Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
September 14, 2005, among China BAK Battery, Inc., a Nevada corporation (the
"Company"), and the investors identified on the signature pages hereto (each, an
"Investor" and collectively, the "Investors").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act (as defined below)
and Rule 506 promulgated thereunder, the Company desires to issue and sell to
each Investor, and each Investor, severally and not jointly, desires to purchase
from the Company certain securities of the Company, as more fully described in
this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Investors agree
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms shall have
the meanings indicated in this Section 1.1:
"Action" means any action, suit, inquiry, notice of violation,
proceeding (including any partial proceeding such as a deposition) or
investigation pending or threatened in writing against or affecting the Company,
any Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency, regulatory authority
(federal, state, county, local or foreign), stock market, stock exchange or
trading facility.
"Affiliate" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is under
common control with a Person, as such terms are used in and construed under Rule
144 (as defined below).
"Business Day" means any day except Saturday, Sunday and any
day which is a federal legal holiday or a day on which banking institutions in
the States of New York or Nevada are authorized or required by law or other
governmental action to close.
"Closing" has the meaning set forth in Section 2.1.
"Closing Date" means the Business Day immediately following
the date on which all of the conditions set forth in Sections 5.1 and 5.2 hereof
are satisfied, or such other date as the parties may agree.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, $0.001
par value per share, and any securities into which such common stock may
hereafter be reclassified.
"Common Stock Equivalents" means any securities of the Company
or any Subsidiary which entitle the holder thereof to acquire Common Stock at
any time, including without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock or other securities that entitle the holder to receive, directly or
indirectly, Common Stock.
"Company Counsel" means the law firm of Xxxxxxx Xxxxx, L.L.P.
"Company Deliverables" has the meaning set forth in Section
2.2(a).
"Disclosure Materials" has the meaning set forth in Section
3.1(h).
"Escrow Agreement" means the Escrow Agreement, dated as of
August 30, 2005, among the Company, Xxxx Capital Partners, LLC and Xxxxx Fargo
Bank, National Association as the escrow agent (the "Escrow Agent") set forth
therein, in the form of Exhibit F hereto.
"Effective Date" means the date that the Registration
Statement required by Section 2(a) of the Registration Rights Agreement is first
declared effective by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Form SB-2" has the meaning set forth in Section 3.1(h).
"GAAP" means U.S. generally accepted accounting principles.
"Hong Kong Counsel" means the law firm of Xxxxxx Xxxxxx & Co.
"Initial Closing" means the initial closing pursuant to which
each Investor, except the Remaining Investors, shall deliver their respective
Investment Amount to the Escrow Agent to be placed in an escrow account until
the Closing and shall occur on the date of this Agreement.
"Investor Deliverables" has the meaning set forth in Section
2.2(c).
"Intellectual Property Rights" has the meaning set forth in
Section 3.1(p).
"Investment Amount" means, with respect to each Investor, the
Investment Amount indicated on such Investor's signature page to this Agreement.
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"Investor Party" has the meaning set forth in Section 4.7.
"Lien" means any lien, charge, encumbrance, security interest,
right of first refusal or other restrictions of any kind.
"Material Adverse Effect" means, as applicable, any of (i) a
material and adverse effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material and adverse effect on the results of
operations, assets, prospects, business or condition (financial or otherwise) of
the Company and the Subsidiaries, taken as a whole, or (iii) an adverse
impairment to the Company's ability to perform on a timely basis its obligations
under any Transaction Document.
"Nevada Counsel" means the law firm of Xxxxxxx Brigone.
"New York Courts" means the state and federal courts sitting
in the City of New York, Borough of Manhattan.
"Pending Registration Statement" means the Registration
Statement on Form SB-2 filed by the Company with the Commission on January 1,
2005, as the same has been and shall be amended or supplemented.
"Per Unit Purchase Price" equals $5.50.
"Person" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or subdivision
thereof) or other entity of any kind.
"PRC Counsel" means the law firm of Grandall Legal Group
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Registration Statement" means a registration statement
meeting the requirements set forth in the Registration Rights Agreement and
covering the resale by the Investors of the appropriate Registrable Securities
as identified in Section 2(a) of the Registration Rights Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company and the
Investors, in the form of Exhibit A hereto.
"Remaining Investors" means the Investors to be indentified by
Xxxx Capital Partners, LLC on the date hereof and conveyed in writing to each of
the Investors and the Company.
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"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SEC Reports" has the meaning set forth in Section 3.1(h).
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means the shares of Common Stock issuable to the
Investors at the Closing in accordance with Section 2.2(a)(i).
"Short Sales" include, without limitation, all "short sales"
as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act
and all types of direct and indirect stock pledges, forward sale contracts,
options, puts, calls, short sales, swaps and similar arrangements (including on
a total return basis), and sales and other transactions through non-US broker
dealers or foreign regulated brokers.
"Subsidiary" means any "significant subsidiary" as defined in
Rule 1-02(w) of the Regulation S-X promulgated by the Commission under the
Exchange Act.
"Trading Day" means (i) a day on which the Common Stock is
traded on a Trading Market, or (ii) if the Common Stock is not quoted on any
Trading Market, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the Pink Sheets, LLC (or any similar
organization or agency succeeding to its functions of reporting prices);
provided, that in the event that the Common Stock is not listed or quoted as set
forth in (i) and (ii) hereof, then Trading Day shall mean a Business Day.
"Trading Market" means whichever of the New York Stock
Exchange, the American Stock Exchange, the NASDAQ National Market, the NASDAQ
SmallCap Market or OTC Bulletin Board on which the Common Stock is listed or
quoted for trading on the date in question.
