SECURITIES PURCHASE AGREEMENT BETWEEN DELI SOLAR (USA), INC. AND BARRON PARTNERS LP AND THE OTHER INVESTORS NAMED HEREIN DATED June 13, 2007
BETWEEN
AND
XXXXXX
PARTNERS LP
AND
THE
OTHER INVESTORS NAMED HEREIN
DATED
June
13, 2007
This
SECURITIES PURCHASE AGREEMENT (the “Agreement”)
is
made and entered into as of the 13th
day of
June, 2007 between Deli
Solar (USA), Inc., a
Nevada
corporation (the “Company”),
and
Xxxxxx
Partners LP, a
Delaware limited partnership (“Xxxxxx”),
and
any other investors
named on
the signature page of this Agreement (together with Xxxxxx, the “Investors”
and
each an “Investor”).
RECITALS:
WHEREAS,
the
Investors wish to purchase from the Company, upon the terms and subject to
the
conditions of this Agreement, for the Purchase Price, as hereinafter defined,
an
aggregate of (i) ONE
MILLION SEVEN HUNDRED SEVENTY FOUR THOUSAND ONE HUNDRED AND NINETY FOUR
(1,774,194)
shares
of the Company’s Series A Convertible Preferred Stock, par value $.001 per share
(“Series
A Preferred Stock”),
with
each share of Series A Preferred Stock being initially convertible into one
(1)
share of the Company’s common stock, par value $.001 per share (“Common
Stock”),
subject to adjustment, (ii) common stock purchase warrants (the “Warrants”)
to
purchase ONE
MILLION SEVEN HUNDRED SEVENTY FOUR THOUSAND ONE HUNDRED AND NINETY FOUR
(1,774,194)
shares
of Common Stock at One Dollar and Ninety Cents ($1.90) per share, (iii) Warrants
to purchase ONE
MILLION SEVEN HUNDRED SEVENTY FOUR THOUSAND ONE HUNDRED AND NINETY FOUR
(1,774,194)
shares
of Common Stock at Two Dollars and Forty cents ($2.40) per share.
WHEREAS,
each
Investor is purchasing the Securities in the amounts set forth in Schedule
A of
this Agreement;
WHEREAS,
the
parties intend to memorialize the terms on which the Company will sell to the
Investors and the Investors will purchase the Securities;
NOW,
THEREFORE,
in
consideration of the mutual covenants and premises contained herein, and for
other good and valuable consideration, the receipt and adequacy of which are
hereby conclusively acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
Article
1
INCORPORATION
BY REFERENCE AND DEFINITIONS
1.1 Incorporation
by Reference.
The
foregoing recitals and the Exhibits and Schedules attached hereto and referred
to herein, are hereby acknowledged to be true and accurate, and are incorporated
herein by this reference.
1.2 Supersedes
Other Agreements.
This
Agreement, to the extent that it is inconsistent with any other instrument
or
understanding among the parties, shall supersede such instrument or
understanding to the fullest extent permitted by law. A copy of this Agreement
shall be filed at the Company’s principal office.
1.3 Certain
Definitions.
For
purposes of this Agreement, the following capitalized terms shall have the
following meanings (all capitalized terms used in this Agreement that are not
defined in this Article 1 shall have the meanings set forth elsewhere in this
Agreement):
1.3.1 “4.9%
Limitation”
has
the
meaning set forth in Section 2.1.3 of this Agreement.
1.3.2 “1933
Act”
means
the Securities Act of 1933, as amended.
1.3.3 “1934
Act”
means
the Securities Exchange Act of 1934, as amended.
1.3.4 “Additional
Financing”
means
the receipt by the Company of not less than $4,000,000 from the Investors
(within 90 days after the effectiveness of the first Registration Statement
filed pursuant to the Registration Rights Agreement) either through the exercise
of Warrants, or additional equity financing which shall not include the proceeds
of the sale of the Series A Preferred Stock hereunder.
1.3.5 “Affiliate”
means
a
Person or Persons directly or indirectly, through one or more intermediaries,
controlling, controlled by or under common control with the Person(s) in
question. The term “control,” as used in the immediately preceding sentence,
means, with respect to a Person that is a corporation, the right to exercise,
directly or indirectly, more than 50% of the voting rights attributable to
the
shares of such controlled corporation and, with respect to a Person that is
not
a corporation, the possession, directly or indirectly, of the power to direct
or
cause the direction of the management or policies of such controlled
Person.
1.3.6 “Articles”
means
the Articles of Incorporation of the Company, as the same may be amended from
time to time.
1.3.7 “Authorized
Stock Proviso”
has
the
meaning set forth in Section 4.4.3 of this Agreement.
1.3.8 “Board
of Directors”
means
the Board of Directors of the Company
1.3.9 “Bylaws”
means
the Bylaws of the Company, as the same may be amended from time to
time.
1.3.10 “Certificate
of Designation”
means
the Certificate of Designations, Preferences and Rights, with respect to the
Series A Preferred Stock. The Certificate of Designation shall be in
substantially the form of Exhibit
A
to this
Agreement.
1.3.11 “Closing” means
the
consummation of the transactions contemplated by this Agreement, all of which
transactions shall be consummated contemporaneously with the
Closing.
1.3.12 “Closing
Date”
means
the date on which the Closing occurs.
1.3.13 “Closing
Escrow Agreement”
shall
mean the agreement between the Company, the Investors and the Escrow Agent
pursuant to which securities are deposited into escrow to be held as provided
in
Section 6 of this Agreement. The Closing Escrow Agreement shall be in
substantially the form of Exhibit
B
to this
Agreement.
1.3.14 “Common
Stock”
means
the Company’s common stock, which is presently designated as the common stock,
par value $.001 per share.
1.3.15 “Company’s
Governing Documents”
means
the Articles and Bylaws.
1.3.16 “Escrow
Agent”
means
Tri-State Title & Escrow, LLC.
1.3.17 “Escrow
Agreement”
means
the Escrow Agreement dated June __, 2007, among the Company, the Investors
and
the Escrow Agent. The Escrow Agreement shall be in substantially the form of
Exhibit
C
to this
Agreement.
1.3.18 “Exempt
Issuance”
means
the issuance of (a) shares of Common Stock or options to employees, officers,
directors of and consultants (other than consultants whose services relate
to
the raising of funds) of the Company pursuant to any stock or option plan that
was or may be adopted by (i) a majority of independent members of the Board
of
Directors or (ii) a majority of the members of a committee of independent
directors established for compensatory purposes, (b) securities upon the
exercise or conversion of any securities issued hereunder and pursuant to the
Registration Rights Agreement, the Series A Preferred Stock, the Warrants and
the Certificate of Designation and (c) securities upon the exercise or
conversion of any other options, warrants or convertible securities which are
outstanding after completion of the Closing, (d) not more than an aggregate
of
3,000 shares of Common Stock (or options to purchase such number of shares)
per
month and (e) securities issued pursuant to acquisitions, licensing agreements,
or other strategic transactions provided, with respect to clause (e), any such
issuance shall only be to a Person which is, itself or through its subsidiaries,
an operating company in a business which the Board of Directors believes is
beneficial to the Company and in which the Company receives benefits in addition
to the investment of funds, but shall not include a transaction in which the
Company is issuing securities primarily for the purpose of raising capital
or to
an entity whose primary business is investing in securities.
1.3.19 “GAAP”
means
United States generally accepted accounting principles consistently
applied.
1.3.20 “Make
Good Escrow Stock”
means
900,000 shares of Series A Preferred Stock.
1.3.21 “Material
Adverse Effect”
means
any adverse effect on the business, operations, properties or financial
condition of the Company or any of its Subsidiaries that is material and adverse
to the Company and its Subsidiaries taken as a whole and/or any condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company or any Subsidiary to perform any of its material
obligations under this Agreement, the Registration Rights Agreement or the
Warrants or to perform its obligations under any other material agreement.
1.3.22 “Nevada
Law”
shall
mean the Nevada Business Corporation Act.
