SECURITIES PURCHASE AGREEMENT
Execution
Copy
This
Securities Purchase Agreement (this “Agreement”)
is
dated as of October 9, 2007, by and among Wentworth II, Inc., a Delaware
corporation, and all predecessors thereto (collectively, the “Company”),
and
the investors identified on the signature pages hereto (each, an “Investor”
and
collectively, the “Investors”).
WHEREAS,
on October 9, 2007, the Company entered into a Share Exchange Agreement, which
will be attached to the Company’s Current Report on Form 8-K under the U.S.
Securities Exchange Act of 1934, as amended (the “Exchange
Agreement”),
with
Omnia Luo Group Limited, a British Virgin Islands company (“Omnia”),
pursuant to which the Company will, subject to the terms and conditions thereof,
acquire all of the equity interest of Omnia and, indirectly, all of Omnia’s
subsidiaries, in exchange for 93.75% of the Common Stock on a fully diluted
basis as of the time of the closing of the exchange under the Exchange Agreement
and as of the Closing under this Agreement (the “Exchange”).
WHEREAS,
the closing of the Exchange is conditioned, among other things, on the
concurrent consummation of the financing contemplated by this
Agreement.
WHEREAS,
subject to the terms and conditions set forth in this Agreement and the
Transaction Documents and pursuant to exemptions from registration under the
Securities Act (as defined below), the Company desires to issue and sell to
each
Investor, and each Investor, severally and not jointly, desires to purchase
from
the Company, an aggregate of not less than 160 and not more than 240 units
(each, a “Unit”),
each
Unit in the principal amount of $25,000 and consisting of 20,000 shares of
the
Company’s Common Stock (as defined in Section
1.1),
and a
Warrant (as defined in Section
1.1)
to
purchase 20,000 shares of the Company’s Common Stock, as more fully described in
this Agreement and the other Transaction Documents.
WHEREAS,
the Company shall issue to the Agent (as defined in Section 1.1)
warrants to purchase up to 10% of the number of shares of Common Stock sold
pursuant to this Agreement, which shall be exercisable, on a net-issuance or
cashless basis, at any time at a price equal to 125% of the Per Unit Purchase
Price (as defined in Section
1.1),
and
which will have registration rights similar to the registration rights afforded
to the Investors under the Transaction Documents.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and the Investors agree as
follows:
ARTICLE
1.
DEFINITIONS
1.1. Definitions.
In
addition to the terms defined elsewhere in this Agreement, for all purposes
of
this Agreement, the following terms shall have the meanings indicated in this
Section
1.1:
“2007
Adjusted Income”
has the
meaning set forth in Section
4.11.
“2007
Annual Report”
has the
meaning set forth in Section
4.11.
“2007
Guaranteed ATNI” has
the
meaning set forth in Section
4.11.
“2007
Make Good Shares” has
the
meaning set forth in Section
4.11.
“2008
Adjusted Income”
has the
meaning set forth in Section
4.11.
“2008
Annual Report”
has the
meaning set forth in Section
4.11.
“2008
Guaranteed ATNI” has
the
meaning set forth in Section
4.11.
“2008
Make Good Shares” has
the
meaning set forth in Section
4.11.
“Action”
means
any action, suit, inquiry, notice of violation, proceeding (including any
partial proceeding such as a deposition) or investigation pending or threatened
in writing against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
administrative agency, regulatory authority (federal, state, county, local
or
foreign), stock market, stock exchange or trading facility.
“Agent”
means
Xxxxxxx Securities, LLC and such other soliciting dealers as Xxxxxxx Securities,
LLC may have designated as additional selling agents in connection with the
offer and sale of the Securities.
“Agent
Shares”
means
the Common Stock issuable upon exercise of the Agent Warrants.
“Agent
Warrants”
means
the warrants to purchase Common Stock of the Company issued to the Agent
pursuant to the Placement Agent Agreement between the Company and the Agent,
dated as of September 14, 2007.
“Agreement”
has the
meaning set forth in the preamble.
“Affiliate”
means
any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such
terms are used in and construed under Rule 144.
“Business
Day”
means
any day except Saturday, Sunday and any day which is a federal legal holiday
or
a day on which banking institutions in the State of New York or the province
of
[Guangdong]
in the
People’s Republic of China are authorized or required by law or other
governmental action to close.
“Buy-In”
has
the
meaning set forth in Section
4.1(c).
“BVI
Preferred Shares”
means
the 808,529 shares of Common Stock issued by the Company in exchange for
ordinary shares of Omnia issued upon conversion of Omnia preferred shares,
and
the additional 149,884 shares of Common Stock, transferred by a Company
principal stockholder or issued by the Company, to a former holder of Omnia
preferred shares in consideration of its agreement to waive or modify certain
contractual rights.
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“BVI
Warrant Shares”
means
the shares of Common Stock (initially, up to 292,752 shares) issuable upon
exercise of warrants issued by the Company in exchange for warrants to purchase
ordinary shares of Omnia.
“Closing”
means
the closing of the purchase and sale of the Securities pursuant to Article
II.
“Closing
Date”
means
the Business Day on which all of the conditions set forth in Sections
5.1
and
5.2
hereof
are satisfied, or such other date as the parties may agree.
"Closing
Escrow Agreement"
means
the Closing Escrow Agreement, dated as of the date hereof, between the Company
and the escrow agent (the “Escrow
Agent”)
identified therein, in the form of Exhibit
C
hereto.
“Commission”
means
the Securities and Exchange Commission.
“Common
Stock”
means
the common stock of the Company, par value $0.01 per share, and any securities
into which such common stock may hereafter be reclassified or for which it
may
be exchanged as a class.
“Common
Stock Equivalents”
means
any securities of the Company or any Subsidiary which entitle the holder thereof
to acquire Common Stock at any time, including without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is at any
time convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock or other securities that entitle the holder
to
receive, directly or indirectly, Common Stock.
“Company”
has the
meaning set forth in the preamble hereto.
“Company
Counsel”
means
Xxxxxx Xxxx Xxxxx Raysman and Xxxxxxx LLP.
“Company
Deliverables”
has the
meaning set forth in Section
2.2(a).
“Disclosure
Materials”
has the
meaning set forth in Section
3.1(g).
“Effective
Date”
means,
as to a Registration Statement, the date on which such Registration Statement
is
first declared effective by the Commission.
“Escrow
Shares”
means
the aggregate shares Common Stock owned by the Make Good Pledgors that are
placed into escrow pursuant to the Make Good Escrow Agreement, which shall
represent approximately 19.79% of the Company’s total post-Exchange issued and
outstanding shares (but before reflecting the additional issued and outstanding
shares offered pursuant to this Agreement).
“Evaluation
Date” has
the
meaning set forth in Section
3.1(q).
3
“Exchange”
has the
meaning set forth in the recitals hereto.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
“Exchange
Agreement”
has the
meaning set forth in the recitals hereto.
“Exempt
Issuance”
means
the issuance of:
(a)
shares of Common Stock or options to employees, officers or independent
directors of the Company pursuant to any stock or option plan duly approved
by
the Company’s stockholders, provided such issuances are approved by the Board of
Directors of the Company or a majority of the members of a committee of
directors established for such purpose, but including therein the approval
of a
majority of the independent directors on the Board or such committee:
(b)
securities upon the exercise or exchange of or conversion of any Securities
issued hereunder or to any placement agents in connection with the transactions
contemplated hereby and/or securities exercisable or exchangeable for or
convertible into shares of Common Stock issued and outstanding on the date
of
this Agreement, provided that such securities have not been amended since the
date of this Agreement to increase the number of such securities or to decrease
the exercise, exchange or conversion price of any such securities; or
(c)
securities issued pursuant to acquisitions or strategic transactions, provided
any such issuance shall only be to a Person that is, itself or through its
subsidiaries, an operating company in a business synergistic with the business
of the Company and in which the Company receives benefits in addition to the
investment of funds, but shall not include a transaction in which the Company
is
issuing securities primarily for the purpose of raising capital or to an entity
whose primary business is investing in securities.
“Intellectual
Property Rights”
has the
meaning set forth in Section
3.1(n).
“Investment
Amount”
means,
with respect to each Investor, the Investment Amount indicated on such
Investor’s signature page to this Agreement.
“Investor”
or
“Investors”
has the
meaning set forth in the preamble.
“Investors’
Deliverables”
has the
meaning set forth in Section
2.2(b).
“Investor
Party” or
“Investor
Parties”
has the
meaning set forth in Section
4.6.
“Lien”
means
any lien, charge, encumbrance, security interest, right of first refusal, right
of participation or other restrictions of any kind.
“Losses”
means
any loss, liability, obligation, claim, contingency, damage, cost or expense,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation related thereto.