"Transaction Documents" means this Agreement, the Registration
Rights Agreement, the Escrow Agreement and any other documents or agreements
executed in connection with the transactions contemplated hereunder.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. At the Initial Closing each Investor, except the Remaining
Investors, shall deliver each Investor's respective Investment Amount to the
Escrow Agent to be placed in an escrow account until the Closing. At the
Closing, subject to the terms and conditions set forth in this Agreement,
including the applicable Conditions Precedent to Closings set forth in Article
V, the Escrow Agent shall release the funds received pursuant to the Initial
Closing to the Company and the Company shall issue and sell to each Investor,
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and each Investor, including the Remaining Investors shall, severally and not
jointly, purchase from the Company, the Shares representing such Investor's
Investment Amount. The Initial Closing shall take place at the offices of
Company Counsel, or such other location or time as the parties may agree. The
Closing shall take place at the offices of Company Counsel on the Closing Date
or at such other location or time as the parties may agree.
2.2 Closing Deliveries. (a) At the Closing, the Company shall deliver
or cause to be delivered to each Investor the following (the "Company
Deliverables"):
(i) a certificate evidencing a number of Shares equal to such
Investor's Investment Amount divided by the Per Unit Purchase Price, registered
in the name of such Investor;
(ii) the legal opinions of Company Counsel, Nevada Counsel,
PRC Counsel and Hong Kong Counsel, in the form attached hereto as Exhibit B,
Exhibit C, Exhibit D, and Exhibit E, respectively, addressed to the Xxxx Capital
Partners, LLC and the Investors; and
(iii) the Registration Rights Agreement, duly executed by the
Company;
(b) At the Initial Closing, (i) the Company shall deliver the Escrow
Agreement, duly executed by the Company Xxxx Capital Partners, LLC and the
Escrow Agent, and (ii) each Investor, except the Remaining Investors, shall
deliver or cause to be delivered to the Escrow Agent, its Investment Amount, in
United States dollars and in immediately available funds, by wire transfer to an
account designated in writing by the Escrow Agent for such purpose; and
(c) At the Closing, each Investor shall deliver or cause to be
delivered to the Company, the Registration Rights Agreement, duly executed by
such Investor. In addition, the Remaining Investors shall deliver or cause to be
delivered to the Company, its Investment Amount, in United States dollars and in
immediately available funds, by wire transfer to an account designated in
writing by the Company for such purpose. Each Investor's Investment Amount,
together with the duly executed Registration Rights Agreement shall be the
"Investor Deliverables".
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to each Investor as of the
date hereof and as of the Closing Date:
(a) Subsidiaries. The Company has no direct or indirect Subsidiaries
other than as specified in the SEC Reports or the Form SB-2. The Company owns,
directly or indirectly, all of the capital stock of each Subsidiary free and
clear of any and all Liens, and all the issued and outstanding shares of capital
stock of each Subsidiary are validly issued and are fully paid, non-assessable
and free of preemptive and similar rights.
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(b) Organization and Qualification. The Company and each Subsidiary are
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents except where
the violation would not, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect. The Company and each Subsidiary
are duly qualified to conduct its respective businesses and are in good standing
as a foreign corporation in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case may
be, would not, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect.
(c) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary corporate action
on the part of the Company and no further action is required by the Company in
connection therewith. Each Transaction Document has been (or upon delivery will
have been) duly executed by the Company and, when delivered in accordance with
the terms hereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
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(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as would not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents,
other than (i) the filing with the Commission of one or more Registration
Statements in accordance with the requirements of the Registration Rights
Agreement, (ii) filings required by state securities laws, (iii) the filing of a
Notice of Sale of Securities on Form D with the Commission under Regulation D of
the Securities Act, (iv) the filings required in accordance with Section 4.5 and
(v) those that have been made or obtained prior to the date of this Agreement.
(f) Issuance of the Shares. The Shares issuable under Section 2.2(a)(i)
have been duly authorized and, when issued and paid for in accordance with the
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens, provided, however, the Company's
representation in this subsection (f) shall not apply to Liens created by any
Investor. The Company has reserved from its duly authorized capital stock the
shares of Common Stock issuable pursuant to this Agreement in order to issue the
Shares.
(g) Capitalization. Except as set forth on Schedule 3.1(g), the number
of shares and type of all authorized, issued and outstanding capital stock of
the Company, and all shares of Common Stock reserved for issuance under the
Company's various option and incentive plans, is specified in the SEC Reports or
the Form SB-2. Except as specified in the SEC Reports or the Form SB-2 or on
Schedule 3.1(g), no Person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as specified in the SEC
Reports or the Form SB-2 or on Schedule 3.1(g), there are no outstanding
options, warrants, scrip rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exchangeable for, or giving any Person any right to
subscribe for or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock. Except as specified in
the SEC Reports or the Form SB-2 or on Schedule 3.1(g), the issue and sale of
the Shares will not, immediately or with the passage of time, obligate the
Company to issue shares of Common Stock or other securities to any Person (other
than the Investors) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price under
such securities.