1.3.23 “Person”
means
an individual, partnership, firm, limited liability company, trust, joint
venture, association, corporation, or any other legal entity.
1.3.24 “Preferred
Stock”
means
the Company’s authorized preferred stock, par value $.001 per share.
1.3.25 “Pre-Tax
Income”
means
income
before income taxes determined in accordance with GAAP plus
(a)
any
cash or non-cash charges relating to the transaction contemplated by this
Agreement and the Registration Rights Agreement (including, without limitation,
any charges for derivative instruments), minus
(b) the
amount, if any, by which all non-recurring losses or expenses exceed all
non-recurring items of income or gain provided however that Pre-Tax
Income shall not be adjusted under clause (b) if all non-recurring items of
income or gain exceed all non-recurring losses or expenses.
1.3.26 “Purchase
Price”
means
the two million seven hundred fifty thousand dollars ($2,750,000) to be paid
by
the Investors to the Company for the Securities.
1.3.27 “Registration
Rights Agreement”
means
the registration rights agreement between the Investors and the Company in
substantially the form of Exhibit
D
to this
Agreement.
1.3.28 “Registration
Statement”
means
the registration statement under the 1933 Act to be filed with the SEC for
the
registration of the Shares pursuant to the Registration Rights
Agreement.
1.3.29 “Restricted
Stockholders”
shall
have the meaning set forth in Section 6.16 of this Agreement.
1.3.30 “Restriction
Termination Date”
shall
mean the date on which the Investors shall have (a) converted all shares of
Series A Preferred Stock and exercised all Warrants (other than Warrants that
shall have expired unexercised) and (b) sold the underlying Shares in the public
market.
1.3.31 “Restriction
Termination Date at 90%”
shall
mean the date on which the Investors shall have (a) converted shares of Series
A
Preferred Stock and exercised Warrants (other than Warrants that shall have
expired unexercised) and (b) sold 90% of the Total Shares.
1.3.32 “Securities”
means
the shares of Series A Preferred Stock, the Warrants and the
Shares.
1.3.33 “SEC”
means
the Securities and Exchange Commission.
1.3.34 “SEC
Documents”
means,
at any given time, the Company’s latest Form 10-K or Form 10-KSB and all Forms
10-Q or 10-QSB and 8-K and all proxy statements or information statements filed
between the date the most recent Form 10-K or Form 10-KSB was filed and the
date
as to which a determination is being made.
1.3.35 “Series
A Preferred Stock”
means
the shares of Series A Preferred Stock having the rights, preferences and
privileges and subject to the limitations set forth in the Certificate of
Designation.
1.3.36 “Shares”
means,
collectively, the shares of Common Stock issued or issuable (i) upon conversion
of the Series A Preferred Stock and (ii) upon exercise of the
Warrants.
1.3.37 “Subsidiary”
means
an entity in which the Company and/or one or more other Subsidiaries directly
or
indirectly own either 50% of the voting rights or 50% of the equity
interests.
1.3.38 “Subsequent
Financing”
means
any offer and sale of shares of Preferred Stock or debt that is initially
convertible into shares of Common Stock or otherwise senior or superior to
the
Series A Preferred Stock.
1.3.39 “Target
Number”
has
the
meaning set forth in Section 6.15.2 of this Agreement.
1.3.40 “Total
Shares”
means
the number of shares of Common Stock issuable upon conversion of the Series
A
Preferred Stock (excluding the Make Good Escrow Stock) and exercise of the
Warrants. The Total Shares shall initially be Five Million Three Hundred Twenty
Two Thousand Five Hundred Eighty Two (5,322,582) shares of Common Stock but
may
be subsequently increased as contemplated by Section 6.15. The number of Total
Shares shall be adjusted to reflect any change in the conversion price of the
Series A Preferred Stock and the exercise price of the Warrants and the
expiration of any Warrants.
1.3.41 “Transaction
Documents”
means
this Agreement, all Schedules and Exhibits attached hereto, the Certificate
of
Designation, the Warrants, the Registration Rights Agreement, the Closing Escrow
Agreement, the Escrow Agreement and all other documents and instruments to
be
executed and delivered by the parties in order to consummate the transactions
contemplated hereby.
1.3.42 “Warrants”
means
the common stock purchase warrants in substantially the forms of Exhibits
E-1 and E-2
to this
Agreement.
1.4 All
references in this Agreement to “herein” or words of like effect, when referring
to preamble, recitals, article and section numbers, schedules and exhibits
shall
refer to this Agreement unless otherwise stated.
Article
2
SALE
AND PURCHASE OF SECURITIES; PURCHASE PRICE
2.1 Sale
of Securities.
2.1.1 Upon
the
terms and subject to the conditions set forth herein, and in accordance with
applicable law, the Company agrees to sell to the Investors, and each Investor
severally agrees to purchase from the Company, on the Closing Date, the number
of Securities set forth after the Investor’s name on Schedule A set forth for
the portion of the Purchase Price set forth in Schedule A. At or prior to the
Closing each Investor shall wire the Investor’s portion of the Purchase Price to
the Escrow Agent, who shall release the Purchase Price to the Company upon
receipt of instructions from the Investor and the Company as provided in the
Escrow Agreement. The Company shall cause the Securities to be issued to the
Investors upon the release of the Purchase Price to the Company by the Escrow
Agent pursuant to the terms of the Escrow Agreement.
2.1.2 Except
as
expressly provided in the Certificate of Designation and the
Warrants,
an
Investor shall not be entitled to convert the Series A Preferred
Stock
into
shares of Common Stock or to exercise the Warrants to the extent that such
conversion or exercise would result in beneficial ownership by the Investor
and
its Affiliates of more than 4.9% of the then outstanding number of shares of
Common Stock on such date after giving effect to such conversion or exercise.
For the purposes of this Agreement beneficial ownership shall be determined
in
accordance with Section 13(d) of the 1934 Act, and Regulation 13d-3 thereunder.
The limitation set forth in this Section 2.1.2 is referred to as the
“4.9%
Limitation.”
Article
3
CLOSING
DATE AND DELIVERIES AT CLOSING
3.1 Closing
Date.
The
Closing of the transactions contemplated by this Agreement, unless expressly
determined herein, shall be held at the offices of Guzov Ofsink, LLC, 000
Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 2:00 P.M. local time, on June
14,
2007 (the “Closing
Date”)
or on
such other date and at such other place as may be mutually agreed by the
parties, including closing by facsimile with originals to follow.
3.2 Deliveries
by the Company.
In
addition to and without limiting any other provision of this Agreement, the
Company agrees to deliver, or cause to be delivered, to the Escrow Agent under
the Closing Escrow Agreement, the following:
(a) At
or
prior to Closing, an executed Agreement with all exhibits and schedules attached
hereto;
(b) At
the
Closing, shares of Series A Preferred Stock and Warrants in the names of the
Investors in the numbers set forth in Schedule A to this Agreement;
(c) The
executed Registration Rights Agreement;
(d) The
executed Closing Escrow Agreement and Escrow Agreement;
(e) Copies
of
all SEC correspondence, if any, since the last Form 10-KSB and any
correspondence which was issued prior to the last Form 10-KSB, if any, which
has
not been resolved to the satisfaction of the SEC;
(f) Schedule
of all amounts owed (cash and stock) to officers, consultants and key employees
(salary, bonuses, etc.);
(g) Certifications
in form and substance acceptable to the Company and the Investors from any
and
all brokers or agents involved in the transactions contemplated hereby as to
the
amount of commission or compensation payable to such broker or agent as a result
of the consummation of the transactions contemplated hereby and from the Company
or Investor, as appropriate, to the effect that reasonable reserves for any
other commissions or compensation that may be claimed by any broker or agent
have been set aside;
(h) Copies
of
management letters from the Company’s registered independent accounting firm
issued in connection with the Company’s most recent audit;
(i) Evidence
of approval by the Board of Directors of the Transaction Documents and the
transactions contemplated hereby;
(j) Agreements
from the Restricted Stockholders pursuant to Section 6.16 of this
Agreement;
(k) Evidence
that the Certificate of Designation has been approved by the Board of
Directors;
(l) Good
standing certificate from the Secretary of State of the State of
Nevada;
(m) Copy
of
the Company’s Articles and the Certificate of Designation, as currently in
effect, certified by the Secretary of State of the State of Nevada;
(n) An
opinion from the Company’s general counsel, Guzov Ofsink, LLC, concerning the
Transaction Documents and the transactions contemplated thereby in form and
substance reasonably acceptable to Investors;
(o) Executed
disbursement instructions pursuant to the Escrow Agreement, which shall provide
that the Escrow Agent continue to hold $150,000 to pay the Company’s anticipated
obligations to its investor relations company;
(p) Copies
of
(i) all executive employment agreements which have not been disclosed in the
Company’s Form 10-KSB for the year ended December 31, 2006, (ii) all past and
present financing documents or other documents where stock could potentially
be
issued or issued as payment, (iii) all past and present material litigation
documents which have not been disclosed in the Company’s Form 10-KSB for the
year ended December 31, 2006; and
(q) Such
other documents or certificates as shall be reasonably requested by Investors
or
their counsel.
