SECURITIES PURCHASE AGREEMENT
This
Securities Purchase Agreement (this “Agreement”) is dated as of ________, 2007
among China Housing and Land Development, Inc., a Nevada corporation (the
“Company”) and the
purchasers identified on the signature page hereto (including their successors
and assigns, each a “Purchaser”
and
collectively, the “Purchasers”).
WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant
to
Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”)
and Rule 506 promulgated thereunder, the Company desires to issue and sell
to
the Purchasers, and the Purchasers desire to purchase from the Company,
securities of the Company as more fully described in this
Agreement.
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 Purchasers agree as
follows:
ARTICLE
I.
DEFINITIONS
1.1 Definitions.
In addition to the terms defined elsewhere in this Agreement: (a) capitalized
terms that are not otherwise defined herein have the meanings given to such
terms in the Warrants (as defined herein), the Registration Rights Agreement
(as
defined herein), and the Lock-up Agreement (as defined herein), and (b) the
following terms have the meanings indicated in this Section 1.1:
“Action”
shall
have the meaning ascribed to such term in Section 3.1(j).
“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 under the Securities Act. With
respect to the Purchasers, any investment fund or managed account that is
managed on a discretionary basis by the same investment manager as any of the
Purchasers will be deemed to be an Affiliate of such Purchaser.
“Baqiao”
means
that certain property acquired pursuant to that certain Shares Transfer
Agreement entered into on March 9, 2007, between the Company and the
shareholders of Xi’an New Land Development Co., Ltd.
“Closing”
means
the closing of the purchase and sale of the Securities pursuant to Section
2.1.
“Closing
Date”
means
the Trading Day when all of the Transaction Documents have been executed and
delivered by the applicable parties thereto, and all conditions precedent to
(i)
the Purchasers’ obligations to pay the Investment Amount and (ii) the Company’s
obligations to deliver the Securities have been satisfied or
waived.
“Commission”
means
the Securities and Exchange Commission.
1
“Common
Stock”
means
the common stock of the Company, par value $0.001 per share, and any other
class
of securities into which such securities may hereafter have been reclassified
or
changed into.
“Common
Stock Equivalents”
means
any securities of the Company or the Subsidiaries which would entitle the holder
thereof to acquire at any time Common Stock, including, without limitation,
any
debt, preferred stock, rights, options, warrants or other instrument that is
at
any time convertible into or exercisable 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
Counsel”
means
Xxxxx & XxXxxxxx, LLP.
“Disclosure
Schedules”
shall
have the meaning
ascribed
to such term in Section 3.1.
“Effective
Date”
means
the date that the initial
Registration Statement filed by the Company pursuant to the Registration Rights
Agreement is first declared effective by the Commission.
“Evaluation
Date”
shall
have the meaning ascribed
to such
term in Section 3.1(r).
“Exchange
Act”
means
the Securities Exchange
Act of
1934, as amended, and the rules and regulations promulgated
thereunder.
“Excepted
Issuance”
shall
have the meaning
ascribed
to such term in Section 4.2(a).
“GAAP”
shall
have the meaning ascribed to such term in Section 3.1(h).
"Knowledge"
means,
with respect to any statement made to the knowledge of a party, that the
statement is based upon actual knowledge of the officers of such party having
responsibility for the matter or matters that
are the
subject of the statement, after due inquiry.
“Intellectual
Property Rights”
shall
have the
meaning
ascribed to such term in Section 3.1(o).
“Investment
Amount”
means,
as to each Purchaser, the aggregate amount to be paid for Shares and Warrants
purchased hereunder as specified below each Purchaser’s name on the signature
page of this Agreement and next to the heading “Investment Amount”, payable in
United States Dollars and in immediately available funds.
“Lead
Investor”
means
Lake Street Fund LP.
“Legend
Removal Date”
shall
have the meaning
ascribed
to such term in Section 4.1(c).
“Liens”
means
a
lien, charge, security interest,
encumbrance, right of first refusal, preemptive right or other restriction.
“Lock-up
Agreement”
means
the Lock-up Agreement,
dated
the date hereof, among the Company and its directors, management and founding
shareholders, as specified in the Lock-up Agreement, in the form of Exhibit
A
attached
hereto.
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“Make-Good
Escrow”
shall
have the meaning
assigned
to such term in Section 4.20.
“Material
Adverse Effect”
shall
have the
meaning
assigned to such term in Section 3.1(b).
“Material
Permits”
shall
have the meaning
ascribed
to such term in Section 3.1(m).
“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.
“Placement
Agent”
means
Cantor Xxxxxxxxxx & Co.
“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.
“Public
Float”
means
that the aggregate
outstanding number of shares held by investors not affiliated with the
Company.
“Purchaser
Party”
shall
have the meaning
ascribed
to such term in Section 4.10.
“Registration
Rights Agreement”
means
the Registration Rights Agreement, dated the date hereof, among the Company
and
the Purchaser,
in the
form of Exhibit
B
attached
hereto.
“Registration
Statement”
means
a
registration
statement meeting the requirements set forth in the Registration Rights
Agreement and covering the resale of the Shares and Warrant Shares by the
Purchasers as provided for in the Registration Rights Agreement.
“Required
Approvals”
shall
have the
meaning
ascribed to such term in Section 3.1(e).
“Right
of First Refusal Notice”
shall
have the meaning ascribed to such term in Section 4.2(a).
“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”
shall
have the meaning ascribed
to such
term in Section 3.1(h).
“Securities”
means
the Shares, the Warrants and the Warrant Shares.
“Securities
Act”
means
the Securities Act of 1933,
as
amended.
“SFO”
shall
have the meaning ascribed to such
term in
Section 4.18.
3
“Shares”
means
the shares of Common Stock issued or issuable to the Purchasers pursuant to
this
Agreement, par value $0.001 per share.
“Short
Sales”
shall
include all “short sales” as defined in Rule 200 of Regulation SHO under the
Exchange Act (but shall
not be
deemed to include the location and/or reservation of borrowable shares of Common
Stock).
“Subsidiary”
means
any subsidiary of the Company as set forth on Schedule
3.1(a).
“Subsequent
Financings”
shall
have the meaning
ascribed
to such term in Section 4.2(a).
“Subsequent
Financing Notice”
shall
have the meaning ascribed to such term in Section 4.2(a).
“Trading
Day”
means
a
day on which the Common Stock is traded on a Trading Market.
“Trading
Market”
means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the
date in
question: the Nasdaq Capital Market, the American Stock Exchange, the New York
Stock Exchange, the Nasdaq National Market or the OTC Bulletin
Board.
“Transaction
Documents”
means
this Agreement, the Warrants, the Registration Rights Agreement, the Lock-up
Agreement
and any
other documents or agreements executed in connection with the transactions
contemplated hereunder.
“VWAP”
means,
for any date, the price determined by the first of the following clauses that
applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price
of the
Common Stock for such date (or the nearest preceding date) on the Trading Market
on which the Common Stock is then listed or quoted as reported by Bloomberg
Financial L.P. (based on a Trading Day from 9:30 a.m. Eastern Time to 4:02
p.m.