(h) SEC Reports; Financial Statements. Except as set forth on Schedule
3.1(h), the Company has filed all reports required to be filed by it under the
Securities Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the 12 months preceding the date hereof (or such shorter
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period as the Company was required by law to file such reports) (the foregoing
materials being collectively referred to herein as the "SEC Reports" and,
together with the Company Schedules to this Agreement and the Form SB-2 (as
defined below), the "Disclosure Materials") on a timely basis or has timely
filed a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. Except as set forth on
Schedule 3.1(h), as of their respective dates, the SEC Reports, as amended and
the registration statement on Form SB-2/A (File No. 333-122209), as amended (the
"Form SB-2"), complied as to form in all material respects with (i) the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder and (ii) any SEC comments
received or otherwise conveyed to the Company with respect to any previously
filed SEC Reports or the Form SB-2. In addition, none of the SEC Reports or the
Form SB-2, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Reports and the Form SB-2 comply in all material respects with
applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved, except as may be otherwise
specified in such financial statements or the notes thereto, and fairly present
in all material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit adjustments.
(i) Press Releases. The press releases disseminated by the Company
during the 12 months preceding the date of this Agreement taken as a whole do
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made and when made,
not misleading.
(j) Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports or the Form SB-2, (i) there has been no event, occurrence or
development that has had or that would reasonably be expected to result in a
Material Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables, accrued expenses and
other liabilities incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting or the identity of its auditors, (iv) the Company has not declared or
made any dividend or distribution of cash or other property to its shareholders
or purchased, redeemed or made any agreements to purchase or redeem any shares
of its capital stock, and (v) the Company has not issued any equity securities
to any officer, director or Affiliate, except pursuant to existing Company stock
option plans, or as described in Schedule 3.1(j). The Company does not have
pending before the Commission any request for confidential treatment of
information.
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(k) Litigation. There is no Action which (i) adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Shares or (ii) except as specifically disclosed in the SEC
Reports or the Form SB-2, would, if there were an unfavorable decision,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect. Neither the Company nor any Subsidiary, nor any
director or officer thereof (in his or her capacity as such), is or has been the
subject of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary duty, except
as specifically disclosed in the SEC Reports or the Form SB-2. There has not
been, and to the knowledge of the Company, there is not pending any
investigation by the Commission involving the Company or any current or former
director or officer of the Company (in his or her capacity as such). The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.
(l) Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company.
(m) Compliance. Neither the Company nor any Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body applicable
to the Company or Subisidiary, as appropriate, or (iii) is in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws relating to taxes,
environmental protection, occupational health and safety, product quality and
safety and employment and labor matters applicable to the Company or Subsidiary,
as appropriate, except in the case of each of the clauses (i)-(iii) as would
not, individually or in the aggregate, have or reasonably be expected to result
in a Material Adverse Effect. The Company is in compliance with all effective
requirements of the Xxxxxxxx-Xxxxx Act of 2002, as amended, and the rules and
regulations thereunder, that are applicable to it, except where such
noncompliance could not have or reasonably be expected to result in a Material
Adverse Effect.
(n) Regulatory Permits. Except as disclosed in Schedule 3.1(n), the
Company and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described in the
SEC Reports or the Form SB-2, except where the failure to possess such permits
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would not, individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect, and neither the Company nor any Subsidiary
has received any notice of proceedings relating to the revocation or material
modification of any such permits.
(o) Title to Assets. Except as set forth in Schedule 3.1(o), the
Company and the Subsidiaries have good and marketable title in fee simple to all
real property owned by them that is material to their respective businesses and
good and marketable title in all personal property owned by them that is
material to their respective businesses, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries and those liens reflected on
the financial statements included in the SEC Reports or the Form SB-2 or on
Schedule 3.10(o). Any real property and facilities held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and the Subsidiaries are in compliance,
except as would not, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect.
(p) Patents and Trademarks. The Company and the Subsidiaries have, or
have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Reports or the Form SB-2 and which
the failure to so have would, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect (collectively, the
"Intellectual Property Rights"). Neither the Company nor any Subsidiary has
received a written notice that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of any Person.
Except as set forth in the SEC Reports or the Form SB-2, to the knowledge of the
Company, all such Intellectual Property Rights are enforceable and there is no
existing infringement by another Person of any of the Intellectual Property
Rights.
(q) [Intentionally left blank]
(r) Transactions With Affiliates and Employees. Except as set forth in
the SEC Reports or the Form SB-2, none of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, that is required to be disclosed in
the SEC Reports.
(s) Disclosure Controls. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15 and 15d-15) for
the Company and designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its Subsidiaries, is
made known to the Chief Executive Officer and Chief Financial Officer by others
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within those entities, particularly during the period in which the Company's
Form 10-K or 10-Q, as the case may be, is being prepared. The Company's Chief
Executive Officer and Chief Financial Officer have evaluated the effectiveness
of the Company's controls and procedures in accordance with Item 307 of
Regulation S-K under the Exchange Act for the Company's most recently ended
fiscal quarter or fiscal year-end (such date, the "Evaluation Date"). The
Company presented in its most recently filed Form 10-K or Form 10-Q the
conclusions of the Chief Executive Officer and Chief Financial Officer about the
effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there have
been no significant changes in the Company's internal control over financial
reporting (as such term is defined in Item 308(c) of Regulation S-K under the
Exchange Act) or, to the Company's knowledge, in other factors that could
significantly affect the Company's internal control over financial reporting.
(t) Solvency. Based on the financial condition of the Company as of the
Closing Date (and assuming that the Closing shall have occurred), (i) the
Company's fair saleable value of its assets exceeds the amount that will be
required to be paid on or in respect of the Company's existing debts and other
liabilities (including known contingent liabilities) as they mature, (ii) the
Company's assets do not constitute unreasonably small capital to carry on its
business for the current fiscal year as now conducted and as proposed to be
conducted including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof, and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).
