GENERAL STEEL HOLDINGS INC. SUBSCRIPTION AGREEMENT
THIS
SUBSCRIPTION AGREEMENT (this “Agreement”)
is
made as of this 1st day of September 2005, by and between General Steel Holdings
Inc., a Nevada corporation (the “Company”),
and
the undersigned investors (collectively, together with all successors and
permitted assignors, the “Investor”).
RECITALS
Subject
to the terms and conditions of this Agreement, the Investor desires to subscribe
for and purchase, and the Company desires to issue and sell to the Investor,
certain shares of the Company’s common stock, par value $0.001 per share (the
"Common
Shares").
The
Company is offering an aggregate of 3,333,333 shares of Common Stock in a
private placement to the Investor and other investors at a purchase price of
$1.50 per share (the “Purchase
Stock Price”)
and on
the other terms and conditions contained in this Agreement (the “Offering”).
Concurrently
with the execution and delivery of this Agreement, the Company and the Investor
are entering into and delivering a Registration Rights Agreement (in the form
attached hereto as Exhibit
A)
and a
Warrant Agreement (in the form attached hereto as Exhibit
B).
WITNESSETH
THE
PARTIES HEREBY AGREE AS FOLLOWS:
| 1. |
Definitions. The
following terms shall have the
meanings ascribed to them below:
|
“Alloy
Rod JV” shall
have the meaning ascribed to that term in Section 6.2.
“Agreement”
shall
have the meaning ascribed to that term in the Recitals.
“Articles
of Incorporation”
means
the articles of incorporation previously adopted by resolution in writing of
all
shareholders of the Company.
“Authorization” means
any
authorization, approval, consent, certificate, license, permit or franchise
of
or from any Governmental Entity or pursuant to any Law.
“Capital
Stock” means
(a)
in the case of a corporation, its shares of capital stock, (b) in the case
of a
partnership or limited liability company, its partnership or membership
interests or units (whether general or limited), and (c) any other interest
that
confers on a Person the right to receive a share of the profits and losses
of,
or distribution of assets, of the issuing entity.
“Centre”
shall
have the meaning ascribed to that term in Section 8.6(ii).
“Closing”
shall
have the meaning ascribed to that term in Section 2.1(ii).
“Common
Shares”
shall
have the meaning ascribed to that term in the Recitals.
“Company”
means
General Steel Holdings Inc., a Nevada corporation.
“Company
Permits” shall
have the meaning ascribed to that term in Section 3.18.
“Confidential
Information” shall
have the meaning ascribed to that term in Section 7.1(a).
“Disclosing
Party” shall
have the meaning ascribed to that term in Section 7.2.
“Disclosure
Documents”
shall
have the meaning ascribed to that term in Section 4.5.
“Disclosure
Schedule” shall
have the meaning ascribed to that term in Section 3.
“Environmental
Laws” shall
have the meaning ascribed to that term in Section 3.19.
“Equity
Securities” means
(a)
Common Shares, and (b) options, warrants or other rights convertible into,
or
exercisable or exchangeable for, directly or indirectly, or otherwise entitling
any Person to acquire, directly or indirectly, Common Shares.
“Governmental
Entity” means
any
entity or body exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to United States federal, state or
local government or foreign, international, multinational or other government,
including any department, commission, board, agency, bureau, official or other
regulatory, administrative or judicial authority thereof. “Exchange
Act”
means
the U.S. Securities Exchange Act of 1934, as amended.
“Financial
Statements”
shall
have the meaning ascribed to that term in Section 3.8.
“Indemnifiable
Loss” shall
have the meaning ascribed to that term in Section 8.2.
“Indemnifying
Party” shall
have the meaning ascribed to that term in Section 8.3.
“Indemnitee”
shall
have the meaning ascribed to that term in Section 8.2.
“Investment
Company” shall
have the meaning ascribed to that term in Section 3.18.
“Investor”
means
shall have the meaning ascribed to that term in the Recitals.
“Material
Adverse Effect” means
any
event that immediately causes a negative impact of 10% or more of either the
Company’s revenue or net income.
“Knowledge
of the Company”
or
any
similar phrase means all matters that are known to, or that would reasonably
be
expected to be known as of the date of this Agreement, after a reasonable
investigation sufficient to express an informed view, by the following persons:
Xxxxx
Xx
or
Xxxx
Xxxx.
“Law”
means
any statute, law, ordinance, rule or regulation of any Governmental
Entity.
“Lien”
means,
with respect to any property or asset, any mortgage, lien, pledge, charge,
security interest, hypothecation or any other encumbrance in respect of such
property or asset.
“Lock
Box”
shall
have the meaning ascribed to that term in Section 6.1 “Lock
Box Agent”
shall
have the meaning ascribed to that term in Section 6.1.
“Lock
Box Agreement”
shall
have the meaning ascribed to that term in Section 6.1.
“Lock
Box Amount”
shall
have the meaning ascribed to that term in Section 6.1.
“Net
Proceeds” shall
have the meaning ascribed to that term in Section 6.2.
“Offering”
shall
have the meaning ascribed to that term in the Recitals.