Eastern Time); (b) if the Common Stock is not then listed or quoted on a Trading
Market and if prices for the Common Stock are then reported in the “Pink Sheets”
published by the Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price
per
share of the Common Stock so reported; or (c) in all other cases, the fair
market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Purchasers and reasonably acceptable
to
the Company.
“Warrants”
means
collectively the Common Stock purchase warrants, in the form of Exhibit
D
delivered to each Purchaser
at the
Closing in accordance with Section 2.2(b) hereof, which Warrants shall be
exercisable immediately and have a term of exercise equal to five
years.
“Warrant
Call”
shall
have the meaning
ascribed
to such term in Section 4.22.
“Warrant
Shares”
means
the shares
of
Common Stock issuable upon exercise of the Warrants.
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ARTICLE
II.
PURCHASE
AND SALE
2.1 Closing.
On
the
Closing Date, upon the terms and subject to the conditions set forth herein,
concurrent with the execution and delivery of this Agreement by the parties
hereto, the Company agrees to sell, and the Purchasers agree to purchase (i)
9,261,844 Shares at a price of $2.70 per Share and (ii) Warrants exercisable
into approximately 2,778,553 Shares, with an exercise price equal to the lower
of (a) $4.50 per Share and (b) $0.90 above the market VWAP of the last three
trading days prior to the Closing Date. The Warrants shall have a term of five
(5) years. The Purchasers shall deliver to the Company via wire transfer or
certified check immediately available funds equal to their applicable Investment
Amounts and the Company shall deliver to the Purchasers their respective Shares
and Warrants, pro rata with each Purchaser’s Investment Amount, as determined
pursuant to Section 2.2(a) and the other items set forth in Section 2.2 issuable
at the Closing. Upon satisfaction of the conditions set forth in Sections 2.2
and 2.3, the Closing shall occur at the offices of Xxxxx & XxXxxxxx LLP,
0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, XX 00000, or such other location as
the
parties shall mutually agree. The commission payable to the Placement Agent
shall be paid in full upon Closing.
2.2 Deliveries.
(a) On
the
Closing Date, the Company shall deliver or cause to be delivered to each
Purchaser the following:
(i) this
Agreement duly executed by the Company;
(ii) a
certificate evidencing a number of Shares equal to each Purchasers’ applicable
Investment Amount registered in the name of the Purchaser, as provided for
in
Schedule 2.2(a)(ii);
(iii) a
Warrant
registered in the name of the Purchaser exercisable into a number of shares
of
Common Stock equal to 30% of the number of shares of Common Stock purchased
by
each Purchaser hereunder, with the exercise price set forth in Section 2.1
above, subject to adjustment therein;
(iv) the
legal
opinion of Company Counsel and/or Nevada counsel, in agreed form, addressed
to
the Purchasers;
(v) the
Registration Rights Agreement, as provided for in Exhibit B, duly executed
by
the Company; and
(vi) a
copy of
the duly executed Lock-up Agreement, as set forth in Exhibit A.
(b) On
the
Closing Date, each of the Purchasers shall deliver or cause to be delivered
to
the Company the following:
5
(i) this
Agreement duly executed by each of the Purchasers;
(ii) the
Purchasers’ applicable Investment Amounts by wire transfer to the account as
specified in writing by the Company; and
(iii) the
Registration Rights Agreement, duly executed by the Purchasers.
2.3 Closing
Conditions.
(a) The
obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:
(i) the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Purchasers contained herein;
(ii) all
obligations, covenants and agreements of the Purchasers required to be performed
at or prior to the Closing Date shall have been performed; and
(iii) the
delivery by the Purchasers of the items set forth in Section 2.2(b) of this
Agreement.
(b) The
respective obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being met:
(i) the
accuracy in all material respects on the Closing Date of the representations
and
warranties of the Company contained herein;
(ii) all
obligations, covenants and agreements of the Company required to be performed
at
or prior to the Closing Date shall have been performed;
(iii) the
delivery by the Company of the items set forth in Section 2.2(a) of this
Agreement;
(iv) since
the
date of execution of this Agreement, no event or series of events shall have
occurred that reasonably could have or result in (i) an adverse effect on the
legality, validity or enforceability of any Transaction Document, or (ii) a
Material Adverse Effect;
(v) 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;
6
(vi) from
the
date hereof to the Closing Date, trading in the Common Stock shall not have
been
suspended by the Commission or the Company’s principal Trading Market (except
for any suspension of trading of limited duration agreed to by the Company,
which suspension shall be terminated prior to the Closing), and, at any time
prior to the Closing Date, trading in securities generally as reported by
Bloomberg Financial Markets shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades are reported
by such service, or on any Trading Market, nor shall a banking moratorium have
been declared either by the United States or New York State authorities nor
shall there have occurred any material outbreak or escalation of hostilities
or
other national or international calamity of such magnitude in its effect on,
or
any material adverse change in, any financial market which, in each case, in
the
reasonable judgment of the Purchasers, makes it impracticable or inadvisable
to
purchase the Shares at the Closing; and
(vii) the
delivery by the Company of the agreements entered into by the Company in
connection with its purchase of Baqiao.
ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES
3.1 Representations
and Warranties of the Company. Except as set forth under the corresponding
section of the disclosure schedules delivered to the Purchasers concurrently
herewith (the “Disclosure Schedules”) which Disclosure Schedules shall be deemed
a part hereof, the Company hereby makes the representations and warranties
set
forth below to the Purchasers.
(a) Subsidiaries.
All of
the direct and indirect subsidiaries of the Company are set forth on
Schedule
3.1(a).
The
Company owns, directly or indirectly, all of the capital stock or other equity
interests of each Subsidiary free and clear of any Liens, and all the issued
and
outstanding shares of capital stock of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities. If the Company has no subsidiaries, then
references in the Transaction Documents to the Subsidiaries will be
disregarded.
(b) Organization
and Qualification.
The
Company and each of the Subsidiaries is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), 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 or default of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the Subsidiaries is duly qualified
to
conduct business and is 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
(i) a material adverse effect on the legality, validity or enforceability of
any
Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business, prospects or condition (financial or otherwise)
of
the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company’s ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or (iii),
a “Material Adverse Effect”) and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.
7
(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 hereunder and 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, its board of directors or its stockholders
in
connection therewith other than in connection with the Required Approvals.
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 and thereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of
general application affecting enforcement of creditors’ rights generally and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.
(d) No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the other transactions contemplated
hereby and 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, result in the creation of any Lien
upon any of the properties or assets of the Company or any Subsidiary, or give
to others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any agreement, credit
facility, debt 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) subject to the Required Approvals, conflict with
or
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.
(e) Filings,
Consents and Approvals.