(u) Certain Fees. Except as described in Schedule 3.1(u), no brokerage
or finder's fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
this Agreement. The Investors shall have no obligation with respect to any fees
or with respect to any claims (other than such fees or commissions owed by an
Investor pursuant to written agreements executed by such Investor which fees or
commissions shall be the sole responsibility of such Investor) made by or on
behalf of other Persons for fees of a type contemplated in this Section that may
be due in connection with the transactions contemplated by this Agreement.
(v) Certain Registration Matters. Assuming the accuracy of the
Investors' representations and warranties set forth in Sections 3.2(b)-(e), no
registration under the Securities Act is required for the offer and sale of the
Shares by the Company to the Investors under the Transaction Documents. Except
as specified in Schedule 3.1(v), the Company has not granted or agreed to grant
to any Person any rights (including "piggy-back" registration rights) to have
any securities of the Company registered with the Commission or any other
governmental authority that have not been satisfied.
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(w) Listing and Maintenance Requirements. The Common Stock is
registered pursuant to Section 12(g) of the Exchange Act. Except as specified in
the SEC Reports or the Form SB-2, the Company has not, in the one year preceding
the date hereof, received notice from any Trading Market to the effect that the
Company is not in compliance with the listing or maintenance requirements
thereof. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with the listing and
maintenance requirements for continued listing of the Common Stock on the
Trading Market on which the Common Stock is currently listed or quoted. The
issuance and sale of the Shares under the Transaction Documents does not
contravene the rules and regulations of the Trading Market on which the Common
Stock is currently listed or quoted, and no approval of the shareholders of the
Company thereunder is required for the Company to issue and deliver to the
Investors the Shares contemplated by Transaction Documents. The representations
contained in this subsection shall not be construed to attach any liability on
the Company in the event that the Trading Market upon which the Company's common
stock is traded ceases to operate or exist.
(x) Investment Company. The Company is not, and is not an Affiliate of,
and immediately following the Closing will not have become, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(y) Application of Takeover Protections. The Company has taken all
necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company's
Certificate of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Investors as a
result of the Investors and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation the Company's issuance of the Shares and the Investors' ownership of
the Shares.
(z) No Additional Agreements. The Company does not have any agreement
or understanding with any Investor with respect to the transactions contemplated
by the Transaction Documents other than as specified in the Transaction
Documents.
(aa) Disclosure. The Company confirms that neither it nor any Person
acting on its behalf has provided any Investor or its respective agents or
counsel with any information that the Company believes constitutes material,
non-public information except insofar as the existence and terms of the proposed
transactions hereunder may constitute such information. The Company understands
and confirms that the Investors will rely on the foregoing representations and
covenants in effecting transactions in securities of the Company. All disclosure
provided to the Investors regarding the Company, its business and the
transactions contemplated hereby, furnished by or on behalf of the Company
(including the Company's representations and warranties set forth in this
Agreement) are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
12
(bb) Tax Status. Except for matters that would not, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary has filed all necessary federal, state
and foreign income and franchise tax returns and has paid or accrued all taxes
shown as due thereon, and the Company has no knowledge of a tax deficiency which
has been asserted or threatened against the Company or any Subsidiary.
(cc) No General Solicitation. Neither the Company nor any person acting
on behalf of the Company has offered or sold any of the Shares by any form of
general solicitation or general advertising. The Company has offered the Shares
for sale only to the Investors and certain other "accredited investors" within
the meaning of Rule 501 under the Securities Act.
(dd) Foreign Corrupt Practices. Neither the Company, nor to the
knowledge of the Company, any agent or other person acting on behalf of the
Company, has (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company (or made by any person
acting on its behalf of which the Company is aware) which is in violation of
law, or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
(ee) Accountants. The Company's auditors are Xxxxxxxx Xxxxxxxx Xxxxxxx
LLP. To the knowledge of the Company, such auditors, who have certified the
consolidated financial statements included in the Form SB-2 dated June 27, 2005,
as amended, are independent public accountants with respect to the Company
within the meaning of the Securities Act and the applicable rules and
regulations thereunder and is a registered public accounting firm within the
meaning of Section 102 of the Xxxxxxxx-Xxxxx Act of 2002.
(ff) Investors' Purchase of Securities. The Company acknowledges and
agrees that each of the Investors is acting solely in the capacity of an arm's
length purchaser with respect to the Transaction Documents and the transactions
contemplated hereby. The Company further acknowledges that no Investor is acting
as a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement and the transactions contemplated hereby and any
advice given by any Investor or any of their respective representatives or
agents in connection with this Agreement and the transactions contemplated
hereby is merely incidental to the Investors' purchase of the Shares. The
Company further represents to each Investor that the Company's decision to enter
into this Agreement has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives.
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(gg) Manipulation of Price. The Company has not, and to its knowledge
no one acting on its behalf has, in violation of applicable law, (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 or (ii) sold, bid for,
purchased, or, paid any compensation for soliciting purchases of, any of the
Securities (other than for the placement agent's placement of the Securities).
3.2 Representations and Warranties of the Investors. Each Investor
hereby, for itself and for no other Investor, represents and warrants to the
Company as of the date hereof and as of the Closing Date as follows:
(a) Organization; Authority. Such Investor is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the applicable
Transaction Documents and otherwise to carry out its obligations thereunder. The
execution, delivery and performance by such Investor of the transactions
contemplated by this Agreement has been duly authorized by all necessary
corporate or, if such Investor is not a corporation, such partnership, limited
liability company or other applicable like action, on the part of such Investor.