“Order” means
any
award, injunction, judgment, decree, order, ruling, subpoena or verdict or
other
decision issued, promulgated or entered by or with any Governmental Entity
of
competent jurisdiction.
“Person”
means
any individual, corporation, partnership, limited partnership, proprietorship,
association, limited liability company, firm, trust, estate or other enterprise
or entity.
“PRC”
means
the People’s Republic of China, but solely for the purposes of this Agreement,
excluding the Hong Kong Special Administrative Region, Macau Special
Administrative Region and the islands of Taiwan.
“Purchase
Price”
shall
have the meaning ascribed to that term in Section 2.1.
“Purchase
Stock Price”
shall
mean US$1.50 per Common Share.
“Repurchase
Date” shall
have the meaning ascribed to that term in Section 6.1.
“SEC”
means
the U.S. Securities and Exchange Commission.
“SEC
Documents” shall
have the meaning ascribed to that term in Section 3.9.
“Securities
Act”
means
the U.S. Securities Act of 1933, as amended
“Shares”
shall
have the meaning ascribed to that term in Section 2.1(i).
“Statement
Date”
shall
have the meaning ascribed to that term in Section 3.8.
“Re-purchase
Price” shall
mean US$1.95 per Common Share.
“SEC
Documents” shall
have the meaning ascribed to that term in Section 3.10.
“Warrants”
shall
have the meaning ascribed to that term in Exhibit
B.
“Warrant
Agreement” shall
mean the agreement attached as Exhibit
B
hereto.
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2.
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Purchase
and Sale.
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2.1 Subscription
and Issuance of Common Shares.
(i) Subject
to the terms and conditions of this Agreement, at the Closing (as defined
below), the Investor agrees to subscribe for and purchase from the Company,
and
the Company agrees to issue and sell to the Investor 1,000,000 of Common Shares
(the “Shares”)
for
the amount equal to the product of the number of Shares subscribed for by the
Investor multiplied by the Purchase Stock Price (the “Purchase
Price”).
For
each share purchased by the Investor, it shall also receive two Warrants.
(ii) The
purchase and sale of the Shares shall take place on September 1, 2005 (or such
other date mutually agreed to by the parties) at a location to be mutually
agreed by the parties (the “Closing”).
(iii) At
the
Closing, (a) the Investor shall pay the aggregate Purchase Price by wire
transfer in immediately available funds to the account designated in
Exhibit
D
of this
Agreement, or by other payment method mutually agreed to between the Company
and
the Investor; and (b) the Company shall issue the Shares to the Investor, and
deliver to the Investor certificate(s) representing the Shares duly registered
in the Investor’s name(s).
2.2 Legend.
Any
certificate or certificates representing the Shares shall bear the following
legend:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS
SPECIFIED IN THE SUBSCRIPTION AGREEMENT DATED AS OF SEPTEMBER 1, 2005. A COPY
OF
SUCH CONDITION WILL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON
WRITTEN REQUEST AND WITHOUT CHARGE. THESE SECURITIES MAY BE RESOLD OR
TRANSFERRED ONLY (1) PURSUANT TO THE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OR THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, (2) OUTSIDE
THE UNITED STATES IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT,
(3)
IN RELIANCE UPON ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT SUBJECT, IN EACH CASE DESCRIBED ABOVE, TO THE RECEIPT
BY
THE COMPANY OF AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, OR (4) PURSUANT TO
AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH APPLICABLE STATE AND OTHER SECURITIES LAWS.
2.3 Termination.
This
Agreement may be terminated at any time prior to the Closing:
(i) by
mutual
written consent of the Company and the Investor;
(ii) by
the
Investor, (A) upon a breach of any material representation and warranty,
covenant or agreement on the part of the Company set forth in this Agreement,
or
if any material representation and warranty of the Company shall have become
untrue in any material respect, in either case such that the conditions in
Section 5 would be incapable of being satisfied by the date of the Closing
or
(B) if the Company shall not have satisfied any of the conditions in Section
5
by the date of the Closing; or
(iii) by
the
Company, upon a breach of any material representation and warranty, covenant
or
agreement on the part of the Investor set forth in this Agreement, or if any
material representation and warranty of the Investor shall have become untrue
in
any material respect, in either case such that the conditions in Section 5
would
be incapable of being satisfied by the date of the Closing.
2.4 Effect
of Termination.
In the
event this Agreement is terminated pursuant to Section 2.3, this Agreement
shall
forthwith become void, there shall be no liability on the part of the Company
or
the Investor to each other and all rights and obligations of any party hereto
shall cease; provided,
however,
that
nothing herein shall relieve any party from liability for the willful breach
of
any of its representations and warranties, covenants or agreements set forth
in
this Agreement.
3. Representations
and Warranties of the Company. Each
of
the Company and its subsidiaries hereby jointly and severally represents and
warrants to the Investor that the statements in this Section 3 are true,
complete and correct, except as set forth in the disclosure schedule
accompanying this Agreement, which is attached to this Agreement (the
“Disclosure
Schedule”).
