SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE
AGREEMENT
Dated as of September 7, 2006
among
DOLCE VENTURES INC.
and
THE PURCHASERS LISTED ON EXHIBIT A
TABLE OF CONTENTS
PAGE
ARTICLE I Purchase and Sale of Preferred Stock....................................................................1
Section 1.1 Purchase and Sale of Stock and Warrants................................................1
Section 1.2 Regulation D...........................................................................1
Section 1.3 Conversion Shares......................................................................1
Section 1.4 Closing................................................................................2
Section 1.5 Share Exchange Transaction ............................................................2
ARTICLE II Representations and Warranties.........................................................................3
Section 2.1 Representations and Warranties of the Company..........................................3
Section 2.2 Representations and Warranties of the Purchasers......................................13
ARTICLE III Covenants............................................................................................16
Section 3.1 Securities Compliance.................................................................16
Section 3.2 Registration and Listing..............................................................16
Section 3.3 Compliance with Laws..................................................................16
Section 3.4 Keeping of Records and Books of Account...............................................17
Section 3.5 Reporting Requirements................................................................17
Section 3.6 Amendments............................................................................17
Section 3.7 Other Agreements......................................................................17
Section 3.8 Use of Proceeds.......................................................................18
Section 3.9 Reservation of Shares.................................................................18
Section 3.10 Transfer Agent Instructions...........................................................18
Section 3.11 Disposition of Assets.................................................................18
Section 3.12 Reporting Status......................................................................19
Section 3.13 Disclosure of Transaction ............................................................19
Section 3.14 Disclosure of Material Information....................................................19
Section 3.15 Pledge of Securities..................................................................19
Section 3.16 Form SB-2 Eligibility.................................................................19
Section 3.17 Board Observer Rights ................................................................20
Section 3.18 DTC...................................................................................20
Section 3.19 Investor and Public Relations.........................................................20
Section 3.20 Lock-Up Agreement.....................................................................20
Section 3.21 Revenue Targets ......................................................................20
Section 3.22 Adjustments for Issuance of Additional Shares ........................................21
Section 3.23 Subsequent Financings.................................................................21
ARTICLE IV Conditions............................................................................................22
Section 4.1 Conditions Precedent to the Obligation of the Company to Sell the Shares..............22
Section 4.2 Conditions Precedent to the Obligation of the Purchasers to Purchase the Shares.......23
ARTICLE V Stock Certificate Legend...............................................................................25
Section 5.1 Legend................................................................................25
ARTICLE VI Indemnification.......................................................................................27
Section 6.1 General Indemnity.....................................................................27
Section 6.2 Indemnification Procedure.............................................................27
ARTICLE VII Miscellaneous........................................................................................28
Section 7.1 Fees and Expenses.....................................................................28
Section 7.2 Specific Enforcement, Consent to Jurisdiction.........................................28
Section 7.3 Entire Agreement; Amendment...........................................................29
Section 7.4 Notices...............................................................................29
Section 7.5 Waivers...............................................................................30
Section 7.6 Headings..............................................................................29
Section 7.7 Successors and Assigns................................................................29
Section 7.8 No Third Party Beneficiaries..........................................................30
Section 7.9 Governing Law.........................................................................31
Section 7.10 Survival..............................................................................31
Section 7.11 Counterparts..........................................................................31
Section 7.12 Publicity.............................................................................31
Section 7.13 Severability..........................................................................31
Section 7.14 Further Assurances....................................................................31
ii
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
This SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the
"Agreement") is dated as of September 7, 2006 by and among Dolce Ventures, Inc.,
a Utah corporation (the "Company"), and each of the Purchasers of shares of
Series B Convertible Preferred Stock of the Company whose names are set forth on
Exhibit A hereto (individually, a "Purchaser" and collectively, the
"Purchasers").
The parties hereto agree as follows:
ARTICLE I
Purchase and Sale of Preferred Stock
Section 1.1 Purchase and Sale of Stock and Warrants. Subject to the
terms and conditions hereof and in consideration of and in express reliance upon
the representations, warranties, covenants, terms and conditions of this
Agreement, the Company agrees to issue and sell, for an aggregate purchase price
of $6,876,800 (the "Purchase Price"), to the Purchasers, and the Purchasers,
severally but not jointly, agree to purchase:
(i) the number of shares of the Company's Series B Convertible
Preferred Stock, par value $.001 per share and a purchase price of $2.74 per
share (the "Preferred Shares"), convertible into shares of the Company's common
stock, par value $.001 per share (the "Common Stock"), in the amounts set forth
opposite such Purchaser's name on Exhibit A hereto. The designation, rights,
preferences and other terms and provisions of the Series B Convertible Preferred
Stock are set forth in the Certificate of Designation of the Relative Rights and
Preferences of the Series B Convertible Preferred Stock attached hereto as
Exhibit B (the "Certificate of Designation"),
(ii) Series A Warrants, in substantially the form attached
hereto as Exhibit C-1 (the "Series A Warrants"), to purchase the number of
shares of Common Stock equal to one hundred percent (100%) of the number of
Preferred Shares purchased by each Purchaser pursuant to the terms of this
Agreement, as set forth opposite such Purchaser's name on Exhibit A hereto, and
(iii) Series B Warrants, in substantially the form attached
hereto as Exhibit C-2 (the "Series B Warrants"), to purchase the number of
shares of Common Stock equal to fifty percent (50%) of the number of Preferred
Shares purchased by each Purchaser pursuant to the terms of this Agreement, as
set forth opposite such Purchaser's name on Exhibit A hereto.
(iv) Series J Warrants, in substantially the form attached
hereto as Exhibit C-3 (the "Series J Warrants"), to purchase the number of
shares of Common Stock equal to one hundred percent (100%) of the number of
Preferred Shares purchased by each Purchaser pursuant to the terms of this
Agreement, as set forth opposite such Purchaser's name on Exhibit A hereto,
(v) Series C Warrants, in substantially the form attached
hereto as Exhibit C-4 (the "Series C Warrants"), to purchase the number of
shares of Common Stock equal to one hundred percent (100%) of the number of
Preferred Shares purchased by each Purchaser pursuant to the terms of this
Agreement, as set forth opposite such Purchaser's name on Exhibit A hereto, and
(vi) Series D Warrants, in substantially the form attached
hereto as Exhibit C-5 (the "Series D Warrants" and, together with the Series A
Warrants, the Series B Warrants, the Series J Warrants and the Series C
Warrants, the "Warrants"), to purchase the number of shares of Common Stock
equal to fifty percent (50%) of the number of Preferred Shares purchased by each
Purchaser pursuant to the terms of this Agreement, as set forth opposite such
Purchaser's name on Exhibit A hereto.
(b) Each of the Series A, Series B, Series C and Series D Warrants
shall expire five (5) years following the Closing Date (as defined in Section
1.3 below). The Series J Warrant shall expire one (1) year following the Closing
Date. Each of the Warrants shall have an exercise price per share equal to the
Warrant Price (as defined in the applicable Warrant).
Section 1.2 Regulation D. The Company and the Purchasers are
executing and delivering this Agreement in accordance with and in reliance upon
the exemption from securities registration afforded by Rule 506 of Regulation D
("Regulation D") as promulgated by the United States Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act") or Section 4(2) of the Securities Act.
Section 1.3 Conversion Shares. The Company has authorized and
has reserved and covenants to continue to reserve, free of preemptive rights and
other similar contractual rights of stockholders, such number of shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all of the Preferred Shares and exercise of the Warrants then outstanding.
Any shares of Common Stock issuable upon conversion of the Preferred Shares and
exercise of the Warrants (and such shares when issued) are herein referred to as
the "Conversion Shares" and the "Warrant Shares", respectively. The Preferred
Shares, the Conversion Shares and the Warrant Shares are sometimes collectively
referred to as the "Shares".
Section 1.4 Closing. The closing of the purchase and sale of the
Preferred Shares and the Warrants to be acquired by the Purchasers from the
Company under this Agreement shall take place at the offices of Xxxxxx Xxxxx
Xxxxxxxx & Xxxxxxx LLP ("KL"), 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx
00000 (the "Closing") at 10:00 a.m., New York time on or before September 7,
2006; provided, that all of the conditions set forth in Article IV hereof and
applicable to the Closing shall have been fulfilled or waived in accordance
herewith (the "Closing Date"). The Purchasers acknowledge and agree that the
Company may consummate the sale of additional Preferred Shares and Warrants to
other purchasers, on terms substantially similar to the terms of this Agreement
and the other Transaction Documents (as defined in Section 2.1(b) hereof), which
closing(s) shall occur no later than October 3, 2006, for an aggregate purchase
price of up to $5,923,200 and a per share purchase price of $2.74 (an
"Additional Series B Financing"). Subject to the terms and conditions of this
Agreement, at the Closing the Company shall deliver or cause to be delivered to
each Purchaser (x) a certificate for the number of Preferred Shares set forth
opposite the name of such Purchaser on Exhibit A hereto, (y) its Warrants to
purchase such number of shares of Common Stock as is set forth opposite the name
of such Purchaser on Exhibit A attached hereto and (z) any other documents
required to be delivered pursuant to Article IV hereof. At the Closing, each
Purchaser shall direct that KL, as escrow agent, deliver its Purchase Price by
wire transfer to an account designated by the Company. In addition, the parties
acknowledge that Five Hundred Thousand Dollars ($500,000) of the Purchase Price
funded on the Closing Date shall be deposited in a separate escrow account with
a separate escrow agent to be used by the Company in connection with investor
and public relations in accordance with Section 3.19 hereof.
Section 1.5 Share Exchange Transaction. The parties acknowledge that
immediately prior to the consummation of the transactions contemplated by this
Agreement, the Company will issue shares of its Series A Preferred Stock to the
shareholders of GAS Investment China Co. Ltd., a British Virgin Islands company,
pursuant to that certain Share Exchange Agreement dated as of the date hereof,
and upon the consummation of the transactions contemplated by such Share
Exchange Agreement, GAS Investment China Co. Ltd. will become a wholly-owned
subsidiary of the Company (the "Share Exchange Transaction").
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ARTICLE II
Representations and Warranties
Section 2.1 Representations and Warranties of the Company. The
Company hereby represents and warrants to the Purchasers, as of the date hereof
and the Closing Date (except as set forth on the Schedule of Exceptions attached
hereto with each numbered Schedule corresponding to the section number herein),
as follows:
(a) Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Utah and has the requisite corporate power to own, lease
and operate its properties and assets and to conduct its business as it is now
being conducted. The Company does not have any subsidiaries except as set forth
in the Company's Form 10-KSB for the year ended December 31, 2005, including the
accompanying financial statements (the "Form 10-KSB"), or in the Company's Form
10-QSB for the fiscal quarters ended June 30, 2006, March 31, 2006 and September
30, 2005 (collectively, the "Form 10-QSB"), or on Schedule 2.1(g) hereto. The
Company and each such subsidiary is duly qualified as a foreign corporation to
do business and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary except for any jurisdiction(s) (alone or in the aggregate) in which
the failure to be so qualified will not have a Material Adverse Effect (as
defined in Section 2.1(c) hereof) on the Company's financial condition.
