SECURITIES PURCHASE AGREEMENT
Exhibit 99.4
This
Securities Purchase Agreement (this “Agreement”) is
dated as of October 26,
2009, between Xinhua Sports & Entertainment Limited, a Cayman Islands company (the
“Company”), and each purchaser identified on the signature pages hereto (each, including
its successors and assigns, a “Purchaser” and collectively the “Purchasers”).
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for
all purposes of this Agreement, the following terms have the meanings set forth in this Section
1.1:
“Action” shall have the meaning ascribed to such term in Section 3.1(j).
“ADRs” means the American depositary receipts evidencing the ADSs.
“ADSs” means the American depositary shares of the Company, each representing
two (2) Common Shares, quoted for trading on the Nasdaq Global Market.
“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 405 under the Securities Act.
“Board of Directors” means the board of directors of the Company.
“Business Day” means any day except any Saturday, any Sunday, any day which is
a federal legal holiday in the United States or any day on which banking institutions in the
State of New York are authorized or required by law or other governmental action to close.
“Closing” means the closing of the purchase and sale of the Securities pursuant
to Section 2.1.
“Closing Date” means the Trading Day on which 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 Subscription Amount and (ii) the
Company’s obligations to deliver the Securities, in each case, have been
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satisfied or waived, but in no event later than the third Trading Day following such
satisfaction or waiver.
“Commission” means the United States Securities and Exchange Commission.
“Common Shares” means the class A common shares of the Company, par value
$0.001 per share, and any other class of securities into which such securities may hereafter
be reclassified or changed.
“Common Shares Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time Common Shares,
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 Shares.
“Company Counsel” means Xxxxxxx Xxxx & Xxxxxxx, 2901 One Exchange Square, 0
Xxxxxxxxx Xxxxx, Xxxxxxx, Xxxx Xxxx.
“Custodian” means the Hong Kong and Shanghai Banking Corporation.
“Deposit Agreement” means that certain Deposit Agreement by and among the
Company, the Depositary, and the holders from time to time of the ADRs.
“Depositary” means The Bank of New York Mellon, as the depositary under the
Deposit Agreement.
“Disclosure Schedules” means the Disclosure Schedules of the Company delivered
concurrently herewith.
“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.
“Exempt Issuance” means the issuance of (a) Common Shares Equivalents or Common
Shares to consultants, employees, officers or directors of the Company pursuant to any stock
or option plan duly adopted for such purpose, by the Board of Directors or a majority of the
members of a committee of non-employee directors established for such purpose, (b)
securities issuable upon the exercise or exchange of or conversion of any Securities issued
hereunder and/or other securities exercisable or exchangeable for or convertible into Common
Shares issued and outstanding on the date of this Agreement, provided that the agreements
governing such securities have not been amended since the date of this Agreement to increase
the number of such securities or to decrease the exercise price, exchange price or
conversion price of such securities, and (c) securities issued pursuant to acquisitions or
strategic transactions approved by the Board of Directors of the Company (including prior to
the date hereof), provided that any such issuance shall not include a transaction in which
the Company is issuing securities
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primarily for the purpose of raising capital or to an entity whose primary business is
investing in securities.
“F-3 Registration Statement” means the effective registration statement with
the Commission, file No. 333-161724 which registers the Underlying Shares and the Warrants.
“F-6 Registration Statement” means the effective registration statement with
the Commission, file No. 333-140813 which registers the New ADSs.
“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).
“Intellectual Property Rights” shall have the meaning ascribed to such term in
Section 3.1(o).
“Liens” means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or similar restriction.
“Material Adverse Effect” and “Material Adverse Change” 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).
“Per
New ADS Purchase Price” equals $1.36, subject to adjustment for reverse
and forward share splits, share dividends, share combinations and other similar transactions
with respect to the Common Shares that occur after the date of this Agreement and prior to
the Closing.
“Person” means an individual or corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, joint stock
company, government (or an agency or subdivision thereof) or other entity of any kind.
“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or partial proceeding, such as a
deposition), whether commenced or threatened.
“Prospectus” means the Base Prospectus, any issuer’s free writing prospectus,
and amendments or further supplements to such prospectus, and including, without limitation,
the Prospectus Supplement, filed pursuant to and within the time limits described in Rule
424(b) with the Commission in connection with the proposed sale of the Securities
contemplated by this Agreement through the date of the Prospectus Supplement.
“Prospectus Supplement” means the supplement to the Prospectus complying with
Rule 424(b) of the Securities Act that is filed with the Commission and delivered by the
Company to each Purchaser at the Closing.
“Purchaser Party” shall have the meaning ascribed to such term in Section 4.6.
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“Registration Statements” means the F-3 Registration Statement and the F-6
Registration Statement.
“Required Approvals” shall have the meaning ascribed to such term in Section
3.1(e).
“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.
“Rule 424” means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.
“Sanctioned Entity” means (i) the government of or an agency of the government
of, (ii) an organization directly or indirectly controlled by, or (iii) a person resident in
a country that is subject to a sanctions program identified on the list maintained by OFAC
and available at xxxx://xxx.xxxxxxx.xxx/xxxxxxx/xxxxxxxxxxx/xxxx/xxxxxxxx/, or as otherwise
published from time to time as such program may be applicable to such agency, organization
or person.
“Sanctioned Person” means a person named on the list of Specially Designated
Nationals or Blocked Persons maintained by OFAC and available at
xxxx://xxx.xxxxx.xxx/xxxxxxx/xxxxxxxxxxx/xxxx/xxx/xxxxx.xxxx, or as otherwise published from
time to time.
“SEC Reports” shall have the meaning ascribed to such term in Section 3.1.
“Securities” means the New ADSs, the Warrants and the Warrant Shares.
“Securities Act” means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
“Series
A Warrants” means, collectively, the Series A Common Stock
warrants delivered to the Purchasers at the Closing in accordance
with Section 2.2(a)
hereof, which shall be exercisable commencing six months after the
Closing Date and
have a term of exercise equal to five years from such initial
exercise date, in the form of Exhibit A-1 attached hereto.
