SECURITIES PURCHASE AGREEMENT
SECURITIES
PURCHASE AGREEMENT
(the
“Agreement”),
dated
as of August 31, 2007, by and among Golden Autumn Holdings Inc., a Nevada
corporation, with its principal office located at 00000 Xxxxxx Xxxx,
0xx
Xxxxx
Xxxxxx, XX 00000 (the “Company”),
and
the investors listed on the Schedule of Buyers attached hereto
(individually, a “Buyer”
and
collectively, the “Buyers”).
WHEREAS:
A.
The
Company and each Buyer is executing and delivering this Agreement in reliance
upon the exemptions from securities registration afforded by Section 4(2)
of the Securities Act of 1933, as amended (the “1933
Act”)
and
Rule 506 of Regulation D (“Regulation
D”)
as
promulgated by the United States Securities and Exchange Commission (the
“SEC”)
under
the 1933 Act.
B.
The
Buyers, severally, and not jointly, wish to purchase, and the Company wishes
to
sell, upon the terms and conditions stated in this Agreement, (i) secured
convertible notes, in the form attached hereto as Exhibit A,
in an
aggregate original Principal Amount of $1,000,000 (as amended, restated,
supplemented and/or modified from time to time in accordance with the provisions
thereof, collectively, the “Notes”)
and
(ii) warrants, in substantially the form attached hereto as Exhibit B
(as
amended, restated, supplemented and/or modified from time to time in accordance
with the provisions thereof, the “Warrants”),
to
acquire up to that number of shares of Common Stock, par value $.001 per share,
of the Company (“Conversion
Shares”)
equal to
30% of the quotient obtained by dividing (a) the original aggregate Principal
Amount of the Notes purchased by the Buyers at Closing, by (b) the Conversion
Price (as defined in the Notes) (the Shares issuable upon exercise of the
Warrants, the “Warrant
Shares”).
C.
The
Notes, the Conversion Shares, the Warrants and the Warrant Shares collectively
are referred to herein as the “Securities”.
D.
The
Note (i) will rank (A) pari
passu
with all
Other Notes (as defined in the Notes), (B) senior to the Subordinated
Indebtedness (as defined in the Notes), all Indebtedness (as defined in the
Notes) not constituting Permitted Indebtedness (as defined in the Notes) and
all
Permitted Indebtedness expressly designated as ranking junior to the Notes,
and
(C) pari
passu
with all
other Permitted Indebtedness and (ii) will be secured by the limited guaranty
of
any one of GAH-CDC Holdings LLC, BJP-GAH Holdings LLC or Li Guanglong (the
“Guarantors”)
and a
pledge by the Guarantor of an aggregate of 3,00,000 Common Shares. At the
closing, such limited guaranty shall be evidenced by a limited guaranty by
GAH-CDC Holdings LLC with its 5,366,613 Common Shares in the form attached
hereto as Exhibit C
and a
pledge agreement in the form attached hereto as Exhibit D
(as the
same may be amended, restated, supplemented and/or modified from time to time
in
accordance with the provisions thereof, such limited guaranty and pledge
agreement, taken together, herein referred to as the “Security
Documents”).
However, the parties hereby agree that, after the closing, the limited warranty
of GAH-CDC Holdings LLC shall be replaced by the limited guaranty of either
BJP-GAH Holdings LLC or Li Guanglong secured by a pledge of 3,000,000 Common
Shares held by either of them.
1
E.
Contemporaneously with the Closing, the Buyers and the Company will execute
and
deliver a Registration Rights Agreement in the form attached hereto as
Exhibit E
(as
amended, restated, supplemented and/or modified from time to time in accordance
with the provisions thereof, the “Registration
Rights Agreement”),
pursuant to which the Company will agree to provide certain registration rights
in respect of the Conversion Shares and the Warrant Shares under the 1933 Act
and the rules and regulations promulgated thereunder, and applicable state
securities laws.
F.
Capitalized terms used, but not otherwise defined, herein shall have the
meanings ascribed to such terms in the Notes.
NOW,
THEREFORE,
the
Company and each Buyer hereby agree as follows:
1.
PURCHASE AND SALE OF NOTES AND WARRANTS.
(a)
Purchase
of Notes and Warrants.
Subject
to the satisfaction (or waiver) of the conditions set forth in Sections 6
and 7 below, the Company shall issue and sell to each Buyer, and each Buyer
severally, but not jointly, agrees to purchase from the Company on the Closing
Date (as defined below), (x) the Principal Amount of Note set forth
opposite such Buyer’s name in column (3) on the Schedule of Buyers and
(y) the related Warrants to acquire up to that number of Warrant Shares
equal to equal to 30% of the quotient obtained by dividing (1) the Principal
Amount of the Note purchased by the Buyer at Closing, by (2) the Conversion
Price (as defined in the Note) (the “Closing”).
(b)
Closing.
The
date and time of the Closing (the “Closing
Date”)
shall
be 10:00 a.m., New York City time, on the first day other than Saturday, Sunday
or other day on which commercial banks in the City of New York are authorized
or
required by law to remain closed (a “Business
Day”)
following the satisfaction (or waiver) and notification of the Company of
satisfaction (or waiver) of the conditions to the Closing set forth in
Sections 6 and 7 below (or such later or earlier date as is mutually agreed
to by the Company and Buyers holding the right to purchase at least 50% of
the
aggregate Principal Amount of the Notes). The Closing shall occur on the Closing
Date at the offices of Guzov Ofsink, LLC, 000 Xxxxxxx Xxxxxx, 00xx
Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000, or such other place as the Company and the Buyers
holding the right to purchase at least 50% of the aggregate Principal Amount
of
the Notes shall mutually agree.
(c)
Purchase
Price.
The
aggregate purchase price for the Notes and the Warrants to be purchased by
each
such Buyer at the Closing (the “Purchase
Price”)
shall
be the amount set forth opposite such Buyer’s name in column (4) of the
Schedule of Buyers. Each Buyer shall pay $1.00 for each $1.00 of Principal
Amount of Notes and related Warrants to be purchased by such Buyer at the
Closing.
(d)
Form
of Payment.
On or
before the Closing Date, (i) each Buyer shall deposit its respective
Purchase Price for the Notes and Warrants to be issued and sold to such Buyer
at
the Closing to the escrow account by wire transfer of immediately available
funds in accordance with the provisions of the Escrow Agreement dated the date
hereof, by and among the Buyers, the Company, and Sichenzia Xxxx Xxxxxxxx
Xxxxxxx LLP, as the Escrow Agent (the “Escrow Agreement”), and (ii) the
Company shall deliver to its counsel the Notes (allocated in the Principal
Amounts as such Buyer shall request) representing such Principal Amount of
the
Notes which such Buyer is then purchasing hereunder along with warrants
representing the Warrants (allocated in the amounts as such Buyer shall request)
which such Buyer is purchasing, in each case duly executed on behalf of the
Company and registered in the name of such Buyer or, subject to compliance
with
applicable securities laws, its designee (as to such Buyer, the “Buyer’s
Notes and Warrants”).
2
(e)
Release
of Purchase Price and Notes and Warrants.
Subject
to the satisfaction of the conditions set forth in Sections 6 and 7 of this
Agreement, on the Closing Date the Company shall (i) cause the Escrow Agent
to
release the Purchase Price to the Company or its designees in accordance with
the provisions of the Escrow Agreement, and (ii) cause the Company’s counsel to
deliver to each Buyer the Buyer’s Notes and Warrants registered in the name of
such Buyer,
2.
BUYER’S REPRESENTATIONS AND WARRANTIES. Each Buyer represents and
warrants, severally and not jointly, as of the date of this Agreement and on
the
Closing Date, with respect to only itself that:
(a)
No
Public Sale or Distribution.
Such
Buyer is acquiring the Note, and the Warrants, and upon conversion of the Note
and exercise of the Warrants will acquire the Conversion Shares issuable upon
conversion of the Note and the Warrant Shares issuable upon exercise thereof,
for its own account and not with a view towards, or for resale in connection
with, the public sale or distribution thereof, except pursuant to sales
registered or exempted under the 1933 Act and such Buyer does not have a present
arrangement to effect any distribution of the Securities to or through any
person or entity; provided,
however,
that by
making the representations herein, such Buyer does not agree to hold any of
the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act and pursuant to the
applicable terms of the Transaction Documents (as defined in Section 3(b)).
Such Buyer does not presently have any agreement or understanding, directly
or
indirectly, with any Person (as defined in Section 3(p)) to distribute any
of the Securities.
(b)
Accredited
Investor Status.
Such
Buyer is an “accredited investor” as that term is defined in Rule 501(a) of
Regulation D.
(c)
Reliance
on Exemptions.
Such
Buyer understands that the Securities are being offered and sold to it in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying upon,
among other things, the truth and accuracy of, and such Buyer’s compliance with,
the representations, warranties, agreements, acknowledgments and understandings
of such Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire the
Securities.
(d)
Information.
Such
Buyer and its advisors, if any, have been furnished with all materials relating
to the business, finances and operations of the Company and the Acquisition
and
materials relating to the offer and sale of the Securities which have been
requested by such Buyer. Such Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Company. Neither such inquiries nor
any
other due diligence investigations conducted by such Buyer or its advisors,
if
any, or its representatives shall modify, amend or affect such Buyer’s right to
rely on the Company’s representations and warranties contained herein. Such
Buyer understands that its investment in the Securities involves a high degree
of risk and is able to afford a complete loss of such investment. Such Buyer
has
sought such accounting, legal and tax advice as it has considered necessary
to
make an informed investment decision in respect of its acquisition of the
Securities.
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(e)
No
Governmental Review.
Such
Buyer understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation
or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.
(f)
Transfer
or Resale.
Such
Buyer understands that except as provided in the Registration Rights Agreement:
(i) the Securities have not been and are not being registered under the
1933 Act or any state securities laws, and may not be offered for sale, sold,
assigned or transferred unless (A) subsequently registered thereunder,
(B) such Buyer shall have delivered to the Company an opinion of counsel,
in a form reasonably acceptable to the Company, to the effect that such
Securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, or (C) such
Buyer provides the Company with assurance reasonably acceptable to the Company
that such Securities can be sold, assigned or transferred pursuant to Rule
144
or Rule 144A promulgated under the 1933 Act, as amended, (or a successor
rule thereto) (collectively, “Rule
144”);
(ii) any sale of the Securities made in reliance on Rule 144 may be made
only in accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the seller
(or the Person through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the 0000 Xxx) may require compliance with some
other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) none of the Company or any other Person is under any obligation
to register the Securities under the 1933 Act or any state securities laws
or to
comply with the terms and conditions of any exemption thereunder.
Notwithstanding the foregoing, and subject to compliance with applicable
securities laws, the Securities may be pledged in connection with a bona fide
margin account or other loan or financing arrangement secured by the Securities
and such pledge of Securities shall not be deemed to be a transfer, sale or
assignment of the Securities hereunder, unless required by law, and no Buyer
effecting a pledge of Securities shall be required to provide the Company with
any notice thereof or otherwise make any delivery to the Company pursuant to
this Agreement or any other Transaction Document, including without limitation,
this Section 2(f).
(g)
Legends.
Such
Buyer understands that the certificates or other instruments representing the
Notes and the Warrants and the stock certificates representing the Conversion
Shares and the Warrant Shares, except as set forth below, shall bear any legend
as required by the “blue sky” laws of any state and a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such certificates):
NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE
SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE]] HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR
(B) AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO, AND IN ACCORDANCE WITH, RULE 144 OR RULE 144A UNDER SAID
ACT.
NOTWITHSTANDING THE FOREGOING, SUBJECT TO COMPLIANCE WITH APPLICABLE SECURITIES
LAWS, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES. THIS
INSTRUMENT IS SUBJECT TO THE TERMS OF A SECURITIES PURCHASE AGREEMENT DATED
AS
OF AUGUST 31, 2007, BY AND AMONG GOLDEN AUTUMN HOLDINGS INC. AND THE BUYERS
LISTED THEREIN.