For
the purposes of this Section 3, where any representation or warranty is given
or
made to a party’s best knowledge after due inquiry, or so far as a party is
aware, or is qualified in some other manner having a similar effect, the
statement shall be deemed to be supplemented by the additional statement that
such party has made all reasonable, diligent and prudent inquiries of such
party’s officers, directors, and other employees reasonably believed to have
knowledge of the matter in question, prior to the date of this Agreement and
prior to the Closing, according to the context:
3.1 Organization,
Good Standing and Qualification.
The
Company is duly organized, validly existing and in good standing under the
laws
of the State of Nevada.
3.2 Corporate
Power and Authority. Each
of
the Company and its subsidiaries has all requisite corporate power and authority
necessary to own or lease and operate its properties and assets and to carry
on
its business as now conducted and as proposed to be conducted and is duly
qualified to transact business and is in good standing in each jurisdiction
in
which it owns or leases property or conducts business so as to require such
qualification, except where the failure to so qualify would have a Material
Adverse Effect.
3.3 Authorization. The
Company has the requisite power and authority to enter into this Agreement
and
any ancillary agreements to which it is or will be a party, including, without
limitation the power and authority to issue, sell and deliver the Shares to
be
issued and sold hereunder. All corporate action on the part of the Company,
its
officers, directors and shareholders necessary for the authorization, execution
and delivery of this Agreement, the performance of all obligations of the
Company hereunder, and the authorization, issuance (or reservation for
issuance), sale and delivery of the Shares being sold hereunder has been taken
or will be taken prior to the Closing, and this Agreement constitutes the valid
and legally binding obligation of the Company, enforceable in accordance with
its terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally; and (b) as limited by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies. The issuance of the Shares is not subject to any preemptive
right or right of first refusal, or if any preemptive right to the Investor
or
right of first refusal exists, waiver of such rights has been obtained from
the
holders thereof.
3.4 Subsidiaries.
Each
Subsidiary of the Company is validly existing and in good standing under the
laws of the jurisdiction of its formation, has all requisite power to own,
lease
and operate its properties and to carry on its business as now being conducted,
and is duly qualified to do business and is in good standing in each
jurisdiction in which it owns or leases property or conducts any business so
as
to require such qualification, except where the failure to be so qualified
would
not reasonably be expected to have a Material Adverse Effect.
3.5
Capitalization; Valid Issuance.
(i) Upon
payment of the Purchase Price by the Investor and delivery to the Investor
of
the certificates for the Shares, such Shares will be validly issued, fully
paid
and non-assessable.
(ii) The
authorized Capital Stock of the Company consists of 75,000,000 Common Shares.
All presently outstanding Common Shares of the Company are duly and validly
issued, fully paid and non-assessable, and such Common Shares have been issued
in full compliance with the requirements of all applicable securities laws
and
regulations.
(iii)
Other than as set forth on Section 3.5 of the Disclosure Schedule (i) there
are
no existing rights, calls, or commitments of any character relating to the
Common Shares or other Equity Securities of the Acquired Company, and (ii)
no
Person has any right of first refusal, pre-emptive right, subscription right
or
similar right with respect to any shares of Capital Stock or other Equity
Securities of the Acquired Company.
3.6 Governmental
Consents. No
consents, filings, Authorizations, Orders or other actions of any Governmental
Authority are required to be obtained or made for the Company's execution,
delivery and performance of this Agreement which have not already been obtained
or made. No consent, approval, waiver or other action by any Person under any
contract to which the Company is a party or by which the Company or any of
its
properties or assets are bound is required or necessary for the execution,
delivery or performance of this Agreement by the Company and the consummation
of
the transactions contemplated hereby, except where the failure to obtain such
consents would not have a Material Adverse Effect on the Company.
3.7 Offering. Subject
in part to the truth and accuracy of the Investor’s representations and
warranties set forth in this Agreement, the offer, sale and issuance of the
Common Shares as contemplated by this Agreement are exempt from the registration
requirements of the Securities Act and any applicable state securities laws,
and
neither the Company nor any authorized agent acting on its behalf will take
any
action hereafter that would cause the loss of such exemption.
3.8 Books
and Records.
All
accounts, ledgers, material files, documents, instruments, papers, books and
records relating to the business, operations, conditions (financial or other)
of
the Company, results of operations, and assets and properties of the Company,
each as supplied to the Investor, are true, correct, complete and current in
all
material respects, there are no material inaccuracies or discrepancies of any
kind contained or reflected therein, and they have been maintained in accordance
with relevant legal requirements and high industry standards.
3.9 SEC
Filings, Financial Statements.
The
Company has timely made all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Exchange Act (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein, being hereinafter
referred to as the “SEC
Documents”).
The
Company has delivered or made available to the Investor true and complete copies
of the SEC documents. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the Exchange Act and the
rules
and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with
the
SEC, 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,
misleading. None of the statements made in any such SEC Documents is, or has
been, required to be amended or updated under applicable law (except for such
statements as have been amended or updated in subsequent filings prior to the
date hereof). As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have
been
prepared in accordance with United States GAAP, consistently applied, during
the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed
or
summary statements) and fairly present in all material respects the consolidated
financial position of the Company and its Subsidiaries as of the dates thereof
and the consolidated results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments). Except as set forth in the financial statements of the
Company included in the SEC Documents, the Company has no liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to December 31, 2004 and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under GAAP to be reflected in such financial statements, which,
individually or in the aggregate, are not material to the financial condition
or
operating results of the Company.