3.3 Deliveries
by Investors.
In
addition to and without limiting any other provision of this Agreement, each
Investor agrees to deliver, or cause to be delivered, to the Escrow Agent under
the Closing Escrow Agreement, the following:
(a) The
Investor’s portion of the Purchase Price;
(b) The
executed Agreement with all Exhibits and Schedules attached hereto;
(c) The
executed Registration Rights Agreement;
(d) The
executed Closing Escrow Agreement and Escrow Agreement;
(e) The
executed disbursement instructions pursuant to the Closing Escrow Agreement;
and
(f) Such
other documents or certificates as shall be reasonably requested by the Company
or its counsel.
3.4 Delivery
of Original Documents.
In the
event any document provided to the other party in Paragraphs 3.2 and 3.3 herein
is provided by facsimile, the party shall forward an original document to the
other party within seven (7) business days.
3.5 Further
Assurances.
The
Company and each Investor shall, upon request, on or after the Closing Date,
cooperate with each other (specifically, the Company shall cooperate with the
Investors, and each Investor shall cooperate with the Company) by furnishing
any
additional information, executing and delivering any additional documents and/or
other instruments and doing any and all such things as may be reasonably
required by the parties or their counsel to consummate or otherwise implement
the transactions contemplated by this Agreement.
3.6 Waiver.
An
Investor may waive any of the requirements of Section 3.2 of this Agreement,
and
the Company may waive any of the provisions of Section 3.3 of this Agreement.
The Investors may also waive any of the requirements of the Company under the
Closing Escrow Agreement.
Article
4
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company represents and warrants to the Investors as of the date hereof and
as of
Closing Date (which warranties and representations shall survive the Closing
regardless of any examinations, inspections, audits and other investigations
the
Investors have heretofore made or may hereinafter make with respect to such
warranties and representations) as set forth below. The Investors are entering
into this Agreement in reliance on the representations and warranties set forth
in this Agreement and no reliance is being placed on oral representations,
if
any, that may have been made prior to the execution and delivery of this
Agreement.
4.1 Organization
and Qualification.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada, and has the requisite corporate power
and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted and is duly qualified to do business in any other
jurisdiction where the nature of the businesses conducted by it or the ownership
or leasing of its properties requires such qualification, except where the
failure to be so qualified will not have a Material Adverse Effect on the
business, operations, properties, assets, financial condition or results of
operation of the Company and its Subsidiaries taken as a whole.
4.2 Company’s
Governing Documents.
Complete and correct copies of the Company’s Governing Documents (a) have been
provided to the Investors and (b) have been filed with the SEC in accordance
with the regulations of the SEC and (c) will be in full force and effect on
the
Closing Date.
4.3 Capitalization.
4.3.1 The
authorized and outstanding capital stock of the Company as of the date of this
Agreement and as adjusted to reflect the issuance and sale of the Securities
pursuant to this Agreement is set forth in Schedule
4.3.l
to this
Agreement. Schedule
4.3.1
also
lists all shares issuable pursuant to employment, consulting and other services
agreements, acquisition agreements, options and equity-based incentive plans,
debt securities, convertible securities, warrants, financing or business
relationships as well as each agreement, plan, arrangement or understanding
pursuant to which any shares of any class of capital stock may be issued, a
copy
of each of which has been provided to the Investors.
4.3.2 All
shares of capital stock described above to be issued have been duly authorized
and when issued, will be validly issued, fully paid and non-assessable and
free
of preemptive rights.
4.3.3 Except
pursuant to this Agreement and as set forth in Schedule
4.3.1,
as of
the date hereof, there are no outstanding options, warrants, rights to subscribe
for, calls or commitments of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, shares of any class of capital
stock of the Company, or agreements, understandings or arrangements to which
the
Company is a party, or by which the Company is or may be bound, to issue
additional shares of its capital stock or options, warrants, scrip or rights
to
subscribe for, calls or commitment of any character whatsoever relating to,
or
securities or rights convertible into or exchangeable for, any shares of any
class of its capital stock. The Company agrees to inform the Investors in
writing of any additional warrants of other awards granted prior to the Closing
Date.
4.4 Authority.
4.4.1 The
Company has all requisite corporate power and authority to execute and deliver
this Agreement, the Securities, the Registration Rights Agreement, the Closing
Escrow Agreement, the Escrow Agreement and any other Transaction Documents
to
which the Company is a party, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement, the Securities, the Registration
Rights Agreement, the Closing Escrow Agreement, the Escrow Agreement and any
other Transaction Documents to which the Company is a party, have been duly
authorized by all necessary corporate action and no other corporate proceedings
on the part of the Company is necessary to authorize this Agreement or to
consummate the transactions contemplated hereby and thereby except as disclosed
in this Agreement. This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency and other laws of
general application affecting the enforcement of creditors’ rights and except
that any granting of equitable relief is in the discretion of the
court.
4.4.2 The
Securities, when issued pursuant to this Agreement, constitute the valid,
binding and obligations of the Company enforceable against the Company in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency and other laws of general application affecting the
enforcement of creditors’ rights and except that any granting of equitable
relief is in the discretion of the court. The Certificate of Designation has
been approved by the Board of Directors. Upon the filing of the Certificate
of
Designation, the Series A Preferred Stock, when issued, will be duly and validly
authorized and issued, fully paid and non-assessable. The Warrants constitute
the valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as enforceability may be limited
by bankruptcy, insolvency and other laws of general application affecting the
enforcement of creditors’ rights and except that any granting of equitable
relief is in the discretion of the court. All the Securities, when so issued,
will be free and clear of all liens, charges, claims, options, pledges,
restrictions, preemptive rights, rights of first refusal and encumbrances
whatsoever (other than those, if any, incurred by the Investors).
SECURITIES
PURCHASE AGREEMENT BETWEEN
DELI
SOLAR (USA), INC. AND XXXXXX PARTNERS LP
PAGE
9
4.4.3 Notwithstanding
any contrary representations and warranties, no
representation is made with respect to the ability of any Investor to convert
the Series A Preferred Stock or exercise any Warrant if and to the extent that
the conversion price of the Series A Preferred Stock, as defined in the
Certificate of Designation, or the number of shares of Common Stock issuable
upon exercise of the Warrants would result in the issuance of a number of shares
of Common Stock which is greater than the amount by which the authorized shares
of Common Stock exceeds the sum of the outstanding Common Stock and the shares
of Common Stock reserved for issuance pursuant to outstanding agreements and
outstanding options, warrants, rights, convertible securities and other
securities upon the exercise or conversion of which (or pursuant to the terms
of
which) additional shares of Common Stock may be issuable (the foregoing proviso
being referred to as the “Authorized
Stock Proviso”).