“Series
B Warrants” means, collectively, the Series B Common Stock
warrants delivered to the Purchasers at the Closing in accordance
with Section 2.2(a)
hereof, which shall be exercisable commencing on the
Closing Date and
have a term of exercise equal to six months from the
Closing Date, in the form of Exhibit A-2 attached hereto.
“Short Sales” means 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 Common Shares).
“Subscription Amount” means, as to each Purchaser, the aggregate amount to be
paid for the New ADSs and Warrants purchased hereunder as specified below such Purchaser’s
name on the signature page of this Agreement and next to the heading “Subscription Amount,”
in United States dollars and in immediately available funds.
“Subsidiary” means, with respect to any Person, any other Person with respect
to which the first Person, directly or indirectly, owns or controls 50% or more of the
securities of the second Person having the power to elect members of the board of directors
or similar body governing the affairs of such entity.
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“Trading Day” means a day on which the principal Trading Market is open for
trading.
“Trading Market” means any of the following markets or exchanges on which the
Common Shares are listed or quoted for trading on the date in question: the NYSE AMEX, the
Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New
York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).
“Transaction Documents” means this Agreement, the Warrants and any other
documents or agreements executed in connection with the transactions contemplated hereunder.
“Underlying Shares” means a number of Common Shares equal to the product of (i)
the New ADSs and (ii) two (2).
“Variable Rate Transaction” shall have the meaning ascribed to such term in
Section 4.9(b).
“Warrants”
means the Series A Warrants and the Series B Warrants.
“Warrant Shares” means the Common Shares issuable upon exercise of the
Warrants.
“WS” means Xxxxxxxxx Xxxxx LLP with offices located at 000 Xxxxxxxxx Xxxxxx,
Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000-0000.
2.1 Closing. On the Closing Date, upon the terms and subject to the conditions set
forth herein, the Company agrees to sell, and the Purchasers, severally and not jointly, agree to
purchase, up to an aggregate of $7,500,000 of ADSs (the “New ADSs”) and the Warrants. Each
Purchaser shall deliver to the Company, via wire transfer of immediately available funds equal to
such Purchaser’s Subscription Amount as set forth on the signature page hereto executed by such
Purchaser and the Company shall deliver to each Purchaser (i) its respective New ADSs by book entry
to an account specified in writing by such Purchaser on the signature page hereto and (ii) a
Warrant as determined pursuant to Section 2.2(a), and the Company and each Purchaser shall deliver
the other items set forth in Section 2.2 deliverable at the Closing. Upon satisfaction of the
covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices
of WS or such other location as the parties shall mutually agree.
2.2 Deliveries.
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(a) On or prior to 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 legal opinion of Company Counsel, substantially in the form of
Exhibit B attached hereto;
(iii) (A) evidence of the issuance of the Underlying Shares to BNY (Nominees)
Limited for deposit with the Custodian, under the Deposit Agreement and (B) a copy
of irrevocable instructions to BNY (Nominees) Limited instructing BNY (Nominees)
Limited to deliver to each Purchaser by book entry a number of New ADSs equal to
such Purchaser’s Subscription Amount divided by the Per New ADS Purchase Price,
registered in the name of such Purchaser or its nominees;
(iv)
a Series A Warrant registered in the name of such Purchaser to purchase up to a
number of Common Shares equal to 35% of
the number of Shares issuable to the Purchaser
on the Closing Date, with an exercise price equal to $0.975 per
Common Share, subject to adjustment
therein (such Warrant certificate may be delivered within three Trading Days of the
Closing Date);
(v)
a Series B Warrant registered in the name of such Purchaser to purchase up to a
number of Common Shares equal to 100% of
the number of Shares issuable to the Purchaser
on the Closing Date, with an exercise price equal to $0.68 per
Common Share, subject to adjustment
therein (such Warrant certificate may be delivered within three Trading Days of the
Closing Date); and
(vi) the Prospectus (which may be delivered in accordance with Section 5(b)(1)
or (2) under the Securities Act).
(b) On or prior to the Closing Date, each Purchaser shall deliver or cause to be
delivered to the Company the following:
(i) this Agreement duly executed by such Purchaser; and
(ii) such Purchaser’s Subscription Amount by wire transfer to the account as
specified in writing by the Company.
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 on the Closing Date of the
representations and warranties of the Purchasers contained herein (unless as of a
specific date therein);
(ii) all obligations, covenants and agreements of each Purchaser required to be
performed at or prior to the Closing Date shall have been performed in all material
respects;
(iii) the delivery by each Purchaser of the items set forth in Section 2.2(b)
of this Agreement; and
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(iv) the subscription by Purchasers representing at least 75% of the aggregate
Subscription Amount set forth on the signature page to 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 representations and warranties made by the Company in this Agreement,
disregarding all qualifications and exceptions as to materiality and Material
Adverse Effect, shall be true and correct in all respects on the Closing Date as
though such representations and warranties were made on the Closing Date (except
that any representations and warranties that are made as of a specified date shall
be true and correct as of such specified date), with only such exceptions in the
aggregate as have not resulted in a Material Adverse Effect on the Company;
(ii) all obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been performed in all material
respects;
(iii) the delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;
(iv) there shall have been no Material Adverse Effect with respect to the
Company since the date hereof that is continuing as of the Closing Date; and
(v) After the date hereof and prior to the Closing Date, there shall not have
occurred a suspension or material limitation in trading in the Company’s securities
on the Nasdaq Global Market which occurrence is still outstanding as of the Closing
Date, if the effect of any such event in the reasonable judgment of the Company and
the Purchasers makes it impracticable or inadvisable to proceed with the
transactions contemplated in this Agreement.