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 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) filings required pursuant to Section
4.6,
(ii) the filing with the Commission of one or more Registration Statements
in
accordance with the requirements of the Registration Rights Agreement, (iii)
filings required by state securities laws in accordance with the requirements
of
the Registration Rights Agreement, which when permitted, will be made prior
to
the Effectiveness Date (as such term is defined in the Registration Rights
Agreement), (iv) the notice and/or application(s) to each applicable Trading
Market for the issuance and sale of the Shares, Warrants and the listing of
the
Shares and Warrant Shares for trading thereon in the time and manner required
thereby and (v) the filing of Form D with the Commission and such filings as
are
required to be made under applicable state securities laws (collectively, the
“Required Approvals”).
8
(f) Issuance
of the Securities.
The
Securities are duly authorized and, when issued and paid for in accordance
with
the applicable Transaction Documents, will be duly and validly issued, fully
paid and nonassessable, free and clear of all Liens other than restrictions
on
transfer provided for in the Transaction Documents. The Warrant Shares, when
issued in accordance with the terms of the Transaction Documents, will be
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. The Securities are not subject to any preemptive
or similar rights to subscribe for or purchase securities.
(g) Capitalization.
Other
than disclosed in the SEC Reports and as set forth on Schedule
3.1(g),
the
Company has not issued any capital stock other than pursuant to the exercise
of
employee stock options under the Company’s stock option plans, the issuance of
shares of Common Stock to employees pursuant to the Company’s employee stock
purchase plan and pursuant to the conversion or exercise of outstanding Common
Stock Equivalents all as set forth on Schedule
3.1(g).
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. As of the date of this Agreement, except as disclosed
in
the SEC Reports and as set forth in Schedule
3.1(g)
and as a
result of the purchase and sale of the Warrants, there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or giving any Person any
right to subscribe for or acquire, any shares of the capital stock of the
Company, or contracts, commitments, understandings or arrangements by which
the
Company or any Subsidiary is or may become bound to issue additional shares
of
its capital stock, or securities or rights convertible or exchangeable into
shares of Common Stock. The issuance and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other securities to
any
Person (other than the Purchasers) 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. All of the outstanding shares of capital stock
of
the Company are validly issued, fully paid and nonassessable, have been issued
in compliance with all federal and state securities laws, and none of such
outstanding shares was issued in violation of any preemptive rights or similar
rights to subscribe for or purchase securities. No further approval or
authorization of any stockholder, the Board of Directors of the Company or
others is required for the issuance and sale of the Securities. There are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to
the Knowledge of the Company, between or among any of the Company’s
stockholders.
9
(h) SEC
Reports; Financial Statements.
The
Company has filed all reports, schedules, forms, statements and other documents
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 two years
preceding the date hereof (or such shorter period as the Company was required
by
law to file such material) (the foregoing materials, including the exhibits
thereto and documents incorporated by reference therein, being collectively
referred to herein as the “SEC Reports”) on a timely basis or has received 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 the 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
United States generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”), 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 Company
maintains and will continue to maintain a standard system of accounting
established and administered in accordance with GAAP and the applicable
requirements of the Exchange Act.
(i) Material
Changes.
Since
the date of the latest audited financial statements included within the SEC
Reports, except as specifically disclosed in the SEC Reports, (i) there has
been
no event, occurrence or development that has had or that, individually, or
in
the aggregate, 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 and accrued expenses incurred in the
ordinary course of business consistent with past practice, (B) liabilities
not
required to be reflected in the Company’s financial statements pursuant to GAAP
or required to be disclosed in filings made with the Commission, and (C) other
liabilities that would not, individually or in the aggregate, have a Material
Adverse Effect, (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. Except for the issuance
of
the Securities contemplated by this Agreement or as set forth on Schedule
3.1(i),
no
event, liability or development has occurred or exists with respect to the
Company or its Subsidiaries or their respective business, properties, operations
or financial condition, that would be required to be disclosed by the Company
under applicable securities laws at the time this representation is made that
has not been publicly disclosed 1 Trading Day prior to the date that this
representation is made.
10
(j) Litigation.
Other
than as otherwise disclosed in Schedule 3.1(j), there is no action, suit,
inquiry, notice of violation, proceeding or investigation pending or, to the
Knowledge of the Company, threatened against or affecting the Company, any
Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which (i)
adversely affects or challenges the legality, validity or enforceability of
any
of the Transaction Documents or the Securities or (ii) 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, 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. There has not been,
and
to the Knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former
director or officer of the Company. 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.
None of the Company’s or its Subsidiaries’ employees is a member of a union that
relates to such employee’s relationship with the Company, and neither the
Company or any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that their relationships
with their employees are good. No executive officer, to the Knowledge of the
Company, is, or is now expected to be, in violation of any material term of
any
employment contract, confidentiality, disclosure or proprietary information
agreement or non-competition agreement, or any other contract or agreement
or
any restrictive covenant, and the continued employment of each such executive
officer does not subject the Company or any of its Subsidiaries to any liability
with respect to any of the foregoing matters. The Company and its Subsidiaries
are in compliance with all U.S. federal, state, local and foreign laws and
regulations relating to employment and employment practices, terms and
conditions of employment and wages and hours, except where the failure to be
in
compliance could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
(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 which could reasonably
be
expected to result in a Material Adverse Effect.
11
(l) Compliance.
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 applicable to its business
and all such laws that affect the environment, except in each case as could
not,
individually, or in the aggregate, have a Material Adverse Effect. 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, individually or in the aggregate, could
not have or reasonably be expected to result in a Material Adverse
Effect.
(m) Regulatory
Permits.
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 as described in
the
SEC Reports, 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 (“Material Permits”), and neither the Company nor any
Subsidiary has received any notice of proceedings relating to the revocation
or
modification of any Material Permit.
(n) Title
to Assets.
The
Company and the Subsidiaries have good and marketable title in fee simple to
all
real property owned by them that is material to the business of the Company
and
the Subsidiaries and good and marketable title in all personal property owned
by
them that is material to the business of the Company and the Subsidiaries,
in
each case free and clear of all Liens, except for Liens described in
Schedule
3.1(n)
and
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.
(o) 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,
trade secrets, inventions, copyrights, licenses and other intellectual property
rights or similar rights necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure
to
so have could, individually, or in the aggregate, have or reasonably be expected
to have a Material Adverse Effect (collectively, the “Intellectual Property
Rights”). Neither the Company nor any Subsidiary has received a notice (written
or otherwise) that the Intellectual Property Rights used by the Company or
any
Subsidiary violates or infringes upon the rights of any Person. All such
Intellectual Property Rights are enforceable and do not violate or infringe
the
Intellectual Property Rights of others in any respect that would, individually
or in the aggregate, reasonably be expected to result in a Material Adverse
Effect and, to the Knowledge of the Company, there is no existing infringement
by another Person of any of the Company's or the Subsidiary's Intellectual
Property Rights. The
Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual properties,
except where failure to do so could not, individually or in the aggregate,
reasonably be expect to have a Material Adverse Effect.
12
(p) 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, including, but not limited to, directors and officers insurance
coverage at least equal to the aggregate Investment Amount. To the best
Knowledge of the Company, such insurance contracts and policies are accurate
and
complete. Neither the Company nor any Subsidiary has any reason to believe
that
it will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may
be
necessary to continue its business without a significant increase in
cost.