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Registration Rights Agreement in the form attached hereto as Exhibit D (the
"Registration Rights Agreement"), the Lock-Up Agreement (as defined in Section
3.20 hereof) in the form attached hereto as Exhibit H, the Irrevocable Transfer
Agent Instructions (as defined in Section 3.10), the Certificate of Designation,
and the Warrants (collectively, the "Transaction Documents") and to issue and
sell the Shares and the Warrants in accordance with the terms hereof. The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate action, and no
further consent or authorization of the Company or its Board of Directors or
stockholders is required. This Agreement has been duly executed and delivered by
the Company. The other Transaction Documents will have been duly executed and
delivered by the Company at the Closing. Each of the Transaction Documents
constitutes, or shall constitute when executed and delivered, a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor's rights and remedies or by other
equitable principles of general application.
(c) Capitalization. The authorized capital stock of the Company and
the shares thereof currently issued and outstanding as of the date hereof are
set forth on Schedule 2.1(c) hereto. All of the outstanding shares of the Common
Stock and the Preferred Shares have been duly and validly authorized. Except as
set forth on Schedule 2.1(c) hereto, no shares of Common Stock are entitled to
preemptive rights or registration rights and there are no outstanding options,
warrants, scrip, rights to subscribe to, call or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company. There are no contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
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issue additional shares of the capital stock of the Company or options,
securities or rights convertible into shares of capital stock of the Company.
The Company is not a party to any agreement granting registration or
anti-dilution rights to any person with respect to any of its equity or debt
securities. The Company is not a party to, and it has no knowledge of, any
agreement restricting the voting or transfer of any shares of the capital stock
of the Company. The offer and sale of all capital stock, convertible securities,
rights, warrants, or options of the Company issued prior to the Closing complied
with all applicable Federal and state securities laws, and no stockholder has a
right of rescission or claim for damages with respect thereto which would have a
Material Adverse Effect (as defined below). The Company has furnished or made
available to the Purchasers true and correct copies of the Company's Articles of
Incorporation as in effect on the date hereof (the "Articles"), and the
Company's Bylaws as in effect on the date hereof (the "Bylaws"). For the
purposes of this Agreement, "Material Adverse Effect" means any material adverse
effect on the business, operations, properties, prospects, or financial
condition of the Company and its subsidiaries and/or any condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company to perform any of its obligations under this
Agreement in any material respect.
(d) Issuance of Shares. The Preferred Shares and the Warrants to be
issued at the Closing have been duly authorized by all necessary corporate
action and the Preferred Shares, when paid for or issued in accordance with the
terms hereof, shall be validly issued and outstanding, fully paid and
nonassessable and entitled to the rights and preferences set forth in the
Certificate of Designation. When the Conversion Shares and the Warrant Shares
are issued in accordance with the terms of the Certificate of Designation and
the Warrants, respectively, such shares will be duly authorized by all necessary
corporate action and validly issued and outstanding, fully paid and
nonassessable, and the holders shall be entitled to all rights accorded to a
holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated herein and therein do not and will not (i) violate any
provision of the Company's Articles or Bylaws, (ii) conflict with, or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, mortgage, deed of trust,
indenture, note, bond, license, lease agreement, instrument or obligation to
which the Company is a party or by which it or its properties or assets are
bound, (iii) create or impose a lien, mortgage, security interest, charge or
encumbrance of any nature on any property of the Company under any agreement or
any commitment to which the Company is a party or by which the Company is bound
or by which any of its respective properties or assets are bound, or (iv) result
in a violation of any federal, state, local or foreign statute, rule,
regulation, order, judgment or decree (including Federal and state securities
laws and regulations) applicable to the Company or any of its subsidiaries or by
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which any property or asset of the Company or any of its subsidiaries are bound
or affected, except, in all cases other than violations pursuant to clauses (i)
and (iv) above, for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect. The business of the Company and its
subsidiaries is not being conducted in violation of any laws, ordinances or
regulations of any governmental entity, except for possible violations which
singularly or in the aggregate do not and will not have a Material Adverse
Effect. The Company is not required under Federal, state or local law, rule or
regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under the Transaction
Documents, or issue and sell the Shares and the Warrants in accordance with the
terms hereof or thereof (other than any filings which may be required to be made
by the Company with the Commission or state securities administrators subsequent
to the Closing, any registration statement which may be filed pursuant hereto,
and the Certificate of Designation); provided that, for purposes of the
representation made in this sentence, the Company is assuming and relying upon
the accuracy of the relevant representations and agreements of the Purchasers
herein.
(f) Commission Documents, Financial Statements. The Common Stock is
registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of
1934, as amended the "Exchange Act"), and the Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the Commission pursuant to the reporting requirements of the Exchange
Act, including material filed pursuant to Section 13(a) or 15(d) of the Exchange
Act (all of the foregoing including filings incorporated by reference therein
being referred to herein as the "Commission Documents"). The Company has
delivered or made available to each of the Purchasers at the request of such
Purchaser true and complete copies of the Commission Documents. The Company has
not provided to the Purchasers any material non-public information or other
information which, according to applicable law, rule or regulation, was required
to have been disclosed publicly by the Company but which has not been so
disclosed, other than with respect to the transactions contemplated by this
Agreement. At the times of their respective filings, the Form 10-KSB and the
Form 10-QSB complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder and other federal, state and local laws, rules and regulations
applicable to such documents, and, as of their respective dates, none of the
Form 10-KSB and the Form 10-QSB contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of the
Company included in the Commission Documents comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the Commission or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
United States generally accepted accounting principles ("GAAP") applied on a
consistent basis 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 financial position of the Company and its subsidiaries as of the
dates thereof and the results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).
-5-
(g) Subsidiaries. Schedule 2.1(g) hereto sets forth each subsidiary
of the Company, showing the jurisdiction of its incorporation or organization
and showing the percentage of the Company's ownership. For the purposes of this
Agreement, "subsidiary" shall mean any corporation or other entity of which at
least a majority of the securities or other ownership interest having ordinary
voting power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other subsidiaries. All of the
outstanding shares of capital stock of each subsidiary directly and indirectly
held by the Company have been duly authorized and validly issued, and are fully
paid and nonassessable. Other than as contemplated by the Transaction Documents,
there are no outstanding preemptive, conversion or other rights, options,
warrants or agreements granted or issued by or binding upon any subsidiary for
the purchase or acquisition of any shares of capital stock of any subsidiary or
any other securities convertible into, exchangeable for or evidencing the rights
to subscribe for any shares of such capital stock. Other than as contemplated by
the Transaction Documents, neither the Company nor any subsidiary is subject to
any obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of the capital stock of any subsidiary or any convertible
securities, rights, warrants or options of the type described in the preceding
sentence. Neither the Company nor any subsidiary is party to, nor has any
knowledge of, any agreement restricting the voting or transfer of any shares of
the capital stock of any subsidiary.
(h) No Material Adverse Change. Since December 31, 2005, the Company
has not experienced or suffered any Material Adverse Effect.
(i) No Undisclosed Liabilities. Neither the Company nor any of its
subsidiaries has any liabilities, obligations, claims or losses (whether
liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent
or otherwise) other than those incurred in the ordinary course of the Company's
or its subsidiaries respective businesses since December 31, 2005 and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect on the Company or its subsidiaries.
(j) No Undisclosed Events or Circumstances. To the Company's
knowledge, no event or circumstance has occurred or exists with respect to the
Company or its subsidiaries or their respective businesses, properties,
prospects, operations or financial condition, which, under applicable law, rule
or regulation, requires public disclosure or announcement by the Company but
which has not been so publicly announced or disclosed.
(k) Indebtedness. The Form 10-KSB, Form 10-QSB and the financials
statements of Beijing Zhong Ran Wei Ye Gas Co., Ltd. ("Beijing Gas") for the six
months ended June 30, 2006 and the fiscal years ended December 31, 2005 and
2004, sets forth as of the dates and periods indicated on such form and
financial statements, all outstanding secured and unsecured Indebtedness of the
Company or any subsidiary, or for which the Company or any subsidiary has
commitments. For the purposes of this Agreement, "Indebtedness" shall mean (a)
any liabilities for borrowed money or amounts owed in excess of $100,000 (other
than trade accounts payable incurred in the ordinary course of business), (b)
all guaranties, endorsements and other contingent obligations in respect of
Indebtedness of others, whether or not the same are or should be reflected in
-6-
the Company's balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value of
any lease payments in excess of $25,000 due under leases required to be
capitalized in accordance with GAAP. Except as set forth on Schedule 2.1(k),
neither the Company nor any subsidiary is in default with respect to any
Indebtedness.
(l) Title to Assets. Each of the Company and the subsidiaries has
good and marketable title to, or valid leasehold interest in, free and clear of
all mortgages, pledges, charges, liens, security interests or other
encumbrances, all properties and assets (i) purportedly owned or used by them as
reflected in the Form 10-KSB, or (ii) or necessary for the conduct of their
business as currently conducted, except for those disclosed in the Form 10-KSB
or such that, individually or in the aggregate, do not cause a Material Adverse
Effect.
(m) Actions Pending. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or any other proceeding
pending or, to the knowledge of the Company, threatened against the Company or
any subsidiary which questions the validity of this Agreement or any of the
other Transaction Documents or the transactions contemplated hereby or thereby
or any action taken or to be taken pursuant hereto or thereto. There is no
action, suit, claim, investigation, arbitration, alternate dispute resolution
proceeding or any other proceeding pending or, to the knowledge of the Company,
threatened, against or involving the Company, any subsidiary or any of their
respective properties or assets. There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, arbitrator or governmental or
regulatory body against the Company or any subsidiary or any executive officers
or directors of the Company or subsidiary in their capacities as such.
(n) Compliance with Law. The business of the Company and the
subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except for such noncompliance that, individually or in the
aggregate, would not cause a Material Adverse Effect. The Company and each of
its subsidiaries have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it unless the failure to
possess such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
(o) Taxes. The Company and each of the subsidiaries has accurately
prepared and filed all federal, state and other tax returns required by law to
be filed by it, has paid or made provisions for the payment of all taxes shown
to be due and all additional assessments, and adequate provisions have been and
are reflected in the financial statements of the Company and the subsidiaries
for all current taxes and other charges to which the Company or any subsidiary
is subject and which are not currently due and payable. None of the federal
income tax returns of the Company or any subsidiary have been audited by the
Internal Revenue Service. The Company has no knowledge of any additional
assessments, adjustments or contingent tax liability (whether federal or state)
of any nature whatsoever, whether pending or threatened against the Company or
any subsidiary for any period, nor of any basis for any such assessment,
adjustment or contingency.
-7-
(p) Certain Fees. Except as set forth on Schedule 2.1(p) hereto, no
brokers, finders or financial advisory fees or commissions will be payable by
the Company or any subsidiary or any Purchaser with respect to the transactions
contemplated by this Agreement.
(q) Disclosure. Except as set forth on Schedule 2.1(q) hereto,
neither this Agreement or the Schedules hereto nor any other documents,
certificates or instruments furnished to the Purchasers by or on behalf of the
Company or any subsidiary in connection with the transactions contemplated by
this Agreement contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made herein or
therein, in the light of the circumstances under which they were made herein or
therein, not false or misleading.
(r) Operation of Business. The Company and each of the subsidiaries
owns or possesses all patents, trademarks, domain names (whether or not
registered) and any patentable improvements or copyrightable derivative works
thereof, websites and intellectual property rights relating thereto, service
marks, trade names, copyrights, licenses and authorizations as set forth in the
Form 10-KSB, and all rights with respect to the foregoing, which are necessary
for the conduct of its business as now conducted without any conflict with the
rights of others, except where the failure to so own or possess would not have a
Material Adverse Effect.