4
The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which
it is
stamped or, in the case of Conversion Shares or Warrant Shares, issue to such
holder by electronic delivery at the applicable balance account at The
Depository Trust Company ("DTC"),
if,
unless otherwise required by state securities laws, (i) such Securities are
registered for resale under the 1933 Act, provided that upon receipt of notice
from the Company that the applicable registration statement is not, or no longer
is effective in respect of the resale of such Securities, the Holder will not
transfer such Securities (other than pursuant to clauses 2(g)(ii) or
2(g)(iii) below) until the Company notifies the Holder that the applicable
registration statement becomes effective (again), (ii) in connection with a
sale, assignment or other transfer, such holder provides the Company with an
opinion of counsel reasonably satisfactory to the Company, in a generally
acceptable form, to the effect that such sale, assignment or transfer of the
Securities may be made without registration under the applicable requirements
of
the 1933 Act and that such legend is no longer required, or (iii) such
holder provides the Company with assurances reasonably acceptable to the Company
that the Securities can be sold, assigned or transferred pursuant to Rule 144
or
Rule 144A, and such Holder delivers the legended Securities to the Company
or
the Company’s transfer agent.
(h)
Validity;
Enforcement.
This
Agreement has been, and, when the other Transaction Documents (as defined below)
to which such Buyer is a party are executed and delivered in accordance with
the
terms and conditions contemplated hereby and thereby, such documents shall
have
been duly and validly authorized, executed and delivered on behalf of such
Buyer
and shall constitute the legal, valid and binding obligations of such Buyer
enforceable against such Buyer in accordance with their respective terms, except
as such enforceability may be limited by general principles of equity or to
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and
remedies.
(i)
No
Conflicts.
The
execution, delivery and performance by such Buyer of this Agreement and the
other Transaction Documents to which such Buyer is a party and the consummation
by such Buyer of the transactions contemplated hereby and thereby will not
(i) result in a violation of any organizational documents of such Buyer or
(ii) conflict with, or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which such Buyer is a party, or
(iii) result in a violation of any law, rule, regulation, order, judgment
or decree (including federal and state securities laws) applicable to such
Buyer
or by which any property or asset of the Buyer is bound or affected, except
in
the case of clauses (ii) and (iii) above, for such conflicts,
defaults, rights or violations which would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
ability of such Buyer to perform its obligations hereunder or under any of
the
other Transaction Documents. Each Buyer agrees that it has independently, based
on such documents and information it deemed appropriate, made its decision
to
enter into this Agreement and purchase the Note and Warrants.
5
(j)
Residency.
Such
Buyer is a resident of that jurisdiction specified below its address on the
Schedule of Buyers.
3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to each of the Buyers on the date hereof and on the Closing Date
that:
(a)
Organization
and Qualification.
Set
forth on Schedule 3(a)
is a
true and correct list of the entities in which the Company or any Subsidiary,
directly or indirectly, owns capital stock or holds an equity or similar
interest, together with their respective jurisdictions of organization and
the
percentage of the outstanding capital stock or other equity interests of such
entity that is held by the Company or such Subsidiary or any of their respective
Subsidiaries. Schedule 3(a)
also
sets forth a true and correct corporate structure of the Company and its
subsidiaries immediately following the Closing. Other than with respect to
the
entities listed on Schedule 3(a),
the
Company does not, directly or indirectly, own any securities or beneficial
ownership interests in any other Person (including through joint ventures or
partnership arrangements) or has any investment in any other Person. The Company
and its “Subsidiaries”
(which
for purposes of this Agreement means any entity in which the Company or any
of
its Subsidiaries, directly or indirectly, owns any of the capital stock, equity
or similar interests or voting power of such entity at the date of this
Agreement) are entities duly organized and
validly existing and in good standing under the laws of the jurisdiction in
which they are formed, and have the requisite power and authority to own their
properties and to carry on their business as now being conducted. If applicable,
each of the Company and the Subsidiaries is duly qualified as a foreign entity
to do business and, to the extent legally applicable, is in good standing in
every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not
have
a Material Adverse Effect. As used in this Agreement, “Material
Adverse Effect”
means
any material adverse effect on the business, properties, assets, prospects,
operations, results of operations or condition (financial or otherwise) of
the
Company and its Subsidiaries, taken as a whole, or on the transactions
contemplated hereby and the other Transaction Documents or by the agreements
and
instruments to be entered into in connection herewith or therewith, or on the
authority or ability of the Company or any Subsidiary to perform its obligations
under the Transaction Documents (as defined below). Except as set forth in
Schedule 3(a),
the
Company and each Subsidiary holds all right, title and interest in and to 100%
of the capital stock, equity or similar interests of each of its respective
Subsidiaries, in each case, free and clear of any Liens (as defined below)
other
than Permitted Liens (as defined in the Notes) including any restriction on
the
use, voting, transfer, receipt of income or other exercise of any attributes
of
free and clear ownership by a current holder, and no such Subsidiary owns
capital stock or holds an equity or similar interest in any other Person. As
used in this Agreement, “Lien”
means,
with respect of any asset, any mortgage, lien, pledge, hypothecation, charge,
security interest, encumbrance or adverse claim of any kind and any restrictive
covenant, condition, restriction or exception of any kind that has the practical
effect of creating a mortgage, lien, pledge, hypothecation, charge, security
interest, encumbrance or adverse claim of any kind (including any of the
foregoing created by, arising under or evidenced by any conditional sale or
other title retention agreement, the interest of a lessor with respect to a
"Capital Lease" (in accordance with generally accepted accounting principles),
or any financing lease having substantially the same economic effect as any
of
the foregoing).
6
(b)
Authorization;
Enforcement; Validity.
The
Company has the requisite corporate power and authority to enter into and
perform its obligations under this Agreement, the Registration Rights Agreement,
the Security Documents, the Escrow Agreement (as defined below), the Warrants
and each of the other agreements entered into by the parties hereto in
connection with the transactions contemplated by this Agreement to which it
is a
party (such documents, and together with the Notes, the Warrants, the
Registration Rights Agreement, the Security Documents, the Transfer Agent
Instructions, and each of the other agreements to be entered into in connection
with the transactions contemplated by this Agreement, as amended, restated,
supplemented and/or modified from time to time in accordance with the provisions
thereof, collectively, the “Transaction
Documents”)
and to
consummate the transactions contemplated herein and therein in accordance with
the terms hereof and thereof. The execution and delivery of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby, have been duly authorized by the board of
directors of the Company (the “Board
of Directors”)
and
other than as set forth in Section 3(e) hereof, no further filing, consent
or authorization is required by the Company, its stockholders or the Board
of
Directors. To the extent that a Person that is a Subsidiary is a party to or
bound by a Transaction Document, such Subsidiary has the requisite power and
authority to enter into and perform its obligations under such Transaction
Document and the execution and delivery of such Transaction Document by such
Subsidiary and the consummation by such Subsidiary of the transactions
contemplated thereby have been duly authorized by the board of directors or
equivalent body of such Subsidiary and no further consent or authorization
is
required by such Subsidiary, its equity holders or its board of directors or
equivalent body. This Agreement, the other Transaction Documents have been
duly
executed and delivered by the Company or its Subsidiary, as applicable, and
constitute the legal, valid and binding obligations of such parties enforceable
against such parties in accordance with their respective terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium, liquidation or similar laws relating to, or affecting generally,
the
enforcement of applicable creditors’ rights and remedies. As of the Closing, the
Transaction Documents dated after the date of this Agreement and on or prior
to
the date of the Closing shall have been duly executed and delivered by the
Company or its Subsidiary, if applicable, and shall constitute the valid and
binding obligations of such parties, enforceable against such parties in
accordance with their terms, except as enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance or transfer, moratorium or similar laws relating to,
or
affecting generally, the enforcement of creditors’ rights and
remedies.
(c)
Offer
of Securities; Issuance of Securities.
Subject
to the accuracy of Buyer’s representations and warranties hereunder, the offer
by the Company of the Securities is exempt from registration under the 1933
Act.
The issuance of the Notes and the Warrants are duly authorized and are free
from
all taxes, liens and charges in respect of the issue thereof other than
Permitted Liens (as defined in the Notes). As of the Closing, 2,000,000 Shares
shall have been duly authorized and reserved for issuance upon the conversion
of
the Notes and the exercise of the Warrants. Upon conversion of the Notes in
accordance with the terms thereof the Conversion Shares, and upon exercise
in
accordance with the Warrants, the Warrant Shares, will be validly issued, fully
paid, nonassessable and free from all preemptive or similar rights, taxes,
liens
and charges in respect of the issue thereof other than Permitted Liens, with
the
holders being entitled to all rights accorded to a holder of Shares.
7
(d)
No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company,
and, if applicable, its Subsidiaries, and the consummation by such parties
of
the transactions contemplated hereby and thereby and the granting of a security
interest in the Collateral will not (i) result in a violation of any
articles of association, certificate of incorporation, certificate of formation,
any certificate of designations or other constituent documents of the Company
or
any of the Subsidiaries, any capital stock of the Company or any of the
Subsidiaries or bylaws of the Company or any of the Subsidiaries or
(ii) conflict with, or constitute a default (or an event which with notice
or lapse of time or both would become a default) in any respect under, or give
to others any rights of termination, amendment, acceleration or cancellation
of,
or other remedy in respect of, any agreement, indenture or instrument to which
the Company or any of the Subsidiaries is a party, or (iii) result in a
violation of any Requirements of Law, except (other than pursuant to clauses
(i)
and (iii) above) for such violations, conflicts, defaults or rights which would
not, individually or in the aggregate, have a Material Adverse Effect. As used
in this Agreement, (A) “Requirements
of Law”
means,
as to any Person, any United States or foreign law, statute, treaty, rule,
regulation, right, privilege, qualification, license or franchise or
determination of an arbitrator or a court or other Governmental Entity, in
each
case applicable or binding upon such Person or any of its property or to which
such Person or any of its property is subject or pertaining to any or all of
the
transactions contemplated or referred to herein and (B) “Governmental
Entity”
means
the government of any nation, state, city, locality or other political
subdivision thereof, any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government and any
corporation or other entity owned or controlled, through stock or capital
ownership or otherwise, by any of the foregoing.
(e)
Consents.
Neither
the Company nor any of the Subsidiaries is required to obtain any consent,
authorization or order of, or make any filing or registration with, any court,
governmental agency or any regulatory or self-regulatory agency or any other
Person in order for it to execute, deliver or perform any of its obligations
under or contemplated by the Transaction Documents to which it is a party,
in
each case in accordance with the terms hereof or thereof, except for the
following consents, authorizations, orders, filings and registrations:
(i) the filing of appropriate UCC financing statements (or the equivalent)
with the appropriate states and other authorities pursuant to the Security
Documents; (ii) filings required by applicable federal, state or foreign
securities laws; (iii) the registration statement and related state
securities law filings required by the Registration Rights Agreement; and (iv)
the declaration of effectiveness by the Securities and Exchange Commission
of
any registration statement filed by the Company pursuant to the Registration
Rights Agreement All consents, authorizations, orders, filings and registrations
which the Company is required to have obtained prior to the date hereof pursuant
to the preceding sentence have been obtained or effected.
(f)
Acknowledgment
Regarding Buyer’s Purchase of Securities.
The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of an arm’s length purchaser in respect of the Transaction Documents and the
transactions contemplated hereby and thereby and that, except as set forth
on
Schedule 3(f),
no
Buyer is (i) an officer or director of the Company, (ii) an
“affiliate” of the Company (as defined in Rule 144) or (iii) to the
knowledge of the Company, a “beneficial owner” of more than 10% of the shares of
Common Stock (as defined for purposes of Rule 13d-3 of the Securities Exchange
Act of 1934, as amended (the “1934
Act”)).
The
Company further acknowledges that, except as set forth on Schedule 3(f),
to the
knowledge of the Company, no Buyer is acting as a financial advisor or fiduciary
of the Company or any of its Subsidiary (or in any similar capacity) in respect
of the Transaction Documents and the transactions contemplated hereby and
thereby, and any advice given by a Buyer or any of its representatives or agents
in connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to such Buyer’s purchase of the
Securities. The Company further represents to each Buyer that the decision
of
the Company and each of the Subsidiaries to enter into the Transaction Documents
to which such Person is a party has been based solely on the independent
evaluation by the Company, such Subsidiaries and their respective
representatives.