4
“Make
Good Escrow Agreement” means
the
Make Good Escrow Agreement, dated as of the date hereof, among the Company,
Corporate Stock Transfer, Inc., as escrow agent (the “Make
Good Escrow Agent”)
and Xx.
Xxxxx Xxx and Ms. Kong Xxx Xxx Xxx Xx, in the form of Exhibit
D
hereto.
“Make
Good Pledgors” means
Xx.
Xxxxx Luo and Ms. Kong Xxx Xxx Xxx Xx.
“Material
Adverse Effect”
means
any of (i) a material and adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material and adverse effect
on the results of operations, assets, prospects, business or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole,
or (iii) an adverse impairment to the Company’s ability to perform on a timely
basis its obligations under any Transaction Document.
“New
York Courts”
means
the state and federal courts sitting in the City of New York, Borough of
Manhattan.
“Omnia”
has the
meaning set forth in the recitals hereto.
“Omnia
Financial Statements”
means
the audited financial statements for the fiscal year ended December 31, 2006
(collectively, the “Omnia
Financial Statements”).
“Outside
Date”
means
the sixtieth 60th
day
following the date of this Agreement.
“Per
Unit Purchase Price”
equals
$1.25.
“Person”
means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.
“Proceeding”
means an
action, claim, suit, investigation or proceeding (including, without limitation,
an investigation or partial proceeding, such as a deposition), whether commenced
or threatened.
“Registration
Rights Agreement”
means
the Registration Rights Agreement, dated as of the date of this Agreement,
among
the Company and the Investors, substantially in the form of Exhibit
A
hereto.
“Registration
Statement”
means a
registration statement meeting the requirements set forth in the Registration
Rights Agreement and covering the resale by the Investors of the
Securities.
“Rule
144”
means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as
such
Rule.
“SEC
Reports”
has the
meaning set forth in Section
3.1(h).
5
“Securities”
means
the Shares, the Warrants and the Warrant Shares.
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Share
Delivery Date”
has the
meaning set forth in Section
4.1(c).
“Shares”
means
the shares of Common Stock being offered and sold to the Investors by the
Company hereunder.
“Short
Sales”
include,
without limitation, all “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the Exchange Act and all types of direct and indirect
stock
pledges, forward sale contracts, options, puts, calls, swaps and similar
arrangements (including on a total return basis), and sales and other
transactions through non-US broker dealers or foreign regulated
brokers.
“Subsidiary”
means
any “significant subsidiary” as defined in Rule 1-02(w) of the Regulation S-X
promulgated by the Commission under the Exchange Act.
“Third
Party Purchaser”
has
the
meaning set forth in Section 4.13 hereof.
“Trading
Day”
means
(i) a day on which the Common Stock is traded on a Trading Market (other than
the OTC Bulletin Board), or (ii) if the Common Stock is not listed on a Trading
Market (other than the OTC Bulletin Board), a day on which the Common Stock
is
traded in the over-the-counter market, as reported by the OTC Bulletin Board,
or
(iii) if the Common Stock is not quoted on any Trading Market, a day on which
the Common Stock is quoted in the over-the-counter market as reported by the
Pink Sheets LLC (or any similar organization or agency succeeding to its
functions of reporting prices); provided, that in the event that the Common
Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then
Trading Day shall mean a Business Day.
“Trading
Market”
means
whichever of the New York Stock Exchange, the American Stock Exchange, the
NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital
Market, OTC Bulletin Board or Pink Sheets LLC on which the Common Stock is
listed or quoted for trading on the date in question.
“Transaction
Documents”
means
this Agreement, the Registration Rights Agreement, the Warrants, the Closing
Escrow Agreement, Make Good Escrow Agreement and any other documents or
agreements executed in connection with the transactions contemplated
hereunder.
“Unit”
has the
meaning set forth in the recitals hereto.
“U.
S. GAAP”
means
U.S. generally accepted accounting principles.
“Warrants”
means
the
Common Stock purchase warrants in the form of Exhibit
B,
which
are issuable to the Investors at the Closing.
“Warrant
Shares” has
the
meaning set forth in Section 2.2(a)(ii) hereof.
6
“Wentworth
II Shares”
means
the 400,000 shares of Common Stock issued in January 2007 to investors in the
Company.
ARTICLE
2.
PURCHASE
AND SALE
2.1. Closing.
Subject
to the terms and conditions set forth in this Agreement, at the Closing the
Company shall issue and sell to each Investor, and each Investor shall,
severally and not jointly, purchase from the Company, the Shares and Warrants
representing such Investor’s Investment Amount. The Closing shall take place at
the offices of Xxxxxx Xxxx Xxxxx Raysman & Xxxxxxx LLP, 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000 on the Closing Date or at such other location or time
as the parties may agree.
2.2. Closing
Deliveries.
i)
At the
Closing, the Company shall deliver or cause to be delivered to each Investor
the
following (the “Company
Deliverables”):
(i) a
certificate evidencing a number of Shares equal to such Investor’s Investment
Amount divided by the Per Unit Purchase Price, registered in the name of such
Investor;
(ii) a
Warrant, registered in the name of such Investor, pursuant to which such
Investor shall have the right to acquire the number of shares of Common Stock
equal to 100% of the number of Shares issuable to such Investor pursuant to
Section
2.2(a)(i),
at an
exercise price per share that is equal to 125% of the Per Unit Purchase Price
(the “Warrant
Shares”);
(iii) the
Closing Escrow Agreement, duly executed by all parties thereto;
(iv) the
Make
Good Escrow Agreement, duly executed by all parties thereto;
(v) the
legal
opinion of Company Counsel, in agreed form, addressed to the Investors;
(vi) the
Registration Rights Agreement, duly executed by the Company; and
(vii) a
certificate executed by the Company’s chief executive officer and chief
financial officer, confirming the continued truth and correctness in all
material respects (except as to those representations and warranties qualified
by materiality, as to which the confirmation shall be as to their continued
truth and correctness) as of the Closing Date of the Company’s representations
and warranties made in Article 3
hereof;
(viii) a
certificate of the secretary of the Company, attaching a recent copy of the
certificate of incorporation certified by the Secretary of State of the State
of
Delaware and a good standing certificate as of a date not more than three days
prior to the Closing, copies of the by-laws of the Company and resolutions
of
the board of directors, which the secretary of the Company has certified as
true
and correct copies in full force and effect as of the Closing;
7
(b) At
the
Closing, each Investor shall deliver or cause to be delivered the following
(collectively, the “Investors’
Deliverables”):
(i) to
the
Escrow Agent for deposit and disbursement in accordance with the Closing Escrow
Agreement, its Investment Amount, in United States dollars and in immediately
available funds, by wire transfer to an account designated in writing by the
Company for such purpose; and
(ii) to
the
Company, the Registration Rights Agreement, duly executed by such
Investor.
ARTICLE
3.
REPRESENTATIONS
AND WARRANTIES
3.1. Representations
and Warranties of the Company.
The
Company hereby makes the following representations
and warranties
to each
Investor with the intention and understanding that, as to matters pertaining
to
Omnia and its subsidiaries and the Exchange, such representations and warranties
are made as of the Closing Date and assuming that the Exchange shall have been
consummated immediately prior to the Closing:
(a) Subsidiaries.
The
Company has no direct or indirect Subsidiaries other than as specified in the
Schedule
3.1(a).
Except
as disclosed in Schedule
3.1(a),
the
Company owns, directly or indirectly, all of the capital stock or other equity
of such Subsidiary free and clear of any and all Liens, and all the issued
and
outstanding shares of capital stock of each Subsidiary are validly issued and
are fully paid, non-assessable. As of the Closing, the Company shall own 100%
of
the capital stock of Omnia in accordance with the Exchange Agreement, free
and
clear of all Liens. The term “Subsidiaries” shall be deemed to include Omnia and
its subsidiaries as if the Exchange shall have been consummated as of the time
of the execution of this Agreement, with the effect that all references to
Subsidiaries of the Company in this Agreement shall also refer to Omnia and
its
subsidiaries.
(b) Organization
and Qualification.
The
Company and each Subsidiary are duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, with the
requisite power and authority to own and use its properties and assets and
to
carry on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents. The Company and each Subsidiary are duly qualified to conduct
its respective businesses and are in good standing as a foreign corporation
or
other entity in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not,
individually or in the aggregate, have or reasonably be expected to result
in a
Material Adverse Effect.
8
(c) Authorization;
Enforcement.