3.1 Representations and Warranties of the Company. Except as set forth in any forms,
reports and documents filed or furnished by the Company with the SEC under the Exchange Act (the
foregoing materials, including the exhibits thereto and documents incorporated by reference
therein, together with the Prospectus and the Prospectus Supplement, being collectively referred to
herein as the “SEC Reports”) and the Disclosure Schedules, which Disclosure Schedules shall
be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent
of the disclosure contained in the corresponding section of the Disclosure Schedules, the Company
hereby makes the following representations and warranties to each Purchaser:
(a) Subsidiaries. All material Subsidiaries of the Company are described in
the SEC Reports or in Section 3.1(a) of the Disclosure Schedules. The Company owns,
directly or indirectly, all of the capital stock or other equity interests of each
Subsidiary
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free and clear of any Liens, and all of the issued and outstanding shares of capital
stock of each such Subsidiary are validly issued and are fully paid, non-assessable and free
of preemptive and similar rights to subscribe for or purchase securities.
(b) Organization and Qualification. The Company and each of its material
Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in
good standing (with respect to jurisdictions that recognize the concept of good standing or
its equivalent) under the laws of the jurisdiction of its incorporation or organization,
with the requisite corporate power and authority to own and use its properties and assets
and to carry on its business as currently conducted. The Company is not in violation or
default of any of the provisions of its memorandum or articles of association. Each of the
Company and each of its Subsidiaries is duly qualified to conduct business and is in good
standing (with respect to jurisdictions that recognize the concept of good standing or its
equivalent) 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 (with respect to jurisdictions that recognize the concept of good
standing or its equivalent), as the case may be, would not reasonably be expected to result
in: (i) a material adverse effect on the results of operations, assets, business or
condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole, or
(ii) a material adverse effect on the Company’s ability to perform in any material respect
its obligations under any Transaction Document ((i) or (ii), a “Material Adverse
Effect” or a “Material Adverse Change”), except (i) effects or changes
(including general economic and political conditions) that do not have a materially
disproportionate effect (relative to other industry participants) on the Company and its
Subsidiaries and generally affect the industry in which the Company and its Subsidiaries
operate; (ii) effects or changes relating to loss of employees, suppliers, vendors, agents,
customers or other business partners resulting primarily from the announcement or pendency
of the transactions contemplated by this Agreement; (ii) effects or changes to the extent
attributable to changes in PRC law after the date of this Agreement and (iv) any change or
effect that results from any action taken by the Company at the request of the Purchasers or
as required by the terms of this Agreement or the other Transaction Documents.
(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 to which it is a party and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of each of the Transaction Documents
to which it is a party by the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary corporate action
on the part of the Company and no further corporate action is required by the Company, the
Board of Directors or the Company’s shareholders in connection therewith other than in
connection with the Required Approvals. Each Transaction Document to which it is a party
has been (or upon delivery will have been) duly executed by the Company and assuming due
authorization, execution and delivery by the other parties thereto, 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 general
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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.
(d) No Conflicts. The execution, delivery and performance by the Company of
the Transaction Documents, the issuance and sale of the Underlying Shares and the Securities
and the consummation by it of the transactions contemplated hereby and thereby to which it
is a party 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 would not reasonably be expected to
result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. Except as set forth in Section 3.1(e) of
the Disclosure Schedules, 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) the filing with the Commission of the Prospectus Supplement, (ii)
notification to the Nasdaq Global Market (if required) for the listing of the New ADSs for
trading thereon in the time and manner required thereby and (iii) such filings as are
required to be made under applicable state securities laws (collectively, the “Required
Approvals”).
(f) Issuance of the Securities; Registration. The Underlying Shares to be
issued to BNY (Nominees) Limited and deposited with the Custodian under the Deposit
Agreement against the issuance of the New ADSs will, when issued and paid for pursuant to
this Agreement, be duly authorized, validly issued, fully paid and non-assessable and free
and clear of any Lien. The New ADSs, when issued and paid for in accordance with this
Agreement, will be free and clear of any Lien imposed by the Company at the time of delivery
to the Purchasers. The Warrants are duly authorized and, when issued and paid for in
accordance with this Agreement, will be validly issued, fully paid and nonassessable (except
for the exercise price due in connection with the exercise thereof), free and clear of all
Liens imposed by the Company. The Warrant Shares are duly
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authorized and, when issued and paid for in accordance with the terms of the Warrants,
will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by
the Company. The Company has prepared and filed the F-3 Registration Statement, in
conformity with the requirements of the Securities Act, which became effective on September
16, 2009 (the “Effective Date”), including the base prospectus therein dated
September 4, 2009 (the “Base Prospectus”), and such amendments and supplements
thereto as may have been required to the date of this Agreement. The F-3 Registration
Statement is effective under the Securities Act and no stop order preventing or suspending
the effectiveness of the F-3 Registration Statement or suspending or preventing the use of
the Prospectus has been issued by the Commission and no proceedings for that purpose have
been instituted or, to the knowledge of the Company, are threatened by the Commission. At
the time the F-3 Registration Statement and any amendments thereto became effective the
Registration Statement and any amendments thereto conformed in all material respects to the
requirements of the Securities Act and did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or necessary to make
the statements therein not misleading; and the Prospectus and any amendments or supplements
thereto, at the time the Prospectus or any amendment or supplement thereto was first filed
with the Commission conformed, and the Prospectus, as amended or supplemented, at the
Closing Date will conform, in all material respects to the requirements of the Securities
Act and did not or will not contain an untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(g) Capitalization.
(i) As of the date hereof, the Company has 343,822,874 duly authorized Common
Shares, of which 164,636,640 are issued and outstanding; 50,054,619 duly authorized
class B common shares, US$0.001 par value per share, of which none are issued and
outstanding; 345,600 duly authorized series B convertible preferred shares, US$0.001
par value per share (the “Series B Preferred Shares”), of which 339,200 are
issued and outstanding; and 605,776,907 duly authorized shares that are not yet
designated as to class or series, of which none are issued and outstanding. All of
the outstanding shares of the Company have been duly authorized, are fully paid and
nonassessable and were issued in compliance with all applicable Laws.