4.5 No
Conflict; Required Filings and Consents.
Neither
the issuance of the Securities, nor the execution and delivery of this Agreement
and other Transaction Documents by the Company and the performance by the
Company of its obligations hereunder and thereunder will: (i) conflict with
or
violate the Company’s or any Subsidiary’s Governing Instruments; (ii) conflict
with, breach or violate any federal, state, foreign or local law, statute,
ordinance, rule, regulation, order, judgment or decree (collectively,
“Laws”)
in
effect as of the date of this Agreement and applicable to the Company or any
Subsidiary; or (iii) result in any breach of, constitute a default (or an event
that with notice or lapse of time or both would become a default) under, give
to
any other entity any right of termination, amendment, acceleration or
cancellation of, require payment under, or result in the creation of a lien
or
encumbrance on any of the properties or assets of the Company or any Subsidiary
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
or any of their respective properties or assets is bound, other than (with
respect to clauses (i), (ii) and (iii) above) such violations, conflicts,
breaches, defaults, terminations, accelerations or creations of liens that
would
not, in the aggregate, have a Material Adverse Effect
and
except to the extent that stockholder approval may be required as a result
of
the Authorized Stock Proviso, in which event, the Company will seek stockholder
approval to effect an increase in the authorized Common Stock sufficient to
enable the Company to be in compliance with this Section 4.5.
4.6 Report
and Financial Statements.
The
Company’s Annual Report on Form 10-KSB for the year ended December 31, 2006
filed with the SEC contains the audited consolidated financial statements of
the
Company and its Subsidiaries, certified by Child, Xxx Xxxxxxx & Xxxxxxxx,
PLLC Salt Lake City, Utah (“CVB”),
the
Company’s independent registered accounting firm. Each of the consolidated
balance sheets contained in the Form 10-KSB fairly presents the financial
position of the Company, as of its date, and each of the consolidated statements
of income, stockholders’ equity and cash flows (including any related notes and
schedules thereto) fairly presents the results of operations, cash flows and
changes in stockholders’ equity, as the case may be, of the Company and its
Subsidiaries for the periods to which they relate, in each case in accordance
with GAAP consistently applied during the periods involved. CVB is independent
as to the Company in accordance with the rules and regulations of the SEC.
The
books and records of the Company and its Subsidiaries have been, and are being,
maintained in all material respects in accordance with GAAP and any other
applicable legal and accounting requirements and reflect only actual
transactions. The Company has not received any letters of comments from the
SEC
relating to any filing made by the Company with the SEC which has not been
addressed by an amended filing, and each amended filing responds in all material
respects to the questions raised by the staff of the SEC. The Company maintains
disclosure controls and procedures that are effective to ensure that information
required to be disclosed by the Company in its annual and quarterly reports
filed with the SEC is accumulated and communicated to the Company’s management,
including its principal executive and financial officers as appropriate, to
allow timely decisions regarding required disclosure. There were no significant
changes in the Company’s internal controls or other factors that could
significantly affect such controls subsequent to December 31, 2006. The Company
has not received any advice from its independent registered accounting firm
to
the effect that there is any significant deficiency or material weakness in
the
Company’s controls or recommending any corrective action on the part of the
Company or any Subsidiary.
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4.7 Compliance
with Applicable Laws.
Neither
the Company nor any Subsidiary is in violation of, or, to the knowledge of
the
Company is under investigation with respect to, or has been given notice or
has
been charged with the violation of, any Law of a governmental agency, except
for
violations which individually or in the aggregate do not have a Material Adverse
Effect.
4.8 Brokers.
Except
as set forth on Schedule
4.8,
no
broker, finder or investment banker is entitled to any brokerage, finder’s or
other fee or commission in connection with the transactions contemplated by
this
Agreement based upon arrangements made by or on behalf of the
Company.
4.9 SEC
Documents.
The
Investors acknowledge that the Company is a publicly held company and has made
available to the Investors upon request true and complete copies of any
requested SEC Documents. The Company has registered its Common Stock pursuant
to
Section 12(d) of the 1934 Act, and the Common Stock is quoted and traded on
the
OTC Bulletin Board of the National Association of Securities Dealers, Inc.
The
Company has received no notice, either oral or written, with respect to the
continued quotation or trading of the Common Stock on the OTC Bulletin Board.
The Company has not provided to the Investors any information that, according
to
applicable law, rule or regulation, should have been disclosed publicly prior
to
the date hereof by the Company, but which has not been so disclosed. As of
their
respective dates, the SEC Documents complied in all material respects with
the
requirements of the 1934 Act, and rules and regulations of the SEC promulgated
thereunder and the SEC Documents did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
4.10 Litigation.
To the
knowledge of the Company, no litigation, claim, or other proceeding before
any
court or governmental agency is pending or to the knowledge of the Company,
threatened against the Company, the prosecution or outcome of which may have
a
Material Adverse Effect.
4.11 Employment
Agreements.
Except
as disclosed in the Company’s Form 10-KSB for the year ended December 31, 2006,
the Company does not have any agreement or understanding with any officer or
director, and there has been no material change in the compensation of any
officer and director from that shown in said Form 10-KSB.
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4.12 Exemption
from Registration.
Subject
to the accuracy of the Investors’ representations in Article V of this
Agreement, except as required pursuant to the Registration Rights Agreement,
the
sale of the Series A Preferred Stock and Warrants by the Company to the
Investors will not require registration under the 1933 Act. When issued upon
conversion of the Series A Preferred Stock or upon exercise of the Warrants
in
accordance with their terms, the shares of Common Stock underlying the Series
A
Preferred Stock and the Warrants will be duly and validly authorized and issued,
fully paid, and non-assessable. The Company is issuing the Series A Preferred
Stock and the Warrants in accordance with and in reliance upon the exemption
from registration afforded, inter alia, by Rule 506 under Regulation D as
promulgated by the SEC under the 1933 Act, and/or Section 4(2) of the 1933
Act.
4.13 No
General Solicitation or Advertising in Regard to this
Transaction.
Neither
the Company nor any of its Affiliates nor, to the knowledge of the Company,
any
Person acting on its or their behalf (i) has conducted or will conduct any
general solicitation (as that term is used in Rule 502(c) of Regulation D as
promulgated by the SEC under the 0000 Xxx) or general advertising with respect
to the sale of the Series A Preferred Stock or Warrants, or (ii) made any offers
or sales of any security or solicited any offers to buy any security under
any
circumstances that would require registration of the Series A Preferred Stock
or
Warrants under the 1933 Act, except as required herein.
4.14 No
Material Adverse Effect.
Since
December 31, 2006, no event or circumstance resulting in a Material Adverse
Effect has occurred or exists with respect to the Company. No material supplier
or customer has given notice, oral or written, that it intends to cease or
reduce the volume of its business with the Company from historical levels.
Since
December 31, 2006, no event or circumstance has occurred or exists with respect
to the Company or its businesses, properties, prospects, operations or financial
condition, that, under any applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which
has
not been so publicly announced or disclosed in writing to the
Investor.
4.15 Material
Non-Public Information.
The
Company has not disclosed to the Investors any material non-public information
that (i) if disclosed, would reasonably be expected to have a material effect
on
the price of the Common Stock or (ii) according to applicable law, rule or
regulation, should have been disclosed publicly by the Company prior to the
date
hereof but which has not been so disclosed.
4.16 Internal
Controls And Procedures.
The
Company and its Subsidiaries maintain books and records and internal accounting
controls which provide reasonable assurance that (i) all transactions to which
the Company or any Subsidiary is a party or by which their respective properties
are bound are executed with management’s authorization; (ii) the recorded
accounting of the Company’s consolidated assets is compared with existing assets
at regular intervals; (iii) access to the Company’s consolidated assets is
permitted only in accordance with management’s authorization; and (iv) all
transactions to which the Company or any Subsidiary is a party or by which
any
of their respective properties are bound are recorded as necessary to permit
preparation of the financial statements of the Company in accordance with
GAAP.
