SETTLEMENT AGREEMENT
THIS
SETTLEMENT AGREEMENT (the
“Settlement
Agreement”)
is
entered into by and between Chinamerica Fund, LP (“Chinamerica”)
and
China BAK Battery, Inc. (the “Company”)
and
its subsidiary BAK International, Ltd. (“BAK
International”
and,
together with the Company, “CBAK”).
Chinamerica and CBAK are also each referred to separately as a “Party”
and
together as the “Parties.”
The
Parties, in order to resolve disputed and contested issues and to limit the
hazards, uncertainties and inconvenience of potential litigation, enter into
this Settlement Agreement.
1. Escrow
Agreement.
On
January 20, 2005, BAK International consummated a private placement of its
common stock with unrelated investors whereby it issued an aggregate of
8,600,433 shares of common stock for gross proceeds of US$17,000,000 (the
“Private
Placement”).
Immediately thereafter, the shares of BAK International were exchanged for
shares of the Company. Chinamerica was an investor in the Private Placement
and
entered into a subscription agreement (the “Subscription
Agreement”)
in
connection therewith. In conjunction with the Private Placement, pursuant to
an
Escrow Agreement dated January 20, 2005, Xx. Xx Xiangqian, the Chairman and
Chief Executive Officer of the Company, placed 2,179,550 shares of the Company’s
common stock owned by him (the “Make
Good Shares”)
into
an escrow account. The terms and conditions regarding release of the Make Good
Shares from escrow was set forth in the Escrow Agreement. A dispute has arisen
between Chinamerica and CBAK regarding 1,089,775 Make Good Shares (herein
referred to as the “Released
Shares”)
released from the escrow account to Xx. Xx and subsequently delivered by Xx.
Xx
to BAK International, which then delivered the shares to the Company.
The
Parties have agreed, without any admission of liability, that it is in the
interests of all of the Parties and their respective Affiliates and investors
to
resolve the issues relating to the Released Shares amicably.
2. Definitions.
Capitalized terms not otherwise defined herein shall have the following
meanings:
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a.
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Affiliates
means all persons and entities controlling, controlled by or under
common
control with a Party. Investors in Chinamerica shall not be deemed
Affiliates of Chinamerica for purposes of this Settlement Agreement,
except to the extent of any rights that they may derive as an investor
in
Chinamerica.
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b.
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Claims means
any and all claims, demands, causes of actions, or liabilities, of
any and
every character, kind and nature whatsoever, in law or in equity,
whether
known or unknown, foreseen or unforeseen, past, present, or future,
accrued or unaccrued, contingent or fixed, arising out of or related
to
any or all of the Subscription Agreement, the Escrow Agreement, the
Make
Good Shares (including the Released Shares), and the Private Placement,
including any registration rights (other than the registration rights
granted pursuant to Section 3.b. of this Settlement Agreement) related
thereto.
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c.
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Release
Date
means the earliest of (x) such time as all of the Chinamerica Shares
have
been sold by Chinamerica; (y) such
time as all of the Chinamerica Shares may be sold by Chinamerica
without
volume limitations pursuant to Rule 144 under the Securities Act,
as
determined by the counsel to the Company pursuant to a written opinion
letter to such effect, addressed and acceptable to the Company’s transfer
agent;
and (z) the date a Registration Statement on Form S-3 (or other
appropriate form) covering the resale by Chinamerica of the Chinamerica
Shares is declared effective by the SEC as set forth in Section
3.b.
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d.
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SEC
means the U.S. Securities and Exchange
Commission.
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e.
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Securities
Act
means the U.S. Securities Act of 1933, as
amended.
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3. Settlement
Terms.
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a.
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Delivery
of Shares.
Upon execution of this Settlement Agreement by the Company and
Chinamerica, the Company shall promptly, and no later than ten days
after
the date this Settlement Agreement is executed by the Parties, deliver
to
Chinamerica at the address set out below a certificate or certificates
registered in the name of Chinamerica Fund, LP for 32,050 of the
Released
Shares (the “Chinamerica
Shares”).