8
(g)
No
General Solicitation; No Placement Agent.
None of
the Company, any of its Subsidiaries, any of their respective Affiliates, nor
any Person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in
connection with the offer or sale of the Securities. The Company has not
retained a placement agent in connection with the offer and sale of the
Securities. The Company shall be responsible for the payment of any placement
agent’s fees, financial advisory fees, or brokers’ commissions (other than for
persons engaged by any Buyer or its investment advisor) relating to or arising
out of the transactions contemplated hereby. The Company shall pay, and hold
each Buyer harmless against, any liability, loss or expense (including, without
limitation, attorneys’ fees and out-of-pocket expenses) arising in connection
with any such claim.
(h)
No
Integrated Offering.
None of
the Company, any of its Subsidiaries and any of their respective Affiliates,
nor
any Person acting on its or their behalf has made, directly or indirectly,
any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would require registration of any of the Securities
under the 1933 Act or cause this offering of the Securities to be integrated
with prior or concurrent offerings by the Company for purposes of the 1933
Act.
None of the Company, any of its Subsidiaries and their respective Affiliates
or
any Person acting on their behalf will take any action or steps referred to
in
the preceding sentence that would require registration of any of the Securities
under the 1933 Act or cause the offering of the Securities to be integrated
with
other offerings. Except as otherwise stated, as used in this Agreement,
“Affiliate”
means
any Person who is an “affiliate”
as
defined in Rule 12b-2 of the General Rules and Regulations under the 1934
Act.
(i)
Application
of Takeover Protections; Rights Agreement.
The
Company and its 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 articles of
association and memorandum of association (as amended and in effect on the
date
hereof) or the laws of the jurisdiction of its formation or otherwise which
is
or could become applicable to any Buyer as a result of the transactions
contemplated by the Securities Purchase Agreement, including, without
limitation, the Company’s issuance of the Securities and any Buyer's ownership
of the Securities. The Company has not adopted a stockholder rights plan or
similar arrangement relating to accumulations of beneficial ownership of Shares
or a change in control of the Company.
9
(j)
Financial
Statements.
The
consolidated financial statements of the Company and its Subsidiaries have
been
prepared in accordance with the generally accepted accounting principles of
the
jurisdiction of its organization (“GAAP”),
during the periods involved (except (i) as may be otherwise indicated in
such financial statements or the notes thereto, or (ii) in the case of
unaudited interim statements, to the extent they may exclude footnotes or may
be
condensed or summary statements) and fairly present in all material respects
the
financial position of the Company as of the dates thereof and the results of
its
operations and cash flows for the periods then ended (subject, in the case
of
unaudited statements, to normal year-end audit adjustments that, to the
Company's knowledge, are not material, individually or in the aggregate. Except
for liabilities and obligations incurred in the ordinary course of business
and
consistent with past practice, liabilities and obligations reflected on or
reserved against in the June 30, 2007 consolidated balance sheet of the Company,
prepared in accordance with GAAP (the “Balance
Sheet”)
and as
otherwise contemplated hereby or disclosed herein or in the disclosure schedules
to this Agreement (the "Disclosure
Schedules"),
since
June 30, 2007, inclusive of such date, none of the Company nor any Subsidiary
has incurred any liabilities or obligations that would be required to be
reflected or reserved against in a balance sheet of the Company or such
Subsidiary, as applicable, prepared in accordance with the principles used
in
the preparation of the Balance Sheets. None of the Company or, to the Company's
knowledge, any stockholder, officer or director of the Company has issued any
press release or made any other public statement or communication on behalf
of
the Company or otherwise relating to the Company or any of its Subsidiaries
that
contains any untrue statement of a material fact or omits any statement of
material fact necessary in order to make the statements therein, in the light
of
the circumstances under which they were made, not misleading.
(k)
Absence
of Certain Changes.
Since
June 30, 2007, there has been no change or development in the business,
properties, operations, condition (financial or otherwise), results of
operations of the Company or any Subsidiary that has had or would reasonably
be
expected to have a Material Adverse Effect. Except as set forth on Schedule
3(k),
since
June 30, 2007 (and before giving effect to the transactions contemplated under
the Transaction Documents) none of the Company or any of its Subsidiaries has
(i) declared or paid any dividends, (ii) sold any assets, individually
or in the aggregate, in excess of $10,000 outside of the ordinary course of
business, (iii) had capital expenditures, individually or in the aggregate,
in excess of $10,000 or (iv) waived any material rights in respect of any
Indebtedness or other rights in excess of $1,000 owed to it. None of the Company
or any of its Subsidiaries has taken any steps to seek protection pursuant
to
any bankruptcy law nor does the Company have any knowledge or reason to believe
that its creditors or the creditors of any Subsidiary intend to initiate
involuntary bankruptcy proceedings or any actual knowledge of any fact which
would reasonably lead a creditor to do so. Neither the Company nor any
Subsidiary of the Company is as of the date hereof, and after giving effect
to
the transactions contemplated hereby to occur at the Closing will be, Insolvent
(as defined below). For purposes of this Section 3(k), “Insolvent”
means,
in respect of any Person, (i) the present fair saleable value of such
Person’s assets (and including as assets for this purpose at a fair valuation
all rights of subrogation, contribution or indemnification arising pursuant
to
any guarantees given by such Person) is less than the amount required to pay
such Person’s total Indebtedness (as defined in Section 3(p)),
(ii) such Person is unable to pay its debts and liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and
matured, (iii) such Person intends at any time to incur or believes that it
will at any time incur debts that would be beyond its ability to pay as such
debts mature or (iv) such Person has unreasonably small capital with which
to conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted.
10
(l)
Conduct
of Business; Regulatory Permits.
None
of
the Company or any Subsidiary is in violation of any term of or in default
under
its articles of association, certificate of incorporation, certificate of
formation, any certificate of designations of any outstanding series of
preferred stock of such company or Bylaws or their organizational charter or
other constituent documents or bylaws, respectively except for such violations
or defaults which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. None of the Company or any
Subsidiary is in violation of any judgment, decree or order or any statute,
ordinance, rule or regulation applicable to such entity, and none of the Company
or any Subsidiary will conduct its respective business in violation of any
of
the foregoing, except for such violations and/or possible violations which
would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company and each Subsidiary possess all certificates,
authorizations and permits issued by the appropriate regulatory authorities
necessary to conduct their respective businesses, except where the failure
to
possess such certificates, authorizations or permits would not have,
individually or in the aggregate, a Material Adverse Effect, and none of the
Company or any Subsidiary has received any notice of proceedings relating to
the
revocation or modification of any such certificate, authorization or permit
except where such proceedings, revocation or modification would not have a
Material Adverse Effect.
(m)
Foreign
Corrupt Practices.
None of
the Company or any Subsidiary, nor, any director, officer, agent, employee
or
other Person acting on behalf of any of them has, in the course of its actions
for, or on behalf of, such entity (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; (ii) made any direct or indirect unlawful payment to
any foreign or domestic government official or employee from corporate funds;
(iii) violated or is in violation of any provision of the U.S. 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 or employee.
(n)
Transactions
With Affiliates.
Except
as set forth in Schedule
3(n) hereto,
other than the arrangements disclosed on Schedule
3(n),
none of
the officers, directors or employees of any of the Company or any Subsidiary
is
presently a party to any transaction with any of the Company or any Subsidiary
(other than for ordinary course services as employees, officers or 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 such
officer, director or employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has a substantial interest or is an officer, director,
trustee or partner.
11
(o)
Equity
Capitalization.
As of
the date hereof the authorized capital stock of the Company consists of
75,000,000 shares of Common Stock, par value $.001 per share, of which as of
the
date hereof 20,142,003 shares are issued and outstanding. All of the outstanding
Common Shares have been validly issued and are fully paid and nonassessable.
Except as disclosed in Schedule 3(o):
(i) none of the Company’s capital stock is subject to preemptive rights or
any other similar rights or any Liens suffered or permitted by the Company;
(ii) there are no outstanding options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities
or rights convertible into, or exercisable or exchangeable for, any capital
stock of the Company or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to issue additional capital stock of the Company or
any
of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital stock of
the
Company or any of its Subsidiaries; (iii) there are no outstanding debt
securities, notes, credit agreements, credit facilities or other agreements,
documents or instruments evidencing Indebtedness of the Company or any of its
Subsidiaries or by which the Company or any of its Subsidiaries is or may become
bound, except for such Indebtedness which (x) will be paid or satisfied in
full
substantially concurrently with the Closing with the proceeds of the purchase
of
securities hereunder, or (y) constitutes Permitted Indebtedness (as defined
in
the Notes); (iv) there are no financing statements securing obligations in
any material amounts, either singly or in the aggregate, filed in connection
with the Company or any of its Subsidiaries other than financing statements
evidencing Permitted Liens or filed pursuant to the Security Documents;
(v) there are no agreements or arrangements under which the Company or any
of its Subsidiaries is obligated to register the sale of any of their securities
under the 1933 Act (except pursuant to the Registration Rights Agreement;
(vi) there are no outstanding securities or instruments of the Company or
any of its Subsidiaries which contain any redemption or similar provisions,
and
there are no contracts, commitments, understandings or arrangements by which
the
Company or any of its Subsidiaries is or may become bound to redeem a security
of the Company or any of such Subsidiaries; (vii) there are no securities
or instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities; (viii) the Company does not
have any stock appreciation rights or “phantom stock” plans or agreements or any
similar plan or agreement; (ix) the Company does not have any outstanding
options, warrants or other securities which are exercisable for or convertible
into its Common Shares; and (x) no securities of the Company or any
Subsidiary are listed or quoted on any stock exchange or automated quotation
system. The Company has made available to the Buyers true, correct and complete
copies of the Company’s Certificate of Incorporation, as amended and as in
effect on the date hereof, and all agreements relating to securities convertible
into, or exercisable or exchangeable for, Shares and the material rights of
the
holders thereof in respect thereof.
(p)
Indebtedness
and Other Contracts.
Except
as disclosed in Schedule
3(p),
none of
the Company or any Subsidiary (i) has any outstanding Indebtedness (as defined
below) except for Permitted Indebtedness and such Indebtedness which will be
paid or satisfied in full substantially concurrently with Closing with the
proceeds of the purchase of securities hereunder, (ii) is a party to any
contract, agreement or instrument, the violation of which, or default under
which, by the other party(ies) to such contract, agreement or instrument would
reasonably be expected to result in a Material Adverse Effect, (iii) is in
violation of any term of or in default under any contract, agreement or
instrument relating to any Indebtedness, except where such violations and
defaults would not result, individually or in the aggregate, in a Material
Adverse Effect, or (iv) is a party to any contract, agreement or instrument
relating to any Indebtedness, the performance of which, in the judgment of
the
Company’s officers, would be reasonably expected to have a Material Adverse
Effect. After giving effect to the issuance of the Notes and Warrants as
contemplated by the this Agreement, none of the Company or any Subsidiary will
have any outstanding Indebtedness, except for Permitted Indebtedness. For
purposes of this Agreement: (x) Indebtedness”
of
any
Person means, without duplication (A) all indebtedness for borrowed money,
(B)
all obligations issued, undertaken or assumed as the deferred purchase price
of
property or services, including (without limitation) “capital leases” in
accordance with generally accepted accounting principles (other than trade
payables entered into in the ordinary course of business), (C) all reimbursement
or payment obligations in respect of letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case in respect of
any
property or assets acquired with the proceeds of such indebtedness (even though
the rights and remedies of the seller or bank under such agreement in the event
of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment
of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (y) “Contingent
Obligation”
means,
as to any Person, any direct or indirect liability, contingent or otherwise,
of
that Person in respect of any indebtedness, lease, dividend or other obligation
of another Person if the primary purpose or intent of the Person incurring
such
liability, or the primary effect thereof, is to provide assurance to the obligee
of such liability that such liability will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
liability will be protected (in whole or in part) against loss in respect
thereof; and (z) “Person”
means
an individual, a limited liability company, a partnership, a joint venture,
a
corporation, a trust, an unincorporated organization or a government or any
department or agency thereof.