(q) Transactions
With Affiliates and Employees.
Except
as set forth in the SEC Reports, none of the officers or directors of the
Company and, to the Knowledge of the Company, none of the employees of the
Company 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. In particular, the Company is
not
an Affiliate of Xindadi and is not under common control with
Xindadi.
(r) Xxxxxxxx-Xxxxx;
Internal Accounting Controls.
The
Company is in compliance with all provisions of the Xxxxxxxx-Xxxxx Act of 2002
which are applicable to it as of the Closing Date. 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 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 (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) 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,
particularly during the period in which the Company’s most recently filed
periodic report under the Exchange Act, as the case may be, is being prepared.
The Company’s certifying officers have evaluated the effectiveness of the
Company’s controls and procedures as of the date prior to the filing date of the
most recently filed periodic report under the Exchange Act (such date, the
“Evaluation Date”). The Company presented in its most recently filed periodic
report under the Exchange Act 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 307(b) of Regulation S-K under the Exchange Act) or, to the
Knowledge of the Company, in other factors that could significantly affect
the
Company’s internal controls.
13
(s) Private
Placement.
Assuming the accuracy of the Purchasers’ representations and warranties set
forth in Section 3.2, no registration under the Securities Act is required
for
the offer and sale of the Securities by the Company to the Purchasers as
contemplated hereby. The issuance and sale of the Securities hereunder does
not
contravene the rules and regulations of the Trading Market. Except as described
in Schedule
3.1(s),
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.
(t) Investment
Company.
The
Company is not, and is not an Affiliate of, and immediately after receipt of
payment for the Securities, will not be or be an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.
The Company shall conduct its business in a manner so that it will not become
subject to the Investment Company Act.
(u) Registration
Rights.
Each
Purchaser has the right to cause the Company to effect the registration under
the Securities Act of the Securities held by such Purchaser, in accordance
with
the Registration Rights Agreement.
(v) Listing
and Maintenance Requirements.
The
Company’s Common Stock is registered pursuant to Section 12(g) of the Exchange
Act, and the Company has taken no action designed to, or which to its Knowledge
is likely to have the effect of, terminating the registration of the Common
Stock under the Exchange Act nor has the Company received any notification
that
the Commission is contemplating terminating such registration. The Company
has
not, in the 24 months preceding the date hereof, received notice from any
Trading Market on which the Common Stock is or has been listed or quoted to
the
effect that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements. The issuance and sale of
the
Securities under the Transaction Documents does not contravene the rules and
regulations of the Trading Market on which the Common Stock is currently listed
or quoted, and no approval of the stockholders of the Company thereunder is
required for the Company to issue and deliver to each Purchaser the Securities
contemplated by the Transaction Documents. As of the date hereof, the Company’s
Common Stock is listed on the OTC Bulletin Board.
14
(w) Disclosure.
The
Company confirms that neither it nor any other Person acting on its behalf
has
provided the Purchasers or their agents or counsel with any information that
constitutes or might constitute material, nonpublic information. The Company
understands and confirms that the Purchasers will rely on the foregoing
representations and covenants in effecting transactions in securities of the
Company. All disclosure provided to the Purchasers regarding the Company, its
business and the transactions contemplated hereby, including the Disclosure
Schedules to this Agreement, furnished by or on behalf of the Company with
respect to the representations and warranties made herein are true and correct
with respect to such representations and warranties 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. The Company acknowledges and agrees
that the Purchaser makes or has made any representations or warranties with
respect to the transactions contemplated hereby other than those specifically
set forth in Section 3.2 hereof.
(x) No
Integrated Offering.
Neither
the Company, nor any of its Affiliates, nor any Person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any security
or
solicited any offers to buy any security, under circumstances that would cause
this offering of the Securities to be integrated with prior offerings by the
Company for purposes of the Securities Act or any applicable shareholder
approval provisions, including, without limitation, under the rules and
regulations of any Trading Market on which any of the securities of the Company
are listed or designated.
(y) Solvency.
Based
on the financial condition of the Company as of the Closing Date after giving
effect to the receipt by the Company of the proceeds from the sale of the
Securities hereunder, (i) the Company’s cash and fair saleable value of its
assets in an orderly liquidation 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 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).
The
Company has no Knowledge of any facts or circumstances which lead it to believe
that it will file for reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the Closing Date.
(z) Tax
Status.
Except
for matters that would not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect, the Company and each
Subsidiary has filed all necessary federal, state and foreign income and
franchise tax returns and has paid or accrued all taxes shown as due thereon,
and the Company has no Knowledge of a tax deficiency which has been asserted
or
threatened against the Company or any Subsidiary.
15
(aa) No
General Solicitation.
Neither
the Company nor any person acting on behalf of the Company has offered or sold
any of the Securities by any form of general solicitation or general
advertising. The Company has offered the Securities for sale only to the
Purchasers.
(bb) No
Disagreements with Accountants and Lawyers.
There
are no disagreements of any kind presently existing, or reasonably anticipated
by the Company to arise, between the accountants and lawyers formerly or
presently employed by the Company and the Company is current with respect to
any
fees owed to its accountants and lawyers.
(cc) Acknowledgment
Regarding Purchasers’ Purchase of Securities.
The
Company acknowledges and agrees that the Purchasers are acting solely in the
capacity of arm’s length purchasers with respect to the Transaction Documents
and the transactions contemplated hereby. The Company further acknowledges
that
the Purchasers are not acting as financial advisors or fiduciaries of the
Company (or in any similar capacity) with respect to this Agreement and the
transactions contemplated hereby and any advice given by the Purchasers or
any
of their respective representatives or agents in connection with this Agreement
and the transactions contemplated hereby is merely incidental to the Purchasers’
purchase of the Securities. The Company further represents to the Purchasers
that the Company’s decision to enter into this Agreement has been based solely
on the independent evaluation of the transactions contemplated hereby by the
Company and its representatives.
(dd) Acknowledgement
Regarding Purchasers’ Trading Activity.
Anything in this Agreement or elsewhere herein to the contrary notwithstanding,
it is understood and agreed by the Company (i) that the Purchasers have not
been
asked to agree, nor have the Purchasers agreed, to desist from purchasing or
selling, long and/or short, securities of the Company, or “derivative”
securities based on securities issued by the Company or to hold the Securities
for any specified term; (ii) that past or future open market or other
transactions by the Purchasers, including Short Sales, and specifically
including, without limitation, Short Sales or “derivative” transactions, before
or after the closing of this or future private placement transactions, may
negatively impact the market price of the Company’s publicly-traded securities;
(iii) that the Purchasers, and counter parties in “derivative” transactions to
which the Purchasers are a party, directly or indirectly, presently may have
a
“short” position in the Common Stock, and (iv) that the Purchasers shall not be
deemed to have any affiliation with or control over any arm’s length
counter-party in any “derivative” transaction. The
Company further understands and acknowledges that (a) the Purchasers may engage
in hedging activities at various times during the period that the Securities
are
outstanding, including, without limitation, during the periods that the value
of
the Warrant Shares deliverable with respect to Securities are being determined
and (b) such hedging activities (if any) could reduce the value of the existing
stockholders' equity interests in the Company at and after the time that the
hedging activities are being conducted. The Company acknowledges that such
aforementioned hedging activities do not constitute a breach of any of the
Transaction Documents.
