which
shall survive the termination of this Agreement, or as otherwise expressly
provided herein, this Agreement will be automatically terminated with no further
effect at such time that Citadel is no longer the Beneficial Owner of the
Minimum Holdings.
7.2 Specific
Enforcement.
Upon a
breach by any of the Controlling Shareholders or the Group Companies of this
Agreement, in addition to any such damages as Citadel is entitled to, directly
or indirectly, by reason of said breach, Citadel shall be entitled to injunctive
relief against such Controlling Shareholder or Group Company if such relief
is
applicable and available, as a remedy at law would be inadequate and
insufficient. Nothing in this Section shall be construed as limiting Citadel’s
remedies in any way.
7.3 Notices.
Notices
given pursuant to any provision of this Agreement shall be addressed as follows:
(i) if to the any of the Group Companies or the Controlling Shareholders, to:
13/F, Shenzhen Special Zone Press Tower, Shennan Road, Futian, Shenzhen, China,
Fax: (00) 000-00000000, Attention: Mr. Tu Xxx Xxxx, with a copy to Xxxxxx Xxxx
Xxxxx Raysman & Xxxxxxx LLP, 000 0xx
Xxxxxx,
X.X., Xxxxxxxxxx, XX 00000, Fax: (0-000) 000-0000, Attention: Xx. Xxx
Xxxxxxxxxx, Esq., (ii) if to Citadel, to: c/o
000
Xxxxx Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, XXX,
Fax:
(0-000)
000 0000,
Attention: Xx.
Xxxx
X. Xxxxxx,
with a
copy to 00/X
Xxxxxx Xxxxx, 0 Xxxxxxxxx Xxxx, Xxxxxxx, Xxxx Xxxx, Fax: (000) 0000 0000,
Attention: Xx. Xxxxxx Xxxx and Xx. Xxx Xxx,
and with
a copy to Xxxxxxx Xxxxxxx & Xxxxxxxx LLP, ICBC Xxxxx 00xx Xxxxx, 0 Xxxxxx
Xxxx, Xxxxxxx, Xxxx Xxxx SAR, China, Fax: (000) 0000 0000, Attention: Xx.
Xxxxxxxx Xxxx, Esq.
All
notices, requests, consents and other communications hereunder shall be in
writing and shall be personally delivered or delivered by overnight courier
or
mailed by first-class registered or certified mail, postage prepaid, return
receipt requested, or by facsimile transmission. Every notice hereunder shall
be
deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, upon transmission by facsimile and
confirmed facsimile receipt, or two (2) days after the same shall have been
deposited with a reputable international overnight courier.
7.4 Amendments
and Waiver.
Unless
otherwise specifically stated herein, any term of this Agreement may be amended
with the written consent of the party against whom enforcement may be sought
and
the observance of any term of this Agreement may be waived (either generally
or
in a particular instance and either retroactively or prospectively) by the
Company and the Controlling Shareholders, in the case of Citadel’s obligations,
and by Citadel in the case of the obligations of any other parties hereto.
No
waivers of or exceptions to any term, condition or provision of this Agreement,
in any one or more instances, shall be deemed to be, or construed as, a further
or continuing waiver of any such term, condition or provision.
7.5 Entire
Agreement.
This
Agreement, together with (i) the other Transaction Documents as defined in
the
New Notes Purchase Agreement and (ii) the Transaction Documents as defined
in
the Prior Notes Purchase Agreement and as amended (but excluding the Prior
Investor Rights Agreement), embodies the entire agreement and understanding
between the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof. Without
limiting the generality of the foregoing, this Agreement amends and restates
in
its entirety the Prior Investor Rights Agreement.
7.6 Severability.
The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provisions of this Agreement
to the extent permitted by law.
7.7 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York.
7.8 Successors
and Assigns.
Except
as otherwise provided herein, the terms and conditions of this Agreement shall
be binding upon, and inure to the benefit of, the respective representatives,
successors and assigns of the parties hereto. Unless otherwise provided herein,
Citadel
may
assign its rights hereunder to any of
its
Affiliates
(as
defined below).