(ii) As of the date hereof, the Company has reserved an aggregate of 31,257,807
Common Shares for issuance to officers, directors, employees and consultants of the
Company and its Subsidiaries pursuant to (i) its Share Option and Share Grant Plan
duly adopted by the Company’s board of directors and approved by the shareholders of
the Company (the “Stock Plan”), and (ii) certain individual option
agreements of the Company (the “Option Agreements” and, together with the
Stock Plan, the “Equity Plans”). Of such reserved Common Shares, as of the
date hereof, 18,954,180 shares have been issued pursuant to (x) restricted share
purchase agreements and remain outstanding or (y) the exercise of options to
purchase the Common Shares. As of the date hereof, 8,079,328
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Common Shares are subject to currently issued and outstanding options granted
and issued pursuant to the Equity Plans, and 15,751,683 Common Shares remain
available for issuance to officers, directors, employees and consultants of the
Company and its Subsidiaries pursuant to the Equity Plans.
(iii) Other than (1) those certain warrants exercisable for 4,729,968 Common
Shares (the “Xinhua Warrants”), (2) the Common Shares issuable upon
conversion of the Patriarch Convertible Loan, (3) the securities issued or issuable
pursuant to the Equity Plans, (4) the Common Shares issuable upon conversion of the
issued and outstanding Series B Preferred Shares, and (5) the rights described in
Section 3.1(g) of the Disclosure Schedules, there are no outstanding options,
warrants, rights (including conversion or preemptive rights and rights of first
refusal or similar rights) or agreements, orally or in writing, to purchase or
acquire from the Company any common shares, preferred shares, or other shares of
capital stock of the Company, or any securities convertible into or exchangeable for
such shares of the Company.
(iv) Other than the Series B Preferred Shares, each of which is entitled to
such number of votes equal to the number of Common Shares into which each such
Series B Preferred Share is convertible at the applicable time, there are no
authorized or outstanding bonds, debentures, notes or other obligations of the
Company that would entitle the holders of which to vote, at any annual or
extraordinary general meeting of members of the Company, (i) together with the
holders of Common Share as a single class or (ii) as a separate and single class.
(h) Material Changes; No Undisclosed Liabilities. There has not been, since
June 30, 2009, (i) any Material Adverse Change in respect of the Company that is continuing
as of the Closing Date; or (ii) any share split or similar change to the capital structure
of the Company or any declaration, setting aside or payment of any dividend or other
distribution in respect of any shares of capital stock of; (iii) any material amendment to
any organizational document of the Company; or (iv) any agreement or commitment by to do any
of the foregoing. Except as set forth in Section 3.1(h) of the Disclosure Schedules,
neither the Company nor any of its Subsidiaries has any material liabilities or obligations
that would be required to be reflected on a balance sheet prepared in accordance with U.S.
GAAP, except for the following: (i) liabilities reflected in or reserved for in the
consolidated balance sheet of the Company and its Subsidiaries as of June 30, 2009
(including the notes thereto); (ii) liabilities that have arisen since June 30, 2009 in the
ordinary course of the businesses of the Company and its Subsidiaries consistent with past
practice that would have been required under U.S. GAAP to be reflected in the consolidated
balance sheet of the Company and its Subsidiaries as of June 30, 2009 had such liabilities
existed as of such date; (iii) liabilities that would not be required under U.S. GAAP to be
reflected in an audited consolidated balance sheet of the Company and its Subsidiaries and
that would not in the aggregate reasonably be expected to have a Material Adverse Effect;
and (iv) liabilities incurred in connection with the transactions contemplated hereunder and
under the other Transaction Documents.
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(i) Other Material Changes; Undisclosed Events, Liabilities or Developments. Since
the date of the latest audited financial statements included within the SEC Reports until
the date hereof, except as specifically disclosed in a subsequent SEC Report filed prior to
the date hereof, (i) there has been no event, occurrence or development that has had or that
would reasonably be expected to result in a Material Adverse Effect, (ii) the Company has
not incurred any liabilities (contingent or otherwise) other than (A) liabilities incurred
in the ordinary course of business consistent with past practice and (B) liabilities not
required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed
in filings made with the Commission, (iii) the Company has not altered its method of
accounting, (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 Section 3.1(h) of the Disclosure
Schedules, no event, liability, fact, circumstance, occurrence or development has occurred
or exists or is reasonably expected to occur or exist with respect to the Company or its
Subsidiaries or their respective business, prospects, properties, operations, assets 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
at least 1 Trading Day prior to the date that this representation is made.
(j) Litigation. 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) would, if there were an unfavorable
decision, 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.
(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 would
reasonably be expected to result in a Material Adverse Effect. 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 or such Subsidiary, and neither the Company nor any of its Subsidiaries is
a party to a collective bargaining agreement, and the
12
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 in favor of any third party, and to the knowledge of
the Company 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 would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(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 judgment, decree or order of any court, arbitrator or governmental body or (iii) is or
has been in violation of any statute, rule, ordinance 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 would not have or reasonably be expected to result in a Material Adverse Effect.
(m) Material Permits. The Company and its 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 would not 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. Except as would not reasonably be expected to have a
Material Adverse Effect, the Company and the Subsidiaries have good and marketable title in
fee simple to all real property owned by them 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 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 and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor subject to
penalties. Except as would not reasonably be expected to have a Material Adverse Effect,
any real property and facilities held under lease by the Company and the Subsidiaries are
held by them under valid, subsisting and enforceable leases with which the Company and the
Subsidiaries are in compliance.
13
(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 and 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 would
have a Material Adverse Effect (collectively, the “Intellectual Property Rights”).
Since the date of the latest audited financial statements included within the SEC Reports,
neither the Company nor any Subsidiary has received a notice (written or otherwise) that any
of the Intellectual Property Rights used by the Company or any Subsidiary violates or
infringes upon the rights of any Person. To the knowledge of the Company, all such
Intellectual Property Rights are enforceable and there is no existing infringement by
another Person of any of the Intellectual Property Rights. 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 would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(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 in the People’s Republic of China, including, but not limited to, directors and
officers insurance coverage at least equal to the aggregate Subscription Amount. As of the
date hereof, 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. 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 each case in excess of $120,000 other than for (i) payment
of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred
on behalf of the Company and (iii) other employee benefits, including stock option
agreements under any stock option plan of the Company.