(s) Environmental Compliance. Since their inception, neither the
Company, nor any of its subsidiaries have been, in violation of any applicable
law relating to the environment or occupational health and safety, where such
violation would have a material adverse effect on the business or financial
condition of any of the Company and its Subsidiaries. Each of Company and its
Subsidiaries has operated all facilities and properties owned, leased or
operated by it in material compliance with the Environmental Laws. As used
herein, "Environmental Laws" means all applicable laws governing, regulating or
otherwise affecting the environment, health or safety.
(t) Books and Record Internal Accounting Controls. The books and
records of the Company and its subsidiaries accurately reflect in all material
respects the information relating to the business of the Company and the
subsidiaries, the location and collection of their assets, and the nature of all
transactions giving rise to the obligations or accounts receivable of the
Company or any subsidiary. The Company and each of its subsidiaries maintain a
system of internal accounting controls sufficient, in the judgment of the
Company, to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
actions is taken with respect to any differences.
(u) Material Agreements. The Company and each of its subsidiaries
has in all material respects performed all the obligations required to be
performed by them to date under any written or oral contract, instrument,
agreement, commitment, obligation, plan or arrangement (a copy of which would be
required to be filed with the Commission as an exhibit to a registration
-8-
statement on Form S-3 or applicable form if the Company or any subsidiary were
registering securities under the Securities Act), have received no notice of
default and are not in default under any such agreement now in effect, the
result of which could cause a Material Adverse Effect. Except as restricted
under applicable laws and regulations, the incorporation documents, certificates
of designations or the Transaction Documents, no written or oral contract,
instrument, agreement, commitment, obligation, plan or arrangement of the
Company or of any subsidiary limits or shall limit the payment of dividends on
the Preferred Shares, the Company's other preferred stock, if any, or its Common
Stock.
(v) Transactions with Affiliates. Except as set forth in the
Commission Documents, there are no loans, leases, agreements, contracts, royalty
agreements, management contracts or arrangements or other continuing
transactions between (a) the Company or any subsidiary on the one hand, and (b)
on the other hand, any officer, employee, consultant or director of the Company,
or any of its subsidiaries, or any person owning any capital stock of the
Company or any subsidiary or any member of the immediate family of such officer,
employee, consultant, director or stockholder or any corporation or other entity
controlled by such officer, employee, consultant, director or stockholder, or a
member of the immediate family of such officer, employee, consultant, director
or stockholder.
(w) Securities Act of 1933. Based in material part upon the
representations herein of the Purchasers, the Company has complied and will
comply with all applicable federal and state securities laws in connection with
the offer, issuance and sale of the Shares and the Warrants hereunder. Neither
the Company nor anyone acting on its behalf, directly or indirectly, has or will
sell, offer to sell or solicit offers to buy any of the Shares, the Warrants or
similar securities to, or solicit offers with respect thereto from, or enter
into any preliminary conversations or negotiations relating thereto with, any
person, or has taken or will take any action so as to bring the issuance and
sale of any of the Shares and the Warrants in violation of the registration
provisions of the Securities Act and applicable state securities laws. Neither
the Company nor any of its affiliates, nor any person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the Securities Act) in connection with
the offer or sale of any of the Shares and the Warrants.
(x) Governmental Approvals. Except for the filing of any notice
prior or subsequent to the Closing Date that may be required under applicable
state and/or Federal securities laws (which if required, shall be filed on a
timely basis) of the United States and/or applicable laws of the People's
Republic of China, including, without limitation, the filing of a Form D, a
current report on Form 8-K, a registration statement or statements pursuant to
the Registration Rights Agreement, and the filing of the Certificate of
Designation with the Secretary of State for the State of Utah, no authorization,
consent, approval, license, exemption of, filing or registration with any court
or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary for, or in
connection with, the execution or delivery of the Preferred Shares and the
Warrants, or for the performance by the Company of its obligations under the
Transaction Documents.
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(y) Employees; Labor Relations. Neither the Company nor any
subsidiary has any collective bargaining arrangements or agreements covering any
of its employees, except as set forth on Schedule 2.1(y) hereto and as disclosed
in the Commission Documents. Except as set forth on Schedule 2.1(y) hereto and
as disclosed in the Commission Documents, neither the Company nor any subsidiary
has any employment contract, agreement regarding proprietary information,
non-competition agreement, non-solicitation agreement, confidentiality
agreement, or any other similar contract or restrictive covenant, relating to
the right of any officer, employee or consultant to be employed or engaged by
the Company or such subsidiary required to be disclosed in the Commission
Documents that is not so disclosed. Since December 31, 2005, no officer,
consultant or key employee of the Company or any subsidiary whose termination,
either individually or in the aggregate, would be reasonably likely to have a
Material Adverse Effect, has terminated or, to the knowledge of the Company, has
any present intention of terminating his or her employment or engagement with
the Company or any subsidiary. Except as could not reasonably be expected to
have a Material Adverse Effect, (i) neither the Company nor any of its
Subsidiaries is engaged in any unfair labor practice, (ii) there is no strike,
labor dispute, slowdown or stoppage pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries, and (iii) neither the
Company nor any of its Subsidiaries is a party to any collective bargaining
agreement or contract.
(z) Absence of Certain Developments. Except as may be disclosed in
the Commission Documents, since December 31, 2005, neither the Company nor any
subsidiary has:
(i) issued any stock, bonds or other corporate securities or
any rights, options or warrants with respect thereto;
(ii) borrowed any amount or incurred or become subject to any
liabilities (absolute or contingent) except current liabilities incurred in the
ordinary course of business which are comparable in nature and amount to the
current liabilities incurred in the ordinary course of business during the
comparable portion of its prior fiscal year, as adjusted to reflect the current
nature and volume of the Company's or such subsidiary's business;
(iii) discharged or satisfied any lien or encumbrance or paid
any obligation or liability (absolute or contingent), other than current
liabilities paid in the ordinary course of business;
(iv) declared or made any payment or distribution of cash or
other property to stockholders with respect to its stock, or purchased or
redeemed, or made any agreements so to purchase or redeem, any shares of its
capital stock;
(v) sold, assigned or transferred any other tangible assets,
or canceled any debts or claims, except in the ordinary course of business;
(vi) sold, assigned or transferred any patent rights,
trademarks, trade names, copyrights, trade secrets or other intangible assets or
intellectual property rights, or disclosed any proprietary confidential
information to any person except to customers in the ordinary course of business
or to the Purchasers or their representatives;
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(vii) suffered any substantial losses or waived any rights of
material value, whether or not in the ordinary course of business, or suffered
the loss of any material amount of prospective business;
(viii) made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor that
aggregate in excess of $100,000;
(x) entered into any other transaction other than in the
ordinary course of business, or entered into any other material transaction,
whether or not in the ordinary course of business;
(xi) made charitable contributions or pledges in excess of
$25,000;
(xii) suffered any material damage, destruction or casualty
loss, whether or not covered by insurance;
(xiii) experienced any material problems with labor or
management in connection with the terms and conditions of their employment;
(xiv) effected any two or more events of the foregoing kind
which in the aggregate would be material to the Company or its subsidiaries; or
(xv) entered into an agreement, written or otherwise, to take
any of the foregoing actions.
(aa) Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon the Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
(bb) ERISA. No liability to the Pension Benefit Guaranty Corporation
has been incurred with respect to any Plan (as defined below) by the Company or
any of its subsidiaries which is or would be materially adverse to the Company
and its subsidiaries. The execution and delivery of this Agreement and the
issuance and sale of the Preferred Shares will not involve any transaction which
is subject to the prohibitions of Section 406 of ERISA or in connection with
which a tax could be imposed pursuant to Section 4975 of the Internal Revenue
Code of 1986, as amended, provided that, if any of the Purchasers, or any person
or entity that owns a beneficial interest in any of the Purchasers, is an
"employee pension benefit plan" (within the meaning of Section 3(2) of ERISA)
with respect to which the Company is a "party in interest" (within the meaning
of Section 3(14) of ERISA), the requirements of Sections 407(d)(5) and 408(e) of
ERISA, if applicable, are met. As used in this Section 2.1(ac), the term "Plan"
shall mean an "employee pension benefit plan" (as defined in Section 3 of ERISA)
which is or has been established or maintained, or to which contributions are or
have been made, by the Company or any subsidiary or by any trade or business,
whether or not incorporated, which, together with the Company or any subsidiary,
is under common control, as described in Section 414(b) or (c) of the Code.
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(cc) Dilutive Effect. The Company understands and acknowledges that
its obligation to issue Conversion Shares upon conversion of the Preferred
Shares in accordance with this Agreement and the Certificate of Designation and
its obligations to issue the Warrant Shares upon the exercise of the Warrants in
accordance with this Agreement and the Warrants, is, in each case, absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interest of other stockholders of the Company.
(dd) 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 cause the offering of the Shares
pursuant to this Agreement to be integrated with prior offerings by the Company
for purposes of the Securities Act which would prevent the Company from selling
the Shares pursuant to Rule 506 under the Securities Act, or any applicable
exchange-related stockholder approval provisions, nor will the Company or any of
its affiliates or subsidiaries take any action or steps that would cause the
offering of the Shares to be integrated with other offerings. The Company does
not have any registration statement pending before the Commission or currently
under the Commission's review and since February 1, 2006, the Company has not
offered or sold any of its equity securities or debt securities convertible into
shares of Common Stock.
(ee) Xxxxxxxx-Xxxxx Act. The Company is in compliance with the
applicable provisions of the Xxxxxxxx-Xxxxx Act of 2002 (the "Xxxxxxxx-Xxxxx
Act"), and the rules and regulations promulgated thereunder, that are effective,
and intends to comply with other applicable provisions of the Xxxxxxxx-Xxxxx
Act, and the rules and regulations promulgated thereunder, upon the
effectiveness of such provisions.
(ff) Independent Nature of Purchasers. The Company acknowledges that
the obligations of each Purchaser under the Transaction Documents are several
and not joint with the obligations of any other Purchaser, and no Purchaser
shall be responsible in any way for the performance of the obligations of any
other Purchaser under the Transaction Documents. The Company acknowledges that
the decision of each Purchaser to purchase securities pursuant to this Agreement
has been made by such Purchaser independently of any other purchase and
independently of any information, materials, statements or opinions as to the
business, affairs, operations, assets, properties, liabilities, results of
operations, condition (financial or otherwise) or prospects of the Company or of
its Subsidiaries which may have made or given by any other Purchaser or by any
agent or employee of any other Purchaser, and no Purchaser or any of its agents
or employees shall have any liability to any Purchaser (or any other person)
relating to or arising from any such information, materials, statements or
opinions. The Company acknowledges that nothing contained herein, or in any
Transaction Document, and no action taken by any Purchaser pursuant hereto or
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
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presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents. The Company acknowledges that each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose. The Company
acknowledges that for reasons of administrative convenience only, the
Transaction Documents have been prepared by counsel for one of the Purchasers
and such counsel does not represent all of the Purchasers but only such
Purchaser and the other Purchasers have retained their own individual counsel
with respect to the transactions contemplated hereby. The Company acknowledges
that it has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by the Purchasers.
(gg) Transfer Agent. The name, address, telephone number, fax
number, contact person and email address of the Company's current transfer agent
is set forth on Schedule 2.1(gg) hereto.