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b.
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Registration.
On or prior to the date (the “Filing
Date”)
that is one month after the date that the Company’s Registration Statement
on Form S-3 (Registration No. 333-148253) is declared effective by
the SEC
(or, if the Filing Date is not a business day, the first business
day
after the Filing Date), and provided that Chinamerica has provided
the
Company with a completed questionnaire in the form attached as
Exhibit
A
hereto, the Company shall prepare and file with the SEC a Registration
Statement on Form S-3 (or such other appropriate form for such purpose)
covering the resale by Chinamerica of the Chinamerica Shares in an
offering to be made on a continuous basis pursuant to Rule 415 under
the
Securities Act. Such Registration Statement may also include such
other
selling holders as the Company shall deem appropriate. The Company
shall
cause such Registration Statement to be declared effective under
the
Securities Act as soon as possible, and shall use its reasonable
best
efforts to keep such Registration Statement continuously effective
under
the Securities Act until the date which is the earliest of (i) two
years after its effective date; (ii) such time as all of the Chinamerica
Shares covered by such Registration Statement have been sold by
Chinamerica; and (iii) such time as all of the Chinamerica Shares
covered
by such Registration Statement may be sold by Chinamerica without
volume
limitations pursuant to Rule 144, as determined by counsel to the
Company
pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company’s transfer agent. No later than 5:00 p.m.
Eastern time on the day following the date the Registration Statement
is
declared effective, the Company shall file with the SEC in accordance
with
Rule 424 under the Securities Act the final prospectus to be used
in
connection with sales pursuant to such Registration Statement (whether
or
not such filing is technically required under such
Rule).
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c.
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Ability
to Disclose Information.
The Company agrees that Chinamerica may inform other investors in
the
Private Placement of the terms of this Settlement Agreement. The
Company
agrees that it will promptly furnish or file a report on Form 8-K
regarding this Settlement Agreement, or otherwise make information
regarding this Settlement Agreement available in accordance with
Regulation FD.
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d.
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Relief.
The Company acknowledges that in the event it fails to deliver a
certificate or certificates representing the Chinamerica Shares as
provided in Section 3.a, any remedy at law may prove to be inadequate
relief to Chinamerica. The Company agrees that Chinamerica may require
specific performance of this Settlement Agreement by insisting upon
delivery of the Chinamerica Shares, and shall be entitled to seek
temporary and permanent injunctive relief without the necessity of
proving
actual damages and without posting a bond or other security.
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4 Interpretation.
The
Parties have participated jointly in the negotiation and drafting of this
Settlement Agreement. If an ambiguity or question of intent or interpretation
arises, this Settlement Agreement will be construed as if drafted jointly by
the
Parties, and no presumption or burden of proof will arise favoring or
disfavoring any Party because of the authorship of any provision of this
Settlement Agreement.
5. No
Admission.
By
entering into this Settlement Agreement, no Party is in any way admitting any
liability to any other Party on account of any matter covered by this Settlement
Agreement. Rather, this Settlement Agreement is entered into solely for the
purpose of compromise and settlement of doubtful and contested claims and
issues, to buy peace, and to avoid the hazards, delays, and uncertainties of
litigation.
6. Mutual
Releases.
Effective on the Release Date, Chinamerica, on behalf of itself and its
Affiliates, releases,
acquits, and forever discharges CBAK, its predecessors and successors in
interest, its parent and subsidiary organizations, and its Affiliates, all
of
their respective officers, directors, employees, managers, shareholders,
partners, attorneys, accountants, advisors, representatives, agents, insurers,
heirs, executors and assigns (collectively, the “CBAK
Releasees”)
of and
from any and all Claims; and Chinamerica covenants never to xxx any of the
CBAK
Releasees upon any of the Claims hereby released.