The
Company has the requisite corporate power and authority to enter into and to
consummate the transactions contemplated by each of the Transaction Documents
and otherwise to carry out its obligations thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company and no further
action is required by the Company in connection therewith. Each Transaction
Document has been (or upon delivery will have been) duly executed by the Company
and, when delivered in accordance with the terms hereof, will constitute the
valid and binding obligation of the Company , enforceable against the Company
in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
or
similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general
application.
(d) No
Conflicts; Filings, Consents and Approvals; Regulatory Permits.
(A) Except
as
set forth on Schedule
3.1(d),
the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated thereby
do
not and will not (i) conflict with or violate any provision of the Company’s or
any Subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become
a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both)
of,
any material agreement, lease, license, indenture, note, bond, permit,
concession, franchise or other instrument (evidencing a Company or Subsidiary
debt or otherwise) or other understanding to which the Company or any Subsidiary
is a party or by which any property or asset of the Company or any Subsidiary
is
bound or affected, or (iii) result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations), or by which
any
property or asset of the Company or a Subsidiary is bound or affected; except
in
the case of each of clauses (ii) and (iii), such as could not, individually
or
in the aggregate, have or reasonably be expected to result in a Material Adverse
Effect.
(B) Except
as
set forth on Schedule
3.1(d),
the
Company is not required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any United
States or People’s Republic of China court or other federal, state, local or
other governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than
(i) the filing with the Commission of one or more Registration Statements in
accordance with the requirements of the Registration Rights Agreement, (ii)
filings required by state securities laws, (iii) the filing of a Notice of
Sale
of Securities on Form D with the Commission under Regulation D of the Securities
Act, (iv) the filings required in accordance with Section
4.5
hereof,
and (v) those that have been made or obtained prior to the date of this
Agreement. The Company and the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state, local
or
foreign regulatory authorities necessary to conduct their respective businesses,
except where the failure to possess such permits could not, individually or
in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect, and neither the Company nor any Subsidiary has received any notice
of
proceedings relating to the revocation or modification of any such
permits.
9
(e) Issuance
of the Shares.
The
Securities have been duly authorized and, when issued and paid for in accordance
with the Transaction Documents, will be duly and validly issued, fully paid
and
nonassessable, free and clear of all Liens. The Company has reserved from its
duly authorized capital stock the shares of Common Stock issuable pursuant
to
this Agreement and the Warrants in order to issue the Shares and the Warrant
Shares.
(f) Capitalization.
The
number of shares and type of all authorized, issued and outstanding capital
stock of the Company, and all shares of Common Stock reserved for issuance
under
the Company’s various option and incentive plans, is set forth in the SEC
Reports or as set forth in Schedule
3.1(f).
Except
as specified in the SEC Reports or in Schedule
3.1(f),
no
securities of the Company are entitled to preemptive or similar rights, and
no
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the
Transaction Documents. Except as specified in the SEC Reports or in Schedule
3.1(f),
there
are no outstanding options, warrants, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights
or
obligations convertible into or exchangeable for, or giving any Person any
right
to subscribe for or to acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock,
or
securities or rights convertible or exchangeable into shares of Common Stock.
The issue and sale of the Securities hereunder will not, immediately or with
the
passage of time, obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Investors) and will not result in
a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities.
(g) SEC
Reports; Financial Statements.
To the
knowledge of the Company, the Company has filed all reports required to be
filed
by it under the Securities Act and the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the twelve months preceding the date hereof
(or such shorter period as the Company was required by law to file such
reports), including, for this purpose, the current report on Form 8-K that
is
being filed by the Company on or about the date hereof to disclose the
transactions contemplated hereby and by the Exchange Agreement (the foregoing
materials being collectively referred to herein as the “SEC
Reports”
and,
together with the Schedules to this Agreement (if any), the “Disclosure
Materials”)
on a
timely basis or has timely filed a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such extension.
As
of their respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have
been
prepared in accordance with U.S. GAAP applied on a consistent basis during
the
periods involved, except as may be otherwise specified in such financial
statements or the notes thereto, and fairly present in all material respects
the
financial position of the Company and its consolidated Subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments. The Omnia Financial Statements have
been
prepared in accordance with U.S. GAAP applied on a consistent basis during
the
periods involved, except as may be otherwise specified in such financial
statements or the notes thereto, and fairly present in all material respects
the
financial position of Omnia and its consolidated Subsidiaries as of and for
the
dates thereof and the results of operations and cash flows for the periods
then
ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.
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(h) Press
Releases.
The
press releases disseminated by the Company during the twelve months preceding
the date of this Agreement taken as a whole do not contain any untrue statement
of a material fact or omit 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 and when made, not
misleading.
(i) Material
Changes.
Except
as disclosed in the SEC Reports or Omnia Financial Statements, since December
31, 2006, except as specifically disclosed in the SEC Reports or as set forth
in
Schedule
3.1(i)
and
except as arising as a result of the transactions contemplated by the
Transaction Documents, including, as a result of the acquisition of Omnia,
(i)
there has been no event, occurrence or development that has had or that could
reasonably be expected to result in a Material Adverse Effect, (ii) the Company
has not incurred any liabilities (contingent or otherwise) other than (A) trade
payables, accrued expenses and other liabilities incurred in the ordinary course
of business consistent with past practice and (B) liabilities not required
to be
reflected in the Company’s financial statements pursuant to U.S. GAAP or
required to be disclosed in filings made with the Commission, (iii) the Company
has not altered its method of accounting or the identity of its auditors, (iv)
the Company has not declared or made any dividend or distribution of cash or
other property to its stockholders or purchased, redeemed or made any agreements
to purchase or redeem any shares of its capital stock, and (v) the Company
has
not issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans. The Company does not have
pending before the Commission any request for confidential treatment of
information.
(j) Litigation.
There
is no Action which (i) adversely affects or challenges the legality, validity
or
enforceability of any of the Transaction Documents or the Shares or (ii) except
as specifically disclosed in the SEC Reports or in Schedule
3.1(j),
could,
if there were an unfavorable decision, individually or in the aggregate, have
or
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any Subsidiary, nor any director or officer thereof (in his or
her
capacity as such), is or has been the subject of any Action involving a claim
of
violation of or liability under federal or state securities laws or a claim
of
breach of fiduciary duty, except as specifically disclosed in the SEC Reports
or
as set forth in Schedule
3.1(j).
There
has not been, and to the knowledge of the Company, there is not pending any
investigation by the Commission involving the Company or any current or former
director or officer of the Company (in his or her capacity as such). The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.
11
(k) Labor
Relations.
No
material labor dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company.
(l) Compliance
with Applicable Laws.
During
the two years preceding the date hereof, neither the Company nor any Subsidiary
(i) is in default under or in violation of (and no event has occurred that
has
not been waived that, with notice or lapse of time or both, would result in
a
default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that it
is
in violation of, any indenture, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties
is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal,
state
and local laws relating to taxes, environmental protection, occupational health
and safety, product quality and safety and employment and labor matters, except
in each case as could not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect. The Exchange Agreement
complies with all applicable laws, rules and regulations of the United States
and the People’s Republic of China. The Company is in compliance with all
effective requirements of the Xxxxxxxx-Xxxxx Act of 2002, as amended, and the
rules and regulations thereunder, that are applicable to it, except where such
noncompliance could not have or reasonably be expected to result in a Material
Adverse Effect.
(m) Title
to Assets.
Except
as set forth in Schedule
3.1(m),
the
Company and the Subsidiaries do not own any real property. Except as set forth
in Schedule
3.1(m),
the
Company and the Subsidiaries have valid land use rights for all real property
owned by them that is material to their respective businesses and good and
marketable title in all personal property owned by them that is material to
their respective businesses, in each case free and clear of all Liens, except
for Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property
by the Company and the Subsidiaries. Any real property and facilities held
under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and the Subsidiaries
are
in compliance, except as could not, individually or in the aggregate, have
or
reasonably be expected to result in a Material Adverse Effect.
(n) Patents
and Trademarks.
The
Company and the Subsidiaries have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights that are necessary or material
for
use in connection with their respective businesses and which the failure to
so
have could taken as a whole have or reasonably be expected to result in a
Material Adverse Effect (collectively, the “Intellectual
Property Rights”).
Neither the Company nor any Subsidiary has received a written notice that the
Intellectual Property Rights used by the Company or any Subsidiary violates
or
infringes upon the rights of any Person. To the knowledge of the Company, all
such Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property
Rights.
12
(o) Insurance.
The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged in the geographic areas where they engage in such businesses. The
Company has no reason to believe that it will not be able to renew its and
the
Subsidiaries’ existing insurance coverage as and when such coverage expires or
to obtain similar coverage from similar insurers as may be necessary to continue
its business on terms consistent with market for the Company’s and such
Subsidiaries’ respective lines of business.
(p) Transactions
With Affiliates and Employees.