Section 2.2 Representations and Warranties of the Purchasers. Each
of the Purchasers hereby makes the following representations and warranties to
the Company with respect solely to itself and not with respect to any other
Purchaser:
(a) Organization and Standing of the Purchasers. If the Purchaser is
an entity, such Purchaser is a corporation or partnership duly incorporated or
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization.
(b) Authorization and Power. Each Purchaser has the requisite power
and authority to enter into and perform this Agreement and each of the other
Transaction Documents to which such Purchaser is a party, and to purchase the
Preferred Shares and Warrants being sold to it hereunder. The execution,
delivery and performance of this Agreement and each of the other Transaction
Documents to which such Purchaser is a party, by such Purchaser and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate or partnership action, and no further
consent or authorization of such Purchaser or its Board of Directors,
stockholders, or partners, as the case may be, is required. Each of the
Transaction Documents to which such Purchaser is a party has been duly
authorized, executed and delivered by such Purchaser and constitutes, or shall
constitute when executed and delivered, a valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with the terms
thereof.
(c) No Conflicts. The execution, delivery and performance of this
Agreement and each of the other Transaction Documents to which such Purchaser is
a party and the consummation by such Purchaser of the transactions contemplated
hereby and thereby or relating hereto do not and will not (i) result in a
violation of such Purchaser's charter documents or bylaws or other
organizational documents or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument or obligation to which
such Purchaser is a party or by which its properties or assets are bound, or
result in a violation of any law, rule, or regulation, or any order, judgment or
decree of any court or governmental agency applicable to such Purchaser or its
properties (except for such conflicts, defaults and violations as would not,
-13-
individually or in the aggregate, have a material adverse effect on such
Purchaser). Such Purchaser is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement or each of the other Transaction Documents to which such
Purchaser is a party or to purchase the Preferred Shares or acquire the Warrants
in accordance with the terms hereof, provided that for purposes of the
representation made in this sentence, such Purchaser is assuming and relying
upon the accuracy of the relevant representations and agreements of the Company
herein.
(d) Acquisition for Investment. Each Purchaser is acquiring the
Preferred Shares and the Warrants solely for its own account for the purpose of
investment and not with a view to or for sale in connection with distribution.
Each Purchaser does not have a present intention to sell the Preferred Shares or
the Warrants, nor a present arrangement (whether or not legally binding) or
intention to effect any distribution of the Preferred Shares or the Warrants to
or through any person or entity; provided, however, that by making the
representations herein and subject to Section 2.2(h) below, such Purchaser does
not agree to hold the Shares or the Warrants for any minimum or other specific
term and reserves the right to dispose of the Shares or the Warrants at any time
in accordance with Federal and state securities laws applicable to such
disposition. Each Purchaser acknowledges that it is able to bear the financial
risks associated with an investment in the Preferred Shares and the Warrants and
that it has been given full access to such records of the Company and the
subsidiaries and to the officers of the Company and the subsidiaries and
received such information as it has deemed necessary or appropriate to conduct
its due diligence investigation and has sufficient knowledge and experience in
investing in companies similar to the Company in terms of the Company's stage of
development so as to be able to evaluate the risks and merits of its investment
in the Company. Each Purchaser further acknowledges that such Purchaser
understands the risks of investing in companies domiciled and/or which operate
primarily in the People's Republic of China and that the purchase of the Shares
and Warrants involves substantial risks.
(e) Status of Purchasers. Such Purchaser is an "accredited investor"
as defined in Regulation D promulgated under the Securities Act. Such Purchaser
is not required to be registered as a broker-dealer under Section 15 of the
Exchange Act and such Purchaser is not a broker-dealer.
(f) Disclosure of Information. Each Purchaser hereby specifically
acknowledges that such Purchaser has been provided a copy of the document
attached hereto as Exhibit G (the "Disclosure Document"), and has reviewed and
fully understands the information contained in the Disclosure Document,
including, without limitation, the risks associated in making an investment in
the Company and its business. Each Purchaser acknowledges that such Purchaser
has had full access to all the information it considers necessary or appropriate
to make an informed investment decision with respect to the Shares and Warrants
to be purchased under this Agreement. Each Purchaser further acknowledges that
such Purchaser has had the opportunity to ask questions of and receive answers
from, or obtain additional information from, the executive officers of the
Company concerning the financial and other affairs of the Company and each of
-14-
its subsidiaries, and to the extent deemed necessary in light of such
Purchaser's personal knowledge of the affairs of the Company and each of its
subsidiaries, such Purchaser has asked such questions and received answers to
the full satisfaction of such Purchaser, and such Purchaser desires to invest in
the Company. In making the decision to invest in the Company and its business,
each Purchaser hereby specifically acknowledges that such Purchaser relied
solely on the Disclosure Document and has not relied on any oral representation
made by the Company, or any subsidiary or any officer, director, employee or
agent of any of them.
(g) No General Solicitation. Each Purchaser acknowledges that the
Preferred Shares and the Warrants were not offered to such Purchaser by means of
any form of general or public solicitation or general advertising, or publicly
disseminated advertisements or sales literature, including (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media, or broadcast over television or radio, or
(ii) any seminar or meeting to which such Purchaser was invited by any of the
foregoing means of communications.
(h) Rule 144. Such Purchaser understands that the Shares must be
held indefinitely unless such Shares are registered under the Securities Act or
an exemption from registration is available. Such Purchaser acknowledges that
such Purchaser is familiar with Rule 144 of the rules and regulations of the
Commission, as amended, promulgated pursuant to the Securities Act ("Rule 144"),
and that such person has been advised that Rule 144 permits resales only under
certain circumstances. Such Purchaser understands that to the extent that Rule
144 is not available, such Purchaser will be unable to sell any Shares without
either registration under the Securities Act or the existence of another
exemption from such registration requirement.
(i) No Registration. Other than as contemplated herein and in the
Registration Rights Agreement, such Purchaser understands that the Conversion
Shares and the Warrants Shares have not been registered under the Securities Act
or any state securities laws. Such Purchaser understands that the Shares are
being offered and sold in reliance on a transactional exemption from the
registration requirement of Federal and state securities laws and the Company is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of such Purchaser set forth
herein in order to determine the applicability of such exemptions and the
suitability of such Purchaser to acquire the Shares.
(j) Independent Investment. Except as may be disclosed in any
filings with the Commission by the Purchasers under Section 13 and/or Section 16
of the Exchange Act, no Purchaser has agreed to act with any other Purchaser for
the purpose of acquiring, holding, voting or disposing of the Shares purchased
hereunder for purposes of Section 13(d) under the Exchange Act, and each
Purchaser is acting independently with respect to its investment in the Shares.
ARTICLE III
Covenants
The Company covenants with each of the Purchasers as follows, which
covenants are for the benefit of the Purchasers and their permitted assignees
(as defined herein).
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Section 3.1 Securities Compliance. The Company shall notify the
Commission in accordance with their rules and regulations, of the transactions
contemplated by any of the Transaction Documents, including filing a Form D with
respect to the Preferred Shares, Warrants, Conversion Shares and Warrant Shares
as required under Regulation D, filing of a current report on Form 8-K, and
shall take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Preferred Shares, the Warrants, the Conversion Shares and the
Warrant Shares to the Purchasers or subsequent holders.
Section 3.2 Registration and Listing. The Company shall cause its
Common Stock to continue to be registered under Sections 12(b) or 12(g) of the
Exchange Act, to comply in all respects with its reporting and filing
obligations under the Exchange Act, to comply with all requirements related to
any registration statement filed pursuant to this Agreement, and to not take any
action or file any document (whether or not permitted by the Securities Act or
the rules promulgated thereunder) to terminate or suspend such registration or
to terminate or suspend its reporting and filing obligations under the Exchange
Act or Securities Act, except as permitted herein. The Company will take all
action necessary to continue the quotation of its Common Stock on the OTC
Bulletin Board or other exchange or market on which the Common Stock is trading.
Subject to the terms of the Transaction Documents, the Company further covenants
that it will take such further action as the Purchasers may reasonably request,
all to the extent required from time to time to enable the Purchasers to sell
the Shares without registration under the Securities Act within the limitation
of the exemptions provided by Rule 144 promulgated under the Securities Act.
Upon the request of the Purchasers, the Company shall deliver to the Purchasers
a written certification of a duly authorized officer as to whether it has
complied with such requirements.
Section 3.3 Compliance with Laws. The Company shall comply, and
cause each subsidiary to comply, with all applicable laws, rules, regulations
and orders, noncompliance with which could have a Material Adverse Effect.
Section 3.4 Keeping of Records and Books of Account. The Company
shall keep and cause each subsidiary to keep adequate records and books of
account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company and
its subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section 3.5 Reporting Requirements. If the Commission ceases making
periodic reports filed under the Exchange Act available via the Internet, then
at a Purchaser's request the Company shall furnish the following to such
Purchaser so long as such Purchaser shall be obligated hereunder to purchase the
Preferred Shares or shall beneficially own any Shares:
(a) Quarterly Reports filed with the Commission on Form 10-QSB as
soon as practical after the document is filed with the Commission, and in any
event within five (5) days after the document is filed with the Commission;
-16-
(b) Annual Reports filed with the Commission on Form 10-KSB as soon
as practical after the document is filed with the Commission, and in any event
within five (5) days after the document is filed with the Commission; and
(c) Copies of all notices and information, including without
limitation notices and proxy statements in connection with any meetings, that
are provided to holders of shares of Common Stock, contemporaneously with the
delivery of such notices or information to such holders of Common Stock.
Section 3.6 Amendments. The Company shall not amend or waive any
provision of the Articles or Bylaws of the Company in any way that would
adversely affect the liquidation preferences, dividends rights, conversion
rights, voting rights or redemption rights of the Preferred Shares; provided,
however, that while the Preferred Shares are outstanding, any creation and
issuance of another series of Junior Stock (as defined in the Certificate of
Designation) or any other class or series of equity securities which by its
terms shall rank on parity with the Preferred Shares shall not be deemed to
materially and adversely affect such rights, preferences or privileges.
Section 3.7 Other Agreements. The Company shall not enter into any
agreement in which the terms of such agreement would restrict or impair the
right or ability to perform of the Company or any subsidiary under any
Transaction Document.
Section 3.8 Use of Proceeds. The net proceeds from the sale of the
Shares hereunder and any cash exercise of the Warrants issued hereunder shall be
used by the Company for capital expenditures on tangible assets and gas
distribution rights and land rights and not to redeem any Common Stock or
securities convertible, exercisable or exchangeable into Common Stock or to
settle any outstanding litigation. The proceeds of the sale of the Shares
hereunder shall be used as set forth on Schedule 3.8 hereto. In addition, the
Company shall provide to VOMF monthly reports detailing how such proceeds have
been used by the Company.
Section 3.9 Reservation of Shares. So long as any of the Preferred
Shares or Warrants remain outstanding, the Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, such number of shares of Common Stock as sufficient to provide for the
issuance of the Conversion Shares and the Warrant Shares.