Effective on the Release Date, CBAK, on behalf of itself and its Affiliates,
releases, acquits, and forever discharges Chinamerica and its Affiliates, and
all of their respective officers, directors, employees, managers, shareholders,
partners, attorneys, accountants, advisors, representatives, agents, insurers,
heirs, executors, and assigns (collectively, the “Chinamerica
Releasees”)
of and
from any and all Claims; and CBAK covenants never to xxx any of the Chinamerica
Releasees upon any of the Claims hereby released. For purposes of this
paragraph, the Affiliates of Chinamerica and the Chinamerica Releases shall
not
include Xxxxxx Investment Group, LLC (“TIG”)
or
Xxxxxxx Xxxxxx (“Xxxxxx”)
as to
any Claims other than Claims that TIG or Xxxxxx derived from any investment
by
them, or either of them, directly in Chinamerica or any participation by them,
or either of them, in the management of Chinamerica or Chinamerica Partners,
L.P.
SETTLEMENT
AGREEMENT
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7. Indemnification.
In the
event that any of Chinamerica, its general partner Chinamerica Partners, L.P.,
or Chinamerica Holdings, LLC institutes any proceedings or asserts any Claim
against any of the CBAK Releasees, Chinamerica, to the fullest extent permitted
under the law, shall hold harmless, defend and indemnify such CBAK Releasees
with respect to such proceedings and asserted Claims.
8. Choice
of Law.
This
Settlement Agreement shall be interpreted and construed according to the
internal laws of the State of New York (without giving effect to any choice
of
law or conflict of law provisions of any jurisdiction), and applicable laws
of
the United States of America.
9. Entire
Agreement.
This
Settlement Agreement supersedes all other prior oral or written agreements
between the Parties with respect to the matters set forth herein and contains
the entire agreement of the Parties with respect to the matters set forth
herein. If
any
provision of this Agreement shall be held invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Settlement Agreement in that
jurisdiction or the validity or enforceability of that or any other provision
of
this Settlement Agreement in any other jurisdiction.
10. Amendments.
This
Settlement Agreement may be modified or amended only in writing, signed by
each
of the Parties to this Settlement Agreement prior to the effective date of
any
such modification or amendment. Any waiver must be in writing and signed by
each
Party whose interests are adversely affected by such waiver. No waiver granted
in any one instance shall be construed as a continuing waiver or as a waiver
applicable to any other provision.
No
exercise or failure to exercise any right shall preclude any other or further
exercise of that right or any other right.
11. Representations.
The
Parties acknowledge that this Settlement Agreement is executed after
substantial, long-term negotiations between and among representatives of the
Parties. Each Party represents that: (a) such Party and its attorneys have
conducted their own investigation concerning the facts surrounding the matters
covered by this Settlement Agreement and in voluntarily choosing to execute
this
Settlement Agreement, have relied upon their own analysis of such facts and
not
on any information furnished by any other Party or its representatives;
(b) there are no oral or other written agreements concerning the subject
matter of this Settlement Agreement; (c) the right to rely on any oral or
written statement of any Party or any failure of any Party to state any fact
is
expressly waived and released; (d) it owns and has the right to release any
Claims released herein; (e) such Party has the requisite corporate power and
authority to enter into and to perform this Settlement Agreement; and (f) the
person signing the Settlement Agreement on behalf of such Party has been
authorized to execute and deliver this Settlement Agreement on behalf of such
Party. In addition, Chinamerica represents that
it
(i) is acquiring the Chinamerica Shares in the ordinary course of business
for
its own account and not with a view towards, or for resale in connection with,
the sale or distribution thereof, except pursuant to sales registered or
exempted under the Securities Act, (ii) does not have a present arrangement
to
effect any distribution of the Chinamerica Shares to or through any person
or
entity, (iii) does not presently have any agreement or understanding, directly
or indirectly, with any person to distribute any of the Chinamerica Shares,
(iv)
is an “accredited investor” as that term is defined in Rule 501(a) of Regulation
D under the Securities Act and (v) is not a registered broker-dealer under
Section 15 of the Securities Exchange Act of 1934, as amended. Chinamerica
understands that the Company is relying on specific exemptions from the
registration requirements of United States federal and state securities laws
and
that the Company is relying in part upon the truth and accuracy of, and
Chinamerica’s compliance with, its representations, warranties, agreements,
acknowledgments and understandings set forth herein in order to determine the
availability of such exemptions. When executed by all Parties and delivered
by
each Party to the other Parties, this Settlement Agreement will constitute
the
legal, valid and binding obligation of each Party. This Settlement Agreement
shall be binding upon the assignees and successors of the Parties. This
Settlement Agreement is personal to the Parties and is not intended to create
any right in any third person who is not a Party or is not identified as a
CBAK
Releasee or a Chinamerica Releasee in Section 6 of this Settlement
Agreement.