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4.17 Full
Disclosure.
No
representation or warranty made by the
Company in
this
Agreement and no certificate or document furnished or to be furnished to the
Investors pursuant to this Agreement contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading.
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REPRESENTATIONS
AND WARRANTIES OF THE INVESTORS
Each
Investor severally and not jointly represents and warrants to the Company
that:
5.1 Concerning
the Investors.
The
state in which any offer to purchase shares hereunder was made or accepted
by
any Investor is the state shown as such Investor’s address. The Investor was not
formed for the purpose of investing solely in the Securities.
5.2 Authorization
and Power.
The
Investor has the requisite power and authority to enter into and perform this
Agreement and to purchase the Securities being sold to it hereunder. The
execution, delivery and performance of this Agreement by the Investor and the
consummation by the Investor of the transactions contemplated hereby have been
duly authorized by all necessary corporate or partnership action. This
Agreement, the Registration Rights Agreement, the Closing Escrow Agreement,
the
Escrow Agreement and the other Transaction Documents to which they are parties
have been duly executed and delivered by each such Investor and at the Closing
shall constitute valid and binding obligations of each such Investor enforceable
against each such Investor in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency and other laws of
general application affecting the enforcement of creditors’ rights and except
that any granting of equitable relief is in the discretion of the
court.
5.3 No
Conflicts.
The
execution, delivery and performance of this Agreement, the Registration Rights
Agreement, the Closing Escrow Agreement, the Escrow Agreement and the other
Transaction Documents to which each such Investor is a party, and the
consummation by such Investor of the transactions contemplated hereby or thereby
or relating hereto or thereto do not and will not (i) result in a violation
of
such Investor’s charter documents or bylaws where appropriate 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 Investor is a party, or result in a violation of any
law, rule, or regulation, or any order, judgment or decree of any court or
governmental agency applicable to such Investor or its properties (except for
such conflicts, defaults and violations as would not, individually or in the
aggregate, have a Material Adverse Effect on such Investor). The Investor is
not
required to obtain any consent, authorization or order of, or make any filing
or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of such Investor’s obligations under this Agreement the
Registration Rights Agreement, the Closing Escrow Agreement, the Escrow
Agreement and the other Transaction Documents to which each such Investor is
a
party, or to purchase the securities and the underlying Shares from the Company
in accordance with the terms hereof.
5.4 Financial
Risks.
Such
Investor acknowledges that such Investor is able to bear the financial risks
associated with an investment in the securities (and the underlying shares
of
Common Stock) being purchased by such Investor from the Company and that it
has
been given full access to such records of the Company and its Subsidiaries
and
to the officers of the Company and its Subsidiaries as it has deemed necessary
or appropriate to conduct its due diligence investigation. Such Investor is
capable of evaluating the risks and merits of an investment in the securities
being purchased by the Investor from the Company by virtue of its experience
as
an investor and its knowledge, experience, and sophistication in financial
and
business matters and the Investor is capable of bearing the entire loss of
its
investment in the securities being purchased by the Investor from the
Company.
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5.5 Accredited
Investor.
The
Investor is (i) an “accredited investor” as that term is defined in Rule 501 of
Regulation D promulgated under the 1933 Act by reason of Rule 501(a)(3) and
(6),
(ii) experienced in making investments of the kind described in this Agreement
and the related documents, (iii) able, by reason of the business and financial
experience of its officers (if an entity) and professional advisors (who are
not
affiliated with or compensated in any way by the Company or any of its
affiliates or selling agents), to protect its own interests in connection with
the transactions described in this Agreement, and the related documents, and
(iv) able to afford the entire loss of its investment in the securities being
purchased by the Investor from the Company.
5.6 Brokers.
No
broker, finder or investment banker is entitled to any brokerage, finder’s or
other fee or Commission in connection with the transactions contemplated by
this
Agreement based upon arrangements made by or on behalf of such Investor. Such
Investor understands that any obligations under agreements or arrangements
with
brokers disclosed in Schedule
4.8
are
obligations of the Company.
5.7 Knowledge
of Company.
Such
Investor and such Investor’s advisors, if any, have been, upon request,
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the securities
being purchased by such Investor from the Company. Such Investor and such
Investor’s advisors, if any, have been afforded the opportunity to ask questions
of the Company and have received complete and satisfactory answers to any such
inquiries.
5.8 Risk
Factors.
Each
Investor understands that such Investor’s investment in the securities being
purchased by such Investor from the Company involves a high degree of risk.
Such
Investor 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 being purchased by the Investor from the Company.
Such Investor warrants that such Investor is able to bear the complete loss
of
such Investor’s investment in the securities being purchased by the Investor
from the Company.
5.9 Full
Disclosure.
No
representation or warranty made by such Investor in this Agreement and no
certificate or document furnished or to be furnished to the Company pursuant
to
this Agreement contains or will contain any untrue statement of a material
fact,
or omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading. Except as set forth or referred
to
in this Agreement, Investor does not have any agreement or understanding with
any person relating to acquiring, holding, voting or disposing of any equity
securities of the Company.
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Article
6
COVENANTS
OF THE COMPANY
6.1 Registration
Rights.
The
Company shall cause the Registration Rights Agreement to remain in full force
and effect according to the provisions of the Registration Rights Agreement
and
the Company shall comply in all material respects with the terms thereof. Except
as set forth on
Schedule 6.1, the
Company does not have any agreement or obligation which would enable any Person
to include securities in any registration statement required to be filed on
behalf of the Investors pursuant to the Registration Rights Agreement and will
not take any action which will give any Person any right to include securities
in any such registration statement. Except as set forth on
Schedule 6.1. no
Person
has any demand or piggyback registration right with respect to any securities
of
the Company. The Company will not file any registration statement covering
any
shares of Common Stock issuable to any officers, directors, Affiliates of or
consultants to the Company until the earlier of (a) eighteen (18) months from
the Closing Date or (b) the Restriction Termination Date at 90%; provided,
however,
that
the Company may file a registration statement on Form S-8 for shares issued
or
issuable pursuant to employee stock option plans for employees who are not
officers, directors or Affiliates of the Company.
6.2 Reservation
of Shares.
As of
the date hereof, the Company has reserved and the Company shall continue to
reserve and keep available at all times, free of preemptive rights, the maximum
number of Shares for the purpose of enabling the Company to issue the Shares
issuable on conversion of the Series A Preferred Stock and on exercise of the
Warrants without giving effect to any adjustments.
6.3 Compliance
with Laws.
The
Company hereby agrees to comply in all material respects with the Company’s
reporting, filing and other obligations under the securities Laws.
6.4 Exchange
Act Registration.
The
Company will continue its obligation to report to the SEC under Section 12
of
the 1934 Act and will use its best efforts to comply in all material respects
with its reporting and filing obligations under the 1934 Act, and will not
take
any action or file any document (whether or not permitted by the 1934 Act or
the
rules thereunder) to terminate or suspend any such registration or to terminate
or suspend its reporting and filing obligations under the 1934 until the
Investors have disposed of all of their Shares.
6.5 Corporate
Existence; No Conflicting Agreements.
The
Company will take all steps necessary to preserve and continue the corporate
existence of the Company. The Company shall not enter into any agreement, the
terms of which agreement would restrict or impair the right or ability of the
Company to perform any of its obligations under this Agreement or any of the
other agreements attached as exhibits hereto.
6.6 Listing,
Securities Exchange Act of 1934 and Rule 144
Requirements.
The
Company shall not take any action which would cause its Common Stock not to
be
traded on the OTC Bulletin Board, except that the Company may list the Common
Stock on the Nasdaq Stock Market or the American or New York Stock Exchange
if
it meets the applicable listing requirements. If, for any consecutive thirty
day
period after the Closing Date, the Company is not in compliance with this
Section 6.6, then the Company shall pay to the Investors as liquidated damages
and not as a penalty, an amount equal to one percent (1%) per month for each
subsequent full month that the Company is not in compliance. The one percent
shall be based on the lesser of (a) the Purchase Price or (b) that percentage
of
the Purchase Price which the Unsold Shares bears to the number of shares of
Common Stock initially issuable upon conversion of the Series A Preferred Stock.