3.10 Changes.
To the
Knowledge of the Company after due inquiry, since December 31, 2004, there
has
not been:
(i) any
change in the assets, liabilities, financial condition or results of operations
of the Company or any of its Subsidiaries,
other
than changes in the ordinary course of business, or such changes that would
not
reasonably be expected to have a Material Adverse Effect on the Company;
(ii) any
resignation or termination of any senior officer of the Company; or
(iii) any
other
event or condition of any character that, either individually or cumulatively,
has had or is expected to have a Material Adverse Effect on the
Company.
3.11 Litigation.
There is
no action, suit, proceeding or investigation pending or, to the Company’s best
knowledge after due inquiry, currently threatened against or affecting the
Company, or any of its respective assets or properties, that will have a
Material Adverse Effect on the operation of the Company.
3.12 Compliance
with Laws. The
Company
is, and
at all times have been, in full compliance with any laws or regulations that
are
applicable to it or to the conduct or operation of its business or the ownership
or use of any of its assets, except for such non-compliance that, in the
aggregate, would not result in any Material Adverse Effect.
3.13 Taxes. All
material Tax Returns required to have been filed through and including the
date
hereof by the Company and its Subsidiaries have been filed, and each such Tax
Return is true, correct and complete in all material respects and reflects
the
liability for Taxes in all material respects. All Taxes shown on such Tax
Returns as due have been paid of the filing entity or entities for the relevant
period. To the Knowledge of the Company, there is no audit currently pending
against the Company or any of its Subsidiaries in respect of any Taxes. There
are no material Liens on any of the assets of the Company or any of its
Subsidiaries that arose in connection with any failure (or alleged failure)
to
pay any Tax, other than Liens for Taxes not yet due and payable. Each of the
Company and its Subsidiaries has withheld and paid all material Taxes required
to have been withheld and paid in connection with amounts paid or owing to
any
third party.
3.14 Disclosure.
No event
or circumstance has occurred or exists, nor is the Company in possession of
any
information, with respect to the Company or any of its Subsidiaries or its
or
their business, properties, prospects, operations or financial conditions,
which
has not been publicly announced or disclosed but under applicable law, rule
or
regulation, requires public disclosure or announcement by the Company (assuming
for this purpose that the Company's reports filed under the Exchange Act are
being incorporated into an effective registration statement filed by the Company
under the Securities Act).
3.15 No
Integrated Offering.
Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales of any security
or
solicited any offers to buy any security under circumstances that would require
registration under the Securities Act of the issuance of the Shares to the
Investor. The issuance of the Shares to the Investor will not be integrated
with
any other issuance of the Company's securities (past, current or future) for
purposes of any stockholder approval provisions applicable to the Company or
its
securities.
3.16 Title
to Property.
The
Company and its Subsidiaries have good and marketable title in fee simple to
all
real property and good and marketable title to all personal property owned
by
them which is material to the business of the Company and its Subsidiaries,
in
each case free and clear of all liens, encumbrances and defects, except such
as
are described in Schedule 4.20 or such as would not have a Material Adverse
Effect. Any real property and facilities held under lease by the Company and
its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as would not have a Material Adverse
Effect.
3.17.
Insurance.
The
Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the Company
nor
any such Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
3.18 Not Investment
Company.
The
Company is not, and upon the issuance and sale of the Securities as contemplated
by this Agreement will not be, an “investment company” required to be registered
under the Investment Company Act of 1940 (an “Investment
Company”).
The
Company is not controlled by an Investment Company.
3.19 No
Conflicts. The
execution and delivery of this Agreement by the Company do not, and the
consummation of the transactions contemplated hereby (in each case, with or
without the giving of notice or lapse of time, or both) will not, (i) violate
the provisions of any of the organizational documents of the Company or any
of
its Subsidiaries, (ii) assuming compliance with the matters referred to in
Section 3.7, violate or conflict with any Law, Authorization or Order applicable
to the Company or any of its Subsidiaries or (iii) result in the creation of
any
Liens upon any of the assets owned or used by the Company or any of its
Subsidiaries, except in the case of clauses (i) and (ii) above, where such
violation, default or conflict would not reasonably be excepted to have a
Material Adverse Effect. Section 3.29 of the Disclosure Schedule sets forth
a
list of all material agreements of the Company or any of its Subsidiaries
requiring the waiver, authorization, consent or approval, license, exemption,
notice, filing or registration of any Person to any of the transactions
contemplated hereby.
4. Representations
and Warranties of the Investors. The
Investor hereby represents and warrants to the Company that:
4.1 Authorization.
The
Investor has full power and authority to enter into this Agreement, and this
Agreement, when executed and delivered by the Investor, will constitute the
Investor’s valid and legally binding obligation, enforceable 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.
