STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into as of
10 day of March 2006, by and between Xxxxxxx xx (ID: 110103196312121002) and
Ziyang Zong(ID:132429197110271811) ("Purchaser") and KIWA BIO-TECH PRODUCTS
GROUP CORPORATION (the"Company"), a company incorporated under the laws of the
State of Delaware in the United States of America whose registered office is at
000 X. Xxxxxxxx Xxxx, Xxxxx# 000, Xxxxxxxxx XX 00000, XXX.
WITNESSETH
WHEREAS, the Company desires to sell to Purchaser and Purchaser desires to
purchase from the Company a total of 5,000,000 newly issued, restricted shares
(the "Shares") of the Common Stock of the Company, par value $0.001 per share,
upon the terms, provisions and conditions and for the consideration hereinafter
set forth;
NOW, THEREFORE, for and in consideration of the premises and mutual covenants
and agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto do
hereby represent, warrant, covenant, and agree as follows:
Section 1. Issuance and Sale of Shares
Based upon the representations, warranties, and covenants and subject to the
terms, provisions, and conditions contained in this Agreement, the Company
agrees to sell and deliver the Shares to Purchaser, free and clear of all liens,
pledges, encumbrances, and adverse claims, and Purchaser agrees to purchase the
Shares from the Company for the consideration hereinafter set forth.
Section 2. Purchase Price
The total purchase price to be paid to the Company by Purchaser for the Shares
is 6 million RENMINBI YUAN (RMB1.20 per Share) (the "Purchase Price").
Section 3. The Closing
Upon execution of this Agreement, Purchaser shall deliver to the Company 30% of
total Purchase Price in 10 days from the effective date of this Agreement, and
the balance shall be paid to the Company in 20 days from the effective date of
this Agreement; and immediately upon full payment, the Company shall deliver to
Purchaser a certificate evidencing the Shares issued in the name of Purchaser.
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Section 4. Risk factors
The Purchaser agrees that investment in the Common Stock of the Company involves
a high degree of risk and should be regarded as speculative. The Purchaser
further represents and agrees that it can afford a loss of its entire
investment. In addition to the other information contained in this document, the
Purchaser has considered carefully the following factors.
a) Limited Operating History. The Company has only a limited operating
history from which Purchaser can evaluate its business and prospects
for future success. The Company has recognized only very limited
revenues to date. The Company currently believes it will need capital
in the amounts reflected in the business plan prepared in December
2005 to achieve the projections contained herein. To the extent the
proceeds of this sale of Shares are less than that amount, the Company
intends to raise further funds by equity investment.
b) No Assurance of Profitable Operations. The Business Plan of the
Company projects income and expenses based upon the best estimates of
management. Due to the unique and innovative nature of the business
the projections of both income and expenses contained in the Business
Plan involve a high degree of estimation with no similar business
experiences to review.
c) Arbitrary Offering Price. The Company has arbitrarily determined the
Purchase Price per share. Among the factors considered were estimates
made by the principals as to the future prospects of the Company and
its operations, expenses and potential revenues. Such estimates were
prepared by the principals based on their experience in the industry
and current market conditions. There can be no assurances the
projections prepared by the principals for the Company will be
achieved.
d) Lack of Transferability, Marketability and Liquidity of the Shares.
The Common Stock is currently quoted for trading on OTC Bulletin
Board, but trading volume is low and liquidity is limit. Consequently,
the Purchaser should be prepared to remain a shareholder of the
Company for long time. The Shares have not been registered under the
Securities Act of 1933, as amended (the "Act"), and are being offered
in reliance on certain exemptions contained in the Act. The Shares may
not be sold in the public market except pursuant to an effective
registration statement or an exemption from registration under the
Act.
e) Minimal Capital. The Company will use the net proceeds of the sale of
the Shares to fund its corporate expenses, fixed assets investment as
well as research and development, for developing, manufacturing and
distributing its products and services and for organizational
operations. Net proceeds from the sale of the Shares will also be used
for general working capital. There can be no assurances such funding
will be sufficient. If the amount of funding is not sufficient to
obtain profitable business operations and the Company is liquidated,
there will very likely not be any assets in the Company for payment to
the shareholders.