The Unsold Shares shall mean shares of Series A Preferred Stock with respect
to
which both (i) the Series A Preferred Stock has not been converted and (ii)
the
underlying shares of Common Stock that have not been sold or otherwise
transferred pursuant to a registration statement or Rule 144. The liquidated
damages shall be payable in cash or in shares of Series A Preferred Stock,
as
the Company shall determine. Such
damages shall be payable quarterly on the tenth (10th)
day of
the following calendar quarter, and shall cease to accrue at the time the
Company begins complying with the provisions of this Section 6.6.
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6.7 No
Convertible Debt or Preferred Stock.
The
Company will cause to be cancelled or paid all convertible debt in the Company
on or prior to the Closing Date. Until the earlier of (a) three years from
the
Closing Date or (b) the Restriction Termination Date, the Company will not
issue
any convertible debt or any shares of any class or series of convertible
Preferred Stock.
6.8 Debt
Limitation.
Until
the earlier of (a) three years from the Closing Date or (b) the Restriction
Termination Date at 90%, the Company will not have any debt outstanding in
an
amount greater than twice the sum of the EBITDA from continuing operation for
the past four quarters.
6.9 Reset
Equity Deals.
On
or
prior to the Closing Date, the Company will cause to be cancelled any and all
reset features related to any shares outstanding that could result in additional
shares being issued provided however that no action will be taken with respect
to the outstanding warrants. Until the earlier of (a) five years from the
Closing Date or (b) the Restriction Termination Date, the Company will not
enter
into any transaction that have any reset features that could result in
additional shares being issued.
6.10 Independent
Directors.
6.10.1 No
later
than the thirty (30) days after the Closing Date, the
Company shall increase the size of the Board to five or seven and shall cause
the appointment of the majority of the Board of Directors to be independent
directors, as defined by the rules
of
the Nasdaq Stock Market.
6.10.2 If,
at
any time subsequent to thirty (30) days after the Closing Date until the earlier
of (a) three years from the Closing or (b) the Restriction Termination Date
at
90%, the Board of Directors shall not be composed of a majority of independent
directors:
6.10.2.1 for
a
reason other than for an Excused Reason, the Company shall have 30 days to
take
such steps as are necessary so that a majority of the Company’s directors are
independent directors, and
6.10.2.2 for
an
Excused Reason, the Company shall have 45 days from the date that the Company
becomes aware of the event (or the last event if there are more than one such
event) giving rise to the Excused Reason, to take such steps as are necessary
so
that a majority of the Company’s directors are independent
directors.
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6.10.3 The
term
“Excused
Reason”
shall
mean the death or resignation of an independent director or the occurrence
of an
event whereby an independent director ceases to be independent.
6.10.4 If,
during the period referred to in Section 6.10.2 of this Agreement, the Company
shall have failed to have its Board of Directors composed of a majority of
independent directors after the date by which such situation was to have been
cured pursuant to Section 6.10.2.1 or Section 6.10.2.2 of this Agreement,
whichever shall apply, the Company shall pay to the Investors, as liquidated
damages and not as a penalty, an amount equal to one percent (1%) per month
of
the Purchase Price of the then outstanding shares of Series A Preferred Stock,
payable monthly on the tenth (10th)
day of
the following month, in cash or in Series A Preferred Stock at the option of
the
Investors, based on the number of days that such condition exists beyond the
applicable grace period. The parties agree that the only damages payable for
a
violation of such provisions shall be such liquidated damages. The parties
hereto agree that the liquidated damages provided for in this Section 6.10.4
constitute a reasonable estimate of the damages that may be incurred by the
Investors by reason of the failure of the Company to have a majority of
directors as independent directors.
6.10.5 In
no
event shall the total payments made pursuant to this Section 6.10 and Section
6.11, whether in cash or Series A Preferred Stock exceed in the aggregate one
percent (1%) per month of the Purchase Price of the shares of Series A Preferred
Stock that are outstanding as of the date on which a computation is being made.
6.11 Independent
Directors on Audit and Compensation Committees. No
later
than sixty (60) days after the Closing Date, the Company will have an audit
committee comprised solely of not less than three independent directors and
a
compensation committee comprised of not less than three directors, a majority
of
whom are independent directors. If at any time subsequent to the Closing Date
during the period when the Company is required to have a majority of independent
directors pursuant to Section 6.10 of this Agreement, independent directors
do
not comprise all of the members of the audit committee and a majority of the
members of the compensation committee within the grace periods provided in
Section 6.10, the
Company
shall pay to the Investors, as liquidated damages and not as a penalty, an
amount equal to one percent (1%) per month of the Purchase Price of the then
outstanding Series A Preferred Stock payable in the manner and at the time
provided in Section 6.10, such payment shall be based on the number of days
that
such condition exists. The parties agree that the only damages payable for
a
violation of the terms of this Agreement with respect to which liquidated
damages are expressly provided shall be such liquidated damages. Notwithstanding
the foregoing, no liquidated damages shall be payable pursuant to this Section
6.11 during any period for which liquidated damages are payable pursuant to
Section 6.10.
6.12 Use
of Proceeds.
The
Company will use the net proceeds from the sale of the Securities, after payment
of legal fees and other closing costs, for acquisitions and for working
capital.
6.13 Right
of First Refusal.
6.13.1
In the
event that the Company seeks to raise additional funds through a
private
placement of its securities (a “Proposed
Financing”),
other
than Exempt Issuances as to which this section does not apply, for a period
of
eighteen months after the Closing provided that the Investors continue to
beneficially own in the aggregate at least 25% of Series A Preferred Sock or
the
Common Stock issued thereunder, each Investor shall have the right to
participate in any subsequent funding by the Company of the offering price
on a
pro rata basis, based on the percentage that (a) the number of such Investor’s
Percentage Shares, without regard to the 4.9% Limitation but excluding shares
of
Common Stock issuable upon exercise of Warrants, bears to (b) the total number
of shares of Common Stock outstanding plus the number of Shares issuable upon
conversion of the Series A Preferred Stock and any other series of convertible
preferred stock or debt securities, without regard to the 4.9% Limitations
any
other limitations on exercise such other convertible preferred stock or debt
securities. The term “Percentage
Shares”
shall
mean the number of Total Shares less the number of shares of Common Stock
issuable upon exercise of outstanding Warrants. This Section 6.13 shall apply
to
each such offering based on the total purchase price of the securities being
offered by the Company. This right is personal to the Investors and is not
transferable, whether in connection with the sale of stock or otherwise.
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6.13.2 The
terms
on which the Investors shall purchase securities pursuant to the Proposed
Financing shall be the same as such securities are purchased by other investors.
The Company shall give the Investors the opportunity to participate in the
offering by giving the Investors not less than ten (10) days notice setting
forth the terms of the Proposed Financing. In the event that the terms of the
Proposed Financing are changed in a manner which is more favorable to the
potential investor, the Company shall provide the Investors, at the same time
as
the notice is provided to the other potential investors, with a new ten (10)
day
notice setting forth the revised terms that are provided to the other potential
investors.
6.13.3 In
the
event that the Investors does not exercise its right to participate in the
Proposed Financing within the time limits set forth in Section 6.13.2 of this
Agreement, the Company may sell the securities in the Proposed Financing at
a
price and on terms which are no more favorable to the investors than the terms
provided to the Investors. If the Company subsequently changes the price or
terms so that the price is more favorable to the investors or so the terms
are
more favorable to the investors, the Company shall provide the Investors with
the opportunity to purchase the securities on the revised terms in the manner
set forth in Section 6.13.2
of this
Agreement.
6.14 Price
Adjustment.