4.2 Investment
Intent. The
Investor is acquiring the Shares hereunder for its own account and with no
present intention of distributing or selling such Shares and further
acknowledges that it is legally obligated not to transfer such Shares in
violation of the Securities Act or any applicable state securities law, and
no
one other than the Investor has any beneficial interest in the Shares. The
Investor understands that the offer and sale by the Issuer of the Shares being
acquired by the Investor hereunder has not been registered under the Securities
Act by reason of their contemplated issuance in transactions exempt from the
registration and prospectus delivery requirements of the Securities Act pursuant
to Section 4(2) thereof, and that the reliance of the Issuer on such exemption
from registration is predicated in part on these representations and warranties
of the Investor. The Investor acknowledges that pursuant to Section 2.2 of
this
Agreement a restrictive legend consistent with the foregoing has been or will
be
placed on the certificates for the Shares.
4.3 Investor
Status.
The
Investor is either an “accredited investor” as such term is defined in Rule
501(a) of Regulation D under the Securities Act, or Investor
is not a “U.S. person” as such term is defined in Rule 902(k)(1) of Regulation S
under the Securities Act and
is
not acquiring Common Shares for the account or benefit of any U.S. person.
The
Investor has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of the investment to
be
made by it hereunder. The Investor has consulted with its own legal, tax and
business advisors regarding this transaction. The
Common Shares to be purchased by the Investor will be acquired for investment
purposes for the Investor’s own account, not as a nominee or agent, and not with
a view to the resale or distribution of any part thereof, and the Investor
has
no present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, the Investor further
represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the
securities.
4.4 Investment
Experience.
The
Investor is able to bear the economic risk of its investment and has such
knowledge and experience in financial or business matters that it is capable
of
evaluating the merits and risks of the investment in the Company.
4.5 Disclosure
of Information.
The
Investor has been furnished with access to all public information and filings
relating to the business, finances and operations of the Company which have
been
requested by the Investor
including without limitation, the documents listed on Exhibit
C,
which
have been received by Investor as part of an informational packet of materials
from the Issuer (the “Disclosure
Documents”).
The
Investor has been afforded the opportunity to ask questions of representatives
of the Company and have received answers to such questions, as the Investor
deems necessary in connection with its decision to subscribe for the Shares.
Notwithstanding the foregoing, each party
acknowledges and agrees that the foregoing shall not in any way limit,
reduce or affect the representations and warranties provided by the Company
in this Agreement.
4.6 Compliance
with Laws. The
Investor has complied or will comply with all applicable laws of its
jurisdiction in connection with the subscription of the securities pursuant
to
this Agreement and otherwise in connection with this Agreement, including (i)
the legal requirements within its jurisdiction for the purchase of the Shares;
(ii) any foreign exchange restrictions applicable to such purchase; (iii) any
governmental or other consents that may need to be obtained; and (iv) the income
tax and other consequences, if any, that may be relevant to the purchase,
holding, redemption, sale or transfer of the Shares. The Investor’s subscription
and payment for, and its beneficial ownership of, the Shares will not cause
Investor to violate any applicable security or other law of the Investor’s
jurisdiction.
4.7 Independent
Decision.
The
Investor is not relying on the Company or on any legal or other opinion in
the
materials reviewed by the Investor with respect to the financial or tax
considerations of the Investor relating to its investment in the Company. The
Investor has relied solely on the representations and warranties, covenants
and
agreements of the Company in this Agreement and on its examination and
independent investigation in making its decision to acquire the
Shares.
4.8 Commissions.
The
Investor has not incurred any obligation for any finder's or broker's or agent's
fees or commissions in connection with the transactions contemplated hereby
for
which the Company may be responsible.
5. Covenants
of the Company; Conditions of the Investor’s Obligations at Closing.
5.1 Covenants.
During
the time period from the effective date of this Agreement until the earlier
to
occur of (a) the Closing or (b) the termination of this Agreement in accordance
with Section 2.3, the Company covenants and agrees as follows:
A Advice
of Changes. The
Company will promptly advise Investor in writing of any (a) event that would
render any representation or warranty of the Company or any of its Subsidiaries
contained in this Agreement, if made on or as of the date of such event or
the
Closing Date, to be untrue or inaccurate, (b) any breach of any covenant or
obligation of the Company or any of its Subsidiaries pursuant to this
Agreement.
B No
Integration.
The
Company shall not make any offers or sales of any security (other than the
Shares) under circumstances that would require registration of the Shares being
offered or sold hereunder under the Securities Act or cause the offering of
Shares to be integrated with any other offering of securities by the Company
for
the purpose of any stockholder approval provision applicable to the Company
or
its securities.
C Disclosure
of Material Information.
In the
event that the Company comes into possession of any material non-public
information, the Company shall make full and complete public disclosure in
accordance with all applicable securities laws (including all common law
formulations thereof).
D Satisfaction
of Conditions Precedent.
The
Company will use its diligent efforts to satisfy or cause to be satisfied all
of
the conditions precedent which are set forth in Article 6, and the Company
will
use its diligent efforts to cause the transactions contemplated by this
Agreement to be consummated in accordance with the terms of this Agreement.
5.2
Conditions.