12
(q)
Absence
of Litigation.
There
is no action, suit, proceeding, inquiry or investigation that if adversely
determined, individually or in the aggregate, would have a Material Adverse
Effect before or by, any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company, any Subsidiary, any of their respective
officers or directors, or the Shares.
(r)
Insurance.
The
Company and each Subsidiary is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as management
of the Company believes to be prudent and customary in the businesses in which
such entities are engaged. None of the Company or 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 at a cost that would
not
have a Material Adverse Effect.
(s)
Employee
Relations.
(i)
None
of the Company or any Subsidiary is a party to any collective bargaining
agreement or employs any member of a union. The Company and its Subsidiaries
believe that the Company’s relations with its employees and the relations of its
Subsidiaries with their respective Subsidiaries are good. No executive officer
(as defined in Rule 3b-7 promulgated under the 0000 Xxx) of the Company or
any
Subsidiary has notified the Company or such Subsidiary that such officer intends
to leave the Company or Subsidiary, as applicable, or otherwise intends to
terminate such officer’s employment with the Company or Subsidiary. To the
knowledge of the Company, no executive officer of the Company or any Subsidiary
is, or is now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or
any
restrictive covenant and the continued employment of each such executive officer
does not subject the Company or any Subsidiary to any liability in respect
of
any of the foregoing matters except such violations and/or liabilities that
would not individually or in the aggregate be reasonably expected to have a
Material Adverse Effect.
13
(ii)
The
Company and the Subsidiaries are in compliance with all federal, state, local
and foreign laws and regulations respecting labor, employment and employment
practices and benefits, terms and conditions of employment and wages and hours,
except where failure to be in compliance therewith would not result, either
individually or in the aggregate, in a Material Adverse Effect.
(t)
Title.
The
Company and the Subsidiaries have good and marketable title in fee simple to
all
real property and good and valid title to all personal property owned by them
which is material to the business of the Company or Subsidiary, as applicable,
in each case free and clear of all Liens, except for Permitted Liens (as defined
in the Notes), except where failure to have good and valid title, individually
or in the aggregate, would not be reasonably expected to have a Material Adverse
Effect. Except as set forth on Schedule
3(t),
any
real property and facilities held under lease by the Company or any of the
Subsidiaries are held by the applicable entity under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by
the
Company and such Subsidiaries. Where failures to have such valid, subsisting
and
enforceable lease(s) exist, such failures, in the aggregate, would not have
a
Material Adverse Effect.
(u)
Intellectual
Property Rights.
The
Company and the Subsidiaries own or possess, adequate rights or licenses to
use
all trademarks, trade names, service marks and all applications and
registrations therefor, patents, patent rights, copyrights, original works
of
authorship, inventions, licenses, approvals, governmental authorizations, trade
secrets and other intellectual property rights (“Intellectual
Property Rights”)
necessary to conduct their respective businesses as now conducted. Except as
set
forth on Schedule
3(u),
none of
the Company’s or any Subsidiary’s registered, or applied for, Intellectual
Property Rights have expired or terminated or have been abandoned, or are
expected to expire or terminate or expected to be abandoned, within three years
from the date of this Agreement. The terminations, expirations or abandonments
of such registered, or applied for, Intellectual Property Rights would not,
in
the aggregate, have a Material Adverse Effect. The Company does not have any
knowledge of any infringement by the Company or any of the Subsidiaries of
Intellectual Property Rights of others except of such infringement that would
not have a Material Adverse Effect. Except as set forth on Schedule
3(u),
there
is no claim, action or proceeding being made or brought, or to the knowledge
of
the Company, being threatened, against the Company or any Subsidiary regarding
their respective Intellectual Property Rights and any such claims, actions
and
proceedings being made, brought or threatened would not in the aggregate, have
a
Material Adverse Effect. The Company is unaware of any facts or circumstances
which might give rise to any of the foregoing infringements or claims, actions
or proceedings which would, individually or in the aggregate, have a Material
Adverse Effect. The Company and the Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all of their
Intellectual Property Rights.
14
(v)
Environmental
Laws.
The
Company and the Subsidiaries (i) are in compliance with any and all
Environmental Laws (as hereinafter defined), (ii) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses, (iii) are in
compliance with all terms and conditions of any such permit, license or approval
and (iv) to the Company’s knowledge, there are no events, conditions or
circumstances reasonably likely to result in liability of the Company or any
Subsidiary pursuant to Environmental Laws, except where, in the foregoing
clauses (i) through (iv) the failure to so comply with such Environmental Laws,
permits, licenses or other approvals or to obtain such permits, licenses or
approvals would not be reasonably expected to have, individually or in the
aggregate, a Material Adverse Effect. The term “Environmental
Laws”
means
all federal, state, local or foreign laws relating to pollution or protection
of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous
Materials”)
into
the environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees, demands
or
demand letters, injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations issued, entered, promulgated or approved
thereunder.
(w)
Subsidiary
Rights.
The
Company or one of its Subsidiaries has the unrestricted right to vote, and
(subject to limitations imposed by applicable law) to receive dividends and
distributions on, all capital securities of the Subsidiaries owned by the
Company or such Subsidiary, respectively, subject to the Transaction Documents.
(x)
Tax
Status.
Except
as set forth on Schedule 3(x),
each of
the Company and Subsidiaries (i) has made or filed all foreign, federal,
state and local income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject, (ii) has paid all
taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and for which the Company has made
appropriate reserves on its books and (iii) has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
Except as set forth on Schedule 3(x),
there
are no material unpaid taxes claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any such
claim. Each of the claims set forth on Schedule
3(x)
is being
contested in good faith or would not be expected, individually or in the
aggregate, to have a Material Adverse Effect. Except as set forth on
Schedule 3(x),
no
liens have been filed securing taxes and other governmental assessments and
charges and no claims are being asserted by or against the Company or any of
the
Subsidiaries in respect of any taxes (other than liens for taxes not yet due
and
payable) or other governmental assessments or charges. Except as set forth
on
Schedule 3(x),
none of
the Company or any of the Subsidiaries has received notice of assessment or
proposed assessment of any taxes claimed to be owed by it or any other Person
on
its behalf. Except as disclosed on Schedule 3(x),
none of
the Company or any of the Subsidiaries is a party to any tax sharing or tax
indemnity agreement or any other agreement of a similar nature that remains
in
effect. None of the items set forth on Schedule 3(x)
would,
individually or in the aggregate, have a Material Adverse Effect. Each of the
Company and the Subsidiaries has complied in all material respects with all
applicable legal requirements relating to the payment and withholding of taxes
and, within the time and in the manner prescribed by law, has withheld from
wages, fees and other payments and paid over to the proper governmental or
regulatory authorities all amounts required.
15
(y)
Internal
Accounting Controls.
Each of
the Company and the Subsidiaries maintains 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
consolidated financial statements in conformity with GAAP, and to maintain
asset
and liability accountability, (iii) access to assets or incurrence of
liabilities is permitted only in accordance with management’s general or
specific authorization and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken in respect of any
difference.
(z)
Disclosure.
Each of
this Agreement (including the Schedules hereto), the other Transaction
Documents, and that certain Private Placement Memorandum dated August 31, 2007
(the “Private
Placement Memorandum”),
furnished by or on behalf of the Company regarding the Company or the
Subsidiaries, and their respective businesses and the transactions contemplated
hereby (other than any forward-looking statement or management opinion) is
true
and correct in all material respects and does not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to
make
the statements made therein, in the light of the circumstances under which
they
were made, not misleading. Each press release issued by the Company or its
Subsidiaries during the six (6) months preceding the date of this Agreement
did
not at the time of release contain any untrue statement of a material fact
or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. No event or circumstance has occurred
or
information exists in respect of the Company or any of its Subsidiaries or
its
or their business, properties, operations or financial condition, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed, except
where such failure would not reasonably be expected to have a Material Adverse
Effect.
(aa)
Manipulation
of Price.
The
Company has not, and to its knowledge no one acting on its behalf has, (i)
taken, directly or indirectly, any action designed to cause or to result in
the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
purchased, or paid any compensation for soliciting purchases of, any of the
Securities, or (iii) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company.
(bb)
U.S.
Real Property Holding Corporation.
The
Company is not, nor has it ever been, a U.S. real property holding corporation
within the meaning of Section 897 of the Internal Revenue Code of 1986, as
amended, and the Company shall so certify upon any Buyer’s request.
16
(cc)
No
Other Agreements.
As of
the Closing Date, the Company has not, directly or indirectly, made any
agreements with any Buyers relating to the terms or conditions of the
transactions contemplated by the Transaction Documents, except as set forth
in
the Transaction Documents.
(dd)
Regulations
T, U and X.
Neither
the Company nor any other Subsidiary is and will be engaged in the business
of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation T, U or X of the Board of Governors of the Federal
Reserve System as now and from time to time hereafter in effect), and no
proceeds of any Note will be used to purchase or carry any margin stock or
to
extend credit to others for the purpose of purchasing or carrying any margin
stock.
(ee)
ERISA.
(i)
Except as listed on Schedule
(ff)
hereto,
none of the Company or any of its Subsidiaries or any of their ERISA Affiliates
maintains or contributes to, or within the preceding six (6) years has
maintained or contributed to, any Employee Benefit Plan. Neither the Company
nor
any of its Subsidiaries have any current labor problems or disputes that have
resulted in, or which such Person reasonably believes would be expected to
have,
a Material Adverse Effect. No Employee Benefit Plan has an accumulated or waived
funding deficiency or permitted decrease which would create a deficiency in
its
funding standard account or has applied for an extension of any amortization
period within the meaning of Section 412 of the Internal Revenue Code of 1986,
as amended (or any successor statute thereto) and the regulations thereunder
(the “Code”)
as of
the date hereof, and no Lien imposed under the Code or ERISA exists or is likely
to arise on account of any Employee Benefit Plan within the meaning of Section
412 of the Code.
(ii)
Liabilities under any Employee Benefit Plan of the Company or any of its
Subsidiaries have been appropriately reflected on the financial statements
of
the Company and its Subsidiaries in accordance with GAAP.
(iii)
All
of the Employee Benefit Plans are and have been established and administered
in
all respects in accordance with all applicable laws, regulations or orders
with
respect thereto, no such failure to comply therewith has, or would be reasonably
expected to have, a Material Adverse Effect. To the extent that any Employee
Benefit Plan maintained by the Company or any of its Subsidiaries is intended
to
qualify for favorable tax treatment under any applicable law, regulation or
order, to the knowledge of the Company and the Subsidiaries, no fact or
circumstance exists that would reasonably be expected to adversely affect the
tax-exempt status of such Employee Benefit Plan.
(iv)
All
obligations regarding the Employee Benefit Plans have been satisfied to the
extent due and owing on the date hereof, there are no outstanding defaults
or
violations by any party to any Employee Benefit Plan and no taxes, penalties
or
fees are owing under any of the Employee Benefit Plans where such obligations,
defaults, violations, unpaid taxes, unpaid penalties or unpaid fees have or
would reasonably be expected to have a Material Adverse Effect. Except as set
forth on Schedule
(ee),
neither
the Company or any ERISA Affiliate has incurred any withdrawal liability under
ERISA with respect to any Multiemployer Plan, or is aware of any facts
indicating that it or any of its ERISA Affiliates may in the future incur any
such withdrawal liability, that has, or would reasonably be expected to have,
a
Material Adverse Effect.
17
(v)
the
Company and each of its Subsidiaries have made available to the Buyers true,
correct and complete copies of all material Employee Benefit Plans as amended
as
of the date hereof, as requested by any Buyer.
(vi)
Each
Employee Benefit Plan is fully funded to the extent required by any applicable
law, regulation or order.