From
the
Closing Date until the Restriction Termination Date (except
for Exempt Issuances as to which this Section
6.14
does not
apply), if the Company closes on the sale or issuance of Common Stock at a
sale
price, or warrants, options, convertible
debt or
equity securities with a exercise or conversion price per share which is less
than the Conversion Price (as defined in the Certificate of Designation) then
in
effect (such lower sales price, conversion or exercise price, as the case may
be, being referred to as the “Lower
Price”),
the
Conversion Price in effect from and after the date of such transaction shall
be
reduced to the Lower Price. For purpose of determining the exercise price of
warrants issued by the Company, the purchase price, if any, paid per share
for
the warrants shall be added to the exercise price of the warrants. A similar
provision shall be included in the Warrants, except that the adjustment in
the
warrant exercise price shall have a formula.
6.15 Deliveries
from Escrow Based on Pre-Tax Income Per Share.
6.15.1
The
Company hereby represents to the Investors that the Company’s consolidated
Pre-Tax Income for the fiscal year ending December 31, 2007 shall be at least
$3,000,000 and that the consolidated Pre-Tax Income for the fiscal year ending
December 31, 2008 (assuming receipt by the Company of the Additional Financing)
shall be at least $5,500,000. As the Investors are relying on such
expected profit in making their investment hereunder, and in order to attempt
to
make whole the Investors in the event these numbers are not met, the
Company shall deliver to the Escrow Agent at the Closing the Make Good Escrow
Stock.
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6.15.2
In the
event the Company’s consolidated Pre-Tax Income for the year ended December 31,
2007 is less than $3,000,000 (or Pretax Income Per Share of $0.22 on a fully
diluted basis (the “2007
Target Number”)
the
“2007
Percentage Shortfall”
shall
be computed by dividing the amount of the shortfall by the 2007 Target Number.
Thus, for example, if the Company had Pre-tax Income for the fiscal year ending
December 31, 2007 of $2 million (representing a shortfall of $1 million), the
2007 Percentage Shortfall would be $1 million divided by $3 million, or
one-third (1/3).
6.15.3
If the
2007 Percentage Shortfall is equal to or greater than thirty three and one-third
percent (33 1/3%), then the Escrow Agent shall deliver all of the Make Good
Escrow Stock to the Investors in the ratio of their initial purchase of Series
A
Preferred Stock. In the event of that the Company has Pre-Tax Income of zero
or
a loss all of the Make Good Stock shall be delivered to the
Investors.
6.15.4
If the
2007 Percentage Shortfall is less than thirty three and one-third percent (33
1/3%), then the Escrow Agent shall (i) deliver to the Investors (in the ratio
of
their initial purchase of Series A Preferred Stock) the lesser of (a)such number
of shares of the Make Good Escrow Stock as is determined by multiplying the
2007
Percentage Shortfall by 2,750,000 and (b) 900,000, and (ii) deliver to the
Escrow Agent the remaining shares of Make Good Escrow Stock, if any (the
“Remaining
Escrowed Shares”).
6.15.5
In the
event the Company’s consolidated Pre-Tax Income for the year ended December 31,
2008 is less than $5,500,000 (or Pretax Income Per Share of $0.40 on a fully
diluted basis (the “2008
Target Number”)
the
“2008
Percentage Shortfall”
shall
be computed by dividing the amount of the shortfall by the 2008 Target
Number.
6.15.6
If the
2008 Percentage Shortfall is equal to or greater than thirty three and one-third
percent (33 1/3%), then the Escrow Agent shall deliver all of the Remaining
Escrowed Shares to the Investors in the ratio of their initial purchase of
Series A Preferred Stock.
6.15.7
If the
2008 Percentage Shortfall is less than thirty three and one-third percent (33
1/3%), then the Escrow Agent shall (i) deliver to the Investors (in the ratio
of
their initial purchase of Series A Preferred Stock) the lesser of (a)such number
of shares of the Make Good Escrow Stock as is determined by multiplying the
2008
Percentage Shortfall by 2,750,000 and (b) the Remaining Escrowed Shares and
(ii)
deliver to the Company for cancellation any Remaining Escrowed Shares.
6.15.8
Notwithstanding anything to the contrary contained above or herein, in the
event
that the Company does not receive the Additional Financing, the Investors shall
not be entitled to any of the Make Good Escrow Stock for 2008 and all Remaining
Escrowed Shares shall be returned to the Company for cancellation.
6.15.9
For
purpose of determining Pre-Tax Income Per Share on a fully-diluted basis, all
shares of Common Stock issuable upon conversion of convertible securities and
upon exercise of warrants and options (whether or not vested) shall be deemed
to
be outstanding, regardless of whether (i) such shares are treated as outstanding
for determining diluted earnings per share under GAAP, (ii) such securities
are
“in the money,” or (iii) such shares may be issued as a result of the 4.9%
Limitation; provided,
however,
the
shares of Common Stock issuable upon conversion of the Make Good Escrow Stock
shall be not be deemed outstanding for purpose of this Section 6.15.
SECURITIES
PURCHASE AGREEMENT BETWEEN
DELI
SOLAR (USA), INC. AND XXXXXX PARTNERS LP
PAGE
20
6.15.10 The
distribution of shares of Common Stock pursuant to this Section 6.15 shall
be
made within five (5) business days after the Company files its Form 10-KSB
for
December 31, 2007 with the SEC. In the event that the Company does not file
its
Form 10-KSB with the SEC within thirty (30) days after the date that such filing
is required, after any extension pursuant to Rule 12b-25 of the Exchange Act,
all of the Make Good Escrow Shares shall be transferred to the Investors.
6.15.11 The
parties understand that, pursuant to the Stock Escrow Agreement, the Escrow
Agent will not make any deliveries of shares without the signed written
instructions from the Company and the Investors.
6.16 Insider
Selling.
No
Restricted
Stockholders (as defined below) may sell any shares of Common Stock in the
public market prior to the earlier of 24 months from the Closing Date or the
Restriction Termination Date; provided,
however,
that if
any Restricted Stockholder who is a director (and not an executive officer
of
the Company) shall cease to be a director, such Person may sell not more than
a
total of 50,000 shares of Common Stock in the public market during the period
set forth in this sentence, provided further that this restriction shall only
apply for
so
long as that the Investors continue to beneficially own in the aggregate at
least 25% of Series A Preferred Sock or the Common Stock issued thereunder.
“Restricted
Stockholders”
shall
mean any Person who is an officer, director or Affiliate of the Company on
the
date hereof or who becomes an officer or director of the Company subsequent
to
the Closing Date. Without
limiting the generality of the foregoing, the Restricted Stockholders shall
not,
directly or indirectly, offer to sell, grant an option for the purchase or
sale
of, transfer, pledge assign, hypothecate, distribute or otherwise encumber
or
dispose of any securities in the Company in a transaction which is not in the
public market unless the transferee agrees to be bound by the provisions of
this
Section 6.16. The
Company shall require any newly elected officer or director to agree to the
restriction set forth in this Section 6.16. Xxxxxx Xxxxxx Xxxxxx and the
Investors shall not be considered Restricted Stockholders. The restrictions
in
this Section 6.16 shall not apply to shares issued pursuant to a stock option
or
long-term incentive plans which may be approved by the Board of Directors or
Compensation Committee provided that the Board of Directors or such committee,
as the case may be, is comprised of a majority of independent directors.
6.17 Employment
and Consulting Contracts.
For
three
years after the Closing, the Company shall obtain approval from the Board of
Directors or Compensation Committee provided that the Board of Directors or
such
committee, as the case may be, is comprised of a majority of independent
directors that any awards other than salary are customary, appropriate and
reasonable for any officer, director or consultants whose compensation is more
than $100,000 per annum. This Section 6.17 does not apply to attorneys,
accountants and other persons who provide professional services to the Company.
This section shall only apply for
so
long as that the Investors continue to beneficially own in the aggregate at
least 25% of Series A Preferred Sock or the Common Stock issued
thereunder.