Except
as set forth in the SEC Reports, the Omnia Financial Statements or in
Schedule
3.1(p),
none of
the officers or directors of the Company or of any Subsidiary or members of
the
immediate families of such officers or directors, and, to the knowledge of
the
Company, none of the employees of the Company or of any Subsidiary, is presently
a party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to
or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to
the
knowledge of the Company, any entity in which any officer, director, or any
such
employee has a substantial interest or is an officer, director, trustee or
partner.
(q) Internal
Accounting Controls.
The
Company and the Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed
in
accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with U.S. GAAP and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management’s general
or specific authorization, and (iv) the recorded accountability for assets
is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has established disclosure
controls and procedures for the Company and designed such disclosure controls
and procedures to ensure that material information relating to the Company,
including its Subsidiaries, is made known to the certifying officers by others
within those entities. The Company’s certifying officers have evaluated the
effectiveness of the Company’s controls and procedures in accordance with Item
307 of Regulation S-B under the Exchange Act for the Company’s most recently
ended fiscal quarter or fiscal year-end (such date, the “Evaluation
Date”).
The
Company presented in its most recently filed Form 10-KSB or Form 10-QSB the
conclusions of the certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the Evaluation Date.
Since the Evaluation Date, there have been no significant changes in the
Company’s internal controls (as such term is defined in Item 308(c) of
Regulation S-B under the Exchange Act) or, to the Company’s knowledge, in other
factors that could significantly affect the Company’s internal controls. Since
December 31, 2006, there have been no significant changes in the Subsidiaries’
internal controls or, to any Subsidiary’s knowledge, in other factors that could
significantly affect such Subsidiary’s internal controls.
(r) Solvency.
Based
on the financial condition of the Company as of the Closing Date (and assuming
that the Closing shall have occurred), (i) the Company’s fair saleable value of
its assets exceeds the amount that will be required to be paid on or in respect
of the Company’s existing debts and other liabilities (including known
contingent liabilities) as they mature, (ii) the Company’s assets do not
constitute unreasonably small capital to carry on its business for the current
fiscal year as now conducted and as proposed to be conducted including its
capital needs taking into account the particular capital requirements of the
business conducted or proposed to be conducted by the Company, and projected
capital requirements and capital availability thereof, and (iii) the current
cash flow of the Company, together with the proceeds the Company would receive,
were it to liquidate all of its assets, after taking into account all
anticipated uses of the cash, would be sufficient to pay all amounts on or
in
respect of its debt when such amounts are required to be paid. The Company
does
not intend to incur debts beyond its ability to pay such debts as they mature
(taking into account the timing and amounts of cash to be payable on or in
respect of its debt).
13
(s) Certain
Fees.
Except
as described in Schedule
3.1(s),
no
brokerage or finder’s fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Investors shall have no obligation with
respect to any fees or with respect to any claims (other than such fees or
commissions owed by an Investor pursuant to written agreements executed by
such
Investor which fees or commissions shall be the sole responsibility of such
Investor) made by or on behalf of other Persons for fees of a type contemplated
in this Section
3.1(s)
that may
be due in connection with the transactions contemplated by this
Agreement.
(t) Certain
Registration Matters.
Assuming the accuracy of the Investors’ representations and warranties set forth
in Section
3.2(b)-(l),
no
registration under the Securities Act is required for the offer and sale of
the
Shares and Warrants and the offer of the Warrant Shares by the Company to the
Investors under the Transaction Documents. The Company is eligible to register
its Common Stock for resale by the Investors under Form SB-2 promulgated under
the Securities Act. Except as specified in Schedule
3.1(t),
the
Company has not granted or agreed to grant to any Person any rights (including
“piggy-back” registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority that have
not
been satisfied.
(u) Investment
Company.
Neither
the Company nor any Subsidiary is, and is not an Affiliate of, and immediately
following the Closing will not have become, an “investment company” within the
meaning of the Investment Company Act of 1940, as amended.
(v) Application
of Takeover Protections.
The
Company and the Subsidiaries have taken all necessary action, if any, in order
to render inapplicable any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company’s or the Subsidiaries’
Articles of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Investors
as a
result of the Investors and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation the Company’s issuance of the Shares and the Investors’ ownership of
the Securities.
14
(w) No
Additional Agreements.
The
Company does not have any agreement or understanding with any Investor with
respect to the transactions contemplated by the Transaction Documents other
than
as specified in the Transaction Documents.
(x) Consultation
with Auditors.
The
Company has consulted its independent auditors concerning the accounting
treatment of the transactions contemplated by the Transaction Documents, and
in
connection therewith has furnished such auditors complete copies of the
Transaction Documents.
(y) Make
Good Shares.
The
Make Good Pledgors are the sole record and beneficial owners of the 2007 Make
Good Shares and 2008 Make Good Shares, and to the knowledge of the Company
holds
such shares free and clear of all Liens.
(z) Disclosure.
The
Company understands and confirms that the Investors will rely on the foregoing
representations and covenants in effecting transactions in securities of the
Company. Except as specified below, all disclosure provided to the Investors
regarding the Company, the Subsidiaries or their respective businesses and
the
transactions contemplated hereby, furnished by or on behalf of the Company
(including the Company’s representations and warranties set forth in this
Agreement) are true and correct and do not contain any untrue statement of
a
material fact or omit to state any material fact necessary in order to make
the
statements made therein, in light of the circumstances under which they were
made, not misleading. Notwithstanding the foregoing, any draft of the
Registration Statement to be filed on Form SB-2 in connection with the
transactions contemplated hereby that was provided to the Investors prior to
the
date hereof was incomplete in the form distributed, and such Investor is not
relying on such draft on Form SB-2 in making its decision to enter into the
transactions contemplated hereby.
Each
Investor acknowledges and agrees that the Company has not made nor makes any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section
3.1.
3.2. Representations
and Warranties of the Investors.
Each
Investor hereby, for itself and for no other Investor, represents and warrants
to the Company as follows:
(a) Organization;
Authority.
If an
entity, such Investor is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization with the requisite
corporate, limited liability company or partnership power and authority to
enter
into and to consummate the transactions contemplated by the applicable
Transaction Documents and otherwise to carry out its obligations thereunder.
The
execution, delivery and performance by such Investor of the transactions
contemplated by this Agreement has been duly authorized by all necessary
corporate or, if such Investor is not a corporation, such limited liability
company, partnership or other applicable like action, on the part of such
Investor. Each of this Agreement and the Registration Rights Agreement has
been
duly executed by such Investor, and when delivered by such Investor in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of such Investor, enforceable against it in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating
to,
or affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.
15
(b) Investment
Intent.
Such
Investor is acquiring the Securities as principal for its own account for
investment purposes only and not with a view to or for distributing or reselling
such Securities or any part thereof, without prejudice, however, to such
Investor’s right at all times to sell or otherwise dispose of all or any part of
such Securities in compliance with applicable federal and state securities
laws.
Subject to the immediately preceding sentence, nothing contained herein shall
be
deemed a representation or warranty by such Investor to hold the Securities
for
any period of time. Such Investor is acquiring the Securities hereunder in
the
ordinary course of its business. Such Investor does not have any agreement
or
understanding, directly or indirectly, with any Person to distribute any of
the
Securities.
(c) Investor
Status.
At the
time such Investor was offered the Securities, it was, and at the date hereof
it
is, an “accredited investor” as defined in Rule 501(a) under the Securities Act.
Such Investor is not a registered broker-dealer, and is not affiliated with
a
registered broker-dealer, under Section 15 of the Exchange Act. Such Investor,
either alone or together with its representatives has such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in
the
Securities, and has so evaluated the merits and risks of such investment. Such
Investor understands that it must bear the economic risk of this investment
in
the Securities indefinitely, and is able to bear such risk and is able to afford
a complete loss of such investment.
(d) General
Solicitation.
Such
Investor is not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities published in
any
newspaper, magazine or similar media or broadcast over television or radio
or
presented at any seminar or any other general solicitation or general
advertisement.
(e) Access
to Information.
Such
Investor acknowledges that it has reviewed the Disclosure Materials and has
been
afforded (i) the opportunity to ask such questions as it has deemed necessary
of, and to receive answers from, representatives of the Company concerning
the
terms and conditions of the offering of the Securities and the merits and risks
of investing in the Securities; (ii) access to information about the Company
and
the Subsidiaries and their respective financial condition, results of
operations, business, properties, management and prospects sufficient to enable
it to evaluate its investment; and (iii) the opportunity to obtain such
additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment. Neither such inquiries nor any other
investigation conducted by or on behalf of such Investor or its representatives
or counsel shall modify, amend or affect such Investor’s right to rely on the
truth, accuracy and completeness of the Disclosure Materials and the Company’s
representations and warranties contained in the Transaction Documents. Such
Investor acknowledges that notwithstanding the foregoing, any draft of the
Registration Statement to be filed on Form SB-2 in connection with the
transactions contemplated hereby that was provided to such Investor prior to
the
date hereof was incomplete in the form distributed, and such Investor is not
relying on such draft on Form SB-2 in making its decision to enter into the
transactions contemplated hereby.