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f) Dependence on Key Personnel. The Company's development of its concept
and business is dependent on its management team and the loss of any
one of these persons could have a material adverse effect on the
Company.
g) Unreliability of Projections. Projections contained in the Business
Plan were prepared from management's reasonable estimates of possible
product and service revenue, and expense projections as well as the
consequent possible financial returns the Company could receive if
such revenue and expenses were achieved. Such estimates were based on
management's experience with the industry and business practices. The
Purchaser should have had the opportunity to review with the
representatives of the Company, the various critical assumptions made
by the Company and the various estimates that were made in preparing
the projections. The projections were not prepared with a view toward
compliance with the Association of Independent Certified Public
Accountants guidelines for projections. The assumptions and estimates
are uncertain and the actual results of the Company will vary from the
projected results and could vary substantially.
Section 5. Representations and Warranties of Purchaser
In connection with the transactions contemplated hereby, Purchaser hereby
represents and warrants to the Company that:
a) Purchaser understands that the Common Stock of the Company is quoted on
the OTC Bulletin Board of the NASD, and that the Shares have not been
registered under the Act. At the present trading of the Company's stock
is subject to Rules 15g-2 through 15g-6 promulgated under Section 15(g)
of the Act.
b) Purchaser has such knowledge and experience in financial and business
matters that it is capable of seeking out and evaluating the
information relevant to evaluating the Company, the proposed activities
thereof, and the merits and risks of the prospective investment, and to
make an informed investment decision in connection therewith.
c) Purchaser has reviewed all SEC filings and has had an opportunity to
discuss with the Company.
d) Purchaser will hold the Shares subject to all of the applicable
provisions of the Act, and Purchaser will not at any time make any
sale, transfer, or other disposition of the Shares in contravention of
the Act. Purchaser's overall commitment to investments which are not
readily marketable is not disproportionate to Purchaser's net worth;
Purchaser's investment in the Company will not cause such overall
commitment to become excessive; and Purchaser can afford to bear the
loss of Purchaser's entire investment in the Company.
e) Purchaser understands that all information which Purchaser has provided
to the Company concerning Purchaser, Purchaser's financial position and
knowledge of financial and business matters is correct and complete as
of the date set forth below and, if there should be any material change
in such information prior to the acceptance of this subscription,
Purchaser shall promptly notify the Company thereof.
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f) If Purchaser is a United States person or entity, Purchaser represents
that Purchaser satisfies any suitability or other applicable
requirements of Purchaser's state of residence and/or state in which
the Common Stock are purchased.
g) If Purchaser is not a United States person or entity, such Purchaser
hereby represents that he, she or it has satisfied himself, herself or
itself as to the full observance of the laws of his, her or its
jurisdiction in connection with any invitation to subscribe for the
Common Stock or any use of this Agreement, including (i) the legal
requirements within his, her or its jurisdiction for the purchase of
the Common Stock, (ii) any foreign exchange restrictions applicable to
such purchase, (iii) any governmental or other consents that may need
to be obtained, and (iv) the income tax and other tax consequences, if
any, that may be relevant to the purchase, holding, redemption, sale or
transfer of the Common Stock. Such Purchaser's subscription and payment
for, and his, her or its continued beneficial ownership of the Common
Stock, will not violate any applicable securities or other laws of his,
her or its jurisdiction.
h) If an individual, Purchaser is over 21 years of age. If Purchaser is
acting in a representative capacity for a corporation, partnership or
other business entity, such entity is validly existing and in good
standing under the laws of the jurisdiction of its organization, has
all requisite power and authority to subscribe and perform its
obligations hereunder, has taken all action necessary to purchase the
Common Stock pursuant to this Agreement, and was not organized for the
purpose of acquiring the Common Stock.
i) Purchaser agrees that Purchaser will not attempt to sell, transfer,
assign, pledge or otherwise dispose of all or any portion of the Common
Stock unless they are registered under the Act or unless in the opinion
of counsel satisfactory to the Company an exemption from such
registration is available. Purchaser understands that the Common Stock
have not been registered under the Act by reason of a claimed exemption
under the provisions of the Act which depends, in part, upon
Purchaser's investment intention.
j) Purchaser understands that no securities administrator of any state or
any other jurisdiction has made any finding or determination relating
to the fairness of this investment and that no securities administrator
of any state or any other jurisdiction has recommended or endorsed, or
will recommend or endorse, the offering of the Common Stock.
k) Purchaser has relied solely upon the advice of Purchaser's own tax and
legal advisors with respect to the tax and other legal aspects of the
investment.
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l) Purchaser warrants that Purchaser is an "accredited investor" within
the meaning of Rule 501(a) of Regulation D promulgated by the
Securities and Exchange Commission under the Act and,
m) The sale of the Shares to Purchaser is being made without any public
solicitation or advertisements.