Each of this Agreement and the Registration Rights Agreement has been duly
executed by such Investor, and when delivered by such Investor in accordance
with terms hereof, will constitute the valid and legally binding obligation of
such Investor, enforceable against it in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
(b) Investment Intent. Such Investor is acquiring the Shares as
principal for its own account for investment purposes only and not with a view
to or for distributing or reselling such Shares or any part thereof, without
prejudice, however, to such Investor's right at all times to sell or otherwise
dispose of all or any part of such Shares in compliance with applicable federal
and state securities laws. Subject to the immediately preceding sentence,
nothing contained herein shall be deemed a representation or warranty by such
Investor to hold the Shares for any period of time. Such Investor is acquiring
the Shares hereunder in the ordinary course of its business. Such Investor does
not have any agreement or understanding, directly or indirectly, with any Person
to distribute any of the Shares.
(c) Investor Status. At the time such Investor was offered the Shares,
it was, and at the date hereof it is, (i) knowledgeable, sophisticated and
experienced in making, and qualified to make, decisions with respect to
investments in securities representing an investment decision similar to that
involved in the purchase of the Shares, including investments in securities
issued by the Company and comparable entities, and has had the opportunity to
request, receive, review and consider all information it deemed relevant in
making an informed decision to purchase the Shares; and (ii) an "accredited
investor" as defined in Rule 501(a) under the Securities Act. Such Investor is
not a registered broker-dealer under Section 15 of the Exchange Act.
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(d) General Solicitation. Such Investor is not purchasing the Shares as
a result of any advertisement, article, notice or other communication regarding
the Shares published in any newspaper, magazine or similar media or broadcast
over television or radio or presented at any seminar or any other general
solicitation or general advertisement.
(e) Access to Information. Such Investor acknowledges that it has
reviewed the Disclosure Materials and that the Investor may not rely on those
portions of the Registration Statement not applicable to the offering of the
Shares, including, but not limited to, the sections entitled "Plan of
Distribution," "Calculation of Registration Fee," "The Offering," "Selling
Stockholders" and "Shares Eligible for Future Sale". Such Investor also
acknowledges that is has been afforded (i) the opportunity to ask such questions
as it has deemed necessary of, and to receive answers from, representatives of
the Company concerning the terms and conditions of the offering of the Shares
and the merits and risks of investing in the Shares; (ii) access to information
about the Company and the Subsidiaries and their respective financial condition,
results of operations, business, properties, management and prospects sufficient
to enable it to evaluate its investment; and (iii) the opportunity to obtain
such additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment. Neither such inquiries nor any other
investigation conducted by or on behalf of such Investor or its representatives
or counsel shall modify, amend or affect such Investor's right to rely on the
truth, accuracy and completeness of the Disclosure Materials and the Company's
representations and warranties contained in the Transaction Documents.
(f) Certain Trading Activities. Such Investor has not directly or
indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with such Investor, engaged in any transactions in the securities
of the Company (including, without limitations, any Short Sales involving the
Company's securities) since the earlier to occur of (i) the time that such
Investor was first contacted by the Company or Xxxx Capital Partners, LLC
regarding an investment in the Company and (ii) the 30th day prior to the date
of this Agreement. Such Investor covenants that neither it nor any Person acting
on its behalf or pursuant to any understanding with it will engage in any
transactions in the securities of the Company (including Short Sales) prior to
the time that the transactions contemplated by this Agreement are publicly
disclosed. Such Investor covenants that, until to the earlier of (i) the
Effective Date (as defined in the Registration Rights Agreement) or (ii) the
180th day after the date of this Agreement, such Investor will not, directly or
indirectly, and will not cause persons acting on its behalf to engage in any
Short Sales involving the Company's securities or sell the Shares acquired
pursuant to this Agreement.
(g) Reliance on Investor Representations. Such Investor understands
that the Shares are being offered and sold to it in reliance upon specific
exemptions from the registration requirements of the Securities Act and the
rules and regulations promulgated thereunder, and state securities laws and that
the Company is relying upon the truth and accuracy of, and the Investor's
15
compliance with, the representations, warranties, agreements, acknowledgements
and understandings of the Investor set forth herein in order to determine the
availability of such exemptions and the eligibility of the Investor to acquire
the Shares. Under such laws and rules and regulations the Shares may be resold
without registration under the Securities Act only in certain limited
circumstances. The Investor represents that it is familiar with Rule 144 under
the Securities Act, as presently in effect, and understands the resale
limitations.
(h) Risks of Investment. Such Investor understands that its investment
in the Shares involves a significant degree of risk, including a risk of total
loss of the Investor's investment, and the Investor has full cognizance of and
understands all of the risk factors related to the Investor's purchase of the
Shares, including, but not limited to, those set forth under the caption "Risk
Factors" in the quarterly report on Form 10-Q for the period ending June 30,
2005, as amended. The Investor understands that the market price of the Common
Stock has been volatile and that no representation is being made as to the
future value of the Common Stock. The Investor has the knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of an investment in the Shares and has the ability to bear the economic
risks of an investment in the Shares.
(i) No Approvals. Such Investor understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Shares.
(j) Location of Offices. Such Investors principal executive offices are
in the jurisdiction set forth immediately below the Investor's name on the
signature pages hereto.
(k) Independent Investment Decision. Such Investor has independently
evaluated the merits of its decision to purchase Shares pursuant to the
Transaction Documents, and such Investor confirms that it has not relied on the
advice of any other Investor's business and/or legal counsel in making such
decision. Such Investor has not relied on the business or legal advice of Xxxx
Capital Partners, LLC or any of its agents, counsel or Affiliates in making its
investment decision hereunder, and confirms that none of such Persons has made
any representations or warranties to such Investor in connection with the
transactions contemplated by the Transaction Documents.