16
(f) Certain
Trading Activities.
Such
Investor has not directly or indirectly, nor has any Person acting on behalf
of
or pursuant to any understanding with such Investor, engaged in any transactions
in the securities of the Company (including, without limitations, any Short
Sales involving the Company’s securities) since the earlier to occur of (1) the
time that such Investor was first contacted by the Company or Xxxxxxx
Securities, LLC regarding an investment in the Company and (2) the
30th
day
prior to the date of this Agreement. Such Investor covenants that neither it
nor
any Person acting on its behalf or pursuant to any understanding with it will
engage in any transactions in the securities of the Company (including Short
Sales) prior to the time that the transactions contemplated by this Agreement
are publicly disclosed.
(g) Independent
Investment Decision.
Such
Investor has independently evaluated the merits of its decision to purchase
the
Securities pursuant to the Transaction Documents, and such Investor confirms
that it has not relied on the advice of any other Investor’s business and/or
legal counsel in making such decision. Such Investor has not relied on the
business or legal advice of Xxxxxxx Securities, LLC or any of its agents,
counsel or Affiliates in making its investment decision hereunder, and confirms
that none of such Persons has made any representations or warranties to such
Investor in connection with the transactions contemplated by the Transaction
Documents.
(h) No
Governmental Review.
Such
Investor understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation
or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.
(i) No
Conflicts.
The
execution, delivery and performance by such Investor of this Agreement and
the
consummation by such Investor of the transactions contemplated hereby will
not
(i) result in a violation of the organizational documents, if any, of such
Investor, (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 to which such Investor is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws) applicable to such Investor,
except in the case of clauses (ii) and (iii) above, that do not otherwise affect
the ability of such Investor to consummate the transactions contemplated
hereby.
(j) Restricted
Securities.
The
Investors understand that the Securities are characterized as “restricted
securities” under the U.S. federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering
and
that under such laws and applicable regulations such securities may be resold
without registration under the Securities Act only in certain limited
circumstances.
(k) Legends.
It is
understood that, except as provided in Section 4.1(b)
of this
Agreement, certificates evidencing such Securities may and shall bear the legend
set forth in Section 4.1(b).
17
(l) No
Legal, Tax or Investment Advice.
Such
Investor understands that nothing in this Agreement or any other materials
presented by or on behalf of the Company to the Investor in connection with
the
purchase of the Securities constitutes legal, tax or investment advice. Such
Investor has consulted such legal, tax and investment advisors as it, in its
sole discretion, has deemed necessary or appropriate in connection with its
purchase of the Securities. Such Investor understands that the Placement Agent
has acted solely as the agent of the Company in this placement of the
Securities, and that the Placement Agent makes no representation or warranty
with regard to the merits of this transaction or as to the accuracy of any
information such Investor may have received in connection therewith. Such
Investor acknowledges that he has not relied on any information or advice
furnished by or on behalf of the Placement Agent.
The
Company acknowledges and agrees that no Investor has made or makes any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section
3.2.
or as
set forth in the subscription documents for the Securities (including an
Investor suitability questionnaire, FINRA questionnaire and Investor
acknowledgement and agreement included therein).
ARTICLE
4.
OTHER
AGREEMENTS OF THE PARTIES
4.1. (a)
Securities
may only be disposed of in compliance with state and federal securities laws.
In
connection with any transfer of the Securities other than pursuant to an
effective registration statement, to the Company, to an Affiliate of an Investor
or in connection with a pledge as contemplated in Section
4.1(b),
the
Company may require the transferor thereof to provide to the Company an opinion
of counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under
the
Securities Act.
(b) Certificates
evidencing the Securities will contain the following legend (with Warrants
including the text in brackets), until such time as they are not required under
Section
4.1(c):
THESE
SECURITIES [AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES]
HAVE
NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES [AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED
BY SUCH SECURITIES.
18
The
Company acknowledges and agrees that an Investor may from time to time pledge,
and/or grant a security interest in some or all of the Securities pursuant
to a
bona fide margin agreement in connection with a bona fide margin account and,
if
required under the terms of such agreement or account, such Investor may
transfer pledged or secured Securities to the pledgees or secured parties.
Such
a pledge or transfer would not be subject to approval or consent of the Company
and no legal opinion of legal counsel to the pledgee, secured party or pledgor
shall be required in connection with the pledge, but such legal opinion may
be
required in connection with a subsequent transfer following default by the
Investor transferee of the pledge. No notice shall be required of such pledge.
At the appropriate Investor’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the Securities
including the preparation and filing of any required prospectus supplement
under
Rule 424(b)(3) of the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of selling stockholders
thereunder. Except as otherwise provided in Section
4.1(c),
any
Securities subject to a pledge or security interest as contemplated by this
Section
4.1(b)
shall
continue to bear the legend set forth in this Section
4.1(b)
and be
subject to the restrictions on transfer set forth in Section
4.1(a).
(c) Certificates
evidencing Shares and Warrant Shares shall not contain any legend (including
the
legend set forth in Section
4.1(b)):
(i)
following a sale or transfer of such Shares or Warrant Shares pursuant to an
effective registration statement (including a Registration Statement), or (ii)
following a sale or transfer of such Shares or Warrant Shares pursuant to Rule
144 (assuming the transferee is not an Affiliate of the Company), (iii) while
such Shares or Warrant Shares are eligible for sale under Rule 144(k) or under
Rule 144(d) (the latter if then proposed to be contemporaneously sold or
transferred under Rule 144(d) and if accompanied by an
opinion of counsel selected by the transferor, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that
such
sale or transfer does not require registration of such transferred Securities
under the Securities Act).
If an
Investor shall make a sale or transfer of Shares or Warrant Shares either (x)
pursuant to Rule 144 or (y) pursuant to a registration statement and in each
case shall have delivered to the Company or the Company’s transfer agent the
certificate representing Shares or Warrant Shares containing a restrictive
legend which are the subject of such sale or transfer
and a representation letter in customary form, and if applicable, the opinion
referred to above (the
date of
such sale or transfer and Shares or Warrant Shares delivery being the
“Share
Delivery Date”)
and (1)
the Company shall fail to deliver or cause to be delivered to such Investor
a
certificate representing such Shares or Warrant Shares that is free from all
restrictive or other legends by the third Trading Day following the Share
Delivery Date and (2) following such third Trading Day after the Share Delivery
Date and prior to the time such Shares or Warrant Shares are received free
from
restrictive legends, the Investor, or any third party on behalf of such
Investor, purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the Investor of such Shares
or Warrant Shares (a "Buy-In"),
then
the Company shall pay in cash to the Investor (for costs incurred either
directly by such Investor or on behalf of a third party) the amount by which
the
total purchase price paid for Common Stock as a result of the Buy-In (including
brokerage commissions, if any) exceed the proceeds received by such Investor
as
a result of the sale to which such Buy-In relates. The Investor shall provide
the Company written notice indicating the amounts payable to the Investor in
respect of the Buy-In.
19
4.2. Furnishing
of Information.
Until
the date that all of the Securities may be sold under Rule 144(k) of the
Securities Act (or any successor provision), the Company covenants to timely
file (or obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company after the date
hereof pursuant to the Exchange Act, and, if the Company is not required to
file
reports pursuant to such laws, it will prepare and furnish to the Investors
and
make publicly available in accordance with Rule 144(c) such information as
is
required for the Investors to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to
time
to enable such holder to sell the Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule
144.
4.3. Integration.
The
Company shall not, and shall use its commercially reasonable best efforts to
ensure that no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined
in
Section 2 of the Securities Act) that would be integrated with the offer or
sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Investors, or that would
be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market in a manner that would require stockholder
approval of the sale of the Securities to the Investors.
4.4. Subsequent
Registrations.
Other
than pursuant to the Registration Rights Agreement, prior to the Effective
Date
of the first Registration Statement, covering resale of any Registrable
Securities, filed pursuant to the Registration Rights Agreement, the Company
may
not file any registration statement (other than on Form S-8) with the Commission
with respect to any securities of the Company.