Section 6. Representations and Warranties of the Company
In connection with the transactions contemplated hereby, the Company hereby
represents and warrants to Purchaser as follows:
6.1. Organization, Standing and Power.
The Company is duly organized, validly existing and in good standing under the
laws of the jurisdiction (the State of Delaware in the United States of America)
in which it is incorporated and has the requisite corporate power and authority
to carry on its business as now being conducted. The Company is duly qualified
or licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed (individually or in the
aggregate) would not have a Company Material Adverse Effect. For purposes of
this Agreement, the term "Company Material Adverse Effect" means any material
adverse effect with respect to the Company, taken as a whole, or any change or
effect that adversely, or is reasonably expected to adversely, affect the
ability of the Company to maintain its current business operations or to
consummate the transactions contemplated by this Agreement in any material
respect.
6.2. Validity of Transaction.
This Agreement and, as applicable, each other agreement contemplated hereby are
valid and legally binding obligations of the Company, enforceable in accordance
with their respective terms against the Company, except as limited by
bankruptcy, insolvency and similar laws affecting creditors generally, and by
general principles of equity. At the time that the Shares are sold, assigned,
transferred and conveyed to Purchaser pursuant to this Agreement, the Shares
will be duly authorized, validly issued, fully paid and non-assessable.
The execution, delivery and performance of this Agreement have been duly
authorized by the Company and will not violate any applicable federal or state
law, any order of any court or government agency or the articles or certificate
of incorporation of the Company.
6.3. Capital Structure.
The authorized stock of the Company consists of 100,000,000 shares of common
stock, par value $0.001 per share and 20,000,000 shares of preferred stock, par
value $0.001 per share.
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On the Closing Date hereof, the Company has 65,100,278 shares of Common Stock
outstanding, and there is no preferred stock outstanding. No share of Company
Common Stock is held by the Company in its treasury. No bonds debentures, notes
or other indebtedness of the Company having the right to vote. There are no
outstanding stock appreciation rights or similar derivative securities or rights
of the Company.
In addition, there are warrant to purchaser approximately 6,400,000 shares of
warrants in relation to consultant services and several loansoutstanding. Under
the Company's 2004 Stock Incentive Plan 1,047,907 shares of Company Common Stock
are reserved for issuance, but no stock options have been granted under the
Plan.
6.4. Authority: Non-contravention.
The Company has the requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated by this Agreement. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of the Company.
6.5 No Undisclosed Material Liabilities.
Except as otherwise set forth in the Company's periodic reports as filed with
SEC pursuant to the requirements of the Act, the Company has no Liabilities.
"Liability" means, as to any person, all debts, liabilities and obligations,
direct, indirect, absolute or contingent of such person, whether accrued, vested
or otherwise, whether known or unknown and whether or not actually reflected, or
required in accordance with GAAP to be reflected, in such person's balance
sheet.
6.6. Litigation, etc.
As of the date hereof, (a) there is no suit, claim, action or proceeding (at law
or in equity) pending or, to the knowledge of the Company, threatened against
the Company (including, without limitation, any product liability claims) before
any court or governmental or regulatory authority or body, and (b) the Company
is not subject to any outstanding order, writ, judgment, injunction, order,
decree or arbitration order that, in any such case described in clauses (a) and
(b), (i) could reasonably be expected to have, individually or in the aggregate,
a Company Material Adverse Effect or (ii) involves an allegation of criminal
misconduct or a violation of the Racketeer and Influenced Corrupt Practices Act,
as amended. As of the date hereof, there are no suits, actions, claims or
proceedings pending or, to the Company's knowledge, threatened, seeking to
prevent, hinder, modify or challenge the transactions contemplated by this
Agreement.
Section 7. Survival of Representations and Warranties
All representations, warranties, covenants, and agreements contained herein
shall not be discharged or dissolved upon, but shall survive the closing.
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Section 8. Registration Rights
Beginning on the date that is 16 months after the date of this Agreement, the
Purchaser will be entitled to the piggy-back registration rights set forth in
Exhibit A.
Section 9. Entirety and Modification
This Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes any and all prior agreements
and understandings, whether oral or written, between the parties hereto relating
to such subject matter. No modification, alteration, amendment, or supplement to
this Agreement shall be valid or effective unless the same is in writing and
signed by all parties hereto.
Section 10. Successors and Assigns
This Agreement shall be binding upon and inure to the benefit of the respective
parties hereto, their successors and permitted assigns, heirs, and personal
representatives.
Section 11. Governing Law.
This Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of Delaware.