The Company acknowledges and agrees that no Investor has made or makes any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 (a) Shares may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of the Shares other
than pursuant to an effective registration statement, to the Company, to an
Affiliate of an Investor or in connection with a pledge as contemplated in
16
Section 4.1(b), the Company may require the transferor thereof to provide to the
Company an opinion of counsel selected by the transferor, the form and substance
of which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred Shares
under the Securities Act.
(b) Certificates evidencing the Shares will contain the following
legend, until such time as they are not required under Section 4.1(c):
[NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF
THESE SECURITIES HAVE BEEN REGISTERED] [THESE SECURITIES HAVE NOT BEEN
REGISTERED] WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A
LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
[THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES] [THESE SECURITIES] MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.
The Company acknowledges and agrees that an Investor may from time to
time pledge, and/or grant a security interest in some or all of the Shares
pursuant to a bona fide margin agreement in connection with a bona fide margin
account and, if required under the terms of such agreement or account, such
Investor may transfer pledged or secured Shares to the pledgees or secured
parties. Such a pledge or transfer would not be subject to approval or consent
of the Company and no legal opinion of legal counsel to the pledgee, secured
party or pledgor shall be required in connection with the pledge, but such legal
opinion may be required in connection with a subsequent transfer following
default by the Investor transferee of the pledge. No notice shall be required of
such pledge. At the appropriate Investor's expense, the Company will execute and
deliver such reasonable documentation as a pledgee or secured party of Shares
may reasonably request in connection with a pledge or transfer of the Shares
including the preparation and filing of any required prospectus supplement under
Rule 424(b)(3) of the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of Selling Stockholders
thereunder.
17
(c) Upon an Investor's written request, certificates evidencing the
Shares containing any legend (including the legend set forth in Section 4.1(b)):
(i) while a registration statement (including a Registration Statement) covering
the resale of such security is effective under the Securities Act, or (ii)
following a sale or transfer of such Shares pursuant to Rule 144 (assuming the
transferor is not an Affiliate of the Company), or (iii) while such Shares are
eligible for sale under Rule 144(k), shall be replaced with certificates that do
not bear such legends as hereafter set forth; provided, however, in the case of
clause (i) the request is accompanied by a written certification by the Investor
that (A) the Investor has a present intention to dispose of the Shares covered
by such Registration Statement pursuant to a plan of distribution included in a
currently available prospectus related thereto, and (B) the Investor will comply
with the prospectus delivery requirements applicable to such disposition and, in
the case of clause (ii) or (iii), the request is accompanied by such reasonable
and appropriate customary representations as may be reasonably requested by the
Company. The Company agrees that following the Effective Date or at such time as
such legend is no longer required under this Section 4.1(c), it will, no later
than seven (7) Trading Days following the delivery by a Investor to the Company
or the Company's transfer agent of a certificate representing Shares issued with
a restrictive legend (such seventh Trading Day, the "Legend Removal Date"),
together with the written request of such Investor accompanied by the written
representation letter in customary form, deliver or cause to be delivered to
such Investor a certificate representing such shares that is free from all
restrictive and other legends. Certificates for Shares subject to legend removal
hereunder shall be transmitted by the transfer agent of the Company to the
Investors by crediting the account of the Investor's prime broker with the
Depository Trust Company System.
(d) Each Investor, severally and not jointly with the other Investors,
agrees that the removal of the restrictive legend from certificates representing
Shares as set forth in this Section 4.1 is predicated upon the Company's
reliance that the Investor will sell any Shares pursuant to either the
registration requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption therefrom.
4.2 Furnishing of Information. As long as any Investor owns Shares, the
Company covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act. As long as any
Investor owns Shares, if the Company is not required to file reports pursuant to
such laws, it will prepare and furnish to the Investors and make publicly
available in accordance with Rule 144(c) such information as is required for the
Investors to sell the Shares under Rule 144. The Company further covenants that
it will take such further action as any holder of Shares may reasonably request,
all to the extent required from time to time to enable such Person to sell the
Shares without registration under the Securities Act within the limitation of
the exemptions provided by Rule 144.
4.3 Integration. The Company shall not, and shall use its best efforts
to ensure that no Affiliate of the Company shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
18
offer or sale of the Shares in a manner that would require the registration
under the Securities Act of the sale of the Shares to the Investors, or that
would be integrated with the offer or sale of the Shares for purposes of the
rules and regulations of any Trading Market in a manner that would require
shareholder approval of the sale of the Shares to the Investors.
4.4 Subsequent Registrations. Other than the Pending Registration
Statement and the Registration Statements under the Registration Rights
Agreement, prior to the Effective Date of the Registration Statements that cover
the Registrable Securities, the Company may not file any registration statement
(other than on Form S-8) with the Commission with respect to any securities of
the Company.
4.5 Securities Laws Disclosure; Publicity. By 9:00 a.m. (New York time)
on the Trading Day following the execution of this Agreement, and by 9:00 a.m.
(New York time) on the Trading Day following the Closing Date, the Company shall
issue press releases disclosing the transactions contemplated hereby and the
Closing. On the Trading Day following the execution of this Agreement the
Company will file a Current Report on Form 8-K disclosing the material terms of
the Transaction Documents (and attach as exhibits thereto the Transaction
Documents), and on the Trading Day following the Closing Date the Company will
file additional Current Reports on Form 8-K to disclose the occurrence of the
Closing. In addition, the Company will make such other filings and notices in
the manner and time required by the Commission and the Trading Market on which
the Common Stock is listed. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of any Investor, or include the name of any Investor
in any filing with the Commission (other than the Registration Statement and any
exhibits to filings made in respect of this transaction in accordance with
periodic filing requirements under the Exchange Act) or any regulatory agency or
Trading Market, without the prior written consent of such Investor, except to
the extent such disclosure is required by law or Trading Market regulations.