SETTLEMENT
AGREEMENT
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12. Notice.
All
notices, demands, waivers or other communications required or permitted under
this Settlement Agreement must be in writing and will be deemed to have been
delivered: (i) upon receipt, when delivered personally; (ii) upon receipt,
when
sent by facsimile evidenced by confirmation of transmission (provided a copy
of
such facsimile is also sent by one of the methods provided in (i), (iii) or
(iv)
of this Section 12 within 24 hours of transmission); (iii) two calendar days
after deposit with a courier service that regularly conducts deliveries in
the
recipient’s jurisdiction; or (iv) if the recipient is located in the United
States, five calendar days after deposit in the United States mail, postage
prepaid, return receipt requested, in each case addressed to the addressees
shown below:
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If
to Chinamerica:
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If
to CBAK:
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Xxxx
X. Xxxxxx
Xxxxxx
& Xxxxxx, L.L.P.
Four
Forest Plaza
00000
Xxxxx Xxxxx, Xxx. 0000
Xxxxxx,
XX 00000
Tel:
(000) 000-0000
Fax:
(000) 000-0000
Email:
xx@xxxxxxxxxxxx.xxx
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Xxxxx
Xxxxxxxxxx
Xxxxxx
Xxxx Xxxxx Raysman &
Xxxxxxx
LLP
000
Xxxxxx Xxxxxx, XX
Xxxxxxxxxx,
XX 00000-0000
Tel:
(000) 000-0000
Fax:
(000) 000-0000
E-mail:
xxxxxxxxxxx@xxxxxx.xxx
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Any
Party
may change such Party’s address for the purpose of notices, demands and requests
required or permitted under this Settlement Agreement by providing written
notice of such change of address to the other Party, which change of address
shall only be effective when notice of the change is actually received by the
Party who thereafter sends any notice, demand, or request.
13. Counterparts.
This
Settlement Agreement may be executed in multiple counterparts, each of which
shall be deemed an original and all of which shall constitute one and the same
instrument. A facsimile or electronically reproduced signature shall constitute
due execution, shall be admissible as evidence of execution, and shall be
binding upon the signatory with the same force and effect as if the signature
were an original.
[Signature
Page Follows]
SETTLEMENT
AGREEMENT
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IN
WITNESS WHEREOF,
the
Parties have executed and delivered this Settlement Agreement.
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By
Chinamerica Partners, LP
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Its
General Partner
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By
Chinamerica Holdings, LLC
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Its
General Partner
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By:
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Name:
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Xxxx
Xxxxxxx
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Title:
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Its
Manager
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CHINA
BAK BATTERY, INC.
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By:
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Name:
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Xxxx
Xxxx
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Title:
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Chief
Financial Officer
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BAK
International, Inc.
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By:
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Title:
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SETTLEMENT
AGREEMENT
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Exhibit
A
CHINA
BAK BATTERY, INC.
SELLING
STOCKHOLDER QUESTIONNAIRE