In relation to any legal action or proceedings arising out of or in connection
with this Agreement ("Proceedings"), each party irrevocably submits to the
jurisdiction of the courts of the state of Delaware and waives any objection to
Proceedings in any such court on the grounds of venue or on the grounds that the
Proceedings have been brought in an inconvenient forum.
IN WITNESS WHEREOF, the parties hereto have duly executed this agreement as of
the date first written above.
PURCHASER:
BY:
--------------------------
Name:
Title:
The Company:
BY:
--------------------------
Name: Xx Xxx
Title: Chairman and CEO
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EXHIBIT A
1. REGISTRATION RIGHTS.
1.1 Definitions. For purposes of this Section 1:
a) Registration. The terms "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act of 1933, as amended,
(the "Securities Act"), and the declaration or ordering of
effectiveness of such registration statement.
b) Registrable Securities. The term "Registrable Securities" means: (1)
the shares Common Stock of the Company issued to Purchaser pursuant to
this Agreement and (2) any shares of Common Stock of the Company issued
as (or issuable upon the conversion or exercise of any warrant, right
or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, any shares of
Common Stock described in clause (1) of this subsection (b).
Notwithstanding the foregoing, "Registrable Securities" shall exclude
any Registrable Securities sold by a person in a transaction in which
rights under this Section 1 are not assigned in accordance with this
Agreement or any Registrable Securities sold in a public offering,
whether sold pursuant to Rule 144 promulgated under the Securities Act,
or in a registered offering, or otherwise or securities which can be
sold in accordance with Rule 144(k) promulgated under the Securities
Act.
c) Registrable Securities Then Outstanding. The number of shares of
"Registrable Securities then outstanding" shall mean the number of
shares of Common Stock of the Company that are Registrable Securities
and are then issued and outstanding.
d) Holder. For purposes of this Section 1, the term "Holder" means any
person owning of record Registrable Securities or any permitted
assignee of record of such Registrable Securities to whom rights under
this Section 1 have been duly assigned in accordance with this
Agreement.
e) SEC. The term "SEC" or "Commission" means the U.S. Securities and
Exchange Commission.
1.2 Piggyback Registrations. The Company shall notify all Holders of Registrable
Securities in writing at least thirty (30) days prior to filing any registration
statement under the Securities Act for purposes of effecting a public offering
of securities of the Company (including, but not limited to, registration
statements relating to secondary offerings of securities of the Company, but
excluding registration statements relating to any employee benefit plan or a
corporate reorganization) and will afford each such Holder an opportunity to
include in such registration statement all or any part of the Registrable
Securities then held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by
such Holder shall within fifteen (15) days after receipt of the above-described
notice from the Company, so notify the Company in writing, and in such notice
shall inform the Company of the number of Registrable Securities such Holder
wishes to include in such registration statement. If a Holder decides not to
include all of its Registrable Securities in any registration statement
thereafter filed by the Company, such Holder shall nevertheless continue to have
the right to include any Registrable Securities in any subsequent registration
statement or registration statements as may be filed by the Company with respect
to offerings of its securities, all upon the terms and conditions set forth
herein.
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a) Underwriting. If a registration statement under which the Company gives
notice under this Section 1.2 is for an underwritten offering, then the
Company shall so advise the Holders of Registrable Securities. In such
event, the right of any such Holder's Registrable Securities to be
included in a registration pursuant to this Section 1.2 shall be
conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to
distribute their Registrable Securities through such underwriting shall
enter into an underwriting agreement in customary form with the
managing underwriter or underwriters selected for such underwriting
(including a market stand-off agreement of up to 180 days if required
by such underwriters). Notwithstanding any other provision of this
Exhibit A, if the managing underwriter(s) determine(s) in good faith
that marketing factors require a limitation of the number of shares to
be underwritten, then the Company shall include in such offering (i)
first, all the securities the Company proposes to register for its own
account, and (ii) second, Holder's Registrable Securities and other
shares of Common Stock of the Company requested to be included by other
investors having written registration rights agreements with the
Company respecting such shares ("Other Registrable Securities"), with
Holder and each such investor proposing to sell such shares
participating in such registration on a pro rata basis, such
participation to be based upon the number of shares of Registrable
Securities and Other Registrable Securities then held by the Holder and
each such investor, respectively; provided, however, that the right of
the underwriters to exclude shares (including Registrable Securities)
from the registration and underwriting as described above shall be
restricted so that all shares that are not Registrable Securities or
Other Registrable Securities and are held by any other person,
including, without limitation, any person who is an employee or officer
of the Company (or any subsidiary of the Company) shall first be
excluded from such registration and underwriting before any Registrable
Securities and Other Registrable Securities are so excluded. If any
Holder disapproves of the terms of any such underwriting, such Holder
may elect to withdraw therefrom by written notice to the Company and
the underwriter(s), delivered at least ten (10) business days prior to
the effective date of the registration statement. Any Registrable
Securities excluded or withdrawn from such underwriting shall be
excluded and withdrawn from the registration. For any Holder that is a
partnership, the Holder and the partners and retired partners of such
Holder, or the estates and family members of any such partners and
retired partners and any trusts for the benefit of any of the foregoing
persons, and for any Holder that is a corporation, the Holder and all
corporations that are affiliates of such Holder, shall be deemed to be
a single "Holder," and any pro rata reduction with respect to such
"Holder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in
such "Holder," as defined in this sentence.