Section 3.10 Transfer Agent Instructions. The Company shall issue
irrevocable instructions to its transfer agent, and any subsequent transfer
agent, to issue certificates, registered in the name of each Purchaser or its
respective nominee(s), for the Conversion Shares and the Warrant Shares in such
amounts as specified from time to time by each Purchaser to the Company upon
conversion of the Preferred Shares or exercise of the Warrants in the form of
Exhibit E attached hereto (the "Irrevocable Transfer Agent Instructions"). Prior
to registration of the Conversion Shares and the Warrant Shares under the
Securities Act, all such certificates shall bear the restrictive legend
specified in Section 5.1 of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 3.10 will be given by the Company to its transfer agent and that
the Shares shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the Registration
Rights Agreement. If a Purchaser provides the Company with an opinion of
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counsel, in a generally acceptable form, to the effect that a public sale,
assignment or transfer of the Shares may be made without registration under the
Securities Act or the Purchaser provides the Company with reasonable assurances
that the Shares can be sold pursuant to Rule 144 without any restriction as to
the number of securities acquired as of a particular date that can then be
immediately sold, the Company shall permit the transfer, and, in the case of the
Conversion Shares and the Warrant Shares, promptly instruct its transfer agent
to issue one or more certificates in such name and in such denominations as
specified by such Purchaser and without any restrictive legend. The Company
acknowledges that a breach by it of its obligations under this Section 3.10 will
cause irreparable harm to the Purchasers by vitiating the intent and purpose of
the transaction contemplated hereby. Accordingly, the Company acknowledges that
the remedy at law for a breach of its obligations under this Section 3.10 will
be inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 3.10, that the Purchasers shall be
entitled, in addition to all other available remedies, to an order and/or
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
Section 3.11 Disposition of Assets. So long as the Preferred Shares
remain outstanding, neither the Company nor any subsidiary shall sell, transfer
or otherwise dispose of any of its properties, assets and rights including,
without limitation, its software and intellectual property, to any person except
for sales to customers in the ordinary course of business or with the prior
written consent of the holders of a majority of the Preferred Shares then
outstanding.
Section 3.12 Reporting Status. So long as a Purchaser beneficially
owns any of the Shares, the Company shall timely file all reports required to be
filed with the Commission pursuant to the Exchange Act, and the Company shall
not terminate its status as an issuer required to file reports under the
Exchange Act even if the Exchange Act or the rules and regulations thereunder
would permit such termination.
Section 3.13 Disclosure of Transaction. The Company shall issue a
press release describing the material terms of the transactions contemplated
hereby (the "Press Release") as soon as practicable after the Closing but in no
event later than 9:00 A.M. Eastern Time on the first Trading Day following such
Closing. The Company shall also file with the Commission a Current Report on
Form 8-K (the "Form 8-K") describing the material terms of the transactions
contemplated hereby (and attaching as exhibits thereto this Agreement, the
Registration Rights Agreement, the Certificate of Designation, the Lock-Up
Agreement, the form of each series of Warrant and the Press Release) as soon as
practicable following the Closing Date but in no event more than four (4)
Trading Day following such Closing Date, which Press Release and Form 8-K shall
be subject to prior review and comment by the Purchasers. "Trading Day" means
any day during which the OTC Bulletin Board (or other principal exchange on
which the Common Stock is traded) shall be open for trading.
Section 3.14 Disclosure of Material Information. The Company
covenants and agrees that neither it nor any other person acting on its behalf
has provided or will provide any Purchaser or its agents or counsel with any
information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that each Purchaser shall be relying on the foregoing
representations in effecting transactions in securities of the Company.
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Section 3.15 Pledge of Securities. The Company acknowledges and
agrees that the Shares may be pledged by a Purchaser in connection with a bona
fide margin agreement or other loan or financing arrangement that is secured by
the Common Stock. The pledge of Common Stock shall not be deemed to be a
transfer, sale or assignment of the Common Stock hereunder, and no Purchaser
effecting a pledge of Common Stock shall be required to provide the Company with
any notice thereof or otherwise make any delivery to the Company pursuant to
this Agreement or any other Transaction Document; provided that a Purchaser and
its pledgee shall be required to comply with the provisions of Article V hereof
in order to effect a sale, transfer or assignment of Common Stock to such
pledgee. At the Purchasers' expense, the Company hereby agrees to execute and
deliver such documentation as a pledgee of the Common Stock may reasonably
request in connection with a pledge of the Common Stock to such pledgee by a
Purchaser.
Section 3.16 Form SB-2 Eligibility. The Company currently meets the
"registrant eligibility" and transaction requirements set forth in the general
instructions to Form SB-2 applicable to "resale" registrations on Form SB-2 and
the Company shall file all reports required to be filed by the Company with the
Commission in a timely manner.
Section 3.17 Board Observer Rights. VOMF shall have the right to
have a representative (the "Vision Representative") serve as an observer of the
Company's Board of Directors; provided that, upon request, the Vision
Representative shall enter into a confidentiality agreement in a form reasonably
satisfactory to the Company. The Company shall provide the Vision Representative
at least forty-eight (48) hours prior written notice of any meetings of the
Company's Board of Directors. The Vision Representative may elect in its sole
discretion to attend such meetings of the Company's Board of Directors.
Section 3.18 DTC. Not later than the effective date of the
Registration Statement (as defined in the Registration Rights Agreement), the
Company shall cause its Common Stock to be eligible for transfer with its
transfer agent pursuant to the Depository Trust Company Automated Securities
Transfer Program.
Section 3.19 Investor and Public Relations. The Company shall
deposit or cause to be deposited Five Hundred Thousand Dollars ($500,000) of the
Purchase Price funded on the Closing Date in a separate escrow account with a
separate escrow agent to be used by the Company in connection with investor and
public relations.
Section 3.20 Lock-Up Agreement. The persons listed on Schedule 3.20
attached hereto shall be subject to the terms and provisions of a lock-up
agreement in substantially the form of Exhibit H hereto (the "Lock-Up
Agreement"), which shall provide the manner in which such persons may sell,
transfer or dispose of their shares of Common Stock.
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Section 3.21 Revenue Targets. The Company shall establish an
adjustment escrow account (the "Adjustment Account") in its name in which the
Company shall deposit 3,245,784 shares of Common Stock to be issued to the
Purchasers, along with each other purchaser of Series B Convertible Preferred
Stock in an Additional Series B Financing (collectively, the "Series B
Purchasers"), as adjustment shares (the "Adjustment Shares") with respect to the
Company's audited earnings after taxes. The Adjustment Account shall be managed
by a third party law firm acting as escrow agent for such purpose. In the event
that (A) the Company's earnings after taxes for its 2006 fiscal year is less
than $5,795,000 or (B) (i) if, by the end of its 2007 fiscal year the Company
has raised not less than $20,000,000 through the exercise of warrants or through
an equity or debt offering (the "Capital Condition"), the Company's earnings
after taxes for its 2007 fiscal year is less than $9,120,000 or (ii) if the
Capital Condition has not been met, the Company's earnings after taxes for its
2007 fiscal year is less than $7,900,000, the Company shall issue or cause to be
issued from the Adjustment Account in each instance 1,622,892 Adjustment Shares;
provided, however, that if by the end of its 2007 fiscal year the Company has
met the Capital Condition by procuring not less then $20,000,000 in debt
financing, the Company shall issue or cause to be issued one-half of the
Adjustment Shares that would otherwise be due. The Adjustment Shares shall be
issued to the Series B Purchasers in proportion to their purchases of the
Preferred Shares promptly following public disclosure that such revenue target
has not been achieved. In addition, if the Company shall determine to proceed
with the preparation and filing of a registration statement under the Securities
Act in connection with the proposed offer and sale of any of its securities by
it or any of its security holders (other than a registration statement on Form
X-0, X-0 or other limited purpose form), then the Company will cause all
Adjustment Shares issued pursuant to this Section 3.21 to be included in such
registration statement, all to the extent requisite to permit the resale by the
Series B Purchasers of such Adjustment Shares.
Section 3.22 Adjustments for Issuance of Additional Shares of Common
Stock. In the event the Company, shall, at any time within two (2) years
following the date hereof, issue or sell any additional shares of Common Stock
("Additional Shares of Common Stock"), at a price per share less than $2.74 or
without consideration, then the Conversion Rate (as defined in the Certificate
of Designation) will be adjusted so that the number of shares of Common Stock
issuable upon such conversion of the Preferred Shares shall be increased in
proportion to such increase in outstanding shares of Common Stock and to ensure
the Series B Purchasers, in the aggregate, acquired the Required Percentage (as
defined in the Certificate of Designation) of Common Stock. In the event the
Company, shall, at any time within two (2) years following the date hereof,
shall issue any securities convertible into or exchangeable for, directly or
indirectly, Common Stock ("Convertible Securities"), other than the Preferred
Shares or the Company's Series A Preferred Stock, or any rights or warrants or
options to purchase any such Common Stock or Convertible Securities
(collectively, the "Common Stock Equivalents") shall be issued or sold, and the
price per share for which Additional Shares of Common Stock may be issuable
pursuant to any such Common Stock Equivalent shall be less than $2.74, or if,
after any such issuance of Common Stock Equivalents, the price per share for
which Additional Shares of Common Stock may be issuable thereafter is amended or
adjusted, and such price as so amended shall be less than $2.74, then the
Conversion Rate will be adjusted so that the number of shares of Common Stock
issuable on such Conversion of the Preferred Shares shall be increased in
proportion to such increase in outstanding shares of Common Stock and to ensure
the Series B Purchasers, in the aggregate, acquired the Required Percentage of
Common Stock. The terms of this Section 3.21 shall not apply to securities
issued in connection with a Permitted Financing (as defined in Section 3.23 (b)
below).
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Section 3.23 Subsequent Financings. (a) For a period of two (2)
years following the effective date of the registration statement providing for
the resale of the Conversion Shares and the Warrant Shares, the Company
covenants and agrees to promptly notify (in no event later than five (5)
business days after making or receiving an applicable offer) in writing (a
"Rights Notice") the Series B Purchasers of the terms and conditions of any
proposed offer or sale to any third party by the Company, of Common Stock or any
debt or equity securities convertible, exercisable or exchangeable into Common
Stock (a "Subsequent Financing"). The Rights Notice shall describe, in
reasonable detail, the proposed Subsequent Financing, the names and investment
amounts of all investors participating in the Subsequent Financing, the proposed
closing date of the Subsequent Financing, which shall be within twenty (20)
calendar days from the date of the Rights Notice, and all of the terms and
conditions thereof and proposed definitive documentation to be entered into in
connection therewith. The Rights Notice shall provide each Series B Purchaser an
option (the "Rights Option") during the ten (10) Trading Days following delivery
of the Rights Notice (the "Option Period") to inform the Company whether such
Series B Purchaser will purchase up to its pro rata portion of all or a portion
of the securities being offered in such Subsequent Financing on the same,
absolute terms and conditions as contemplated by such Subsequent Financing. If
any Series B Purchaser elects not to participate in such Subsequent Financing,
the other Series B Purchasers may participate on a pro-rata basis so long as
such participation in the aggregate does not exceed the total Purchase Price
hereunder. For purposes of this Section, all references to "pro rata" means, for
any Series B Purchaser electing to participate in such Subsequent Financing, the
percentage obtained by dividing (x) the number of Preferred Shares purchased by
such Purchaser at the Closing plus the number of shares of Series B Convertible
Preferred Stock purchased by the Series B Purchasers at the closing(s) of an
Additional Series B Financing by (y) the total number of all of the Preferred
Shares purchased by all of the participating Purchasers at the Closing plus the
number of shares of Series B Convertible Preferred Stock purchased by the Series
B Purchasers at the closing(s) of an Additional Series B Financing. Delivery of
any Rights Notice constitutes a representation and warranty by the Company that
there are no other material terms and conditions, arrangements, agreements or
otherwise except for those disclosed in the Rights Notice, to provide additional
compensation to any party participating in any proposed Subsequent Financing,
including, but not limited to, additional compensation based on changes in the
Purchase Price or any type of reset or adjustment of a purchase or conversion
price or to issue additional securities at any time after the closing date of a
Subsequent Financing. If the Company does not receive notice of exercise of the
Rights Option from the Series B Purchasers within the Option Period, the Company
shall have the right to close the Subsequent Financing on the scheduled closing
date with a third party; provided that all of the material terms and conditions
of the closing are the same as those provided to the Series B Purchasers in the
Rights Notice. If the closing of the proposed Subsequent Financing does not
occur on that date, any closing of the contemplated Subsequent Financing or any
other Subsequent Financing shall be subject to all of the provisions of this
Section 3.23(a), including, without limitation, the delivery of a new Rights
Notice. The provisions of this Section 3.23(a) shall not apply to issuances of
securities in a Permitted Financing.