16
(ee) Manipulation
of Price.
The
Company has not, and to its Knowledge no one acting on its behalf has, (i)
taken, directly or indirectly, any action designed to cause or to result in
the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
purchased, or, paid any compensation for soliciting purchases of, any of the
Securities (other than for the placement agent’s placement of the Securities),
or (iii) paid or agreed to pay to any person any compensation for soliciting
another to purchase any other securities of the Company.
(ff) Press
Releases.
The
press releases disseminated by the Company during the two (2) years 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 not misleading.
(gg) No
Additional Agreements.
The
Company does not have any agreement or understanding with the Purchasers with
respect to the transactions contemplated by the Transaction Documents other
than
as specified in the Transaction Documents.
3.2 Representations
and Warranties of the Purchaser. The Purchasers hereby represent and warrant
as
of the date hereof and as of the Closing Date to the Company as
follows:
(a) Organization;
Authority.
Each of
the Purchaser is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization with the requisite
corporate or partnership power and authority to enter into and to consummate
the
transactions contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The execution, delivery and
performance by each of the Purchaser of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate or similar action
on the part of each Purchaser. Each Transaction Document to which each Purchaser
is a party has been duly executed by each Purchaser, and when delivered by
each
Purchaser in accordance with the terms hereof, will constitute the valid and
legally binding obligation of such Purchaser, enforceable against it in
accordance with its terms, except (i) as limited by general equitable principles
and applicable bankruptcy, insolvency, reorganization, moratorium and other
laws
of general application affecting enforcement of creditors’ rights generally,
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable
law.
17
(b) Own
Account.
Each
Purchaser understands that the Securities are “restricted securities” and have
not been registered under the Securities Act or any applicable state securities
law and is acquiring the Securities as principal for its own account and not
with a view to or for distributing or reselling such Securities or any part
thereof in violation of the Securities Act or any applicable state securities
law, has no present intention of distributing any of such Securities in
violation of the Securities Act or any applicable state securities law and
has
no arrangement or understanding with any other persons regarding the
distribution of such Securities (this representation and warranty not limiting
each Purchaser’s right to sell the Securities pursuant to the Registration
Statement or otherwise in compliance with applicable federal and state
securities laws) in violation of the Securities Act or any applicable state
securities law. Subject to the immediately preceding sentence, nothing contained
herein shall be deemed a representation or warranty by each Purchaser to hold
the Securities for any period of time. Each Purchaser is acquiring the
Securities hereunder in the ordinary course of its business. None of the
Purchasers has any agreement or understanding, directly or indirectly, with
any
Person to distribute any of the Securities.
(c) Purchaser
Status.
At the
time each Purchaser was offered the Securities, it was, and at the date hereof
it is, and on each date on which it exercises any Warrants it will be either:
(i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3),
(a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional
buyer” as defined in Rule 144A(a) under the Securities Act. The Purchasers are
not required to be registered as broker-dealers under Section 15 of the Exchange
Act.
(d) Experience
of the Purchaser.
Each
Purchaser, 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.
Each Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of such
investment.
(e) General
Solicitation.
Each
Purchaser 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.
(f) Short
Sales and Confidentiality Prior To The Date Hereof.
Other
than the transaction contemplated hereunder, none of the Purchasers has,
directly or indirectly, nor has any Person acting on behalf of or pursuant
to
any understanding with any of the Purchasers, executed any disposition,
including Short Sales, in the securities of the Company during the period
commencing from the time that each Purchaser first received a term sheet from
the Company or any other Person setting forth the material terms of the
transactions contemplated hereunder until the date hereof. Notwithstanding
the
foregoing, in the case that any of the Purchasers is a multi-managed investment
vehicle whereby separate portfolio managers manage separate portions of such
Purchaser's assets and the portfolio managers have no direct Knowledge of the
investment decisions made by the portfolio managers managing other portions
of
such Purchaser's assets, the representation set forth above shall only apply
with respect to the portion of assets managed by the portfolio manager that
made
the investment decision to purchase the Securities covered by this Agreement.
Other than to other Persons party to this Agreement, each Purchaser has
maintained the confidentiality of all disclosures made to it in connection
with
this transaction (including the existence and terms of this
transaction).
18
The
Company acknowledges and agrees that each Purchaser does not make or has not
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section
3.2.
ARTICLE
IV.
OTHER
AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) The
Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement or Rule 144, to the Company
or
to an affiliate of the Purchasers 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 and reasonably acceptable to the Company, 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) The
Purchasers agree to the imprinting, so long as is required by this Section
4.1(b), of a legend on any of the Securities in the following form:
[NEITHER]
THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
[EXERCISABLE] [CONVERTIBLE]] HAVE 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] [CONVERSION] OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH
A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
19
The
Company acknowledges and agrees that the Purchasers may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or
grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and, if required under the terms of such arrangement, each
Purchaser may transfer pledged or secured Securities to the pledgees or secured
parties. Such a pledge or transfer would not be subject to approval of the
Company and no legal opinion of legal counsel of the pledgee, secured party
or
pledgor shall be required in connection therewith. Further, no notice shall
be
required of such pledge. At the expense of the Purchaser, 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, if the Securities are subject to registration
pursuant to the Registration Rights Agreement, the preparation and filing of
any
required prospectus supplement under Rule 424(b)(3) under the Securities Act
or
other applicable provision of the Securities Act to appropriately amend the
list
of Selling Stockholders thereunder.
(c) Certificates
evidencing the Shares and Warrant Shares shall not contain any legend (including
the legend set forth in Section 4.1(b) hereof): (i) whenever the Shares and
Warrant Shares are registered for resale under the Securities Act, or (ii)
following any
sale
or transfer of such Shares or Warrant Shares pursuant to Rule 144, or (iii)
while such Shares or Warrant Shares are eligible for sale under Rule 144(k),
or
(iv) if such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued
by
the staff of the Commission). The Company shall cause its counsel to issue
a
standing legal opinion to the Company’s transfer agent promptly after the
Effective Date if required by the Company’s transfer agent to effect the removal
of the legend hereunder. Following such time as restrictive legends are not
required to be placed on certificates representing the Shares or Warrant Shares,
the Company will, no later than three Trading Days following the delivery by
the
Purchaser to the Company or the Company's transfer agent of (i) a certificate
representing such Shares or Warrant Shares containing a restrictive legend
(endorsed or with stock power attached, signatures guaranteed, and otherwise
in
form necessary to affect reissuance and/ or transfer), or (ii) an Exercise
Notice in the manner stated in the Warrants to affect the exercise of such
Warrant in accordance with its terms (such third Trading Day, the “Legend
Removal Date”), deliver or cause to be delivered to the Purchaser a certificate
representing such Shares or Warrant Shares that is free from all restrictive
and
other legends. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section 4.1(c). Certificates for Securities
subject to legend removal hereunder shall be transmitted by the transfer agent
of the Company to the Purchaser by crediting the account of the Purchaser’s
prime broker with the Depository Trust Company System.