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b) Expenses. All expenses incurred in connection with a registration
pursuant to this Section 1.2 (excluding underwriters' and brokers'
discounts and commissions relating to shares sold by the Holders and
legal fees of counsel for the Holders), including, without limitation
all federal and "blue sky" registration, filing and qualification fees,
printers' and accounting fees, and fees and disbursements of counsel
for the Company, shall be borne by the Company.
1.3 Obligations of the Company. Whenever required to effect the registration of
any Registrable Securities under this Agreement the Company shall, as
expeditiously as reasonably possible:
a) Registration Statement. Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its
commercially reasonable efforts to cause such registration statement to
become effective, provided, however, that the Company shall not be required
to keep any such registration statement effective for more than ninety (90)
days.
b) Amendments and Supplements. Prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement.
c) Prospectuses. Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the Securities Act, and such other documents as they may reasonably request
in order to facilitate the disposition of the Registrable Securities owned
by them that are included in such registration.
d) Blue Sky. Use its commercially reasonable efforts to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such states as shall be reasonably requested
by the Holders, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such states or
jurisdictions.
e) Underwriting. In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement in usual and
customary form, with the managing underwriter(s) of such offering. Each
Holder participating in such underwriting shall also enter into and perform
its obligations under such an agreement.
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f) Notification. Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing.
g) Opinion and Comfort Letter. Furnish, at the request of any Holder requesting
registration of Registrable Securities, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such securities
are being sold through underwriters, (i) an opinion, dated as of such date,
of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters
in an underwritten public offering and reasonably satisfactory to a majority
in interest of the Holders requesting registration, addressed to the
underwriters, if any, and to the Holders requesting registration of
Registrable Securities and (ii) a "comfort" letter dated as of such date,
from the independent certified public accountants of the Company, in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities provided however, that the
Company's obligation to obtain a "comfort" letter shall be limited to
commercially reasonable efforts. If such securities are not being sold
through underwriters, then the Company shall furnish, at the request and at
the sole expense of any Holder requesting registration of Registrable
Securities, on the date that the registration statement with respect to such
securities becomes effective, an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in
form and substance as is customarily given to underwriters in an
underwritten public offering and reasonably satisfactory to a majority in
interest of the Holders requesting registration, addressed to the
underwriters, if any, and to the Holders requesting registration of
Registrable Securities.
1.4 Furnish Information. It shall be a condition precedent to the obligations of
the Company to take any action pursuant to Sections 1.2 that the selling Holders
shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them, and the intended method of disposition of
such securities as shall be required to timely effect the Registration of their
Registrable Securities.
1.5 Indemnification. In the event any Registrable Securities are included in a
registration statement under Sections 1.2:
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a) By the Company. To the extent permitted by law; the Company will
indemnify and hold harmless each Holder, the partners, officers and
directors of each Holder, any underwriter (as determined in the
Securities Act) for such Holder and each person, if any, who controls
such Holder or underwriter within the meaning of the Securities Act or
the Securities Exchange Act of 1934, as amended, (the "1934 Act"),
against any losses, claims, damages, or Liabilities (joint or several)
to which they may become subject under the Securities Act, the 1934 Act
or other federal or state law, insofar as such losses, claims, damages,
or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "Violation"):
(i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto;
(ii) the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the
statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the
Securities Act, the 1934 Act, any federal or state securities law
or any rule or regulation promulgated under the Securities Act,
the 1934 Act or any federal or state securities law in connection
with the offering covered by such registration statement;
and the Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection 1.5(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder.