For
purposes of this Agreement, an “Affiliate”
shall
refer to: (i) any Person directly or indirectly controlling, controlled by
or
under common control with another Person, (ii) any Person owning or controlling
50% or more of the outstanding voting securities of such other Person, (iii)
any
officer, director or partner of such Person, (iv)
a trust
for the benefit of such Person referred to in the foregoing clause (ii) of
this
definition.
7.9 Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument.
IN
WITNESS WHEREOF, the undersigned have executed this Investor Rights Agreement
as
of the day and year written above.
|
GROUP
COMPANIES:
China
Security & Surveillance Technology,
Inc.
|
||
| |
|
|
| By: | /s/ Tu Xxx Xxxx | |
|
Name:
|
Tu Xxx Xxxx |
|
| Title: | CEO | |
| China Safetech Holdings Limited | ||
| |
|
|
| By: | /s/ Tu Xxx Xxxx | |
|
Name:
|
Tu Xxx Xxxx |
|
| Title: | CEO | |
|
China
Security & Surveillance Technology
(HK) Ltd.
|
||
| |
|
|
| By: | /s/ Tu Xxx Xxxx | |
|
Name:
|
Tu Xxx Xxxx |
|
| Title: | CEO | |
| Golden Group Corporation (Shenzhen) Limited | ||
| |
|
|
| By: | /s/ Tu Xxx Xxxx | |
|
Name:
|
Tu Xxx Xxxx |
|
| Title: | Director | |
| Shanghai Xxxxx Xxxx Digital Technology Co., Ltd. | ||
| |
|
|
| By: | /s/ Tu Xxx Xxxx | |
|
Name:
|
Tu Xxx Xxxx |
|
| Title: | Director | |
| China Security & Surveillance Technology (PRC), Inc. | ||
| |
|
|
| By: | /s/ Tu Xxx Xxxx | |
|
Name:
|
Tu Xxx Xxxx |
|
| Title: | CEO | |
| Chain Star Investments Ltd. | ||
| |
|
|
| By: | /s/ Tu Xxx Xxxx | |
|
Name:
|
Tu Xxx Xxxx |
|
| Title: | Director | |
| Shenzhen Hongtianzhi Electronics Co., Ltd. | ||
| |
|
|
| By: | /s/ Xxxxx Xxxxx | |
|
Name:
|
Xxxxx Xxxxx |
|
| Title: | Director | |
| Shenzhen Tongxing Shixun Technology Co., Ltd. | ||
| |
|
|
| By: | /s/ Xxxxx Xxxx Hui | |
|
Name:
|
Xxxxx Xxxx Hui |
|
| Title: | Director | |
| Guangzhou Shixing Digital Technology Co., Ltd. | ||
| |
|
|
| By: | /s/ Xxxxx Xx | |
|
Name:
|
Xxxxx Xx |
|
| Title: | Director | |
| Shanghai Xxxxx Xxxx Digital Equipment Ltd. | ||
| |
|
|
| By: | /s/ Yang Xxx Xxxx | |
|
Name:
|
Yang Xxx Xxxx |
|
| Title: | Director | |
| Shanghai Xxxxx Xxxx Public Safety Prevention Technology Co., Ltd. | ||
| |
|
|
| By: | /s/ Yang Xxx Xxxx | |
|
Name:
|
Yang Xxx Xxxx |
|
| Title: | Director | |
| CONTROLLING SHAREHOLDERS: | ||
| |
|
|
| By: | /s/ Tu Xxx Xxxx | |
|
|
Mr. Tu Xxx Xxxx |
|
| By: | /s/ Xx Xxx Qun | |
|
Ms. Xx Xxx Xxx |
||
| Xxxxxxxxxx Technology Limited | ||
| |
|
|
| By: | /s/ Tu Xxx Xxxx | |
|
Name:
|
Tu Xxx Xxxx |
|
| Title: | Director | |
Accepted
and Agreed to:
CITADEL
EQUITY FUND LTD.
By:
Citadel Limited Partnership, its Portfolio Manager
By:
Citadel Investment Group, L.L.C., its General Partner
By:
/s/
Xxxxxx
Xxxx
Name:
Xxxxxx Xxxx
Title:
Authorized Signatory