20
4.2 Right
of
First Refusal and Anti Dilution Provisions.
(a) Prior
to
the end of Fiscal Year 2008, the Purchasers shall have a right of
first refusal, to invest and to participate in any subsequent placements or
offerings of Common Stock, except in connection with (i) full or partial
consideration in connection with a strategic merger, acquisition,
consolidation or purchase of substantially all of the
securities or assets of corporation or other
entity which holders of such securities or debt are not
at any time granted registration rights, (ii) the Company's
issuance of securities in connection with strategic license agreements and
other partnering arrangements so long as such
issuances are not for the purpose of raising capital which holders
of such securities or debt are not at any time granted
registration rights, (iii) the Company's issuance of Common
Stock or the issuances or grants of options to purchase Common Stock pursuant
to
stock option plans and employee stock purchase plans described on Schedule
4.2(a) hereto, (iv) as a result of the exercise of Warrants
pursuant to this Agreement or any other Agreements or obligations entered
into by the Company prior to this Agreement, (v) the payment of any
liquidated damages or other damages pursuant to the
Transaction Documents, (vi) as a result of underwritten offerings
conducted by the Company and (vii) as has been described in the Reports or
Other Written Information filed with the Commission not later than three
Business Days before the Closing Date (collectively the foregoing are
“Excepted Issuances”). The Purchasers shall be given prior written notice
of no less than fourteen (14) business days (the “Subsequent Financing Notice”)
prior to any such placements or offerings of Common Stock which are not Excepted
Issuances (“Subsequent Financings”). The Purchaser who decides to
exercise its rights pursuant to this Section shall provide a written notice
to
the Company (the “Right of First Refusal Notice”) no later than seven (7)
business days following the receipt of the Subsequent Financing Notice,
providing the amount that such Purchaser is committed to invest. The Purchaser
is deemed to have waived its right of first refusal if the Company does not
receive the Right of First Refusal Notice by 5:00 p.m. (New York City time)
on
the seventh business day of the Right of First Refusal Notice period. In the
event such terms and conditions are modified during the
Subsequent Financing Notice period, the Purchasers shall be given prompt
notice of such modification and shall have the right during
the fourteen (14) business days
following the notice of modification to exercise such
right.
(b) Other
than in connection with the Excepted Issuances and prior to the end of fiscal
year 2008, if the Company shall offer, issue or agree to issue any common stock
to any person or entity at a price per share which shall be less than the price
of the Shares, or less than the Warrant exercise price in respect of the Warrant
Shares, without the consent of each Purchaser, then the Company shall issue,
for
each such occasion, additional shares of Common Stock to each Purchaser so
that
the average per share purchase price of the Shares issued to the Purchasers
(of
only the Common Stock or Warrant Shares still owned by the Purchaser) is equal
to such other lower price per share and the Warrant exercise price shall
automatically be adjusted as provided in the Warrants. The average Purchase
Price of the Shares and average exercise price in relation to the Warrant Shares
shall be calculated separately for the Shares and Warrant Shares. The delivery
to the Purchasers of the additional shares of Common Stock shall be not later
than the closing date of the transaction giving rise to the requirement to
issue
additional shares of Common Stock. The Purchasers are granted the registration
rights described in the Registration Rights Agreement in relation to such
additional shares of Common Stock, except that the Filing Date and
Effective Date vis-a-vis such additional Shares shall be the forty-fifth
(45th)
day
after the closing date giving rise to the requirement to issue
the additional shares of Common Stock.
21
4.3 Furnishing
of Information. As long as the Purchaser owns Securities, 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. As long as the Purchaser owns
Securities, if the Company is not required to file reports pursuant to the
Exchange Act, it will prepare and furnish to the Purchaser and make publicly
available in accordance with Rule 144(c) such information as is required for
the
Purchaser 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 Person
to
sell such Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144.
4.4 Integration.
The Company shall not, and shall use its 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 Purchaser or that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market.
4.5 Conversion
and Exercise Procedures. The form of Notice of Exercise included in the Warrants
set forth the totality of the procedures required of the Purchaser in order
to
exercise the Warrants. No additional legal opinion or other information or
instructions shall be required of the Purchaser to exercise its Warrants. The
Company shall honor exercises of the Warrants and shall deliver Warrant Shares
in accordance with the terms, conditions and time periods set forth in the
Transaction Documents.
4.6 Securities
Laws Disclosure; Publicity. By 9:00 a.m. (New York time) on the Trading Day
following the execution of this Agreement, and by 9:00 a.m. (New York time)
on
the Trading Day following the Closing Date, the Company shall issue press
releases disclosing the transactions contemplated hereby and the Closing. On
the
Trading Day following the execution of this Agreement 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 on
the
Trading Day following the Closing Date the Company will file an additional
Current Report on Form 8-K to disclose the Closing. In addition, the Company
will make such other filings and notices in the manner and time required by
the
Commission and the Trading Market on which the Common Stock is listed.
Notwithstanding the foregoing, the Company shall not publicly disclose the
name
of the Purchaser, or include the name of the Purchaser 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 the Purchaser, except to the extent such
disclosure is required by law or Trading Market regulations.
4.7 Shareholder
Rights Plan. No claim will be made or enforced by the Company or, to the
Knowledge of the Company, any other Person that the Purchaser is an “Acquiring
Person” under any shareholder rights plan or similar plan or arrangement in
effect or hereafter adopted by the Company, or that the Purchaser could be
deemed to trigger the provisions of any such plan or arrangement, by virtue
of
receiving Securities under the Transaction Documents or under any other
agreement between the Company and the Purchaser. The Company shall conduct
its
business in a manner so that it will not become subject to the Investment
Company Act.
22
4.8 Non-Public
Information. The Company covenants and agrees that neither it nor any other
Person acting on its behalf will provide the Purchaser or its agents or counsel
with any information that the Company believes constitutes material non-public
information, unless prior thereto the Purchaser shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that the Purchaser shall be relying on the foregoing
representations in effecting transactions in securities of the
Company.
4.9 Reimbursement.
The Company shall reimburse the Lead Investor for legal fees up to, but in
no
event more than, US$30,000.00, for the services of its counsel retained in
connection with the transactions contemplated by this Agreement.