(vii)
Except as disclosed in Schedule
(ee)
or as
required by any applicable law, including, without limitation, the Consolidated
Omnibus Budget Reconciliation Act of 1986 or any similar state law, regulation
or order, none of the Employee Benefit Plans provides health and welfare
benefits to retired employees or to the beneficiaries or dependents of retired
employees.
(viii)
As
used in this Agreement, “Employee
Benefit Plan”
means
an employee benefit plan (other than a Multiemployer Plan) covered by Title
IV
of ERISA and maintained (or that was maintained at any time during the six
(6)
calendar years preceding the date of this Agreement) for employees of the
Company, any of its Subsidiaries or any of its ERISA Affiliates; “ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended, and any
successor statute of similar import, and regulations thereunder, in each case,
as in effect from time to time. References to sections of ERISA shall be
construed also to refer to any successor sections; and “ERISA
Affiliate”
means
(a) any Person subject to ERISA whose employees are treated as employed by
the
same employer as the employees of Parent or any of its Subsidiaries under Code
Section 414(b), (b) any trade or business subject to ERISA whose employees
are
treated as employed by the same employer as the employees of Parent or any
of
its Subsidiaries under Code Section 414(c), (c) solely for purposes of Section
302 of ERISA and Section 412 of the Code, any organization subject to ERISA
that
is a member of an affiliated service group of which Parent or any of its
Subsidiaries is a member under Code Section 414(m), or (d) solely for purposes
of Section 302 of ERISA and Section 412 of the Code, any Person subject to
ERISA
that is a party to an arrangement with Parent or any of its Subsidiaries and
whose employees are aggregated with the employees of Parent or any of its
Subsidiaries under Code Section 414(o).
(ff)
Anti-Terrorism
Laws and Anti-Money Laundering Laws.
(i)
None
of the Company or its Subsidiaries is, and to the knowledge of the Company,
no
Person who owns a controlling interest in or otherwise controls the Company
or
any of its Subsidiaries is or is anticipated to be, (i) listed on the Specially
Designated Nationals and Blocked Persons List maintained by the Office of
Foreign Assets Control ("OFAC"),
Department of the Treasury, and/or on any other similar list (collectively,
the
"Lists")
maintained by the OFAC pursuant to any authorizing statute, Executive Order
or
regulation (collectively, "OFAC
Laws and Regulations");
or
(ii) a Person (a "Designated
Person")
either
(A) included within the term "designated national" as defined in the Cuban
Assets Control Regulations, 31 C.F.R. Part 515, or (B) designated under Sections
1(a), 1(b), 1(c) or 1(d) of Executive Order No. 13224, 66 Fed. Reg. 49079
(published September 25, 2001) or similarly designated under any related
enabling legislation or any other similar Executive Orders (collectively, the
"Executive
Orders").
18
(ii)
None
of the Company or its Subsidiaries (x) is a Person or entity with which any
Buyer is prohibited from dealing or otherwise engaging in any transaction by
any
OFAC Laws and Regulations and the Executive Orders (collectively, the
"Anti-Terrorism
Law")
or
(ii) is a Person or entity that commits, threatens or conspires to commit or
supports "terrorism" as defined in the Executive Orders or (y) is affiliated
or
associated with a Person or entity listed in the preceding clause (x) or clause
(y). To the knowledge of the Company, none of the Company or its Subsidiaries
or
Affiliates, nor any brokers or other agents acting in any capacity in connection
with the securities being offered in connection herewith (A) deals in, or
otherwise engages in any transaction relating to, any property or interests
in
property blocked pursuant to the Executive Orders or (B) engages in or conspires
to engage in any transaction that evades or avoids, or has the purpose of
evading or avoiding, or attempts to violate, any of the prohibitions set forth
in any Anti-Terrorism Law.
(iii)
To
the knowledge of the Company, none of the Company or its Subsidiaries nor any
holder of a direct or indirect interest in the Company or any of its
Subsidiaries (x) is under investigation by any governmental authority for,
or
has been charged with, or convicted of, money laundering under 18 U.S.C. §§ 1956
and 1957, drug trafficking, terrorist-related activities or other money
laundering predicate crimes, or any violation of the Bank Secrecy Act (31 U.S.C.
Section 5311 et. seq.), and its implementing regulations, Title 31 Part 103
of
the U.S. Code of Federal Regulations (the "BSA"),
(y)
has been assessed civil penalties under any all applicable laws, regulations
and
government guidance on the prevention and detection of money laundering,
including 18 U.S.C. Section 1956 and 1957, (the "Anti-Money
Laundering Laws"),
or
(z) has had any of its funds seized or forfeited in an action under any
Anti-Money Laundering Laws.
4.
COVENANTS.
(a)
Best
Efforts.
Each
party shall use its best efforts timely to satisfy each of the covenants and
the
conditions to be satisfied by it as provided in Sections 5, 6 and 7 of this
Agreement.
(b)
Securities
Law Filings.
Until
none of the Buyers hold any Securities, the Company agrees to timely make any
securities law filings in respect of the Securities as required under any
federal, state and foreign securities laws and to provide a copy thereof to
each
Buyer promptly upon request after such filing. The Company shall, on or before
the Closing Date, take such action as the Company shall reasonably determine
is
necessary in order to obtain an exemption for or to qualify the Securities
for
sale to the Buyers at the Closing pursuant to this Agreement under applicable
federal, state and foreign securities laws (or to obtain an exemption from
such
qualification), and shall upon request provide evidence of any such action
so
taken to the Buyers on or prior to the Closing Date.
19
(c)
Reporting
Status.
Commencing at such time as it shall be required to file such reports, and until
the later of the date on which (i) none of the Buyers hold any Securities,
(the “Reporting
Period”),
the
Company shall timely file all reports required to be filed with the SEC pursuant
to the 1934 Act. Once so required to file reports, the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act,
even if the 1934 Act or the rules and regulations thereunder would permit such
termination.
(d)
Use
of
Proceeds.
The
Company will use the proceeds from the sale of the Securities for general
corporate purposes, including general and administrative expenses and for the
purposes set forth on Schedule 4(d)
(and not
for the redemption or repurchase of any of its or its Subsidiaries’ equity
securities or to settle any outstanding litigation).
(e)
Financial
Information.
The
Company agrees to send the following to each Buyer during the Reporting Period
(i) unless the following are filed with the SEC through XXXXX and are promptly
(and in any event, within two business hours) available to the public through
the XXXXX system, within three (3) Business Days after the filing thereof with
the SEC, a copy of any of the periodic report or any other interim reports
or
any consolidated balance sheets, income statements, stockholders’ equity
statements and/or cash flow statements filed with the SEC, (ii) promptly and
in
any event, within one (1) Business Day after the release thereof (unless such
press release is available on PR Newswire or Business Wire), facsimile or
e-mailed copies of all press releases issued by the Company or any of its
Subsidiaries, and (iii) copies of any notices and other information made
available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the
stockholders.
(f)
Pledge
of Securities.
The
Company acknowledges and agrees, subject to compliance with applicable
securities laws, that the Securities may be pledged by a Buyer in connection
with a bona fide margin agreement or other loan or financing arrangement that
is
secured by the Securities. Except as otherwise required by applicable securities
laws, the pledge of Securities shall not be deemed to be a transfer, sale or
assignment of the Securities hereunder, and no Buyer effecting a pledge of
Securities shall be required to provide the Company with any notice thereof
or
otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document, including, without limitation, Section 2(f);
provided that a Buyer and its pledgee shall be required to comply with the
provisions of Section 2(f) in order to effect a sale, transfer or
assignment of Securities to such pledgee. The Company hereby agrees to execute
and deliver such documentation as a pledgee of the Securities may reasonably
request in connection with a pledge of the Securities to such pledgee by a
Buyer
at the expense of the Buyer or pledgee.
(g)
Participation
Rights in Future Financings.
The
Company is contemplating consummating a financing in which it would issue equity
(including securities convertible into equity) and/or debt securities of the
Company for gross proceeds of not less than $5,100,000 (the “Financing”). Until
the sooner of the time that the Buyer no longer owns any of the Securities
or a
consummation of a Financing, if the Company receives any indication of interest
or an offer from a third party, other than Xxxx Capital or any party introduced
to the Company by Xxxx Capital in connection with any proposed debt and/or
equity financing of the Company, then the Company will promptly give written
notice thereof to the Buyers, specifying all of the material terms and
conditions of any such proposal or offer (the “Financing
Notice”).
In
such event, the Buyers shall have the option to make an offer to provide all,
but not less than all of such financing to the Buyers on substantially the
same
terms and conditions, such option to be exercised by written notice to the
Company given not more than 5 days after the Financing Notice is given to the
Buyers. If the Buyers decline to exercise the foregoing option, then the Company
may consummate the financing described in the Financing Notice with the third
party within 90 days after the Financing Notice is given on substantially the
same terms and conditions as described in the Financing Notice. If such a
financing is not consummated within such period, then another equity or debt
financing may not be consummated with a third party unless all of the procedures
set forth in the preceding three sentences are again performed.
20
(h)
Transactions
With Affiliates.
From
the date of this Agreement until the first date following the Closing Date
on
which no Notes or Warrants are outstanding, the Company shall not, and shall
cause each of its Subsidiaries not to, without the prior written consent of
the
holders of Notes representing a majority of the aggregate amount of the Notes
then outstanding (the "Required
Holders");
provided,
however,
that
any Note that is held by an Affiliate of the Company shall not be deemed to
be
outstanding for the purposes of the determination of Required Holders) enter
into, amend, modify or supplement any material transaction, contract, agreement,
instrument, commitment, understanding or other arrangement with any of its
or
any Subsidiary’s officers, directors, Persons who were officers or directors at
any time during the previous two years, stockholders, or Affiliates of the
Company or any of its Subsidiaries, or with any individual related by blood,
marriage or adoption to any such individual or with any entity in which any
such
entity or individual owns a beneficial interest, unless such agreement,
amendment, modification or supplement is (A) entered into pursuant to arm's
length negotiation, (B) customary employment arrangements and benefit programs
on reasonable terms, or (C) otherwise permitted under the terms of the
Notes.
(i)
Corporate
Existence.
So long
as any Buyer beneficially owns any Notes or Warrants, as applicable, the Company
shall not be party to any Fundamental Transaction (as defined in the Notes)
unless the Company is in compliance with the applicable provisions governing
Fundamental Transactions set forth in the Notes and the Warrants.
(j)
Reservation
of Shares.
For as
long as any Buyer owns any Notes or Warrants, the Company shall take all actions
necessary to at all times after the Closing Date have authorized, and reserved
for the purpose of issuance, no less than the sum of (i) the number of
Shares issuable upon conversion of all of the Notes issued at Closing, and
(ii) the number of Shares issuable upon exercise of the Warrants issued at
the Closing.
(k)
Conduct
of Business.
The
business of the Company and its Subsidiaries shall not be conducted in violation
of Requirements of Law, except where such violations would not result, either
individually or in the aggregate, in a Material Adverse Effect.
(l)
Compliance
with Notes Covenants.
From
the date of this Agreement until the first date following the Closing Date
on
which no Notes are outstanding, the Company shall comply with and not violate
or
breach, and shall cause the Subsidiaries, as applicable, to comply with and
not
violate or breach, the covenants and agreements set forth in Section 14 of
the Notes as the same may hereafter be amended, being incorporated herein and
made a part hereof.
(m)
No
Additional Registered Securities.
From
the Closing Date until the earlier of the date that is ninety (90) Trading
Days
following the Effective Date (as defined in the Registration Rights Agreement)
and the date the Buyers may sell pursuant to Rule 144(k) (as such Rule is
amended, supplemented or superseded) of the Rules and Regulations promulgated
under the Securities Act of 1933, as amended, all the Conversion Shares and
Warrant Shares, the Company will not file a registration statement under the
1933 Act, or allow any such registration statement to become effective, in
respect of any securities other than the Registration Statement contemplated
by
the Registration Rights Agreement, a registration statement on Form S-8 or
a
registration statement on Form S-4.
21
(n)
Integration.