The
obligations of the Investor under Section 2.1 of this Agreement, unless
otherwise waived in writing by the Investor, are subject to the fulfillment
on
or before the Closing of each of the following conditions:
(i) Performance.
The
Company shall have performed and complied with all agreements, obligations
and
conditions contained in this Agreement that are required to be performed or
complied with by it on or before the Closing.
(ii) Qualifications.
The
Company shall have obtained all authorizations, approvals, waivers or permits
of
any competent Governmental Authority or regulatory body for the consummation
of
all of the transactions contemplated by this Agreement that are required in
connection with the lawful issuance and sale of the Shares pursuant to this
Agreement, and all such authorizations, approvals, waivers and permits shall
be
effective as of the Closing.
(iii) Due
Diligence.
The
Investor shall have completed and be satisfied, in its sole discretion, with
the
results of all business, legal and financial due diligence, and any items
requiring correction identified by the Investor shall have been corrected to
the
Investor’s reasonable satisfaction.
(iv) Proceedings
and Documents.
All
corporate and other proceedings in connection with the transactions contemplated
at the Closing and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Investor, and the Investor shall
have
received (i) all such counterpart original or other copies of such documents
as
it may reasonably request; and (ii) a certificate executed by a director of
the
Company on behalf of the Company, certifying the validity of all such
counterpart original or other copies of such documents as such Investor may
reasonably request.
(v) No
Litigation.
No
action, suit, proceeding, claim, arbitration or investigation shall have been
threatened or instituted prior to the Closing against the Company or any of
its
subsidiaries seeking to enjoin, challenge the validity of, or assert any
liability against any of them on account of, any transactions contemplated
by
this Agreement.
(vi) No
Material Adverse Change.
There
shall not have occurred prior to the Closing any event or transaction reasonably
likely to have a Material Adverse Effect.
(vii) Accuracy
of the Company's Representations and Warranties.
The
representations and warranties of the Company and its Subsidiaries set forth
in
Article 3 (a) that are qualified as to materiality will be true and correct
and
(b) that are not qualified as to materiality shall be true and correct in all
material respects, in each case as of the date when made and as of the Closing
with the same force and effect as if they had been made on the Closing Date
(except for any such representations or warranties that, by their terms, speak
only as of a specific date or dates, in which case such representations and
warranties that are qualified as to materiality shall be true and correct,
and
such representations and warranties that are not qualified as to materiality
shall be true and correct in all material respects, on and as of such specified
date or dates), and at the Closing the Investor will have received a certificate
to such effect executed by an officer of the Company.
(viii) Covenants.
The
Company will have performed and complied in all material respects with all
of
its covenants contained in Article 5 on or before the Closing (to the extent
that such covenants require performance by the Company on or before the
Closing), and at the Closing the Investor will have received a certificate
to
such effect signed by an officer of the Company.
(ix) Requisite
Approvals. This
Agreement will have been duly and validly approved and adopted by Company’s
Board of Directors in accordance with applicable law and the Company’s
Certificate of Incorporation and Bylaws, each as amended.
(x)
Other
Agreements. The
Registration Rights Agreement and Warrant Agreement have been duly executed
and
delivered by the Company.
6. Post-Closing
Covenants.
6.1 Put
Right.
(a)
If
the Investor wishes for the Company to repurchase the Shares, the Investor
shall
deliver to the Company, sixty days (60) prior to the Repurchase Date (as defined
below), a written notice to the Company and the Lock Box Agent (as defined
below) that the Investor wishes for the Shares to be repurchased. Thereafter,
on
the Repurchase Date, the Company shall repurchase all Shares purchased by the
Investor (including any Shares acquired through stock splits of such Shares
or
stock dividends on such Shares or otherwise by reference to such Shares)
at
a
price of $1.95 per Share (with such price being appropriately adjusted to
reflect any subdivision
of the Shares into a greater number of shares (by stock split, reclassification
or otherwise), or any combination or consolidation by reclassification or
otherwise, into a lesser number of shares)
(the
“Repurchase Price”). Such repurchase is referred to as the “Repurchase”.
The
Repurchase shall not cover any Shares sold by the Investor prior to the
Repurchase Date, either directly or indirectly through any forward sale or
derivative arrangement. The Repurchase Date shall be the date 18 months after
the date hereof (or, in the event such date is a holiday or weekend day in
New
York City, the previous day which is neither a holiday or a weekend day). The
Company shall cause the Lock-Box Agent to pay Investor the Repurchase Price
for
the Shares on the Repurchase Date by wire transfer in immediately available
funds to the account designated in Exhibit
D
of this
Agreement or to such other account specified by the Investor.
The
Company shall take all action necessary for it to have a legal source under
applicable law to make the Repurchase.