(r) Xxxxxxxx-Xxxxx; Internal Accounting Controls. The Company is in material
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)
14
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 information required to be disclosed by the Company
in the reports it files or submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the Commission’s rules and forms. The
Company’s certifying officers have evaluated the effectiveness of the Company’s disclosure
controls and procedures as of the end of the period covered by the Company’s most recently
filed annual report on Form 20F under the Exchange Act (such date, the “Evaluation
Date”). The Company presented in its most recently filed annual report on Form 20F
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.
(s) Brokers. Except as set forth in the Prospectus Supplement, no finder,
broker, agent, financial advisor or other intermediary has acted on behalf of the Company in
connection with the negotiation or consummation of this Agreement or the other Transaction
Documents to which the Company is a party, or any of the transactions contemplated hereby or
thereby.
(t) Investment Company. The Company is not, and to the knowledge of the Company
is not an Affiliate of, and immediately after receipt of payment for the Securities, will
not be or to the knowledge of the Company be an Affiliate of, an “investment company” within
the meaning of the Investment Company Act of 1940, as amended.
(u) Registration Rights. No Person has any right to cause the Company to
effect the registration under the Securities Act of any securities of the Company.
(v) Listing and Maintenance Requirements. The ADSs are listed on the Nasdaq
Global Market and, to the knowledge of the Company, there are no proceedings to revoke
or suspend such listing. The Company is in compliance in all material respects with the
requirements of the Nasdaq Global Market for continued listing of the ADSs thereon
and any other applicable Nasdaq Global Market listing and maintenance requirements.
Trading in the ADSs has not been suspended by the SEC or the Nasdaq Global Market.
(w) Application of Takeover Protections. The Company and the Board of
Directors have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the laws of its jurisdiction
of incorporation that is or could become applicable to the Purchasers as a result of the
Purchasers and the Company fulfilling their obligations or exercising their rights under
15
the Transaction Documents, including without limitation as a result of the Company’s
issuance of the Securities and the Purchasers’ ownership of the Securities.
(x) Disclosure. Except with respect to the material terms and conditions of
the transactions contemplated by the Transaction Documents, the Company confirms that
neither it nor any other Person acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that it believes constitutes or might
constitute material, non-public information which is not otherwise disclosed in the
Prospectus Supplement. The Company understands and confirms that the Purchasers will rely
on the foregoing representation in effecting transactions in securities of the Company. The
Company acknowledges and agrees that no 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.
(y) No Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, 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 any applicable shareholder approval provisions of
any Trading Market on which any of the securities of the Company are listed or designated.
(z) Solvency. Based on the consolidated 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 fair saleable value of the Company’s assets
exceeds the amount that will be required to be paid on or in respect of the Company’s
existing debts and other liabilities (including known contingent liabilities) as they
mature, and (ii) the Company’s assets do not constitute unreasonably small capital to carry
on its business 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, (iii) the
Company is “solvent” within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances and (iv) 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). For purposes of
this clause, the amount of any contingent liability at any time shall be computed as the
amount that, in light of all of the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or matured
liability.
(aa) 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.
16
(bb) Foreign Corrupt Practices. None of the Company or any Subsidiary, nor, to
the knowledge of the Company, any of their respective officers, employees, directors,
representatives or agents, acting on behalf of the Company or any of its Subsidiaries, has,
in the course of his or its actions for, or on behalf of the Company and its Subsidiaries
(i) used any corporate funds the Company or any Subsidiary for any unlawful contribution,
gift, entertainment or other unlawful expense relating to political activity; (ii) made any
direct or indirect unlawful payment to any foreign or domestic governmental official from
corporate funds of the Company and its Subsidiaries; (iii) violated or is in violation of
any provisions of the United States Foreign Corrupt Practices Act of 1977, as amended, or
(iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic Government Official. The Company and each of its
Subsidiaries is in compliance with the USA Patriot Act (Title III of Pub.L. 107-56 (signed
into law October 26, 2001)). None of the Company or any Subsidiary is (i) is a Sanctioned
Person, (ii) has more than 10% of its assets in Sanctioned Entities, or (iii) derives more
than 10% of its operating income from investments in, or transactions with, Sanctioned
Persons or Sanctioned Entities.
(cc) Accountants. The Company’s accounting firm is set forth in the SEC
Reports. As of the date hereof, to the knowledge and belief of the Company, such accounting
firm (i) is a registered public accounting firm as required by the Exchange Act and (ii) is
expected to express its opinion with respect to the financial statements to be included in
the Company’s Annual Report for the year ending December 31, 2009.
(dd) Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company
acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an
arm’s length purchaser with respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that no Purchaser is acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with respect to
the Transaction Documents and the transactions contemplated thereby and any advice given by
any Purchaser or any of their respective representatives or agents in connection with the
Transaction Documents and the transactions contemplated thereby is merely incidental to the
Purchasers’ purchase of the Securities. The Company further represents to each Purchaser
that the Company’s decision to enter into this Agreement and the other Transaction Documents
has been based solely on the independent evaluation of the transactions contemplated hereby
by the Company and its representatives.
(ee) Acknowledgement Regarding Purchaser’s Trading Activity. Anything in this
Agreement or elsewhere herein to the contrary notwithstanding (except for Sections 3.2(e)
and 4.11 hereof), it is understood and acknowledged by the Company that: (i) none of the
Purchasers have been asked by the Company to agree, nor has any Purchaser 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) past or future open market or other transactions by any Purchaser,
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)
17
any Purchaser, and counter-parties in “derivative” transactions to which any such
Purchaser is a party, directly or indirectly, presently may have a “short” position in the
Common Shares, and (iv) each Purchaser shall not be deemed to have any affiliation with or
control over any arm’s length counter-party in any “derivative” transaction by virtue of
such transaction alone. The Company further understands and acknowledges that (y) one or
more Purchasers may engage in hedging activities at various times during the period that the
Securities are outstanding and (z) such hedging activities (if any) could negatively impact
the market price of the Company’s publicly traded securities 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.