4.5. Securities
Laws Disclosure;U
(New
York time) on the Business
Day
following the Closing Date, the Company shall issue a press release disclosing
the transactions contemplated hereby and the Closing. No later than the fourth
Business
Day
following the Closing Date the Company will file a Current Report on Form 8-K
disclosing the material terms of the Transaction Documents (and attach as
exhibits thereto the Transaction Documents) and the Closing. Notwithstanding
the
foregoing, the Company shall not publicly disclose the name of any Investor,
or
include the name of any Investor in any filing with the Commission (other than
the Registration Statement and any exhibits to filings made in respect of this
transaction in accordance with periodic filing requirements under the Exchange
Act) or any regulatory agency or Trading Market, without the prior written
consent of such Investor, except to the extent such disclosure is required
by
law or Trading Market regulations.
20
4.6. Indemnification
of Investors. In addition to the indemnity provided in the Registration
Rights Agreement, the Company hereby agrees to the following indemnification
of
the Investors:
(a) The
Company will indemnify and hold the Investors and their respective directors,
officers, shareholders, partners, employees and agents (each, an “Investor
Party”,
collectively, the “Investor
Parties”)
harmless from any and all Losses that any such Investor Party may suffer or
incur as a result of or relating to any misrepresentation, breach or inaccuracy
of any representation, warranty, covenant or agreement made by the Company
in
any Transaction Document. In addition to the indemnity contained herein, the
Company will reimburse each Investor Party for its reasonable legal and other
expenses (including the cost of any investigation, preparation and travel in
connection therewith) incurred in connection therewith, as such expenses are
incurred. It shall be understood, however, that the Company shall not, in
connection with any one such Proceeding (including separate Proceedings that
have been or will be consolidated before a single judge) be liable for the
fees
and expenses of more than one separate firm of attorneys at any time for all
Investor Parties, which firm shall be appointed by a majority of the Investor
Parties.
(b) Except
as
otherwise set forth herein, the mechanics and procedures with respect to the
rights and obligations of the parties under this Section
4.6
shall be
the same as those set forth in Section 5 of the Registration Rights
Agreement.
4.7. Non-Public
Information.
The
Company covenants and agrees that from and after the Closing under this
Agreement neither it nor any other Person acting on its behalf will provide
any
Investor or its agents or counsel with any information that the Company or
the
Subsidiaries believes constitutes material non-public information, unless prior
thereto such Investor shall have executed a written agreement regarding the
confidentiality and use of such information. The Company and the Subsidiaries
understand and confirm that each Investor shall be relying on the foregoing
representations in effecting transactions in securities of the
Company.
4.8. Listing
of Securities.
The
Company agrees: (i) if the Company applies to have the Common Stock traded
on a
Trading Market, it will include in such application the Securities, and will
take such other action as is necessary or desirable to cause the Securities
to
be listed on such Trading Market as promptly as possible; (ii) it will take
all
action reasonably necessary to list and trade its Common Stock on a Trading
Market (excluding for purposes of this provision Pink Sheets LLC) and will
comply in all material respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the Trading Market; and (iii) by the
Closing to have caused to be prepared a completed Form 211 to initiate
quotations on the OTC Bulletin Board, with any and all attachments required
pursuant thereto, in a format that is ready for submission to the FINRA,
accompanied by a letter from a registered broker-dealer dated as of no more
than
five business days prior to the Closing, identifying itself as a prospective
market-maker in the Company’s Common Stock and confirming its readiness to so
submit such Form 211 immediately following the Closing, but with effectiveness
of such Form 211 being subject to such conditions as may be applicable,
including availability for resale of Company Common stock registered under
the
Securities AC or otherwise available for resale under Rule 144.
21
4.9. Use
of
Proceeds.
The
Company will use the net proceeds from the sale of the Shares and Warrants
hereunder for marketing development, media advertising, sales, new product
lines
and working capital purposes, as set forth in the offering memorandum provided
relating to the Securities sold hereunder. In addition, the Company will
allocate $500,000 from the net proceeds for a comprehensive investor relations,
public relations, after-market support and independent research
campaign.
4.10. No
Use
of Proceeds for Redemption.
The
Company will not use the net proceeds from the sale of the Shares for the
satisfaction of any portion of the Company’s debt (other than payment of trade
payables and accrued expenses in the ordinary course of the Company’s business
and consistent with prior practices), or to redeem any Common
Stock..
4.11. Make
Good Shares.
(a) The
Make
Good Pledgors agrees that if the Company’s consolidated after tax net income for
the fiscal year 2007 calculated under U.S. GAAP (minus adjustments for non-cash
and cash charges related to the transactions contemplated in the Transaction
Documents (including any expenses of the exchange transactions between Omnia
and
the Company or of offer, sale and registration for resale of the Securities,
including any liquidated damages payments under the Registration Rights
Agreement,
and
including any expense relating to any issuance of shares by the Company prior
to
the transactions contemplated in the Transaction Documents),
and
minus accounting for the impact on net income of any equity incentive options
or
shares granted (the “2007
Adjusted Income”))
reported in the Company’s Annual Report on Form 10-K or 10-KSB, as applicable,
for the fiscal year ended December 31, 2007, as filed with the Commission (the
“2007
Annual Report”)
is less
than $2.0 million (the “2007
Guaranteed ATNI”),
the
Make
Good Pledgors will transfer to each Investor for no additional consideration
a
number of shares of Common Stock equal to (($2.0 million - 2007 Adjusted
Income)/$2.0 million) multiplied by the Escrow Shares, subject to a maximum
number of 50% of the Escrow Shares (the “2007
Make Good Shares”).
Should
the preceding formula yield a number equal to or less than zero, no transfer
of
2007 Make Good Shares shall be made to Investors. If the 2007 Annual Report
indicates that the Company shall have satisfied the 2007 Guaranteed ATNI test
specified above for such period, then no transfer to Investors of 2007 Make
Good
Shares shall be required by this Section
4.11(a)
and all
2007 Make Good Shares deposited with the Make Good Escrow Agent shall be
returned to the Make Good Pledgors in accordance with the Make Good Escrow
Agreement. Transfers of 2007 Make Good Shares required under this Section
4.11(a)
shall be
made to Investors within 10 Business Days after the date on which the Company’s
2007 Annual Report is filed with the Commission and otherwise delivered in
accordance with the Make Good Escrow Agreement.
(b) The
Make
Good Pledgors agrees that if the Company’s consolidated after tax net income for
the fiscal year 2008 calculated under U.S. GAAP (minus adjustments for non-cash
and cash charges related to the transactions contemplated in the Transaction
Documents (including any expenses of the exchange transactions between Omnia
and
the Company or of offer, sale and registration for resale of the Securities,
including any liquidated damages payments under the Registration Rights
Agreement,
and
including any expense relating to any issuance of shares by the Company prior
to
the transactions contemplated in the Transaction Documents),
and
minus accounting for the impact on net income of any equity incentive options
or
shares granted (the “2008
Adjusted Income”))
reported in the Company’s Annual Report on Form 10-K or 10-KSB, as applicable,
for the fiscal year ended December 31, 2008, as filed with the Commission (the
“2008
Annual Report”)
is less
than $4.3 million (the “2008
Guaranteed ATNI”),
the
Make Good Pledgors will transfer to each Investor for no additional
consideration a number of shares of Common Stock equal to the lesser of (1)
(($4.3 million - 2008 Adjusted Income)/$4.3 million) multiplied by the Escrow
Shares, or (2) the number of Escrow Shares still in escrow (the “2008
Make Good Shares”).
Should
the preceding formula yield a number equal to or less than zero, no transfer
of
2008 Make Good Shares shall be made to Investors. If the 2008 Annual Report
indicates that the Company shall have satisfied the 2008 Guaranteed ATNI test
specified above for such period, then no transfer to Investors of 2008 Make
Good
Shares shall be required by this Section
4.11(b)
and all
2008 Make Good Shares deposited with the Make Good Escrow Agent shall be
returned to the Make Good Pledgors in accordance with the Make Good Escrow
Agreement. Transfers of 2008 Make Good Shares required under this Section
4.11(b)
shall be
made to Investors within 10 Business Days after the date on which the Company’s
2008 Annual Report is filed with the Commission and otherwise delivered in
accordance with the Make Good Escrow Agreement.
22
(c) In
connection with the foregoing, the Make Good Pledgors agree that within one
Business
Day
following the Closing, the Make Good Pledgors will deposit all potential 2007
Make Good Shares and 2008 Make Good Shares into escrow in accordance with the
Make Good Escrow Agreement along with bank signature stamped stock powers
endorsed in blank (or such other signed instrument of transfer acceptable to
the
Company’s transfer agent), and the handling and disposition of the 2007 Make
Good Shares and 2008 Make Good Shares shall be governed by this Section
4.11
and such
Make Good Escrow Agreement. The Make Good Pledgors hereby agree that their
obligation to transfer shares of Common Stock to Investors pursuant to this
Section
4.11
shall
continue to run to the benefit of an Investor who shall have transferred or
sold
all or any portion of its Securities, but that no Investor shall have the right
to assign its rights to receive all or any such shares of Common Stock to other
Persons in conjunction with negotiated or open-market sales or transfers of
any
of its Securities.