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(b) For purposes of this Agreement, a Permitted Financing (as
defined hereinafter) shall not be considered a Subsequent Financing. A
"Permitted Financing" shall mean (i) securities issued pursuant to a bona fide
firm underwritten public offering of the Company's securities, (ii) securities
issued pursuant to the conversion or exercise of convertible or exercisable
securities issued or outstanding on or prior to the date hereof or issued
pursuant to this Agreement (so long as the conversion or exercise price in such
securities are not amended to lower such price and/or adversely affect the
Series B Purchasers), (iii) the Warrant Shares, (iv) securities issued (other
than for cash) in connection with an acquisition of the Company, (v) any
warrants issued to the placement agent for the transactions contemplated by this
Agreement, (vi) securities issued in connection with strategic license
agreements and other partnering arrangements so long as such issuances are not
for the purpose of raising capital and the Company has received the prior
written consent of the Series B Purchasers, and (vii) the issuance of Common
Stock or the issuance or grants of options to purchase Common Stock pursuant to
the Company's stock option plans and employee stock purchase plans and which
have been approved by the Company's Board of Directors so long as such issuances
in the aggregate do not exceed ten percent (10%) of the Company's issued and
outstanding Common Stock as of the Closing Date.
ARTICLE IV
CONDITIONS
Section 4.1 Conditions Precedent to the Obligation of the Company to
Sell the Shares. The obligation hereunder of the Company to issue and sell the
Preferred Shares and the Warrants to the Purchasers is subject to the
satisfaction or waiver, at or before the Closing, of each of the conditions set
forth below. These conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion.
(a) Accuracy of Each Purchaser's Representations and Warranties.
Each of the representations and warranties of each Purchaser in this Agreement
and each of the other Transaction Documents to which such Purchaser is a party
shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made at that time, except for representations
and warranties that are expressly made as of a particular date, which shall be
true and correct in all material respects as of such date.
(b) Performance by the Purchasers. Each Purchaser shall have
performed, satisfied and complied in all respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by such Purchaser at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(d) Delivery of Purchase Price. The Purchase Price for the Preferred
Shares and Warrants has been delivered to the Company at the Closing Date.
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(e) Delivery of Transaction Documents. The Transaction Documents
have been duly executed and delivered by the Purchasers to the Company.
(f) Share Exchange Transaction. The Share Exchange Transaction shall
have been consummated.
Section 4.2 Conditions Precedent to the Obligation of the Purchasers
to Purchase the Shares. The obligation hereunder of each Purchaser to acquire
and pay for the Preferred Shares and the Warrants is subject to the satisfaction
or waiver, at or before the Closing, of each of the conditions set forth below.
These conditions are for each Purchaser's sole benefit and may be waived by such
Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each
of the representations and warranties of the Company in this Agreement and each
of the other Transaction Documents shall be true and correct in all respects as
of the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that are expressly made as of a
particular date), which shall be true and correct in all respects as of such
date.
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing.
(c) No Suspension, Etc. Quotation of the Common Stock shall not have
been suspended by the Commission or the OTC Bulletin Board (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the Closing), and, at any time prior to
the Closing Date, trading in securities generally as reported by Bloomberg
Financial Markets ("Bloomberg") shall not have been suspended or limited, or
minimum prices shall not have been established on securities whose trades are
reported by Bloomberg, or on the New York Stock Exchange, nor shall a banking
moratorium have been declared either by the United States or New York State
authorities, nor shall there have occurred any material outbreak or escalation
of hostilities or other national or international calamity or crisis of such
magnitude in its effect on, or any material adverse change in any financial
market which, in each case, in the judgment of such Purchaser, makes it
impracticable or inadvisable to purchase the Preferred Shares.
(d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(e) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company or any subsidiary, or any of the officers, directors or
affiliates of the Company or any subsidiary seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.
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(f) Certificate of Designation of Rights and Preferences. Prior to
the Closing, the Certificate of Designation in the form of Exhibit B attached
hereto shall have been filed with the Secretary of State of Utah.
(g) Opinion of Counsel. At the Closing, the Purchasers shall have
received an opinion of counsel to the Company, dated the date of such Closing,
in the form of Exhibit F hereto, and such other certificates and documents as
the Purchasers or its counsel shall reasonably require incident to such Closing.
(h) Registration Rights Agreement. At the Closing, the Company shall
have executed and delivered the Registration Rights Agreement to each Purchaser.
(i) Stock Certificates; Warrants. The Company shall have executed
and delivered to the Purchasers the certificates (in such denominations as such
Purchaser shall request) for the Preferred Shares and the Warrants being
acquired by such Purchaser at the Closing (in such denominations as such
Purchaser shall request).
(j) Resolutions. The Board of Directors of the Company shall have
adopted resolutions consistent with Section 2.1(b) hereof in a form reasonably
acceptable to such Purchaser (the "Resolutions").
(k) Reservation of Shares. As of the Closing Date, the Company shall
have reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Preferred Shares and the exercise of
the Warrants, a number of shares of Common Stock equal to the aggregate number
of Conversion Shares issuable upon conversion of the Preferred Shares issued or
to be issued pursuant to this Agreement and the number of Warrant Shares
issuable upon exercise of the number of Warrants issued or to be issued pursuant
to this Agreement.
(l) Transfer Agent Instructions. As of the Closing Date, the
Irrevocable Transfer Agent Instructions, in the form of Exhibit E attached
hereto, shall have been delivered to and acknowledged in writing by the
Company's transfer agent.
(m) Secretary's Certificate. The Company shall have delivered to
such Purchaser a secretary's certificate, dated as of the Closing Date, as to
(i) the Resolutions, (ii) the Articles, (iii) the Bylaws, (iv) the Certificate
of Designation, each as in effect at the Closing, and (iv) the authority and
incumbency of the officers of the Company executing the Transaction Documents
and any other documents required to be executed or delivered in connection
therewith.
(n) Officer's Certificate. The Company shall have delivered to the
Purchasers a certificate of an executive officer of the Company, dated as of the
Closing Date, confirming the accuracy of the Company's representations,
warranties and covenants as of such Closing Date and confirming the compliance
by the Company with the conditions precedent set forth in this Section 4.2 as of
such Closing Date.
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(o) Material Adverse Effect. No Material Adverse Effect shall have
occurred at or before the Closing Date.
(p) Share Exchange Transaction. On or prior to the Closing Date, the
Share Exchange Transaction shall have been consummated.
(q) Audited Financial Statements. On or prior to the Closing Date,
the Company shall have delivered to the Purchasers the audited financial
statements of Beijing Gas for the fiscal years ended December 31, 2005 and 2004
prepared by Xxxxxx X. Xxxx & Co., LLP.
(r) Form 8-K. On or prior to the Closing Date, the Company shall
have delivered to the Purchasers the Form 8-K substantially in the form to be
filed with the Commission pursuant to Section 3.13 hereof.
(s) Lock-Up Agreement. On or prior to the Closing Date, the persons
listed on Schedule 3.20 attached hereto shall have executed and delivered the
Lock-Up Agreement to the Purchasers.
ARTICLE V
Stock Certificate Legend
Section 5.1 Legend. Each certificate representing the Preferred
Shares and the Warrants, and, if appropriate, securities issued upon conversion
thereof, shall be stamped or otherwise imprinted with a legend substantially in
the following form (in addition to any legend required by applicable state
securities or "blue sky" laws):
THESE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES")
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED
UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS
OR DOLCE VENTURES INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL
THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND
UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED.
The Company agrees to reissue certificates representing any of the
Conversion Shares and the Warrant Shares, without the legend set forth above if
at such time, prior to making any transfer of any such securities, such holder
thereof shall give written notice to the Company describing the manner and terms
of such transfer and removal as the Company may reasonably request. Such
proposed transfer and removal will not be effected until: (a) either (i) the
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Company has received an opinion of counsel reasonably satisfactory to the
Company, to the effect that the registration of the Conversion Shares or the
Warrant Shares under the Securities Act is not required in connection with such
proposed transfer, (ii) a registration statement under the Securities Act
covering such proposed disposition has been filed by the Company with the
Commission and has become effective under the Securities Act, (iii) the Company
has received other evidence reasonably satisfactory to the Company that such
registration and qualification under the Securities Act and state securities
laws are not required, or (iv) the holder provides the Company with reasonable
assurances that such security can be sold pursuant to Rule 144 under the
Securities Act; and (b) either (i) the Company has received an opinion of
counsel reasonably satisfactory to the Company, to the effect that registration
or qualification under the securities or "blue sky" laws of any state is not
required in connection with such proposed disposition, or (ii) compliance with
applicable state securities or "blue sky" laws has been effected or a valid
exemption exists with respect thereto. The Company will respond to any such
notice from a holder within five (5) business days. In the case of any proposed
transfer under this Section 5.1, the Company will use reasonable efforts to
comply with any such applicable state securities or "blue sky" laws, but shall
in no event be required, (x) to qualify to do business in any state where it is
not then qualified, (y) to take any action that would subject it to tax or to
the general service of process in any state where it is not then subject, or (z)
to comply with state securities or "blue sky" laws of any state for which
registration by coordination is unavailable to the Company. The restrictions on
transfer contained in this Section 5.1 shall be in addition to, and not by way
of limitation of, any other restrictions on transfer contained in any other
section of this Agreement. Whenever a certificate representing the Conversion
Shares or Warrant Shares is required to be issued to a Purchaser without a
legend, in lieu of delivering physical certificates representing the Conversion
Shares or Warrant Shares (provided that a registration statement under the
Securities Act providing for the resale of the Warrant Shares and Conversion
Shares is then in effect), the Company shall cause its transfer agent to
electronically transmit the Conversion Shares or Warrant Shares to a Purchaser
by crediting the account of such Purchaser's Prime Broker with the Depository
Trust Company ("DTC") through its Deposit Withdrawal Agent Commission ("DWAC")
system (to the extent not inconsistent with any provisions of this Agreement).
ARTICLE VI
Indemnification
Section 6.1 General Indemnity. The Company agrees to indemnify and
hold harmless the Purchasers (and their respective directors, officers,
managers, partners, members, shareholders, affiliates, agents, successors and
assigns) from and against any and all losses, liabilities, deficiencies, costs,
damages and expenses (including, without limitation, reasonable attorneys' fees,
charges and disbursements) incurred by the Purchasers as a result of any
inaccuracy in or breach of the representations, warranties or covenants made by
the Company herein. Each Purchaser severally but not jointly agrees to indemnify
and hold harmless the Company and its directors, officers, managers, affiliates,
agents, successors and assigns from and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including, without limitation,
reasonable attorneys' fees, charges and disbursements) incurred by the Company
as result of any inaccuracy in or breach of the representations, warranties or
covenants made by such Purchaser herein. The maximum aggregate liability of each
Purchaser pursuant to its indemnification obligations under this Article VI
shall not exceed the portion of the Purchase Price paid by such Purchaser
hereunder.