4.6 Limitation on Issuance of Future Priced Securities. During the six
months following the Closing Date, the Company shall not issue any "Future
Priced Securities" as such term is described by NASD IM-4350-1.
4.7 Indemnification of Investors. In addition to the indemnity provided
in the Registration Rights Agreement, the Company will indemnify and hold the
Investors and their directors, officers, shareholders, partners, employees and
agents (each, an "Investor Party") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation (collectively, "Losses") that any
such Investor Party may suffer or incur as a result of or relating to any
misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company in any Transaction Document. In
addition to the indemnity contained herein, the Company will reimburse each
Investor Party for its reasonable legal and other expenses (including the cost
of any investigation, preparation and travel in connection therewith) incurred
in connection therewith, as such expenses are incurred.
19
4.8 Non-Public Information. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Investor
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Investor
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that each Investor shall
be reasonably relying on the foregoing representations in effecting transactions
in securities of the Company.
4.9 Listing of Shares. The Company agrees, (i) if the Company applies
to have the Common Stock traded on any other Trading Market, it will include in
such application the Shares, and will take such other action as is necessary or
desirable to cause the Shares to be listed on such other Trading Market as
promptly as possible, and (ii) it will take all action reasonably necessary to
continue the listing and trading of its Common Stock on a Trading Market and
will comply in all material respects with the Company's reporting, filing and
other obligations under the bylaws or rules of the Trading Market.
4.10 Use of Proceeds. The Company will use the net proceeds from the
sale of the Shares hereunder for the purchase of equipment, cost of the offering
and working capital.
ARTICLE V.
CONDITIONS PRECEDENT TO CLOSINGS
5.1 Conditions Precedent to the Obligations of the Investors to
Purchase Shares at the Closing. The obligation of each Investor to acquire
Shares at the Closing is subject to the satisfaction or waiver by such Investor,
at or before the Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company contained herein shall be true and correct in all material
respects as of the date when made and as of the Closing as though made on and as
of such date;
(b) Performance. The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by it at or prior to the Closing;
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents;
(d) Adverse Changes. Since the date of execution of this Agreement, no
event or series of events shall have occurred that has resulted in or reasonably
would be expected to result in a Material Adverse Effect (the parties agreeing
that a decrease in stock price alone shall not be deemed such an event);
20
(e) No Suspensions of Trading in Common Stock; Listing. Trading in the
Common Stock shall not have been suspended by the Commission or any Trading
Market (except for any suspensions of trading of not more than one Trading Day
solely to permit dissemination of material information regarding the Company) at
any time since the date of execution of this Agreement, and the Common Stock
shall have been at all times since such date listed for trading on a Trading
Market;
(f) Officer's Certificate. The Company shall have delivered to the
Investors a certificate executed by a duly authorized officer of the Company
certifying that (i) the representations and warranties of the Company contained
herein are true and correct in all material respects as of the date when made
and as of the Closing as though made on and as of such date, (ii) the Company
has performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by it at or prior to the Closing and (iii)
the items referenced in Sections 5.1(c)-(e) have been satisfied;
(g) Company Deliverables. The Company shall have delivered the Company
Deliverables in accordance with Section 2.2(a); and
(h) Comfort Letter. The Investors shall have received a "comfort
letter" addressed to the Investors and Xxxx Capital Partners, LLC from the
Company's independent accountants, Xxxxxxxx Xxxxxxxx Xxxxxxx LLP in a form and
substance satisfactory to the Investors and Xxxx Capital Partners, LLC as of
date hereof. As appropriate, the Investors may also request a "bring-down
comfort letter" dated as of the Closing.
5.2 Conditions Precedent to the Obligations of the Company to Sell
Shares at the Closing. The obligation of the Company to sell Shares at the
Closing is subject to the satisfaction or waiver by the Company, at or before
the Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and warranties
of each Investor contained herein shall be true and correct in all material
respects as of the date when made and as of the Closing Date as though made on
and as of such date;
(b) Performance. Each Investor shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by such Investor at or prior to the Closing;
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents; and
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(d) Investor Deliverables. Each Investor shall have delivered its
Investor Deliverables in accordance with Section 2.2(b) and (c).
ARTICLE VI.
MISCELLANEOUS
6.1 Fees and Expenses. Each party shall pay the fees and expenses of
its advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of the Transaction Documents. The Company
shall pay all stamp and other taxes and duties levied in connection with the
sale of the Shares.
6.2 Entire Agreement. The Transaction Documents, together with the
Company Schedules and the Exhibits thereto, contain the entire understanding of
the parties with respect to the subject matter hereof and supersede all prior
agreements, understandings, discussions and representations, oral or written,
with respect to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.
6.3 Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of (a) the date of transmission, if such
notice or communication is delivered via facsimile (provided the sender receives
a machine-generated confirmation of successful transmission) at the facsimile
number specified in this Section prior to 5:30 p.m. (New York City time) on a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section on a day that is not a Trading Day or later than 5:30
p.m. (New York City time) on any Trading Day, (c) the Trading Day following the
date of mailing, if sent by U.S. nationally recognized overnight courier
service, or (d) upon actual receipt by the party to whom such notice is required
to be given. The address for such notices and communications shall be as
follows:
If to the Company: China BAK Battery, Inc.