b) By Selling Holders. To the extent permitted by law, each selling Holder
will indemnify and hold harmless the Company, each of its directors,
each of its officers who have signed the registration statement, each
person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter and any other Holder selling securities
under such registration statement or any of such other Holder's
partners, directors or officers or any person who controls such Holder
within the meaning of the Securities Act or the 1934 Act, against any
losses, claims, damages or liabilities (joint or several) to which the
Company or any such director, officer, controlling person, underwriter
or other such Holder, partner or director, officer or controlling
person of such other Holder may become subject under the Securities
Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each
such Holder will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, controlling
person, underwriter or other Holder, partner, officer, director or
controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or
action: provided, however, that the indemnity agreement contained in
this Section 1.5(b) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Holder, which consent shall not be
unreasonably withheld; and provided, further, that the total amounts
payable in indemnity by a Holder under this Section 1.5(b) in respect
of any Violation shall not exceed the net proceeds received by such
Holder in the registered offering out of which such Violation arises.
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c) Notice. Promptly after receipt by an indemnified party under this
Section 1.5 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this
Section 1.5, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties;
provided, however, that an indemnified party shall have the right to
retain its own counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due
to actual or potential conflict of interests between such indemnified
party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action
shall relieve such indemnifying party of liability to the indemnified
party under this Section 1.5 to the extent the indemnifying party is
prejudiced as a result thereof, but the omission so to deliver written
notice to the indemnified party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this
Section 1.5.
d) Defect Eliminated in Final Prospectus. The foregoing indemnity
agreements of the Company and Holders are subject to the condition
that, insofar as they relate to any Violation made in a preliminary
prospectus but eliminated or remedied in the amended prospectus on file
with the SEC at the time the registration statement in question becomes
effective or the amended prospectus filed with the SEC pursuant to SEC
Rule 424(b) (the "Final Prospectus"), such indemnity agreement shall
not inure to the benefit of any person if a copy of the Final
Prospectus was timely furnished to the indemnified party and was not
furnished to the person asserting the loss, liability, claim or damage
at or prior to the time such action is required by the Securities Act.
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e) Contribution. In order to provide for just and equitable contribution
to joint liability under the Securities Act in any case in which either
(i) any Holder exercising rights under this Agreement, or any
controlling person of any such Holder, makes a claim for
indemnification pursuant to this Section 1.5 but it is judicially
determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not
be enforced in such case notwithstanding the fact that this Section 1.5
provides for indemnification in such case, or (ii) contribution under
the Securities Act may be required on the part of any such selling
Holder or any such controlling person in circumstances for which
indemnification is provided under this Section 1.5; then, and in each
such case, the Company and such Holder will contribute to the aggregate
losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that such Holder
is responsible for the portion represented by the percentage that the
public offering price of its Registrable Securities offered by and sold
under the registration statement bears to the public offering price of
all securities offered by and sold under such registration statement,
and the Company and other selling Holders are responsible for the
remaining portion; provided, however, that, in any such case: (A) no
such Holder will be required to contribute any amount in excess of the
public offering price of all such Registrable Securities offered and
sold by such Holder pursuant to such registration statement; and (B) no
person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
f) Survival. The obligations of the Company and Holders under this Section
1.5 shall survive until the fifth anniversary of the completion of any
offering of Registrable Securities in a registration statement,
regardless of the expiration of any statutes of limitation or
extensions of such statutes.
1.6 Transfer of Registration Rights. The rights of a Holder hereunder may be
transferred or assigned in connection with a transfer of Registrable Securities
to (i) any affiliate of a Holder, (ii) any subsidiary, parent, partner, retired
partner, limited partner, shareholder or member of a Holder or (iii) any family
member or trust for the benefit of any Holder, or (iv) any transferee who is
acquiring at least 25% shares of Registrable Securities held by the Holder prior
to the transfer. Notwithstanding the foregoing, such rights may only be
transferred or assigned provided that all of the following additional conditions
are satisfied: (a) such transfer or assignment is effected in accordance with
applicable securities laws; (b) such transferee or assignee agrees in writing to
become subject to the terms of this Agreement; and (c) the Company is given
written notice by such Holder of such transfer or assignment, stating the name
and address of the transferee or assignee and identifying the Registrable
Securities with respect to which such rights are being transferred or assigned.
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1.7 Termination of the Company's Obligations. The Company's registration
obligations under this Exhibit A shall terminate four years after the date of
this Agreement or, if sooner when, in the opinion of counsel to the Company, all
Registrable Securities held by a Holder may then be sold under Rule 144 in one
transaction without exceeding the volume limitations thereunder.
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