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Section 6.2 Indemnification Procedure. Any party entitled to
indemnification under this Article VI (an "indemnified party") will give written
notice to the indemnifying party of any matters giving rise to a claim for
indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VI except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
indemnified party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of the indemnified party a conflict of interest between it
and the indemnifying party may exist with respect of such action, proceeding or
claim, to assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. In the event that the indemnifying party advises an
indemnified party that it will contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such person of its election to defend, settle or
compromise, at its sole cost and expense, any action, proceeding or claim (or
discontinues its defense at any time after it commences such defense), then the
indemnified party may, at its option, defend, settle or otherwise compromise or
pay such action or claim. In any event, unless and until the indemnifying party
elects in writing to assume and does so assume the defense of any such claim,
proceeding or action, the indemnified party's costs and expenses arising out of
the defense, settlement or compromise of any such action, claim or proceeding
shall be losses subject to indemnification hereunder. The indemnified party
shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the indemnified party which relates to such action or claim. The indemnifying
party shall keep the indemnified party fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. If
the indemnifying party elects to defend any such action or claim, then the
indemnified party shall be entitled to participate in such defense with counsel
of its choice at its sole cost and expense. The indemnifying party shall not be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent. Notwithstanding anything in this Article VI to the
contrary, the indemnifying party shall not, without the indemnified party's
prior written consent, settle or compromise any claim or consent to entry of any
judgment in respect thereof which imposes any future obligation on the
indemnified party or which does not include, as an unconditional term thereof,
the giving by the claimant or the plaintiff to the indemnified party of a
release from all liability in respect of such claim. The indemnification
required by this Article VI shall be made by periodic payments of the amount
thereof during the course of investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred, so long as the
indemnified party irrevocably agrees to refund such moneys if it is ultimately
determined by a court of competent jurisdiction that such party was not entitled
to indemnification. The indemnity agreements contained herein shall be in
addition to (a) any cause of action or similar rights of the indemnified party
against the indemnifying party or others, and (b) any liabilities the
indemnifying party may be subject to pursuant to the law.
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ARTICLE VII
Miscellaneous
Section 7.1 Fees and Expenses. Except as otherwise set forth in this
Agreement and the other Transaction Documents, each party shall pay the fees and
expenses of its advisors, counsel, accountants and other experts, if any, and
all other expenses, incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement, provided
that the Company shall pay all actual attorneys' fees and expenses (including
disbursements and out-of-pocket expenses) actually incurred by VOMF in retaining
one legal counsel, KL, in connection with (i) the preparation, negotiation,
execution and delivery of this Agreement and the other Transaction Documents and
the transactions contemplated thereunder, including review of the documents
relating to the Share Exchange Transaction, which payment shall be made at the
Closing, (ii) the filing and declaration of effectiveness by the Commission of
the Registration Statement (as defined in the Registration Rights Agreement) and
(iii) any amendments, modifications or waivers of this Agreement or any of the
other Transaction Documents. The Company shall also pay $100,000 in cash to VOMF
or its affiliates at the Closing in connection with all due diligence expenses
incurred by VOMF or its affiliates and all reasonable fees and expenses incurred
by the Purchasers in connection with the enforcement of this Agreement or any of
the other Transaction Documents, including, without limitation, all reasonable
attorneys' fees and expenses. Notwithstanding the foregoing to the contrary, any
amounts having been paid by the Company in relation thereto prior to the date
hereof shall be deducted from the amounts owed by the Company to the Purchasers,
and any amounts to be paid by the Company to the Purchasers pursuant to this
Section 7.1 shall be paid out of the proceeds held in escrow pursuant to the
Escrow Agreement dated as of September 7, 2006, by and between GAS Investment
China Co., Ltd. and the Purchasers at the Closing.
Section 7.2 Specific Enforcement, Consent to Jurisdiction.
(a) The Company and the Purchasers acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement or the other Transaction Documents were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement and to enforce specifically
the terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity.
(b) Each of the Company and the Purchasers (i) hereby irrevocably
submits to the jurisdiction of the United States District Court sitting in the
Southern District of New York and the courts of the State of New York located in
New York county for the purposes of any suit, action or proceeding arising out
of or relating to this Agreement or any of the other Transaction Documents or
the transactions contemplated hereby or thereby and (ii) hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Each of the Company and the
Purchasers consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section 7.2 shall affect or limit any right to serve process in any other manner
permitted by law.
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Section 7.3 Entire Agreement; Amendment. This Agreement and the
Transaction Documents contains the entire understanding and agreement of the
parties with respect to the matters covered hereby and thereby, except as
specifically set forth herein or in the Transaction Documents, neither the
Company nor any of the Purchasers makes any representations, warranty, covenant
or undertaking with respect to such matters and they supersede all prior
understandings and agreements with respect to said subject matter, all of which
are merged herein. No provision of this Agreement may be waived or amended other
than by a written instrument signed by the Company and the holders of at least
seventy-five percent (75%) of the Preferred Shares then outstanding, and no
provision hereof may be waived other than by an a written instrument signed by
the party against whom enforcement of any such amendment or waiver is sought. No
such amendment shall be effective to the extent that it applies to less than all
of the holders of the Preferred Shares then outstanding. No consideration shall
be offered or paid to any person to amend or consent to a waiver or modification
of any provision of any of the Transaction Documents unless the same
consideration is also offered to all of the parties to the Transaction Documents
or holders of Preferred Shares, as the case may be.
Section 7.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telex (with correct answer back
received), telecopy or facsimile at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company: Dolce Ventures Inc.
N0.18 Xxxxx Xxxx Cun Dong St.
Haidian District
Beijing, China
Attention: Xxxx Xxxx
Tel. No.: 000-00-00-00000000
Fax No.: 000-000-00000000
with copies to: GUZOV OFSINK, LLC
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx
Tel. No.: (000) 000-0000, ext. 127
Fax No.: (000) 000-0000
If to any Purchaser: At the address of such Purchaser set forth
on Exhibit A to this Agreement, with copies
to Purchaser's counsel as set forth on
Exhibit A or as specified in writing by such
Purchaser with copies to:
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Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxxx
Tel No.: (000) 000-0000
Fax No.: (000) 000-0000
Any party hereto may from time to time change its address for notices by
giving at least ten (10) days written notice of such changed address to the
other party hereto.
Section 7.5 Waivers. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
Section 7.6 Headings. The article, section and subsection headings
in this Agreement are for convenience only and shall not constitute a part of
this Agreement for any other purpose and shall not be deemed to limit or affect
any of the provisions hereof.
Section 7.7 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
Section 7.8 No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 7.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to any of the conflicts of law principles which would result in
the application of the substantive law of another jurisdiction. This Agreement
shall not be interpreted or construed with any presumption against the party
causing this Agreement to be drafted.
Section 7.10 Survival. The representations and warranties of the
Company and the Purchasers shall survive the execution and delivery hereof and
the Closings hereunder for a period of two years following the Closing Date.
Section 7.11 Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
-30-
Section 7.12 Publicity. The Company agrees that it will not
disclose, and will not include in any public announcement, the name of the
Purchasers without the consent of the Purchasers unless and until such
disclosure is required by law or applicable regulation, and then only to the
extent of such requirement.
Section 7.13 Severability. The provisions of this Agreement and the
Transaction Documents are severable and, in the event that any court of
competent jurisdiction shall determine that any one or more of the provisions or
part of the provisions contained in this Agreement or the Transaction Documents
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision or part of a provision of this Agreement or the Transaction
Documents and such provision shall be reformed and construed as if such invalid
or illegal or unenforceable provision, or part of such provision, had never been
contained herein, so that such provisions would be valid, legal and enforceable
to the maximum extent possible.
Section 7.14 Further Assurances. From and after the date of this
Agreement, upon the request of any Purchaser or the Company, each of the Company
and the Purchasers shall execute and deliver such instrument, documents and
other writings as may be reasonably necessary or desirable to confirm and carry
out and to effectuate fully the intent and purposes of this Agreement and each
of the other Transaction Documents.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-31-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officer as of the date first above
written.
DOLCE VENTURES INC.
By: ____________________________________
Name:
Title:
PURCHASER
By: ____________________________________
Name:
Title:
-32-
SEI PRIVATE TRUST CO. FAO -
THE XX XXXXXXX CO. MASTER TRUST
By: ____________________________________
Name:
Title:
CORONADO CAPITAL PARTNERS LP
By: ____________________________________
Name:
Title:
-33-
EXHIBIT A to the
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
DOLCE VENTURES INC.
Names and Addresses Number of Preferred Shares Dollar Amount of
of Purchasers & Warrants Purchased Investment
------------- -------------------- ----------
Vision Opportunity Master Fund, Ltd. Preferred Shares: 2,189,782 $6,000,000
00 X 00xx Xx., 0xx floor Series A Warrants: 2,189,782
Xxx Xxxx, XX 00000 Series B Warrants: 1,094,891
Tax ID: 00-0000000 Series J Warrants: 1,993,355
Series C Warrants: 1,993,355
Series D Warrants: 996,678
SEI Private Trust Co. FAO
The XX Xxxxxxx Co. Master Trust Preferred Shares: 140,000 $383,600
0 Xxxxxxx Xxxxxx Xx Series A Warrants: 140,000
Xxxx, XX 00000 Series B Warrants: 70,000
Attn: Xxxxxxx Xxxxxxx Series J Warrants: 127,442
Tax ID: 00-0000000 Series C Warrants: 127,442
Series D Warrants: 63,721
Coronado Capital Partners LP Preferred Shares: 180,000 $493,200
c/o XX Xxxxxxx Series A Warrants: 180,000
00000 X Xxxx Xx, Xxxxx 000 Series B Warrants: 90,000
Xxxxxxxxxx, XX 00000 Series J Warrants: 163,854
Attn: Xxxxxxxxx Xxxxxxx Series C Warrants: 163,854
Tax ID: 00-0000000 Series D Warrants: 81,927
EXHIBIT B to the
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
DOLCE VENTURES INC.
FORM OF CERTIFICATE OF DESIGNATION
EXHIBIT C-1 to the
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
DOLCE VENTURES INC.
FORM OF SERIES A WARRANT
EXHIBIT C-2 to the
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
DOLCE VENTURES INC.
FORM OF SERIES B WARRANT
EXHIBIT C-3 to the
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
DOLCE VENTURES INC.
FORM OF SERIES J WARRANT
EXHIBIT C-4 to the
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
DOLCE VENTURES INC.
FORM OF SERIES C WARRANT
EXHIBIT C-5 to the
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
DOLCE VENTURES INC.
FORM OF SERIES D WARRANT
EXHIBIT D to the
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
DOLCE VENTURES INC.
FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT E to the
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
DOLCE VENTURES INC.
FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
DOLCE VENTURES INC.
as of September 7, 2006
[Name and address of Transfer Agent]
Attn: _____________
Ladies and Gentlemen:
Reference is made to that certain Series B Convertible Preferred Stock
Purchase Agreement (the "Purchase Agreement"), dated as of September 7, 2006, by
and among Dolce Ventures Inc., a Utah corporation (the "Company"), and the
purchasers named therein (collectively, the "Purchasers") pursuant to which the
Company is issuing to the Purchasers shares of its Series B Convertible
Preferred Stock, par value $.001 per share, (the "Preferred Shares") and
warrants (the "Warrants") to purchase shares of the Company's common stock, par
value $.001 per share (the "Common Stock"). This letter shall serve as our
irrevocable authorization and direction to you provided that you are the
transfer agent of the Company at such time) to issue shares of Common Stock upon
conversion of the Preferred Shares (the "Conversion Shares") and exercise of the
Warrants (the "Warrant Shares") to or upon the order of a Purchaser from time to
time upon (i) surrender to you of a properly completed and duly executed
Conversion Notice or Exercise Notice, as the case may be, in the form attached
hereto as Exhibit I and Exhibit II, respectively, (ii) in the case of the
conversion of Preferred Shares, a copy of the certificates (with the original
certificates delivered to the Company) representing Preferred Shares being
converted or, in the case of Warrants being exercised, a copy of the Warrants
(with the original Warrants delivered to the Company) being exercised (or, in
each case, an indemnification undertaking with respect to such share
certificates or the warrants in the case of their loss, theft or destruction),
and (iii) delivery of a treasury order or other appropriate order duly executed
by a duly authorized officer of the Company. So long as you have previously
received (x) written confirmation from counsel to the Company that a
registration statement covering resales of the Conversion Shares or Warrant
Shares, as applicable, has been declared effective by the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act"), and no subsequent notice by the Company or its counsel of the
suspension or termination of its effectiveness and (y) a copy of such
registration statement, and if the Purchaser represents in writing that the
Conversion Shares or the Warrant Shares, as the case may be, were sold pursuant
to the Registration Statement, then certificates representing the Conversion
Shares and the Warrant Shares, as the case may be, shall not bear any legend
restricting transfer of the Conversion Shares and the Warrant Shares, as the
case may be, thereby and should not be subject to any stop-transfer restriction.
Provided, however, that if you have not previously received those items and
representations listed above, then the certificates for the Conversion Shares
and the Warrant Shares shall bear the legend substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
REGISTERED UNDER THE SECURITIES ACT OR APPLICABLE STATE
SECURITIES LAWS, OR AN OPINION OF COUNSEL HAS BEEN PROVIDED
THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT
AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS
IS NOT REQUIRED."
and, provided further, that the Company may from time to time notify you to
place stop-transfer restrictions on the certificates for the Conversion Shares
and the Warrant Shares in the event a registration statement covering the
Conversion Shares and the Warrant Shares is subject to amendment for events then
current.
A form of written confirmation from counsel to the Company that a
registration statement covering resales of the Conversion Shares and the Warrant
Shares has been declared effective by the SEC under the 1933 Act is attached
hereto as Exhibit III. Further, the legal opinion should indicate if the
Conversion Shares or Warrant Shares can be issued directly from the transfer
agent without restrictive legend as an original issue.
Please be advised that the Purchasers are relying upon this letter as an
inducement to enter into the Purchase Agreement and, accordingly, each Purchaser
is a third party beneficiary to these instructions.
Please execute this letter in the space indicated to acknowledge your
agreement to act in accordance with these instructions. Should you have any
questions concerning this matter, please contact me at ___________.
Very truly yours,
DOLCE VENTURES INC.
By: ____________________________________
Name: __________________________________
Title: _________________________________
ACKNOWLEDGED AND AGREED:
[TRANSFER AGENT]
By: ____________________________________
Name: __________________________________
Title: _________________________________
Date: _____________
EXHIBIT I
DOLCE VENTURES INC.
CONVERSION NOTICE
Reference is made to the Certificate of Designation of the Relative Rights and
Preferences of the Series B Preferred Stock of (the "Certificate of
Designation"). In accordance with and pursuant to the Certificate of
Designation, the undersigned hereby elects to convert the number of shares of
Series B Preferred Stock, par value $.001 per share (the "Preferred Shares"), of
Dolce Ventures Inc., a Utah corporation (the "Company"), indicated below into
shares of Common Stock, par value $.001 per share (the "Common Stock"), of the
Company, by tendering the stock certificate(s) representing the share(s) of
Preferred Shares specified below as of the date specified below.
Date of Conversion: _____________________________
Number of Preferred Shares to be converted: ________
Stock certificate no(s). of Preferred Shares to be converted: ________
The Common Stock have been sold pursuant to the Registration Statement (as
defined in the Registration Rights Agreement): YES ____ NO____
Please confirm the following information:
Conversion Price: _____________________________
Number of shares of Common Stock
to be issued: _____________________________
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the Date of Conversion: _________________________
Please issue the Common Stock into which the Preferred Shares are being
converted and, if applicable, any check drawn on an account of the Company in
the following name and to the following address:
Issue to: _____________________________
_____________________________
Facsimile Number: _____________________________
Authorization: _____________________________
By: _________________________
Title: ______________________
Dated:
EXHIBIT II
FORM OF EXERCISE NOTICE
DOLCE VENTURES INC.
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of Dolce
Ventures Inc. covered by the within Warrant.
Dated: _________________ Signature _____________________________
Address _____________________
_____________________
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the date of Exercise: _________________________
ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.
Dated: _________________ Signature _____________________________
Address _____________________
_____________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
Dated: _________________ Signature _____________________________
Address _____________________
_____________________
FOR USE BY THE ISSUER ONLY:
This Warrant No. W-_____ canceled (or transferred or exchanged) this _____ day
of ___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock in
the name of _______________.
EXHIBIT III
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[Name and address of Transfer Agent]
Attn: _____________
Re: Dolce Ventures Inc.
Ladies and Gentlemen:
We are counsel to Dolce Ventures Inc., a Utah corporation (the "Company"),
and have represented the Company in connection with that certain Series B
Convertible Preferred Stock Purchase Agreement (the "Purchase Agreement"), dated
as of September 7, 2006, by and among the Company and the purchasers named
therein (collectively, the "Purchasers") pursuant to which the Company issued to
the Purchasers shares of its Series B Convertible Preferred Stock, par value
$.001 per share, (the "Preferred Shares") and warrants (the "Warrants") to
purchase shares of the Company's common stock, par value $.001 per share (the
"Common Stock"). Pursuant to the Purchase Agreement, the Company has also
entered into a Registration Rights Agreement with the Purchasers (the
"Registration Rights Agreement"), dated as of September 7, 2006, pursuant to
which the Company agreed, among other things, to register the Registrable
Securities (as defined in the Registration Rights Agreement), including the
shares of Common Stock issuable upon conversion of the Preferred Shares and
exercise of the Warrants, under the Securities Act of 1933, as amended (the
"1933 Act"). In connection with the Company's obligations under the Registration
Rights Agreement, on ________________, 2006, the Company filed a Registration
Statement on Form SB-2 (File No. 333-________) (the "Registration Statement")
with the Securities and Exchange Commission (the "SEC") relating to the resale
of the Registrable Securities which names each of the present Purchasers as a
selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective under the 1933 Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and accordingly, the
Registrable Securities are available for resale under the 1933 Act pursuant to
the Registration Statement.
Very truly yours,
[COMPANY COUNSEL]
By: ____________________________________
cc: [LIST NAMES OF PURCHASERS]
EXHIBIT F to the
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
DOLCE VENTURES INC.
FORM OF OPINION OF COUNSEL
1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Utah and has the requisite
corporate power to own, lease and operate its properties and assets, and to
carry on its business as presently conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary.
2. The Company has the requisite corporate power and authority to
enter into and perform its obligations under the Transaction Documents and to
issue the Preferred Stock, the Warrants and the Common Stock issuable upon
conversion of the Preferred Stock and exercise of the Warrants. The execution,
delivery and performance of each of the Transaction Documents by the Company and
the consummation by it of the transactions contemplated thereby have been duly
and validly authorized by all necessary corporate action and no further consent
or authorization of the Company or its Board of Directors or stockholders is
required. Each of the Transaction Documents have been duly executed and
delivered, and the Preferred Stock and the Warrants have been duly executed,
issued and delivered by the Company and each of the Transaction Documents
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its respective terms. The Common Stock
issuable upon conversion of the Preferred Stock and exercise of the Warrants are
not subject to any preemptive rights under the Articles of Incorporation or the
Bylaws.
3. The Preferred Stock and the Warrants have been duly authorized
and, when delivered against payment in full as provided in the Purchase
Agreement, will be validly issued, fully paid and nonassessable. The shares of
Common Stock issuable upon conversion of the Preferred Stock and exercise of the
Warrants, have been duly authorized and reserved for issuance, and, when
delivered upon conversion or against payment in full as provided in the
Certificate of Designation and the Warrants, as applicable, will be validly
issued, fully paid and nonassessable.
4. The execution, delivery and performance of and compliance with
the terms of the Transaction Documents and the issuance of the Preferred Stock,
the Warrants and the Common Stock issuable upon conversion of the Preferred
Stock and exercise of the Warrants do not (i) violate any provision of the
Articles of Incorporation or Bylaws, (ii) conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, mortgage, deed of trust, indenture,
note, bond, license, lease agreement, instrument or obligation to which the
Company is a party, (iii) create or impose a lien, charge or encumbrance on any
property of the Company under any agreement or any commitment to which the
Company is a party or by which the Company is bound or by which any of its
respective properties or assets are bound, or (iv) result in a violation of any
federal, state, local or foreign statute, rule, regulation, order, judgment,
injunction or decree (including Federal and state securities laws and
regulations) applicable to the Company or by which any property or asset of the
Company is bound or affected, except, in all cases other than violations
pursuant to clauses (i) and (iv) above, for such conflicts, default,
terminations, amendments, acceleration, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect.
5. No consent, approval or authorization of or designation,
declaration or filing with any governmental authority on the part of the Company
is required under Federal, state or local law, rule or regulation in connection
with the valid execution and delivery of the Transaction Documents, or the
offer, sale or issuance of the Preferred Stock, the Warrants or the Common Stock
issuable upon conversion of the Preferred Stock and exercise of the Warrants
other than the Certificate of Designation and the Registration Statement.
6. There is no action, suit, claim, investigation or proceeding
pending or threatened against the Company which questions the validity of this
Agreement or the transactions contemplated hereby or any action taken or to be
taken pursuant hereto or thereto. There is no action, suit, claim, investigation
or proceeding pending, or to our knowledge, threatened, against or involving the
Company or any of its properties or assets and which, if adversely determined,
is reasonably likely to result in a Material Adverse Effect. There are no
outstanding orders, judgments, injunctions, awards or decrees of any court,
arbitrator or governmental or regulatory body against the Company or any
officers or directors of the Company in their capacities as such.
7. The offer, issuance and sale of the Preferred Stock and the
Warrants and the offer, issuance and sale of the shares of Common Stock issuable
upon conversion of the Preferred Stock and exercise of the Warrants pursuant to
the Purchase Agreement, the Certificate of Designation and the Warrants, as
applicable, are exempt from the registration requirements of the Securities Act.
8. The Company is not, and as a result of and immediately upon
Closing will not be, an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
Very truly yours,
EXHIBIT G to the
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
DOLCE VENTURES INC.
DISCLOSURE DOCUMENT
[To insert draft Form 8-K]
EXHIBIT H to the
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
DOLCE VENTURES INC.
FORM OF LOCK-UP AGREEMENT