(d) The
Company covenants and agrees that upon any transfer under this Section
4.11
of 2007
Make Good Shares or 2008 Make Good Shares to the Investors in accordance with
Section 4 of the Make Good Escrow Agreement, the Company shall promptly reissue
such 2007 Make Good Shares or 2008 Make Good Shares in the applicable Investor’s
name and deliver the same as directed by such Investor.
(e) Notwithstanding
the foregoing, the parties agree that for purposes of determining whether or
not
the 2007 Guaranteed ATNI or the 2008 Guaranteed ATNI have been achieved, the
release of the 2007 Make Good Shares or the 2008 Make Good Shares to either
the
Investors or to the Make Good Pledgors as a result of the operation of this
Section
4.11
shall
not be deemed to be an expense, charge or other deduction from revenues even
though U.S. GAAP may require contrary treatment and even though the applicable
annual report on Form 10-K or 10-KSB, as applicable, may indicate otherwise.
(f) Each
of
the Company and the Make Good Pledgors agrees that they will not issue, or
cause
the Company to issue, to either of the Make Good Pledgors or their family
relatives, shares of Common Stock or other Common Stock Equivalents in
replacement of or for any 2007 Make Good Shares or 2008 Make Good Shares
transferred to the Investors.
23
(g) The
Company shall use its reasonable best efforts, consistent with applicable
federal and state securities law and regulation and subject to any requirements
of its transfer agent, to cause the certificates for any 2007 Make Good Shares
or 2008 Make Good Shares transferred to Investors to be dated and deemed issued
as of the Closing Date for purposes of SEC Rule 144 holding periods.
4.12. Participation
Rights. Investors who execute and deliver a copy of the Registration Rights
Agreement shall be entitled to participate in certain future privately placed
equity financings of the Company, to the extent and on the terms and conditions
set forth in Section 6 thereof.
4.13. Adjustment
for Future Dilutive Issuances.
(a) Until
the
third anniversary of the Closing Date, other than with respect to any Excepted
Issuances, if at any time Shares are held by an Investor, the Company shall
offer, issue or agree to issue any Common Stock or securities convertible into
or exercisable for shares of Common Stock (or modify any of the foregoing which
may be outstanding) to any Person (a “Third
Party Purchaser”)
at a
price per share of Common Stock or exercise price per share of Common Stock
which shall be less than the then effective per share Purchase Price of the
Shares of the Investors holding Shares (adjusted to reflect any issuance to
such
Investor of 2007 Make Good Shares or 2008 Make Good Shares), then the Company
shall issue, for each such occasion, additional shares of Common Stock to each
Investor so that the average per share purchase price of the shares of Common
Stock issued to the Investor (of only the Shares still owned by the Investor)
is
equal to such other lower price per share.
(b)
The
delivery to the Investor of the additional shares of Common Stock shall be
not
later than 15 Business Days from the closing date of the transaction giving
rise
to the requirement to issue additional shares of Common Stock. If the Third
Party Purchaser is offered registration rights with respect to the shares
purchased by such Third Party Purchaser, the Investors shall be granted such
registration rights in relation to such additional shares of Common Stock.
(c) For
purposes of the issuance and adjustment described in this Section 4.14, the
issuance of any security of the Company carrying the right to convert such
security into shares of Common Stock or of any warrant, right or option to
purchase Common Stock shall result in the issuance of the additional shares
of
Common Stock upon the actual issuance of such convertible security, warrant,
right or option, but shall not result in any later issuance upon any subsequent
issuances of shares of Common Stock upon exercise of such conversion or purchase
rights, except to the extent such later such issuance is at a price lower than
the original conversion price or exercise price in effect upon the first
issuance.
(d) The
Company shall use its reasonable best efforts, consistent with applicable
federal and state securities law and regulation and subject to any requirements
of its transfer agent, to cause the certificates for any shares issued pursuant
to this Section 4.13 to be dated and deemed issued as of the Closing Date for
purposes of SEC Rule 144 holding periods.
24
(e) The
rights of the Investor set forth in this Section 4.13 are in addition to any
other rights the Subscriber has pursuant to Section 4.11 of this Agreement
or
Section 6 of the Registration Rights Agreement.
4.14. Corporate
Governance. In
addition to complying with its reporting and other obligations under the U.S.
federal securities, the Company will: (i) subject to identification and
availability of qualified candidates, cause, within 90 days following the
Closing, a majority of the members of its Board of Directors to be “independent”
as defined under the NASDAQ listing requirements; and (ii) otherwise satisfy,
within 90 days following the Closing, the corporate governance requirements
relating to Board and Board committee composition, process and decision-making,
and approval of related-party transactions applicable to a NASDAQ-listed
company.
4.15. NASDAQ
Listing Application. The
Company will: (i) use its commercially reasonable best efforts to meet the
initial listing requirements of the NASDAQ Capital Market, and (ii) assuming
it
meets or can reasonably be expected to then meet all quantitative listing
requirements of the NASDAQ Capital Market, within 180 days of the Closing,
prepare and file with NASDAQ an initial listing application with respect to
its
Common Stock..
4.16. Chief
Financial Officer. The
Company will, within 60 days following the Closing, hire as a full-time chief
financial officer a qualified individual with adequate experience and skills
who
is bilingual (English and Chinese).
ARTICLE
5.
CONDITIONS
PRECEDENT TO CLOSING
5.1. Conditions
Precedent to the Obligations of the Investors to Purchase
Securities.
The
obligation of each Investor to acquire Securities at the Closing is subject
to
the satisfaction or waiver by such Investor, at or before the Closing, of each
of the following conditions:
(a) Representations
and Warranties.
The
representations and warranties of the Company contained herein shall be true
and
correct in all material respects as of the date when made and as of the Closing
as though made on and as of such date;
(b) Performance.
The
Company shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by it 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 that prohibits the consummation of any
of
the transactions contemplated by the Transaction Documents;
25
(d) Adverse
Changes.
Since
the date of execution of this Agreement, no event or series of events shall
have
occurred that reasonably could have or result in a Material Adverse Effect
or a
material adverse change with respect to the Subsidiaries;
(e) PRC
Opinion.
Omnia
shall have received an opinion from its legal counsel in the People's Republic
of China that confirms the legality under Chinese law of the transactions being
effected by Omnia in connection with the Exchange in form and substance
satisfactory to the Investors;
(f) Minimum
Offering.
The
Company shall have sold, subject to Closing, at least 160 Units pursuant to
this
Agreement;
(g) Exchange
Agreement; Form 8-K.
Immediately prior to the Closing, the Company shall have acquired all of the
outstanding ordinary shares and any outstanding preferred shares of Omnia
pursuant to the Exchange Agreement, and the Company shall provide the Investors
with the Current Report on Form 8-K to be filed within four Business
Days
following the closing date under the Exchange Agreement, containing the audited
financial statements of Omnia and other required disclosure with respect to
Omnia;
(h) Investor
Relations.
Prior
to the Closing, the Company shall have engaged After-Market Support, LLC as
the
Company’s investor relations firm;
(i) Company
Deliverables.
The
Company shall have delivered the Company Deliverables in accordance with
Section
2.2(a);
(j) SEC
Reports.
The
Company shall have filed all reports required to be filed by it under the
Securities Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the twelve months preceding the date hereof (or such shorter
period as the Company was required by law to file such reports);
and
(k) Termination.
This
Agreement shall not have been terminated as to such Investor in accordance
with
Section
6.5.
5.2. Conditions
Precedent to the Obligations of the Company to Sell Securities.
The
obligation of the Company to sell Securities at the Closing is subject to the
satisfaction or waiver by the Company, at or before the Closing, of each of
the
following conditions:
(a) Representations
and Warranties.
The
representations and warranties of each Investor contained herein shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made on and as of such date;
(b) Performance.
Each
Investor shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by such Investor at or
prior to the Closing;
26
(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 that prohibits the consummation of any
of
the transactions contemplated by the Transaction Documents;
(d) Investors
Deliverables.
Each
Investor shall have delivered its Investors Deliverables in accordance with
Section
2.2(b);
(e) Minimum
Offering.
The
Company shall have sold, subject to Closing, at least 160 Units pursuant to
this
Agreement;
(f) Exchange
Agreement.
Immediately prior to the Closing, the Company shall have acquired all of the
outstanding ordinary shares and any outstanding preferred shares of Omnia
pursuant to the Exchange Agreement; and
(e) Termination.