XXX Xxxxxxxxxx Xxxx, Xx. 0 XXX Xxxxxx
Kuichong Town, Longgang District
Shenzhen, People's Republic Of China
Attn: Li Xiangqian, Chief Executive Officer
Facsimile: 011 86 755 89 77 00 04
and also to
Nevada Agency and Trust Company
00 Xxxx Xxxxxxx Xxxxxx, Xxxxx 000
Xxxx, Xxxxxx 00000
Attn: China BAK Battery, Inc.
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With a copy to: Xxxxxxx Xxxxx, L.L.P.
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attn: Xxxxx Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
If to an Investor: To the address set forth under such Investor's
name on the signature pages hereof;
or such other address as may be designated in writing hereafter, in the
same manner, by such Person.
6.4 Amendments; Waivers; No Additional Consideration. No provision of
this Agreement may be waived or amended except in a written instrument signed by
the Company and the Investors holding a majority of the Shares. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right. No
consideration shall be offered or paid to any Investor to amend or consent to a
waiver or modification of any provision of any Transaction Document unless the
same consideration is also offered to all Investors who then hold Shares.
6.5 Termination. This Agreement may be terminated prior to the Closing:
(a) by written agreement of the Investors and the Company; and
(b) by the Company or an Investor (as to itself but no other Investor)
upon written notice to the other, if the Closing shall not have taken place by
5:30 p.m. Eastern time on September 30, 2005; provided, that the right to
terminate this Agreement under this Section 6.5(b) shall not be available to any
Person whose failure to comply with its obligations under this Agreement has
been the cause of or resulted in the failure of the Initial Closing to occur on
or before such time.
In the event of a termination pursuant to this Section, the Company
shall promptly notify all non-terminating Investors. Upon a termination in
accordance with this Section 6.5, the Company and the terminating Investor(s)
shall not have any further obligation or liability (including as arising from
such termination) to the other and no Investor will have any liability to any
other Investor under the Transaction Documents as a result therefrom.
6.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. This Agreement
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shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement or any of the Transaction
Documents.
6.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Investors. Any Investor may assign any
or all of its rights under this Agreement to any Person to whom such Investor
assigns or transfers any Shares, provided such transferee agrees in writing to
be bound, with respect to the transferred Shares, by the provisions hereof that
apply to the "Investors."
6.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.7 (as to each
Investor Party).
6.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all Proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, employees or agents) shall be commenced exclusively in the New York
Courts. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of the any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such New York Court, or that such Proceeding has been
commenced in an improper or inconvenient forum. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If either party shall
commence a Proceeding to enforce any provisions of a Transaction Document, then
the prevailing party in such Proceeding shall be reimbursed by the other party
for its reasonable attorneys' fees and other reasonable costs and expenses
incurred with the investigation, preparation and prosecution of such Proceeding.
24
6.10 Survival. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and the delivery of the
Shares.
6.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
6.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
6.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Investor 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 Investor
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.
6.14 Replacement of Shares. If any certificate or instrument evidencing
any Shares is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Shares. If a replacement
certificate or instrument evidencing any Shares is requested due to a mutilation
thereof, the Company may require delivery of such mutilated certificate or
instrument as a condition precedent to any issuance of a replacement.
6.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Investors and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
25
6.16 Payment Set Aside. To the extent that the Company makes a payment
or payments to any Investor pursuant to any Transaction Document or an Investor
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
6.17 Independent Nature of Investors' Obligations and Rights. The
obligations of each Investor under any Transaction Document are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Shares pursuant to the Transaction Documents has been made by such
Investor independently of any other Investor. Nothing contained herein or in any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Shares or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to independently protect and enforce
its rights, including without limitation the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Investors
has been provided with the same Transaction Documents for the purpose of closing
a transaction with multiple Investors and not because it was required or
requested to do so by any Investor.
6.18 Limitation of Liability. Notwithstanding anything herein to the
contrary, the Company acknowledges and agrees that the liability of an Investor
arising directly or indirectly, under any Transaction Document of any and every
nature whatsoever shall be satisfied solely out of the assets of such Investor,
and that no trustee, officer, other investment vehicle or any other Affiliate of
such Investor or any investor, shareholder or holder of shares of beneficial
interest of such a Investor shall be personally liable for any liabilities of
such Investor.
26
6.19 Construction. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
CHINA BAK BATTERY, INC.
By:___________________________________
Name:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR INVESTORS FOLLOW]
28
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
NAME OF INVESTOR
____________________________________________
By:_________________________________________
Name:
Title:
Investment Amount: $________________________
Tax ID No.:_________________________________
ADDRESS FOR NOTICE
c/o:________________________________________
Street:_____________________________________
City/State/Zip:_____________________________
Attention:__________________________________
Tel:________________________________________
Fax:________________________________________
DELIVERY INSTRUCTIONS
(if different from above)
c/o:________________________________________
Street:_____________________________________
City/State/Zip:_____________________________
Attention:__________________________________
Tel:________________________________________
29
EXECUTION COPY
COMPANY SCHEDULES
-----------------
EXHIBIT A
---------
FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT B
---------
FORM OF COMPANY COUNSEL OPINION
EXHIBIT C
---------
FORM OF NEVADA COUNSEL OPINION
EXHIBIT D
---------
PRC COUNSEL OPINION
EXHIBIT E
---------
HONG KONG OPINION
EXHIBIT F
---------
THE ESCROW AGREEMENT