(ff) Regulation M Compliance. The Company has not taken, directly or
indirectly, any action designed to or that would be reasonably expected to cause or result
in stabilization or manipulation of the price of the Common Shares or ADSs or any other
“reference security” (as defined in Rule 100 of Regulation M under the Exchange Act.
3.2 Representations and Warranties of the Purchasers. Each Purchaser, for itself and
for no other Purchaser, hereby represents and warrants as of the date hereof and as of the Closing
Date to the Company as follows (unless as of a specific date therein):
(a) Organization; Authority. Such Purchaser is either an individual or an entity
duly organized, validly existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to enter into and to
consummate the transactions contemplated by this Agreement and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of this Agreement and
performance by such Purchaser of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate, partnership, limited liability company or similar
action, as applicable, on the part of such Purchaser. Each Transaction Document to which it is
a party has been duly executed by such Purchaser, and when delivered by such 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.
(b) No Conflicts. The execution, delivery and performance by such Purchaser of
the Transaction Documents to which it is a party, the issuance and sale of the Securities and
the consummation by it of the transactions contemplated hereby and thereby to which it is a
party do not and will not (i) conflict with or violate any provision of such Purchaser’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 such Purchaser, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of,
18
any agreement, credit facility, debt or other instrument (evidencing a debt or otherwise)
or other understanding to which such Purchaser is a party or by which any property or asset of
such Purchaser is bound or affected, or (iii) 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 such Purchaser is subject (including federal and state
securities laws and regulations), or by which any property or asset of such Purchaser is bound
or affected. Such Purchaser is not required to obtain any consent, authorization or approval
of, or make any filing or registration with, any governmental authority in order for such
Purchaser to execute, deliver and perform each Transaction Document to which it is a party and
to consummate the Transactions.
(c) Understandings or Arrangements. Such Purchaser is acquiring the Securities as
principal for its own account and has no direct or indirect arrangement or understandings with
any other persons to distribute or regarding the distribution of such Securities (this
representation and warranty not limiting such Purchaser’s right to sell the Securities pursuant
to the Registration Statement or otherwise in compliance with applicable federal and state
securities laws). Such Purchaser is acquiring the Securities hereunder in the ordinary course
of its business. Such Purchaser is not an Affiliate of the Company.
(d) Receipt of Disclosure Package. Such Purchaser represents that it has received
(or otherwise had made available to it by the filing by the Company of an electronic version
thereof with the Commission) on or prior to the Closing Date, the Prospectus.
(e) Certain Transactions and Confidentiality. Other than consummating the
transactions contemplated hereunder, such Purchaser has not, nor has any Person acting on
behalf of or pursuant to any understanding with such Purchaser, directly or indirectly executed
any purchases or sales, including Short Sales, of the securities of the Company during the
period commencing as of the time that such Purchaser first received a term sheet (written or
oral) from the Company or any other Person representing the Company setting forth the material
terms of the transactions contemplated hereunder and ending immediately prior to the execution
hereof. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed
investment vehicle whereby separate portfolio managers manage separate portions of such
Purchaser’s assets and individual 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, such Purchaser
has maintained the confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction). Notwithstanding the
foregoing, for avoidance of doubt, nothing contained herein shall constitute a representation
or warranty, or preclude any actions, with respect to the identification of the availability
of, or securing of, available shares to borrow in order to effect Short Sales or similar
transactions in the future
(f) Brokers. Except as heretofore been disclosed to the Company by such Purchaser,
no broker, investment banker or other Person is entitled to any broker’s, finder’s or other
similar fee or commission in connection with the execution and delivery of this
19
Agreement or the other Transaction Documents or the consummation of any of the
transactions based upon arrangements made by or on behalf of such Purchaser, and such Purchaser
shall indemnify and hold the Company harmless against any claim for any such fee or commission
based on any such arrangements.
The Company acknowledges and agrees that the representations contained in Section 3.2 shall not
modify, amend or affect such Purchaser’s right to rely on the Company’s representations and
warranties contained in this Agreement or any representations and warranties contained in any other
Transaction Document or any other document or instrument executed and/or delivered in connection
with this Agreement or the consummation of the transaction contemplated hereby.
4.1 Underlying Shares and Warrant Shares. The Company agrees that, no later than the
Closing Date, it will issue and deliver the Underlying Shares to BNY (Nominees) Limited for deposit
with the Custodian, under the Deposit Agreement. Provided that the Holder is not an Affiliate of
the Company, if all or any portion of a Warrant is exercised at a time when there is an effective
registration statement to cover the issuance or resale of the Warrant Shares, the Warrant Shares
issued pursuant to any such exercise shall be issued free of all legends. If at any time following
the date hereof the F-3 Registration Statement (or any subsequent registration statement
registering the sale or resale of the Warrant Shares) is not effective or is not otherwise
available for the sale or resale of the Warrant Shares, the Company shall promptly notify the
holders of the Warrants in writing that such registration statement is not then effective and
thereafter shall promptly notify such holders when the registration statement is effective again
and available for the sale of the Warrant Shares (it being understood and agreed that the foregoing
shall not limit the ability of the Company to issue, or any Purchaser to sell, any of the Warrant
Shares in compliance with applicable federal and state securities laws). The Company shall use
commercially reasonable efforts to keep a registration statement (including the F-3 Registration
Statement) registering the Warrant Shares effective during the term of the Warrants.
4.2 Furnishing of Information. Until the earliest of the time that (i) no Purchaser
owns Securities or (ii) the Warrants have expired, the Company shall use commercially reasonable
efforts 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.