None of
the Company, any of its Subsidiaries, any of its or their affiliates (as defined
in Rule 501(b) under the 0000 Xxx) nor any person acting on behalf the Company,
its Subsidiaries or such affiliate will sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in the
1933
Act) which will be integrated with the sale of the Securities or the Conversion
Shares in a manner which would require the registration under the 1933 Act
of
the Securities or require stockholder approval under the rules and regulations
of the applicable Principal Market (as defined in the Notes) and the Company
will take all action that is appropriate or necessary to assure that its
offerings of other securities will not be integrated for purposes of the 1933
Act or the rules and regulations of the applicable Principal Market (as defined
in the Notes) with the issuance of Securities contemplated hereby.
(o)
No
Inconsistent Agreement or Actions.
From
the date of this Agreement until the first date following the Closing Date
on
which no Notes are outstanding, the Company and its Subsidiaries shall not
enter
into any contract, agreement or understanding which limit or restrict the
Company’s or any of its Subsidiaries’ ability to perform under, or take any
other voluntary action to avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed by it under, this Agreement
or
any of the other Transaction Documents.
(p)
Collateral
Agent.
(i)
Each
Buyer hereby (x) appoints Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP, as the
collateral agent for such Buyer hereunder (the “Collateral
Agent”),
and
(y) each Buyer hereby authorizes the Collateral Agent (and its officers,
directors, employees and agents) in such capacity to take any and all such
actions on its behalf with respect to the Collateral (as defined in the Security
Documents) and the Obligations in accordance with the terms of this Agreement
and the Security Documents. The Collateral Agent shall not have, by reason
hereof or any of the other Transaction Documents, a fiduciary relationship
in
respect of any Buyer. Neither the Collateral Agent nor any of its officers,
directors, employees and agents shall have any liability to any Buyer for any
action taken or omitted to be taken in connection herewith or therewith, except
to the extent caused by its own gross negligence or willful misconduct, and
each
Buyer agrees to defend, protect, indemnify and hold harmless the Collateral
Agent and all of its officers, directors, employees and agents (collectively,
the “CA
Indemnitees”)
from
and against any losses, damages, liabilities, obligations, penalties, actions,
judgments, suits, fees, costs and expenses (including, without limitation,
reasonable attorneys’ fees, costs and expenses) incurred by such CA Indemnitee,
whether direct, indirect or consequential, arising from or in connection with
the performance by such CA Indemnitee of the duties and obligations of
Collateral Agent pursuant hereto and/or to the Security Documents.
22
(ii)
The
Collateral Agent may resign from the performance of all its functions and duties
hereunder at any time by giving at least five (5) Business Days’ prior written
notice to the Company and each holder of the Notes. Such resignation shall
take
effect upon the acceptance by a successor Collateral Agent of appointment as
provided below. Upon any such notice of resignation, the holders of a majority
of the outstanding principal under the Notes shall appoint a successor
Collateral Agent. Upon the acceptance of the appointment as Collateral Agent,
such successor Collateral Agent shall succeed to and become vested with all
the
rights, powers, privileges and duties of the retiring Collateral Agent, and
the
retiring Collateral Agent shall be discharged from its duties and obligations
under this Agreement. After any Collateral Agent’s resignation hereunder, the
provisions of this Section 4(p) shall inure to its benefit. If a successor
Collateral Agent shall not have been so appointed within said five (5) Business
Day period, the retiring Collateral Agent shall then appoint a successor
Collateral Agent who shall serve until such time, if any, as the holders of
a
majority of the outstanding principal under the Notes appoint a successor
Collateral Agent as provided above.
(iii)
Without limiting the generality of the foregoing, each Buyer hereby irrevocably
appoints and authorizes Collateral Agent to execute and deliver the Security
Documents (on substantially the terms set forth in the forms of such documents
attached as exhibits hereto) for and on behalf of such Buyer and to perform
all
of the obligations and duties of Collateral Agent provided for therein, and
each
Buyer shall be bound by the terms of the Security Documents as if such Buyer
were an original signatory thereto. As to (x) any matters not expressly provided
for by this Agreement and the other Transaction Documents (including, without
limitation, enforcement of any security interests) and (y) any amendments,
consents or waivers of any Transaction Document, the Collateral Agent shall
not
be required to exercise any discretion or take any action, but shall be required
to act or to refrain from acting (and shall be fully protected in so acting
or
refraining from acting) upon the instructions of the Required Holders, and
such
instructions of the Required Holders shall be binding upon all
holders.
(iv)
The
Collateral Agent shall have no duties or responsibilities except those expressly
set forth in this Agreement or in the other Transaction Documents. The duties
of
the Collateral Agent shall be mechanical and administrative in nature. The
Collateral Agent shall not have by reason of this Agreement or any other
Transaction Document a fiduciary relationship in respect of any holder. Nothing
in this Agreement or any other Transaction Document, express or implied, is
intended to or shall be construed to impose upon the Collateral Agent any
obligations in respect of this Agreement or any other Transaction Document,
except as expressly set forth herein or therein.
(v)
If
the Company seeks the consent or approval of the Required Holders to the taking
or refraining from taking any action hereunder, the Company shall send notice
thereof to each holder. Any such consents shall be solicited and tabulated
by
the Company, or a solicitation and/or tabulation agent engaged by the Company,
subject to the Collateral Agent’s right to receive all such consents and satisfy
itself as to (x) the authenticity of such consents (y) receipt of such
consents from holders representing a sufficient Principal Amount of Notes,
and
(z) any other matters that the Collateral Agent, in its sole discretion
deems necessary or advisable. It shall not be necessary for such Holders to
approve the particular form of any proposed amendment or waiver, but it shall
be
sufficient if the written consents of the Required Holders reflect the approval
of the substance thereof. The Company shall provide the Collateral Agent with
copies of any such written consent(s).
23
(vi)
The
Collateral Agent shall promptly notify each holder any time that the Required
Holders have instructed the Collateral Agent to act or refrain from acting
pursuant hereto. the Company or
the
Collateral Agent may at any time request instructions from the holders in
respect of any actions or approvals which by the terms of this Agreement or
of
any of the other Transaction Documents the Collateral Agent is permitted or
required to take or to grant, and if such instructions are promptly requested,
the Collateral Agent shall be absolutely entitled to refrain from taking any
action or to withhold any approval under any of the Transaction Documents until
it shall have received such instructions from the Required Holders. Without
limiting the foregoing, no holder shall have any right of action whatsoever
against the Collateral Agent as a result of the Collateral Agent acting or
refraining from acting under this Agreement or any of the other Transaction
Documents in accordance with the instructions of the Required Holders unless
consent of all holders is required by the terms of such document.
(q)
General
Solicitation.
None of
the Company, any of its Affiliates or any person acting within the scope of
their delegated authority on behalf of the Company or such affiliate will
solicit any offer to buy or offer or sell the Securities by means of any form
of
general solicitation or general advertising within the meaning of Regulation
D,
including: (i) any advertisement, article, notice or other communication
published in any newspaper, magazine or similar medium or broadcast over
television or radio; and (ii) any seminar or meeting whose attendees have
been invited by any general solicitation or general advertising.
(r)
Financing.
(i) The
Company shall use its best efforts to effectuate the Financing not later than
November 30, 2007.
(s)
Nonpublic
Information.
The
Company shall not, and shall cause each of its Subsidiaries and each of their
respective officers, directors, employees and agents, not to, provide any Buyer
with any material, nonpublic information regarding the Company or any of its
Subsidiaries from and after the filing of the Registration Statement (as such
term is defined in the Registration Rights Agreement) without the express
written consent of such Buyer.
5.
REGISTERS; TRANSFER AGENT INSTRUCTIONS.
(a)
Registers.
The
Company shall maintain at its principal executive offices (or such other office
or agency of the Company), a register for the Notes and a register for the
Warrants, in which the Company shall record the name and address of the Person
in whose name the Notes or the Warrants, respectively, have been issued
(including the name and address of each transferee), the Principal Amount of
Notes held by such Person, the number of Conversion Shares issuable upon
conversion of the Notes, and Warrant Shares issuable upon exercise of the
Warrants held by such Person. The Company shall keep the registers open and
available at all times during business hours for inspection of any Buyer or
its
legal representatives.
24
(b)
Transfer
Agent Instructions.
Until
none of the Buyers hold any Securities, the Company shall cause its Shares
to be
eligible for transfer with its transfer agent pursuant to the Depository Trust
Company Automated Securities Transfer Program. The Company shall issue
instructions to its transfer agent in the form attached hereto as Exhibit F,
and any
subsequent transfer agent, to issue certificates or credit shares to the
applicable balance accounts at DTC, registered in the name of each Buyer or
its
respective nominee(s), for the Conversion Shares and the Warrant Shares issued
at the Closing or upon conversion of the Notes or exercise of the Warrants
in
such amounts as specified from time to time by each Buyer to the Company upon
conversion of the Notes or exercise of the Warrants in the form of E
attached
hereto (the “Transfer
Agent Instructions”).
The
Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5(b), and stop transfer
instructions to give effect to Section 2(g) including in the event that the
Registration Statement ceases to be effective under the Securities Act of 1933,
will be given by the Company to its transfer agent, and that the Securities
shall otherwise be freely transferable on the books and records of the Company,
subject to compliance with applicable securities law, as and to the extent
provided in this Agreement and the other Transaction Documents. If a Buyer
effects a sale, assignment or transfer of the Securities in accordance with
Section 2(f), the Company shall permit the transfer and shall promptly
instruct its transfer agent to issue one or more certificates or credit shares
to the applicable balance accounts at DTC in such name and in such denominations
as specified by such Buyer to effect such sale, transfer or assignment. In
the
event that such sale, assignment or transfer involves Conversion Shares or
Warrant Shares sold, assigned or transferred pursuant to an effective
registration statement or pursuant to Rule 144, and Buyer provides evidence
of
compliance with Rule 144 reasonably acceptable to the Company, the transfer
agent shall, subject to compliance with applicable securities laws, issue such
Securities to the Buyer, assignee or transferee, as the case may be, without
any
restrictive legend. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to affected Buyers.
Accordingly, the Company acknowledges that the remedy at law for a breach of
its
obligations under this Section 5(b) will be inadequate and agrees, in the
event of a breach by the Company of the provisions of this Section 5(b),
that any affected Buyers shall be entitled, in addition to all other available
remedies, to an order and/or injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic
loss
and without any bond or other security being required.
6.
CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL. The obligation of the
Company hereunder to issue and sell the Notes and the related Warrants to each
Buyer at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, reasonably satisfactory to the
Company, provided that these conditions are for the Company’s benefit and may be
waived by the Company at any time in their sole discretion by providing each
Buyer with prior written notice thereof:
(a)
Each
Buyer and Collateral Agent shall have executed each of the Transaction Documents
to which it is a party and delivered the same to the Company.
(b)
Each
Buyer shall have delivered to the Escrow Agent the Purchase Price for the Notes
and the related Warrants being purchased by such Buyer at the Closing by wire
transfer of immediately available funds pursuant to the wire instructions
provided under the Escrow Agreement.
25
(c)
The
representations and warranties of such Buyer shall be true and correct in all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the date when made and as of the Closing Date
as
though made at that time (except for representations and warranties that speak
as of a specific date, each of which shall be true and correct as of such date),
and such Buyer shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by such Buyer at or prior
to the Closing Date. For clarification purposes only, the conditions set forth
in each of the subsections of this Section 6, including, but not limited to,
Sections 6(a) and (b), must be satisfied in all respects, or waived as provided
for in this Section 6.
7.
CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE. The obligation of each
Buyer hereunder to purchase the Notes and the related Warrants at the Closing
is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for each Buyer’s sole
benefit and may be waived by such Buyer at any time in its sole discretion
by
providing the Company with prior written notice thereof:
(a)
Each
of the Company and each of their Subsidiaries, to the extent each is a party
thereto, shall have executed and delivered to such Buyer or to the Company’s
counsel for delivery to such Buyer (i) each of the Transaction Documents,
(ii) the Notes (in such Principal Amounts as such Buyer shall request)
being purchased by such Buyer at the Closing pursuant to this Agreement and
(iii) the Warrants (in such denominations as such Buyer shall request)
being purchased by such Buyer at the Closing pursuant to this Agreement.