4.10 Indemnification
of Purchaser. Subject to the provisions of this Section 4.10 and in addition
to
the indemnity provided in the Registration Rights Agreement, the Company will
indemnify and hold the Purchaser and its directors, officers, shareholders,
members, partners, employees and agents (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding
a
lack of such title or any other title), each Person who controls the Purchaser
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents, members, partners or
employees (and any other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any other title)
of
such controlling person (each, a “Purchaser Party”) harmless from any and all
losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs
and
reasonable attorneys’ fees and costs of investigation that any such Purchaser
Party may suffer or incur as a result of or relating to (a) any breach,
misrepresentation or inaccuracy of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or in the other
Transaction Documents or (b) any action instituted against the Purchaser, or
any
of its respective Affiliates, by any stockholder of the Company who is not
an
Affiliate of the Purchaser, with respect to any of the transactions contemplated
by the Transaction Documents (unless such action is based upon a material breach
of the Purchaser’s representations, warranties or covenants under the
Transaction Documents or any agreements or understandings that the Purchaser
may
have with any such stockholder or any violations by the Purchaser of state
or
federal securities laws or any conduct by the Purchaser which constitutes fraud,
gross negligence, willful misconduct or malfeasance). If any action shall be
brought against any Purchaser Party in respect of which indemnity may be sought
pursuant to this Agreement, such Purchaser Party shall promptly notify the
Company in writing, and the Company shall have the right to assume the defense
thereof with counsel of its own choosing. Any Purchaser Party shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing, (ii) the
Company has failed after a reasonable period of time to assume such defense
and
to employ counsel or (iii) in such action there is, in the reasonable opinion
of
such separate counsel, a material conflict on any material issue between the
position of the Company and the position of such Purchaser Party. The Company
will not be liable to any Purchaser Party under this Agreement (i) for any
settlement by a Purchaser Party effected without the Company’s prior written
consent, which shall not be unreasonably withheld or delayed; or (ii) to the
extent, but only to the extent that a loss, claim, damage or liability is
attributable to any Purchaser Party’s material breach of any of the
representations, warranties, covenants or agreements made by the Purchaser
in
this Agreement or in the other Transaction Documents.
23
4.11 Equal
Treatment. No consideration shall be offered or paid to any person to amend
or
consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration is also offered to all of the parties
to
the Transaction Documents.
4.12 Form
D.
The Company agrees to timely file a Form D with respect to the Securities as
required under Regulation D and to provide a copy thereof, promptly upon request
of the Purchaser.
4.13 Subsequent
Registrations. Other than pursuant to the Registration Statement, prior to
the
Effective Date, 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.
4.14 Listing
of Common Stock. The Company hereby agrees to use best efforts to maintain
the
listing and trading of its Common Stock on the OTC Bulletin Board (or another
nationally recognized Trading Market). The Company further agrees, if the
Company applies to have the Common Stock traded on any other Trading Market,
it
will include in such application the Shares and Warrant Shares, and will take
such other action as is necessary or desirable in the opinion of the Purchaser
to cause all of the Shares and Warrant Shares to be listed on such other Trading
Market as promptly as possible. The Company will use best efforts and take
all
action reasonably necessary to continue the listing and trading of its Common
Stock on the Trading Market on which the Common Stock is currently listed or
quoted and will comply in all respects with the Company’s reporting, filing and
other obligations under the bylaws or rules of such Trading Market.
4.15 Form
SB-2
and Form S-1 Eligibility. The Company is eligible to register the resale of
the
Shares and the Warrant Shares by the Purchaser under Form SB-2 or Form S-1
promulgated under the Securities Act and the Company hereby covenants and agrees
to use its best efforts to maintain its eligibility to use Form SB-2 until
the
Registration Statement covering the resale of the Shares and Warrant Shares
shall have been filed with, and declared effective by, the Commission. If for
any reason the Company is not eligible to register the resale of the Shares
and
the Warrant Shares by the Purchaser under Form SB-2, the Company covenants
and
agrees to register the resale of the Shares and Warrant Shares on Form S-1
promulgated under the Securities Act.
4.16 Registration
Rights. The
Company shall register the Shares and the shares underlying the Warrants
pursuant (“Registrable Securities”) to the terms set forth in the Registration
Rights Agreement within forty-five (45) days from the Closing Date. If the
Registrable Securities are not registered by six (6) months after the Closing
Date, the Company shall pay to each Purchaser an amount equal to 1% per month
of
the aggregate Investment Amount paid by such Purchaser pursuant to this
Agreement. Such penalty shall not apply if delays in registration are due to
Commission comments or concerns for any reason relating to or involving Rule
415
of the Securities Act or its interpretation. In the event that the number of
Shares and the shares underlying the Warrants to be registered on the initial
registration statement as permitted by the Commission is less than the full
amount of the Registrable Securities as a result of Rule 415 of the Securities
Act or its interpretation, the Company shall file one or more subsequent
registration statements to register the rest of the Registrable Securities
until
all Registrable Securities are registered, which shall be filed within thirty
(30) days from the day when the Company becomes qualified or permitted by the
Commission to file a new subsequent registration statement to registered the
rest of the Restrable Securities; provided that each of such subsequent
registration statement shall only register the number of Registrable Securities
as permitted under Rule 415 of the Securities Act or its interpretation. Each
Purchaser’s shares registered in the subsequent registrations are on a pro rata
basis. If a subsequent registration statement is not filed by the deadline,
damages equal to the amount of 1.0% of the remaining unregistered principal
amount shall be paid to the Purchaser on the first business day after the
deadline, and on each anniversary of said date (applied on a daily pro rata
basis) until such registration statement is filed.
24
4.17 Board
of
Directors. The Company covenants and agrees that it will appoint the requisite
number of directors and of independent directors in order to comply with Nasdaq
Global Market listing requirements as soon as is reasonably practicable
following the date of this Agreement. The Company covenants and agrees that,
as
soon as is reasonably practicable following the date of this Agreement, the
Lead
Investor shall have the right to approve one (1) director to serve on the Board
of Directors of the Company as designated in writing by the Lead
Investor.
4.18 Senior
Financial Officer. The
Company covenants and agrees that, as soon as is reasonably practicable
following the date of this Agreement, it will retain the services of a Senior
Financial Officer, subject to the approval of the Lead Investor (“SFO”), with
experience in matters relating to public companies and Commission compliance
and
requirements. Failure to appoint a SFO by March 30th,
2008
shall result in penalties to the Company in the form of 1% per month additional
shares of Common Stock based on the Shares already issued at the Closing, to
be
issued and allocated among the Purchasers pro rata in accordance with their
applicable Investment Amounts.
4.19 Make-Good
Obligation. In the event that the after-tax net income of the Company during
fiscal year 2007 is less than US$16,300,000.00, as reported in the Company’s
audited financial statements for fiscal year 2007, the Company shall pay the
Purchasers 510,000 management-held shares, held in Make-Good Escrow as set
forth
in Section 4.20 below, to be distributed to the Purchasers pro rata in
accordance with their respective Investment Amounts. In the event that the
after-tax net income of the Company during fiscal year 2008 is less than
US$35,800,000.00, as reported in the Company’s audited financial statements for
fiscal year 2008, the Company shall pay the Purchasers either (i) 510,000
management-held Shares, if the after-tax net income of the Company during fiscal
year 2007 was equal to or greater than US$16,300,000.00, to be distributed
pro
rata in accordance with each Purchaser’s respective Investment Amounts, or (ii)
510,000 newly issued Shares of Common Stock by the Company, if the after-tax
net
income of the Company during fiscal year 2007 was less than US$16,300,000.00,
as
reported in the Company’s audited financial statements for fiscal year 2007, and
the 510,000 management-held shares have already been distributed to the
Purchasers in accordance with this Section 4.19, to be distributed pro rata
in
accordance with each Purchaser’s respective Investment Amount. The costs
associated with the make-good guarantee shall not be included as a cost towards
the determination of the after-tax net income for each year.