4.3 Securities Laws Disclosure; Publicity. The Company shall, by 8:30 a.m. (New York
City time) on the Trading Day immediately following the date hereof, issue a press release
disclosing the material terms of the transactions contemplated hereby, and including a form of the
Warrant. From and after the issuance of such press release, the Company shall have publicly
disclosed all material, non-public information delivered to any of the Purchasers by the Company or
any of its subsidiaries, or any of their respective officers, directors, employees or agents in
connection with the transactions contemplated by the Transaction Documents. The Company and each
Purchaser shall consult with each other in issuing any other press releases with respect to the
transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such
press release nor otherwise make any such public statement without the prior consent of
20
the Company, with respect to any press release of any Purchaser, or without the prior consent
of each Purchaser, with respect to any press release of the Company, which consent shall not
unreasonably be withheld or delayed, except if such disclosure is required by law or Trading Market
regulations, in which case the disclosing party shall promptly provide the other party with prior
notice of such public statement or communication. Notwithstanding the foregoing, the Company shall
not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing
with the Commission or any regulatory agency or Trading Market, without the prior written consent
of such Purchaser, except (a) as required by federal securities law in connection with the filing
of the Prospectus or the final Transaction Documents (including signature pages thereto) with the
Commission and (b) to the extent such disclosure is required by law or Trading Market regulations,
in which case the Company shall provide the Purchasers with prior notice of such disclosure
permitted under this clause (b).
4.4 Non-Public Information. Except with respect to the material terms and conditions
of the transactions contemplated by the Transaction Documents, the Company covenants and agrees
that neither it, nor any other Person acting on its behalf will provide any Purchaser or its agents
or counsel with any information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have executed a written agreement with the
Company regarding the confidentiality and use of such information. The Company understands and
confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions
in securities of the Company.
4.5 Use of Proceeds. Except as set forth on Schedule 4.5 attached hereto, the
Company shall use the net proceeds from the sale of the Securities hereunder for working capital
purposes and shall not use such proceeds for: (a) the satisfaction of any portion of the Company’s
debt (other than payment of trade payables in the ordinary course of the Company’s business and
prior practices), (b) the redemption of any Common Shares or Common Shares Equivalents or (c) the
settlement of any outstanding litigation.
4.6 Indemnification of Purchasers. Subject to the provisions of this Section 4.6,
the Company will indemnify and hold each Purchaser and its directors, officers, shareholders,
members, partners, employees and agents, each Person who controls such Purchaser (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors,
officers, shareholders, agents, members, partners or employees of such controlling persons (each, a
“Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages (excluding consequential, special, indirect or punitive damages or
diminution in value or lost profits), costs and expenses, including all judgments, amounts paid in
settlements, court costs and reasonable attorneys’ fees and costs of investigation
(“Damages”) that any such Purchaser Party may suffer or incur as a result of or arising
from any breach of any of the representations, warranties, covenants or agreements made by the
Company in this Agreement or in the other Transaction Documents. 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 reasonably acceptable to the
Purchaser Party. 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
21
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 outside counsel to such Purchaser Party, a material conflict
on any material issue between the position of the Company and the position of such Purchaser Party,
in which case the Company shall be responsible for the reasonable fees and expenses of no more than
one such separate counsel. The Company will not be liable to any Purchaser Party under this
Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written
consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the
extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of
any of the representations, warranties, covenants or agreements made by such Purchaser Party in
this Agreement or in the other Transaction Documents. Notwithstanding anything to the contrary
contained in this Agreement, the maximum amount of indemnifiable Damages which may be recovered
from the Company by a Purchaser pursuant to this Section 4.6
shall be the 150% of such Purchaser’s Subscription Amount.
4.7 Reservation of Common Shares. As of the date hereof, the Company has reserved and
the Company shall continue to reserve and keep available at all times, free of preemptive rights, a
sufficient number of Common Shares for the purpose of enabling the Company to issue Warrant Shares
pursuant to any exercise of the Warrants.
4.8 Listing of New ADSs. The Company hereby agrees to use commercially reasonable
efforts to maintain the listing of the ADSs on the NASDAQ Global Market. Concurrently with the
Closing, the Company shall (if required) notify the NASDAQ Global Market with respect to the
listing or quotation of all of the New ADSs.
(a) From the date hereof until 45 days after the Closing Date, neither the Company nor
any Subsidiary shall issue, enter into any agreement to issue or announce the issuance or
proposed issuance of any Common Shares or Common Shares Equivalents.
(b) From the date hereof until the date that is 30 months from the date hereof, the
Company shall be prohibited from effecting or entering into an agreement to effect any
issuance by the Company or any of its Subsidiaries of Common Shares or Common Shares
Equivalents for cash consideration pursuant to a Variable Rate Transaction. “Variable
Rate Transaction” means a transaction in which the Company enters into an equity line
of credit whereby the Company may put Common Shares or other securities to third parties, at
a discount to the then-prevailing market price for such Common Shares (or to the ADSs) or
other securities. Any Purchaser shall be entitled to obtain injunctive relief against the
Company to preclude any such issuance, which remedy shall be in addition to any right to
collect damages.
(c) Notwithstanding the foregoing, this Section 4.9 shall not apply in respect of an
Exempt Issuance, except that no Variable Rate Transaction shall be an Exempt Issuance.
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4.10 Equal Treatment of Purchasers. No consideration (including any modification of
any Transaction Document) 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. For clarification purposes, this
provision constitutes a separate right granted to each Purchaser by the Company and negotiated
separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class
and shall not in any way be construed as the Purchasers acting in concert or as a group with
respect to the purchase, disposition or voting of Securities or otherwise.
4.11 Certain Transactions and Confidentiality. Each Purchaser, severally and not
jointly with the other Purchasers, covenants that neither it nor any Affiliate acting on its behalf
or pursuant to any understanding with it will execute any purchases or sales, including Short Sales
of any of the Company’s securities during the period commencing with the execution of this
Agreement and ending at such time that the transactions contemplated by this Agreement are first
publicly announced pursuant to the initial press release as described in Section 4.3. Each
Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as
the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to
the initial press release as described in Section 4.3, such Purchaser will maintain the
confidentiality of the existence and terms of this transaction. Notwithstanding the foregoing and
notwithstanding anything contained in this Agreement to the contrary, the Company expressly
acknowledges and agrees that (i) no Purchaser makes any representation, warranty or covenant hereby
that it will not engage in effecting transactions in any securities of the Company after the time
that the transactions contemplated by this Agreement are first publicly announced pursuant to the
initial press release as described in Section 4.3, (ii) no Purchaser shall be restricted or
prohibited from effecting any transactions in any securities of the Company in accordance with
applicable securities laws from and after the time that the transactions contemplated by this
Agreement are first publicly announced pursuant to the initial press release as described in
Section 4.3 and (iii) no Purchaser shall have any duty of confidentiality to the Company or its
Subsidiaries after the issuance of the initial press release as described in Section 4.3.