(b)
The
Company shall have delivered to such Buyer a copy of the Transfer Agent
Instructions, in the form of Exhibit F
attached
hereto, which instructions shall have been delivered to and acknowledged in
writing by the Company’s transfer agent.
(c)
The
Company shall have delivered to such Buyer a copy of a certificate evidencing
incorporation, partnership or the formation, as applicable, and good standing
of
the Company, and each of the Subsidiaries in such entity’s jurisdiction of
formation issued by the Secretary of State (or comparable office) of such
jurisdiction, as of a date within the 30 days prior to the Closing
Date.
(d)
If
applicable, the Company shall have delivered to such Buyer a certificate
evidencing the Company's and each Subsidiary’s qualification as a foreign entity
(or the equivalent) and good standing issued by the Secretary of State of the
State (or comparable office) of each jurisdiction in which the Company or such
Subsidiary is required to qualify as a foreign entity, each as of a date within
30 days prior to the Closing Date.
(e)
The
Board of Directors shall have adopted resolutions consistent with
Section 3(b) above and in a form reasonably acceptable to such Buyer (the
“Resolutions”).
(f)
The
Company, and each Subsidiary of the Company shall have delivered to such Buyer
a
secretary’s certificate in the form attached hereto as Exhibit
G,
executed by the secretary (or comparable office) of such Person and dated as
of
the Closing Date, certifying (A) that the attached resolutions adopted by
the board of directors of such Person in connection with the Transaction
Documents are true, complete and correct and remain unamended and in full force
and effect, (B) that the attached articles of association, certificate of
incorporation or certificate of formation of such Person, certified as of a
date
within 30 days of the Closing Date, by the secretary of state of the state
of
the jurisdiction of its organization, is true, complete and correct and remains
unamended and in full force and effect, (C) that the attached memorandum of
association, bylaws or limited liability company or operating agreement of
such
Person are true, complete and correct and remain unamended and in full force
and
effect and (D) as to the incumbency and specimen signature of each officer
of
such Person executing this Agreement, the other Transaction Documents and any
other document delivered in connection herewith on behalf of such
Person.
26
(g)
The
representations and warranties of the Company and any Subsidiary set forth
in
this Agreement or any other Transaction Document shall be true and correct
in
all material respects (except for those representations and warranties that
are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the date when made and as of the Closing Date
as
though made at that time (except for representations and warranties which speak
as of a specific date, each of which shall be true and correct as of such date)
and the Company, or each Subsidiary, as applicable, shall have performed,
satisfied and complied in all material respects with the covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by such entity at or prior to the Closing Date. Such Buyer
shall have received a certificate delivered and executed by the President of
each of the Company, dated as of the Closing Date, to the foregoing effect
and
as to such other matters as may be reasonably requested by such Buyer in the
form attached hereto as Exhibit H.
(h)
The
Company shall have (i) obtained all governmental, regulatory or third party
consents and approvals, if any, and (ii) made all filings under all
applicable federal, state or foreign securities laws (to the extent such filings
must be made on or prior to the Closing Date in each case) necessary to
consummate the issuance and the sale of the Securities.
(i)
The
Guarantors shall have delivered to the Collateral Agent an aggregate of
3,000,000 Common Shares together with executed stock powers, to be pledged
pursuant to the Security Documents.
(j)
No
Material Adverse Effect shall have occurred.
(k)
The
Company shall have delivered a certificate of an officer of the Company and
each
Subsidiary certifying as to the solvency of the Company or such Subsidiary.
(l)
All
proceedings in connection with the issuance of the Notes and the other
transactions contemplated by this Agreement and the other Transaction Documents,
and all documents incidental hereto and thereto, shall be reasonably
satisfactory to the Buyers, and the Buyers shall have received all such
information and such counterpart originals or certified or other copies of
such
documents as the Collateral Agent may reasonably request.
(m)
The
Company shall have paid the Buyers $15,000 in cash to reimburse Buyers for
due
diligence and investment documentation expenses.
27
(n)
The
Company shall have delivered to such Buyer such other documents relating to
the
transactions contemplated by this Agreement as such Buyer or its counsel may
reasonably request.
8.
TERMINATION. In the event that the Closing shall not have occurred in
respect of a Buyer on or before the tenth (10th)
Business Day from the date hereof due to the Company’s or such Buyer’s failure
to satisfy the conditions set forth in Sections 6 and 7 above (and the
nonbreaching party’s failure to waive such unsatisfied condition(s)), the
nonbreaching party shall have the option to terminate this Agreement in respect
of such breaching party at the close of business on such date without liability
of any party to any other party.
9.
MISCELLANEOUS.
(a)
Governing
Law; Jurisdiction; Jury Trial.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision
or
rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State
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, 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 brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. 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 to such party at the address for such notices to it
under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
(b)
Counterparts.
This
Agreement may be executed in two or more identical counterparts, all of which
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;
provided that a facsimile signature shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if
the
signature were an original, not a facsimile signature.
(c)
Headings.
The
headings of this Agreement are for convenience of reference only and shall
not
form part of, or affect the interpretation of, this Agreement.
(d)
Severability.
If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
28
(e)
Entire
Agreement; Amendments.
This
Agreement supersedes all other prior oral or written agreements between the
Buyers, the Company, their affiliates and Persons acting on their behalf in
respect of the matters discussed herein, and this Agreement, the Transaction
Documents and the instruments referenced herein contain the entire understanding
of the parties in respect of the matters covered herein and therein and, except
as specifically set forth herein or therein, none of the Company and its
Subsidiaries nor any Buyer makes any representation, warranty, covenant or
undertaking in respect of such matters. No provision of this Agreement may
be
amended other than by an instrument in writing signed by the Company, and the
Required Holders, and any amendment to this Agreement made in conformity with
the provisions of this Section 9(e) shall be binding on all Buyers and
holders of Securities as applicable. No provision hereof may be waived other
than by an instrument in writing signed by the party against whom enforcement
is
sought. No such amendment shall be effective to the extent that it applies
to
less than all of the holders of the applicable Securities then outstanding.
No
consideration shall be offered or paid to any Person to amend or consent to
a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration also is offered to all of the parties to the
Transaction Documents, holders of Notes or holders of the Warrants, as the
case
may be. The Company has not, directly or indirectly, made any agreements with
any Buyers relating to the terms or conditions of the transactions contemplated
by the Transaction Documents except as set forth in the Transaction Documents.
Without limiting the foregoing, the Company confirms that, except as set forth
in this Agreement, no Buyer has made any commitment or promise or has any other
obligation to provide any financing to the Company or otherwise.
(f)
Notices.
Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally provided
same is on a Business Day and, if not, on the next Business Day; (ii) upon
receipt, when sent by facsimile (provided that confirmation of transmission
is
mechanically or electronically generated and kept on file by the sending party)
provided same is on a Business Day and, if not, on the next Business Day;
(iii) one (1) Business Day after deposit with an overnight courier
service, in each case properly addressed to the party to receive the same;
or
(iv) if sent by certified mail, return receipt requested, when received or
three (3) days after deposited in the mails, whichever occurs first. The
addresses and facsimile numbers for such communications shall be:
If
to the
Company:
Attention:
Xx. Xxxxxxx X. Fu Vice
Chairman
& President
00000
Xxxxxx Xxxx, 0xx
Xxxxx
Xxxxxx,
XX 00000
Email:
Xxxxxxx.Xx@XxxxxxXxxxxx.xx
With
a
copy to:
Xxxxxxx
Xxxxxxxxx, Esq.
Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP
00
Xxxxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Fax
(000)
000-0000
Email:
xxxxxxxxxx@xxxx.xxx
29
If
to a
Buyer, to its address and facsimile number set forth on the Schedule of
Buyers, with copies to such Buyer’s representatives as set forth on the
Schedule of Buyers,
or
to
such other address and/or facsimile number and/or to the attention of such
other
Person as the recipient party has specified by written notice given to each
other party five (5) days prior to the effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated
by the sender’s facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided
by an overnight courier service shall be rebuttable evidence of personal
service, receipt by facsimile or receipt from an overnight courier service
in
accordance with clause (i), (ii) or (iii) above,
respectively.
(g)
Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns, including any purchasers
of
the Notes or the Warrants. The Company shall not assign this Agreement or any
rights or obligations hereunder without the prior written consent of the
Required Holders, including by way of a Fundamental Transaction (unless the
Company is in compliance with the applicable provisions governing Fundamental
Transactions set forth in the Notes and the Warrants). Subject to compliance
with applicable securities laws, a Buyer may assign some or all of its rights
hereunder and under the other Transaction Documents without the consent of
the
Company, in which event such assignee shall be deemed to be a Buyer hereunder
and thereunder in respect of such assigned rights. A Buyer or the Collateral
Agent making an assignment of this Agreement shall provide the Company (and
in
the case of an assignment by a Buyer, the Collateral Agent) with written notice
of such assignment within ten (10) Business Days after such assignment is
consummated; provided, however, that the failure by a Buyer or the Collateral
Agent to provide or timely provide such notice shall not invalidate the
assignment.
(h)
No
Third Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person except to the extent set
forth
in Section 9(k).
(i)
Survival.
Unless
this Agreement is terminated under Section 8, the representations and
warranties of the Company and the Buyers contained in Sections 2 and 3, and
the agreements and covenants set forth in Sections 4, 5, 8 and 9 shall
survive the Closing and the delivery, conversion and exercise of the Securities,
as applicable. Each Buyer shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.
(j)
Further
Assurances.
Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
30
(k)
Indemnification.
(ix)
In
consideration of each Buyer’s execution and delivery of the Transaction
Documents and acquiring the Securities thereunder and in addition to all of
the
Company’s other obligations under the Transaction Documents, unless this
Agreement is terminated under Section 8 hereof, the Company shall defend,
protect, indemnify and hold harmless each Buyer and each other holder of the
Securities and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons’ agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Indemnitees”)
from
and against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys’ fees
and disbursements (the “Indemnified
Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or relating to
(a) any misrepresentation or breach of any representation or warranty made
by the Company in any Transaction Document or any other certificate, instrument
or document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in any Transaction Document
or
any other certificate, instrument or document contemplated hereby or thereby
or
(c) any cause of action, suit or claim brought or made against such
Indemnitee by a third party (including for these purposes a derivative action
brought on behalf of the Company) and arising out of or resulting from
(i) the execution, delivery, performance or enforcement of any Transaction
Document or any other certificate, instrument or document contemplated hereby
or
thereby, (ii) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of the issuance of the
Securities, or (iii) the status of such Buyer or holder of the Securities
as an investor in the Company pursuant to the transactions contemplated by
the
Transaction Documents. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law provided that the Company
shall not be obligated to indemnify a Buyer or Collateral Agent for any
Indemnified Liabilities caused by the gross negligence or willful misconduct
of
that Buyer and the Company shall not be obligated to indemnify the Collateral
Agent for any Indemnified Liabilities caused by the gross negligence or willful
misconduct of the Collateral Agent.
(x)
Promptly after receipt by Indemnitee under this Section 9(k) of notice of the
commencement of any action or proceeding (including any governmental action
or
proceeding) involving an Indemnified Liability, such Indemnitee shall, if a
claim in respect thereof is to be made against any indemnifying party under
this
Section 9(k), 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 control of the
defense thereof with counsel mutually satisfactory to the indemnifying party
and
the Indemnitee, as the case may be; provided,
however,
that an
Indemnitee shall have the right to retain its own counsel with the fees and
expenses of not more than one counsel for such Indemnitee to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnitee and
the
indemnifying party would be inappropriate due to actual or potential differing
interests between such Indemnitee and any other party represented by such
counsel in such proceeding. In the case of an Indemnitee, legal counsel referred
to in the immediately preceding sentence shall be selected by Required
Holders,
to which
the claim relates. The Indemnitee shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or claim
by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the Indemnitee which relates to such action
or claim. The indemnifying party shall keep the Indemnitee reasonably apprised
at all times as to the status of the defense or any settlement negotiations
in
respect thereof. No indemnifying party shall be liable for any settlement of
any
action, claim or proceeding effected without its prior written consent;
provided,
however,
that
the indemnifying party shall not unreasonably withhold, delay or condition
its
consent. No indemnifying party shall, without the prior written consent of
the
Indemnitee, consent to entry of any judgment or enter into any settlement or
other compromise which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnitee of a release from all
liability in respect to such claim or litigation, and such settlement shall
not
include any admission as to fault on the part of the Indemnitee. Following
indemnification as provided for hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnitee in respect of all third parties,
firms or corporations relating to the matter for which indemnification has
been
made. The failure to deliver written notice to the indemnifying party within
a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnitee under this Section 9(k),
except to the extent that the indemnifying party is materially prejudiced in
its
ability to defend such action.