25
4.20 Make-Good
Escrow. In order to comply with the requirements of Section 4.19 above, the
Company shall place in escrow 510,000 shares of Common Stock held by management,
(the “Make-Good Escrow”). The Make-Good Escrow agent shall be appointed by the
Lead Investor and the Company.
4.21 Public
Company Activities. Beginning with the quarter ending in June, 2007, the Company
shall conduct conference calls on a quarterly basis. The management of the
Company shall visit the United States two times per annum to meet with current
and potential investors. The Company shall retain the services of a reputable
investor relations company.
4.22 Callable
Warrants. If the VWAP of the Company’s Common Stock price for any continuous
period of twenty (20) days equals or exceeds 200% above the Warrants’ exercise
price, the Company can send a call notice on the warrants to the Purchasers
for
the mandatory exercise of the Warrants (the “Warrant Call”). The Purchasers
shall have sixty (60) calendar days notice for the Warrant Call. If the
Purchaser cannot exercise the Warrant within sixty (60) calendar days from
receipt of Warrant Call, the Warrant shall be cancelled, forfeited and avoided
by the Company. The Company may send a Warrant Call only after the Securities
shall have been registered for thirty (30) calendar days.
ARTICLE
V.
MISCELLANEOUS
5.1 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
Shares.
5.2 Termination.
This Agreement may be terminated prior to Closing:
(a) by
written agreement of the Purchaser and the Company; and
(b) by
the
Company or the Purchaser upon written notice to the other, if the Closing shall
not have taken place by 6:30 p.m. Eastern time on May 15, 2007; provided, that
the right to terminate this Agreement under this Section 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.
Upon
a
termination in accordance with this Section, the Company and the Purchaser
shall
not have any further obligation or liability (including as arising from such
termination) to the other except pursuant to Section 4.10.
26
5.3 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 and understandings,
discussions, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and
schedules.
5.4 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 set forth on the signature pages attached hereto prior to
5:30
p.m. (New York City time) on a Trading Day, (b) the next Trading Day after
the
date of transmission, if such notice or communication is delivered via facsimile
at the facsimile number set forth on the signature pages attached hereto on
a
day that is not a Trading Day or later than 5:30 p.m. (New York City time)
on
any Trading Day, (c) the 2nd
Trading
Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom
such
notice is required to be given. The address for such notices and communications
shall be as set forth on the signature pages attached hereto.
5.5 Amendments;
Waivers. No provision of this Agreement may be waived, modified, supplemented
or
amended except in a written instrument signed, in the case of an amendment,
by
the Company and the Purchaser or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. 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.
5.6 Headings.
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.
5.7 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 Purchaser. The Purchaser may assign any or all of its
rights under this Agreement to any Person to whom the Purchaser 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 the Purchaser.
5.8 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 4.10 (as to each Purchaser
Party).
27
5.9 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 legal
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, directors,
officers, shareholders, employees or agents) shall be commenced exclusively
in
the state and federal courts sitting in the City of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan 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 any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process
and
consents to process being served in any such suit, action or 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 an action
or
proceeding to enforce any provisions of the Transaction Documents, then the
prevailing party in such action or 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 action or
proceeding.
5.10 Survival.
The representations, warranties, covenants and other agreements contained herein
shall survive the Closing and the delivery, exercise and/or conversion of the
Securities, as applicable for the applicable statue of limitations.
5.11 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.
5.12 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.
28
5.13 Rescission
and Withdrawal Right. Notwithstanding anything to the contrary contained in
(and
without limiting any similar provisions of) the Transaction Documents, whenever
the Purchaser 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 the Purchaser 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; provided, however, in the case of a rescission of
exercise of a Warrant, the Purchaser shall be required to return any shares
of
Common Stock subject to any such rescinded exercise notice.
5.14 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.
5.15 Remedies.
In addition to being entitled to exercise all rights provided herein or granted
by law, including recovery of damages, each of the Purchaser 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.
5.16 Payment
Set Aside. To the extent that the Company makes a payment or payments to the
Purchaser pursuant to any Transaction Document or the Purchaser 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.
5.17 Liquidated
Damages. The Company’s obligations to pay any partial liquidated damages or
other amounts owing under the Transaction Documents is a continuing obligation
of the Company and shall not terminate until all unpaid partial liquidated
damages and other amounts have been paid notwithstanding the fact that the
instrument or security pursuant to which such partial liquidated damages or
other amounts are due and payable shall have been canceled.
29
5.18 Construction.
The parties agree that each of them and/or their respective counsel has reviewed
and had an opportunity to revise the Transaction Documents and, therefore,
the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto.
5.19 Limitation
of Liability. Notwithstanding anything herein to the contrary, the Company
acknowledges and agrees that the liability of the Purchaser arising directly
or
indirectly, under any Transaction Document of any and every nature whatsoever
shall be satisfied solely out of the assets of the Purchaser, and that no
trustee, officer, other investment vehicle or any other Affiliate of the
Purchaser or any investor, shareholder or holder of shares of beneficial
interest of the Purchaser shall be personally liable for any liabilities of
the
Purchaser.
(Signature
Pages Follow)
30
IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as
of
the date first indicated above.
|
CHINA
HOUSING AND LAND DEVELOPMENT, INC.
|
Address
for Notice:
|
|
By:__________________________________________
Name:
Title:
|
|
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOR PURCHASER FOLLOWS]
31
[PURCHASER
SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.
Name
of
Purchaser: ________________________________________________________
Signature
of Authorized Signatory of Purchaser:
__________________________________
Name
of
Authorized Signatory:
____________________________________________________
Title
of
Authorized Signatory:
_____________________________________________________
Email
Address of
Purchaser:________________________________________________
Address
for Notice of Purchaser:
Address
for Delivery of Securities for Purchaser (if not same as above):
Investment
Amount:
Warrant
Shares:
EIN
Number:
32
Annex
A
CLOSING
STATEMENT
Pursuant
to the attached Securities Purchase Agreement, dated as of the date hereto,
the
Purchaser shall purchase up to $25,100,000.00 of Shares and Warrants from China
Housing and Land Development, Inc. (the “Company”).
All funds will be wired into an escrow account maintained by Signature Bank,
escrow agent to the Company. All funds will be disbursed in accordance with
this
Closing Statement.
Disbursement
Date: May
9,
2007
|
I.
PURCHASE
PRICE
|
|
|
Gross
Proceeds to be Received in Escrow
|
$
|
|
II. DISBURSEMENTS
|
|
|
|
$
|
|
|
$
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Total
Amount Disbursed:
|
$
|
|
WIRE
INSTRUCTIONS:
|
|
|
To:
_____________________________________
|
|
|
To:
_____________________________________
|
33