(b)
Lock-Box. Upon receipt of proceeds from assuming any debt obligations or the
issuance and/or sale of any debt or debt securities of the Company after the
Closing, the Company shall (i) enter into a lock-box agreement with a lock-box
agent (the “Lock-Box
Agent”)
and
the other investors who purchased Common Shares of the Company in connection
with the Offering, in substantially the form attached hereto as Exhibit
E
with
such changes as may be required by the Lock-Box Agent or such other reasonable
changes as mutually agreed to by the parties provided that such changes are
in
accordance with the terms of this Agreement (the “Lock
Box Agreement”)
and
(ii) deposit or cause to be deposited into an account (the “Lock
Box”)
a
sufficient amount to complete the Repurchase (as defined herein) from any
amounts it receives from assuming any debt obligations or the issuance and/or
sale of any debt or debt securities (the “Lock
Box Amount”)
to be
held for payment of the Company’s obligations under this Section 6.1. The
parties rights and obligations with respect to the Lock-Box shall be set forth
in the Lock-Box Agreement between the parties attached hereto as Exhibit
E.
(c)
Prohibition on Additional Put Rights. The Company shall not grant to any other
person any right to require the Company to purchase any equity security of
the
Company, any Company subsidiary or any other entity from such person without
the
prior consent of the Company.
6.2 Use
of Proceeds.
After
retaining an amount to be specified by the Company and the Investors for general
corporate purposes in the Company’s overseas bank account, the Company shall use
the balance of the proceeds from the Offering (the “Net
Proceeds”)
to
purchase a 51% equity interest in the alloy road joint venture with Baotou
Steel
(the “Alloy
Rod JV”).
7. Confidentiality.
Each
of
the parties agrees that it will keep confidential and will not disclose, divulge
or use for any purpose any confidential information obtained from the other
party pursuant to the terms of this Agreement, unless such confidential
information (i) is known or becomes known to the public in general (other than
as a result of a breach of this Section 7 by such party), (ii) is or has been
independently developed or conceived by either the Company or the Investor
without use of the confidential information of such other party or (iii) is
or
has been made known or disclosed to such party by a third party without a breach
of any obligation of confidentiality such third party may have to the Company
or
the Investor, as applicable; provided,
however,
that
the either the Company or the Investor may disclose confidential information
(a)
to its attorneys, accountants, consultants, and other professionals to the
extent necessary to obtain their services in connection with the transactions
contemplated by this Agreement, (b) to any prospective investor of any Shares
from the Investor as long as such prospective investor agrees to be bound by
the
provisions of this Section 7, (c) to any affiliate, partner, member, stockholder
or wholly-owned subsidiary of such party in the ordinary course of business,
or
(d) as may otherwise be required by law, provided that such party takes
reasonable steps to minimize the extent of any such required disclosure. The
Company acknowledges the Investor may review the business plans and related
proprietary information of many enterprises, including enterprises which may
have products or services which compete directly or indirectly with those of
the
Company. Nothing in this Agreement shall preclude or in any way restrict the
Investor from investing or participating in any particular enterprise whether
or
not such enterprise has products or services which compete with those of the
Company.
The
Company will treat this Agreement, and the transactions contemplated hereby,
and
the Investor’s relationship as a stockholder of the Company as confidential, and
will not issue disclose or otherwise provide any information regarding the
Investor without the prior written consent of the Investor.
7.1 Standstill
Agreement.
For
a
period of twelve (12) months from the Closing Date (the “Lock-Up
Period”),
the
Investor will not, without the prior written consent of the Company, directly
or
indirectly, offer, sell, contract to sell, pledge or otherwise dispose of,
enter
into any transaction which is designed to, or might reasonably be expected
to,
result in the disposition (whether by actual disposition or effective economic
disposition due to cash settlement or otherwise) by the Investor or any
affiliate of the Investor, file (or participate in the filing of) a registration
statement with the SEC or any comparable registration document with foreign
governmental entities, in respect of, make any demand for or exercise any right
with respect to registration of, or establish or increase a put equivalent
position or liquidate or decrease a call equivalent position within the meaning
of Section 16 of the Exchange Act, and the rules and regulations of the SEC
promulgated thereunder or any comparable law, rule or regulation outside of
the
United States with respect to, any of the Shares purchased hereunder, or
publicly announce an intention to effect any such transaction. Notwithstanding
the foregoing, this section shall not restrict: (i) the Investor’s exercise of
the Put Rights; (ii) the Investor’s acquisition of Common Stock of the Company
through open market purchases or otherwise; (iii) transfers of Shares or any
interest therein by the Investor by gift or charitable contribution; (iv)
distributions of Shares or any interest therein to its partners or other equity
owners; or (v) the Investor entering into a binding contract, the giving of
instructions or the adoption of a written plan by the Investor with respect
to
the disposition of Shares, in each case meeting the requirements of Rule 10b5-1
promulgated under the Securities Exchange Act of 1934, as amended, provided
that
such contract, instructions or plan does not permit any such dispositions prior
to the expiration of the Lock-Up Period.
7.2 Legally
Compelled Disclosure.
In
the
event that any party is requested or becomes legally compelled (including
without limitation, pursuant to securities laws and regulations) to disclose
Confidential Information in contravention of the provisions of this Section
7,
such party (the “Disclosing
Party”)
shall
provide the other parties hereto with prompt written notice of that fact and
shall consult with the other parties hereto regarding such disclosure. The
Disclosing Party shall, to the extent possible and with the cooperation and
reasonable efforts of the other parties, seek a protective order, confidential
treatment or other appropriate remedy. In such event, the Disclosing Party
shall
furnish only that portion of the information which is legally required and
shall
exercise reasonable efforts to obtain reliable assurance that confidential
treatment will be accorded such information.