Notwithstanding the foregoing, in the case of a Purchaser that 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 covenant 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.
5.1 Termination. This Agreement may be terminated by any Purchaser, as to such
Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between
the Company and the other Purchasers, or by the Company, by written notice to the other parties, if
the Closing has not been consummated on or before October 31, 2009; provided that the terminating
party is not in material default of any of its obligations hereunder.
5.2 Fees and Expenses. Except as expressly set forth in the Transaction Documents to
the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and
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other experts, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall
pay all Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the
delivery of any Securities to the Purchasers.
5.3 Entire Agreement. The Transaction Documents, together with the exhibits and
schedules thereto, the Prospectus and the Prospectus Supplement, contain the entire understanding
of the parties with respect to the subject matter hereof and supersede all prior agreements and
understandings, 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 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 second (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 Purchasers holding at least 67% in interest of the New ADSs then outstanding or, in
the case of a waiver, by the party against whom enforcement of any such waived provision 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
any 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.
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 each
Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this
Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided that
such transferee agrees in writing to be bound, with respect to the transferred Securities, by the
provisions of the Transaction Documents that apply to the “Purchasers.”
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,
24
nor may any provision hereof be enforced by, any other Person, except as otherwise set forth
in Section 4.6.
5.9 Governing Law. All questions concerning the construction, validity, enforcement
and interpretation of the Transaction Documents 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 is an 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 other manner permitted by
law. If either party shall commence an action or proceeding to enforce any provisions of the
Transaction Documents, then, in addition to the obligations of the Company under Section 4.6, 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 and warranties contained herein shall survive the
Closing and the delivery of the Securities until the date that is two
(2) years after the
Closing Date.
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 or by e-mail delivery of a “.pdf” format data file, 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 or “.pdf” signature
page were an original thereof.
5.12 Severability. If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an alternative means to
25
achieve the same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
5.13 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall (subject to the Company’s
memorandum and articles of association) issue or cause to be issued in exchange and substitution
for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution
therefor, a new certificate or instrument, but only (i) upon receipt of evidence of such loss,
theft or destruction and (ii) if requested by the Company, an indemnity, in the case of (i) and
(ii), reasonably satisfactory to the Company. The applicant 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.
5.14 Remedies. In addition to being entitled to exercise all rights provided herein
or granted by law, including recovery of damages, each of the Purchasers and the Company will be
entitled to specific performance under the Transaction Documents.
5.15 Payment Set Aside. To the extent that the Company makes a payment or payments to
any Purchaser pursuant to any Transaction Document or a 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.
5.16 Independent Nature of Purchasers’ Obligations and Rights. The obligations of
each Purchaser under any Transaction Document are several and not joint with the obligations of any
other Purchaser, and no Purchaser shall be responsible in any way for the performance or
non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing
contained herein or in any other Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the Purchasers are in any
way acting in concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently
protect and enforce its rights including, without limitation, the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser
has been represented by its own separate legal counsel in their review and negotiation of the
Transaction Documents. For reasons of administrative convenience only, each Purchaser and its
respective counsel have chosen to communicate with the Company through WS. WS does not represent
any of the Purchasers and only represents Xxxxxx & Xxxxxxx, LLC, the placement agent. The Company
has elected to provide all Purchasers with the same terms and
26
Transaction Documents for the convenience of the Company and not because it was required or
requested to do so by any of the Purchasers.
5.17 Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall not be a Business Day,
then such action may be taken or such right may be exercised on the next succeeding Business Day.
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. In addition, each and every reference to share prices and Common Shares or ADSs in any
Transaction Document shall be subject to adjustment for reverse and forward share splits, share
dividends, share combinations and other similar transactions of the Common Shares that occur after
the date of this Agreement.
5.19 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION
BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE
GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND
EXPRESSLY WAIVES FOREVER TRIAL BY JURY.
(Signature Pages Follow)
27
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.
| XINHUA SPORTS & ENTERTAINMENT LIMITED | Address for Notice: | |||||
| Xxxxx 0000-0 Xxxxxxx Xxxxx, | ||||||
By:
|
000 Xxx Xxxxx Xxxx Xxxxxxx, | |||||
| Hong Kong | ||||||
| Title: | Attention: General Counsel Fax: x000 0000-0000 |
|||||
With a copy to (which shall not constitute notice):
Xxxxxx & Xxxxxxx
00/X, Xxx Xxxxxxxx Xxxxxx
0 Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxx Xxxx
Attn: Xxxxx X. Xxxxx, Esq.
Tel.: x000 0000 0000
Facsimile: x000 0000 0000
00/X, Xxx Xxxxxxxx Xxxxxx
0 Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxx Xxxx
Attn: Xxxxx X. Xxxxx, Esq.
Tel.: x000 0000 0000
Facsimile: x000 0000 0000
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
[PURCHASER SIGNATURE PAGES TO XSEL 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 Authorized Signatory:
Facsimile Number of Authorized Signatory:
Address for Notice of Purchaser:
Account Details for Delivery of New ADSs for Purchaser:
Address for Delivery of Warrants for Purchaser (if not same as address for notice):
Subscription Amount: $_________________
Shares: _________________
Series A Warrant Shares: __________________
Series B Warrant Shares: __________________
[SIGNATURE PAGES CONTINUE]
Exhibit
A–1
Form of Series A Warrant
Form of Series A Warrant
Exhibit A-2
Form of Series B Warrant
Form of Series B Warrant
Exhibit B
Form of Legal Opinion
Form of Legal Opinion