31
(xi)
The
indemnification required by this Section 9(k) shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as
and
when bills are received or Indemnified Liabilities are incurred.
(xii)
(iii) The indemnity agreements contained herein shall be in addition to (A)
any
cause of action or similar right of the Indemnitee against the indemnifying
party or others, and (B) any liabilities the indemnifying party may be subject
to pursuant to the law.
(l)
No
Strict Construction.
The
language used in the Transaction Documents will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
(m)
Remedies.
Each
Buyer and each holder of the Securities shall have all rights and remedies
set
forth in the Transaction Documents and all rights and remedies which such
holders have been granted at any time under any other agreement or contract
and
all of the rights which such holders have under any law. Any Person having
any
rights under any provision of this Agreement shall be entitled to enforce such
rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. Furthermore, the Company recognizes
that in the event that it fails to perform, observe, or discharge any or all
of
its obligations under the Transaction Documents, any remedy at law may prove
to
be inadequate relief to the Buyers. The Company therefore agrees that the Buyers
shall be entitled to seek temporary and permanent injunctive relief in any
such
case without the necessity of proving actual damages and without posting a
bond
or other security.
(n)
Rescission
and Withdrawal Right.
Notwithstanding anything to the contrary contained in (and without limiting
any
similar provisions of) the Transaction Documents, whenever any Buyer exercises
a
right, election, demand or option under a Transaction Document and the Company
does not timely perform its related obligations within the periods therein
provided, then such Buyer may rescind or withdraw, in its sole discretion from
time to time upon written notice to the Company, any relevant notice, demand
or
election in whole or in part without prejudice to its future actions and
rights
32
(o)
Payment
Set Aside.
To the
extent that the Company makes a payment or payments to the Buyers hereunder
or
pursuant to any of the other Transaction Documents or the Buyers or the
Collateral Agent, as applicable, enforce or exercise their rights hereunder
or
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, foreign, 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.
(p)
Independent
Nature of Buyers’ Obligations and Rights.
The
obligations of each Buyer under any Transaction Document are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any other Buyer under
any
Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall
be
deemed to constitute the Buyers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Buyers
are
in any way acting in concert or as a group in respect of such obligations or
the
transactions contemplated by the Transaction Documents and the Company
acknowledges that the Buyers are not acting in concert or as a group in respect
of such obligations or the transactions contemplated by the Transaction
Documents. Each Buyer confirms that it has independently participated in the
negotiation of the transaction contemplated by this Agreement and the
Transaction Documents with the advice of its own counsel and advisors, that
it
has independently determined to enter into the transactions contemplated hereby
and thereby, that it is not relying on any advice from or evaluation by any
other Buyer, and that it is not acting in concert with any other Buyer in making
its purchase of Securities hereunder or in monitoring its investment in the
Company. The Buyers and, to its knowledge, the Company agree that no action
taken by any Buyer pursuant hereto or to the other Transaction Documents, shall
be deemed to constitute the Buyers as a partnership, an association, a joint
venture or any other kind of entity or group, or create a presumption that
the
Buyers are in any way acting in concert or would deem such Buyers to be members
of a “group” for purposes of Section 13(d) of the 1934 Act. The Buyers each
confirm that they have not agreed to act together for the purpose of acquiring,
holding, voting or disposing of equity securities of the Company. The Company
has elected to provide all Buyers with the same terms and Transaction Documents
for the convenience of the Company and not because it was required or requested
to do so by any of the Buyers. The Company acknowledges on behalf of itself
and
the Company that such procedure in respect of the Transaction Documents in
no
way creates a presumption that the Buyers are in any way acting in concert
or as
a “group” for purposes of Section 13(d) of the 1934 Act in respect of the
Transaction Documents or the transactions contemplated hereby or thereby. Each
Buyer shall be entitled to independently protect and enforce its rights,
including, without limitation, the rights arising out of this Agreement, or
out
of the Registration Rights Agreement, its Note, its Warrant and the right of
set-off under the Guaranties, and it shall not be necessary for any other Buyer
to be joined as an additional party in any proceeding for such
purpose.
33
(q)
[intentionally omitted.]
(r)
Definitions:
For
purposes of this Securities Purchase Agreement and the Notes, the following
terms shall have the following meanings:
"Principal
Amount"
shall
mean the Principal (as defined in the Notes) amount.
"Solvent"
means,
with respect to any Person on a particular date, that on such date i) the fair
value of the property of such Person is not less than the total amount of the
liabilities of such Person (and including as assets for this purpose at a fair
valuation all rights of subrogation, contribution or indemnification arising
pursuant to any guarantees given by such Person, to the extent such amount
is
readily ascertainable), ii) the present fair salable value of the assets of
such
Person (and including as assets for this purpose at a fair valuation all rights
of subrogation, contribution or indemnification arising pursuant to any
guarantees given by such Person, to the extent such amount is readily
ascertainable) is not less than the amount that will be required to pay the
probable liability of such Person on its existing debts as they become absolute
and matured, iii) such Person is able to realize upon its assets and pay its
debts and other liabilities, contingent obligations and other commitments as
they mature in the normal course of business, iv) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature, and v) such Person
is not engaged in business or a transaction, and is not about to engage in
business or a transaction, for which such Person's property would constitute
unreasonably small capital.
"Subsidiary"
means,
from time to time, any entity in which the Company, directly or indirectly,
owns
any of the capital stock, equity or similar interest or voting power of such
entity at the date of this Agreement.
[Signature
Pages Follow]
34
IN
WITNESS WHEREOF,
each
Buyer and the Company have caused their respective signature page to this
Securities Purchase Agreement to be duly executed as of the date first written
above.
| COMPANY: | ||
| GOLDEN AUTUMN HOLDINGS INC. | ||
| By: | /s/Xxxxxxx Xx | |
|
Name: Xxxxxxx Xx |
||
| Title: President | ||
| BUYERS: | ||
| STRATEGIC ALLIANCE FUND, L.P. | ||
| By: | Strategic Alliance Capital, LLC, General Partner | |
| By: | /s/Xxxxxx X. Xxxxxxx | |
|
|
||
| Name: Xxxxxx X. Xxxxxxx | ||
| Title: Manafer | ||
| STRATEGIC ALLIANCE FUND II, L.P. | ||
| By: | Strategic Alliance Capital, LLC, General Partner | |
| By: | /s/Xxxxxx X. Xxxxxxx | |
|
Name: Xxxxxx X. Xxxxxxx |
||
| Title: Manager | ||
35
SCHEDULE
OF BUYERS
|
(1)
|
(2)
|
(3)
|
(4)
|
(5)
|
||||
|
Buyer
|
Address,
Telephone
Number
and E-Mail
|
Original
Principal
Amount
of
Notes
|
Purchase
Price
|
Legal
Representative’s
Address,
Telephone
Number
and Facsimile
Number
|
||||
|
Strategic
Alliance Fund, L.P.
|
||||||||
|
Strategic
Alliance Fund II, L.P.
|
|
Exhibit A
|
Form
of Notes
|
|
Exhibit B
|
Form
of Warrant
|
|
Exhibit
C
|
Form
of Limited Guaranty
|
|
Exhibit
D
|
Form
of Pledge Agreement
|
|
Exhibit E
|
Form
of Registration Rights Agreement
|
|
Exhibit F
|
Form
of Transfer Agent Instructions
|
|
Exhibit G
|
Form
of Secretary’s Certificate
|
|
Exhibit H
|
Form
of Officer’s Certificate
|
SCHEDULES
|
Organization
and Qualification
|
|
|
Schedule 3(f)
|
Acknowledgement
Regarding Buyer’s Purchase of Securities
|
|
Schedule 3(k)
|
Absence
of Certain Changes
|
|
Schedule 3(n)
|
Transactions
with Affiliates
|
|
Schedule 3(o)
|
Equity
Capitalization; Debt
|
|
Schedule 3(p)
|
Indebtedness
and Other Contracts
|
|
Schedule 3(t)
|
Title
|
|
Schedule 3(u)
|
Intellectual
Property Rights
|
|
Schedule 3(x)
|
Tax
Status
|
|
Schedule 3(ff)
|
ERISA
|
|
Schedule 4(d)
|
Use
of Proceeds
|
36
Disclosure
Schedules
to
(Prepared
in connection with an
aggregate of $1,000,000 of 8% Senior Secured Notes together with a Common Stock
Purchase Warrant to purchase a number of shares of the Company equal to 30%
of
the number of shares of common stock into which the Note is convertible
sold
by the Company to the Purchaser under the Securities Purchase Agreement dated
August 31, 2007 (the “Securities Purchase Agreement”). Capitalized terms not
defined herein shall have the meaning given to such terms in the Securities
Purchase Agreement.)
37
Schedule
3(a): Organization and Qualification
Golden
Autumn Holdings, Inc. has three subsidiaries:
1)
Sichuan Baoguang Golden Autumn Senior Living Development Co., Ltd. (92%) (the
“JV”)
2)
Golden
Autumn Holdings (Hong Kong) Ltd. (100%)
3)
Golden
Autumn Development (Hong Kong) Ltd. (100%)
(Note:
The two Hong Kong subsidiaries do not have any substantial operating activities
yet.)
Under
the
JV, there are three wholly-owned subsidiaries:
1)
Chendu
Xinjin Hua Yuan Real Estate Development Co., Ltd.
2)
Sichuan Golden Autumn Property Management Services Co., Ltd.
3)
Sichuan Baoguang Memorial Products & Services Chain Co., Ltd.
38
Schedule
3(f): Acknowledgement Regarding Buyer’s Purchase of
Securities
N/A
39
Schedule
3(k): Absence of Certain Changes
N/A
40
Schedule
3(n): Transactions with Affiliates
At
December 31, 0000, Xxxxxxx Xxxxx Chuanxi Entertainment Co., Ltd., a company
under the control of Xx. Xxxxxxxxx Xx, and director of Golden Autumn Holdings
Inc. maintained a loan payable balance of $3,353,020. The outstanding loan
balance comprised of cash advances of approximately $2,319,665 for the purposes
of acquiring certain shares of the Predecessor. These debts are unsecured and
interest free. In 0000, Xxxxxxx Xxxxx Chuanxi Entertainment Co., Ltd repaid
a
portion of the debt by returning common shares in Golden Autumn Holdings Inc.
valued $2,319,665. As of June 30, 0000, Xxxxxxx Xxxxx Chuanxi Entertainment
Co.,
Ltd. outstanding receivable was approximately $905,150. Chuanxi Entertainment
paid off $128,205(1,000,000 CNY) in January of 2007.
41
Schedule
3(o): Equity Capitalization; Debt
1
million
warrants at the exercise price of $1 per share, issued to Galway
Holdings.
42
Schedule
3(p): Indebtedness and Other Contracts
N/A
43
Schedule
3(t): Title
N/A
44
Schedule
3(u): Intellectual Property Rights
N/A
45
Schedule
3(x): Tax Status
N/A
46
Schedule
(ff): ERISA
N/A
47
Schedule
4(d): Use of Proceeds
For
general corporate purposes (e.g., hiring a CFO with good work experience with
the U.S. GAAP and SEC filings, expenses in raising funds with Xxxx Capital,
etc.)
48