8. Miscellaneous.
8.1 Survival
of Warranties.
The
warranties, representations and covenants contained in or made pursuant to
this
Agreement shall survive the execution and delivery of this Agreement and the
Closing, and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of any of the Investors or the
Company.
8.2 Indemnity.
The
Company agrees to indemnify and hold harmless the Investor and its successors
and assigns (each, an “Indemnitee”),
as
the case may be, against any and all claims, demands, suits, actions, causes
of
actions, losses, costs, damages, liabilities and expenses including, without
limitation, reasonable attorneys’ fees, other professionals’ and experts’
reasonable fees and court or arbitration costs (hereinafter collectively
referred to as “damages”) directly or indirectly incurred, resulting or and
arising out of any inaccuracy, misrepresentation, breach of, or default in,
any
of the representations, warranties or covenants given or made by the Company
in
this Agreement.
8.3 Indemnification
Procedures.
Each
Person entitled to indemnification under this Section (an "Indemnified
Party")
shall
give notice as promptly as reasonably practicable to each party required to
provide indemnification under this Section (an "Indemnifying
Party")
of any
action commenced against or by it in respect of which indemnity may be sought
hereunder, but failure to so notify an Indemnifying Party shall not relieve
such
Indemnifying Party from any liability that it may have otherwise than on account
of this indemnity agreement so long as such failure shall not have materially
prejudiced the position of the Indemnifying Party.
8.4
Limits of Settlement. The
Indemnifying Party shall not be liable for any settlement of any proceeding
effected without its written consent (which shall not be unreasonably withheld
or delayed by such Indemnifying Party), but if settled with such consent or
if
there be final judgment for the plaintiff, the Indemnifying Party shall
indemnify the Indemnified Party from and against any damages.
8.5 Notices.
Unless
otherwise provided, any notice required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given upon personal delivery
to the party to be notified, on the first day after the date sent by express
courier, or on the 10th
day
after the date mailed, by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated for such party
on
the signature page hereof, or at such other address as such party may designate
by ten (10) days' advance written notice to the other parties, or on the first
business day following the date of transmission by facsimile.
For
notices to the Company, the contact information is:
Xxxx
Xxxx
Chief
Financial Officer
10th
Flr., Block A Haitong Building
Xx.0
Xxxxxxxx Xxx.
Xxxxxxx
Xxxxxxxx, Xxxxxxx 000000
The
People’s Republic of China
Fax:
00-00-00000000
8.6 Governing
Law.
This
Agreement shall be governed by and construed under the laws of the State of
New
York, without regard to principles of conflicts of law thereunder.
8.7 [Intentionally
Omitted]
8.8 Expenses.
All
costs and expenses incurred by the Company and the Investor with respect to
the
negotiation, execution, delivery and performance of this Agreement and the
transactions contemplated hereby and thereby shall be born by the party
incurring them.
8.9 Amendments
and Waivers.
Any term
of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the Investor. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of any securities purchased under
this Agreement at the time outstanding (including securities into which such
securities are convertible), each future holder of all such securities, and
the
Company.
8.10 Successors
and Assigns.
Except
as otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
assigns of the parties hereto whose rights or obligations hereunder are affected
by such terms and conditions. This Agreement, and the rights and obligations
herein may be assigned by the Investor to any affiliate of the Investor, but
not
to any other person without the prior written consent of the Company. Nothing
in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
8.11 Severability. If
one or
more provisions of this Agreement are held to be unenforceable under applicable
law, such provision shall be excluded from this Agreement and the balance of
the
Agreement shall be interpreted as if such provision were so excluded and shall
be enforceable in accordance with its terms.
8.12 Entire
Agreement.
This
Agreement and the documents referred to herein, together with all schedules
and
exhibits hereto and thereto, constitute the entire agreement among the parties
and no party shall be liable or bound to any other party in any manner by any
warranties, representations, or covenants except as specifically set forth
herein or therein; provided,
however,
that
nothing in this Agreement shall be deemed to terminate or supersede the
provisions of any confidentiality and nondisclosure agreements executed by
the
parties hereto prior to the date of this Agreement, all of which agreements
shall continue in full force and effect until terminated in accordance with
their respective terms.
8.13 Titles
and Subtitles.
The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this
Agreement.
8.14 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
parties hereto have caused this Subscription Agreement to be duly executed
and
delivered as of the date set forth below.
| NAME OF INVESTOR: | ADDRESS FOR NOTICES (Please Print): |
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______________________________
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_______________________________________
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_______________________________________
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SIGNATURE:
|
_______________________________________
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Attention:_______________________________
|
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By:___________________________
|
Telecopy:_______________________________
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Name:
|
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Title:
|
Tax
Identification #:_______________________
|
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Exact
Name to appear on Stock Certificate:
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_______________________________________
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Number
of Shares Subscribed For:
|
______________________
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Purchase
Price (see Section 2.1): $______________________
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