This
Agreement shall not have been terminated as to such Investor in accordance
with
Section
6.5.
ARTICLE
6.
MISCELLANEOUS
6.1. Fees
and Expenses.
Each
party shall pay the fees and expenses of its advisers, counsel, accountants
and
other experts, if any, and all other expenses incurred by such party incident
to
the negotiation, preparation, execution, delivery and performance of the
Transaction Documents. The Company shall pay all stamp and other taxes and
duties levied in connection with the sale of the Securities.
6.2. Entire
Agreement.
The
Transaction Documents, together with the exhibits and schedules thereto, contain
the entire understanding of the parties with respect to the subject matter
hereof and supersede all prior agreements, understandings, discussions and
representations, oral or written, with respect to such matters, which the
parties acknowledge have been merged into such documents, exhibits and
schedules.
6.3. Notices.
Any and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (a) the date of transmission, if such notice or communication
is delivered via facsimile (provided the sender receives a machine-generated
confirmation of successful transmission) at the facsimile number specified
in
this Section
6.3
prior to
6:30 p.m. (New York City time) on a Business
Day,
(b) the
next Business
Day
after
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section
6.3
on a day
that is not a Business
Day
or later
than 6:30 p.m. (New York City time) on any Business
Day
or (c)
upon actual receipt by the party to whom such notice is required to be given,
if
sent by any means other than facsimile transmission. The address for such
notices and communications shall be as follows:
27
If
to the Company:
|
Omnia
Luo Group Limited
|
|
Xxxx
000, Xxxxxxxx X0,
|
||
Xxxxxxxxxxxx
Xxxx Xxxxxxxxxx Xxxx
|
||
Xxxxxxx
Xxxxxxxx, Xxxxxxxx, 000000
|
||
The
People’s Republic of China
|
||
Facsimile:
00-000-0000-0000
|
||
Attention:
Chief Financial Officer
|
||
With
a copy to:
|
Xxxxxx
Xxxx Xxxxx Raysman and Xxxxxxx LLP
|
|
000
Xxxxx Xxxxxx
|
||
Xxx
Xxxx, Xxx Xxxx 00000
|
||
Facsimile:
(000) 000-0000
|
||
Attn.:
Xxxxx X. Xxxxxxx, Esq.
|
||
If
to an Investor:
|
To
the address set forth under such Investor’s name on the signature pages
hereof;
|
or
such
other address as may be designated in writing hereafter, in the same manner,
by
such Person.
6.4. Amendments;
Waivers; No Additional Consideration.
No
provision of this Agreement may be waived or amended except in a written
instrument signed by the Company and the Investors holding a majority of the
Securities. No waiver of any default with respect to any provision, condition
or
requirement of this Agreement shall be deemed to be a continuing waiver in
the
future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of either
party
to exercise any right hereunder in any manner impair the exercise of any such
right. No consideration shall be offered or paid to any Investor to amend or
consent to a waiver or modification of any provision of any Transaction Document
unless the same consideration is also offered to all Investors who then hold
Securities.
6.5. Termination.
This
Agreement may be terminated prior to Closing:
(a) by
written agreement of the Investors and the Company; and
(b) by
the
Company, or an Investor (as to itself but no other Investor) upon written notice
to the other, if the Closing shall not have taken place by 6:30 p.m. Eastern
time on the Outside Date; provided,
that
the right to terminate this Agreement under this Section 6.5(b)
shall
not be available to any Person whose failure to comply with its obligations
under this Agreement has been the cause of or resulted in the failure of the
Closing to occur on or before such time.
In
the
event of a termination pursuant to this Section
6.5,
the
Company shall promptly notify all non-terminating Investors. Upon a termination
in accordance with this Section
6.5,
the
Company and terminating Investor(s) shall not have any further obligation or
liability (including as arising from such termination) to the other and no
Investor will have any liability to any other Investor under the Transaction
Documents as a result therefrom.
28
6.6. Construction.
The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party. This Agreement shall be
construed as if drafted jointly by the parties, and no presumption or burden
of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement or any of the Transaction
Documents.
6.7. Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Investors. Except with respect to Sections
4.4,
4.11,
4.12 and 4.13, any Investor may assign any or all of its rights under this
Agreement to any Person to whom such Investor assigns or transfers any
Securities, provided such transferee agrees in writing to be bound, with respect
to the transferred Securities, by the provisions hereof that apply to
“Investors.”
6.8. No
Third-Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except as otherwise set
forth
in Section
4.6
(as to
each Investor Party).
6.9. Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all Proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and any other Transaction Documents (whether
brought against a party hereto or its respective Affiliates, employees or
agents) shall be commenced exclusively in the New York Courts. Each party hereto
hereby irrevocably submits to the exclusive jurisdiction of the New York Courts
for the adjudication of any dispute hereunder or in connection herewith or
with
any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of the any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any Proceeding, any claim that
it is not personally subject to the jurisdiction of any such New York Court,
or
that such Proceeding has been commenced in an improper or inconvenient forum.
Each party hereto hereby irrevocably waives personal service of process and
consents to process being served in any such Proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence
of
delivery) 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 contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH
PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY. If
either
party shall commence a Proceeding to enforce any provisions of a Transaction
Document, then the prevailing party in such Proceeding shall be reimbursed
by
the other party for its reasonable attorneys’ fees and other costs and expenses
incurred with the investigation, preparation and prosecution of such
Proceeding.
29
6.10. Survival.
The
representations, warranties, agreements and covenants contained herein shall
survive the Closing and the delivery of the Securities.
6.11. Execution.
This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to
the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of
the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original
thereof.
6.12. Severability.
If any
provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and
the
parties will attempt to agree upon a valid and enforceable provision that is
a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
6.13. Rescission
and Withdrawal Right.
Notwithstanding anything to the contrary contained in (and without limiting
any
similar provisions of) the Transaction Documents, whenever any Investor
exercises a right, election, demand or option under a Transaction Document
and
the Company does not timely perform its related obligations within the periods
therein provided, then such Investor may rescind or withdraw, in its sole
discretion from time to time upon written notice to the Company, any relevant
notice, demand or election in whole or in part without prejudice to its future
actions and rights.
6.14. Replacement
of Securities.
If any
certificate or instrument evidencing any Securities is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
customary and reasonable indemnity, if requested. The applicants for a new
certificate or instrument under such circumstances shall also pay any reasonable
third-party costs associated with the issuance of such replacement Securities.
If a replacement certificate or instrument evidencing any Securities is
requested due to a mutilation thereof, the Company may require delivery of
such
mutilated certificate or instrument as a condition precedent to any issuance
of
a replacement.
6.15. Remedies.
In
addition to being entitled to exercise all rights provided herein or granted
by
law, including recovery of damages, each of the Investors and the Company will
be entitled to specific performance under the Transaction Documents. The parties
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance
of
any such obligation the defense that a remedy at law would be
adequate.
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6.16. Payment
Set Aside.
To the
extent that the Company makes a payment or payments to any Investor pursuant
to
any Transaction Document or an Investor enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement
or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation,
any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full
force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
6.17. Independent
Nature of Investors’ Obligations and Rights.
The
obligations of each Investor under any Transaction Document are several and
not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Securities pursuant to the Transaction Documents has been made by
such
Investor independently of any other Investor. Nothing contained herein or in
any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association,
a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents.
Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction
Documents. Each Investor 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 Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Investors
has been provided with the same Transaction Documents for the purpose of closing
a transaction with multiple Investors and not because it was required or
requested to do so by any Investor.
6.18. Limitation
of Liability.
Notwithstanding anything herein to the contrary, the Company acknowledges and
agrees that the liability of an Investor arising directly or indirectly, under
any Transaction Document of any and every nature whatsoever shall be satisfied
solely out of the assets of such Investor, and that no trustee, officer, other
investment vehicle or any other Affiliate of such Investor or any investor,
shareholder or holder of shares of beneficial interest of such a Investor shall
be personally liable for any liabilities of such Investor.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGES FOLLOW]
IN
WITNESS WHEREOF,
each
Investor, the Company and the other parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date indicated on the first page of the Securities
Purchase Agreement.
WENTWORTH
II, INC.
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By: | ||
Name:
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Title: |
Only as to Section 4.11 herein: | ||
Luo
Zheng
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Kong
Xxx Xxx Xxx Xx
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[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOR INVESTORS FOLLOWS]
IN
WITNESS WHEREOF,
each
Investor, the Company and the other parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date indicated on the first page of this Securities
Purchase Agreement.
INVESTORS:
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Print Name of Investor(s) |
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By: | ||
Name: |
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Title: |
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