SECURITIES
PURCHASE AGREEMENT BETWEEN
DELI
SOLAR (USA), INC. AND XXXXXX PARTNERS LP
PAGE
21
6.18 Subsequent
Equity Sales.
For
so
long as the Investors continue to beneficially own at least 15% of the
outstanding shares of the Series A Preferred Stock or Common Stock issued on
conversion thereof, the Company shall be not effect or enter into an agreement
to effect any Subsequent Financing involving a “Variable
Rate Transaction”
or
an
“MFN
Transaction”
(each
as defined below). The term “Variable
Rate Transaction”
shall
mean a transaction in which the Company issues or sells (i) any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (A) at
a
conversion, exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the shares of Common Stock
at any time after the initial issuance of such debt or equity securities, or
(B)
with a conversion, exercise or exchange price that is subject to being reset
at
some future date after the initial issuance of such debt or equity security
or
upon the occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common Stock.
The
term “MFN
Transaction”
shall
mean a transaction in which the Company issues or sells any securities in a
capital raising transaction or series of related transactions which grants
to an
investor the right to receive additional shares based upon future transactions
of the Company on terms more favorable than those granted to such investor
in
such offering. Any Investor shall be entitled to obtain injunctive relief
against the Company to preclude any such issuance, which remedy shall be in
addition to any right to collect damages. Notwithstanding the foregoing, this
Section 6.18 shall not apply in respect of an Exempt Issuance, except that
no
Variable Rate Transaction or MFN Transaction shall be an Exempt
Issuance.
6.19 Certificate
of Designation. The
Board
of Directors has approved the Certificate of Designation. The
Company shall file the Certificate of Designation with the Secretary of State
of
the State of Nevada prior to the Closing.
6.20 Stock
Splits.
All
forward and reverse stock splits shall effect all equity and derivative holders
proportionately.
6.21 Retention
of Investor Relations Firm.
The
Company shall instruct the Escrow Agent to retain one hundred fifty thousand
($150,000) of the proceeds of the sale of the Securities to be utilized for
payment to investor relations firms. The Company shall retain an investor
relations firm within 30 days after the Closing Date.
6.22 Payment
of Due Diligence Expenses.
At
Closing the Escrow Agent shall disperse to Xxxxxx the sum of fifty thousand
dollars ($50,000.00) for its due diligence expenses.
6.23 No
Outside Interests.
The
Company’s chairman, chief executive officer and chief financial officer will
devote their full time and attention to the business of the Company and shall
not have any business interests or activities other than as chairman, chief
executive officer or chief financial officer, as the case may be, except that
he or she may devote time, which shall not be material and which shall not
interfere with his or her duties as the Company’s chairman, chief executive
officer or chief financial officer, as the case may be, to personal passive
investments and charitable and community activities. This
restriction shall only apply for
so
long as that the Investors continue to beneficially own in the aggregate at
least 25% of Series A Preferred Sock or the Common Stock issued
thereunder.
SECURITIES
PURCHASE AGREEMENT BETWEEN
DELI
SOLAR (USA), INC. AND XXXXXX PARTNERS LP
PAGE
22
6.24 Related
Party Transactions. For
so
long as that the Investors continue to own in the aggregate at least 25% of
Series A Preferred Stock or the Common Stock issued thereunder, all transactions
with “related persons” (as defined by Item 404 of Regulation S-K) shall require
the
approval
of the Board of Directors comprised of a majority of independent directors,
provided, however,
that
such approval shall not be required for (i) single transactions where the amount
involved is less than $200,000 and (ii) transactions in any three month period
with an aggregate value of less than $400,000.
Article
7
COVENANTS
OF THE INVESTOR
Each
Investor, severally and not jointly, covenants and agrees with the Company
as
follows:
7.1 Compliance
with Law.
Each
Investor’s trading activities with respect to Company’s Common Stock will be in
compliance with all applicable state and federal securities laws, rules and
regulations and rules and regulations of any public market on which the Common
Stock is listed.
7.2 Limitation
on Short Sales.
The
Investor and its affiliates shall not engage in short sales of the Company's
Common Stock.
7.2 Transfer
Restrictions. Each
Investor acknowledges that (a) the Series A Preferred Stock, Warrants and the
Shares have not been registered under the provisions of the 1933 Act, and may
not be transferred unless (i) subsequently registered thereunder or (ii) the
Investor shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that
the
Series A Preferred Stock, Warrants and the Shares to be sold or transferred
may
be sold or transferred pursuant to an exemption from such registration; and
(b)
any sale of the Shares made in reliance on Rule 144 promulgated under the 1933
Act may be made only in accordance with the terms of said Rule and further,
if
said Rule is not applicable, any resale of such 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 used in the 1933 Act, may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder.
7.3 Restrictive
Legend. Each
Investor acknowledges and agrees that the Securities and the Shares shall bear
a
restrictive legend and a stop-transfer order may be placed against transfer
of
any such Securities except that the requirement for a restrictive legend shall
not apply to Shares sold pursuant to a current and effective registration
statement or a sale pursuant Rule 144 or any successor rule.
Article
7
CONDITIONS
PRECEDENT TO THE COMPANY’S OBLIGATIONS
The
obligation of the Company to consummate the transactions contemplated hereby
shall be subject to the fulfillment, on or prior to Closing Date, of the
following conditions:
8.1 No
Termination.
This
Agreement shall not have been terminated pursuant to Article 10
hereof.
SECURITIES
PURCHASE AGREEMENT BETWEEN
DELI
SOLAR (USA), INC. AND XXXXXX PARTNERS LP
PAGE
23
8.2 Representations
True and Correct.
The
representations and warranties of the Investors contained in this Agreement
shall be true and correct in all material respects on and as of the Closing
Date
with the same force and effect as if made on as of the Closing
Date.
8.3 Compliance
with Covenants.
The
Investors shall have performed and complied in all material respects with all
covenants, agreements, and conditions required by this Agreement to be performed
or complied by them prior to or at the Closing Date.
8.4 No
Adverse Proceedings.
On the
Closing Date, no action or proceeding shall be pending by any public authority
or individual or entity before any court or administrative body to restrain,
enjoin, or otherwise prevent the consummation of this Agreement or the
transactions contemplated hereby or to recover any damages or obtain other
relief as a result of the transactions proposed hereby.
Article
9
CONDITIONS
PRECEDENT TO INVESTOR’S OBLIGATIONS
The
obligation of the Investors to consummate the transactions contemplated hereby
shall be subject to the fulfillment, on or prior to Closing Date unless
specified otherwise, of the following conditions:
9.1 No
Termination.
This
Agreement shall not have been terminated pursuant to Article 10
hereof.
9.2 Representations
True and Correct.
The
representations and warranties of the Company contained in this Agreement shall
be true and correct in all material respects on and as of the Closing Date
with
the same force and effect as if made on as of the Closing Date.
9.3 Compliance
with Covenants .
The
Company shall have performed and complied in all material respects with all
covenants, agreements, and conditions required by this Agreement to be performed
or complied by it prior to or at the Closing Date.
9.4 No
Adverse Proceedings.
On the
Closing Date, no action or proceeding shall be pending by any public authority
or individual or entity before any court or administrative body to restrain,
enjoin, or otherwise prevent the consummation of this Agreement or the
transactions contemplated hereby or to recover any damages or obtain other
relief as a result of the transactions proposed hereby.
Article
10
TERMINATION,
AMENDMENT AND WAIVER
10.1 Termination.
This
Agreement may be terminated at any time prior to the Closing Date.
10.1.1 by
mutual
written consent of the Investors and the Company;
10.1.2 by
the
Company upon a material breach of any representation, warranty, covenant or
agreement on the part of any Investor set forth in this Agreement, or by any
Investor upon a material breach of any representation, warranty, covenant or
agreement on the part of the Company set forth in this Agreement, or if any
representation or warranty of the Company or the Investor, respectively, shall
have become untrue, in either case such that any of the conditions set forth
in
Article 8 or Article 9 hereof would not be satisfied (a “Terminating
Breach”),
and
such breach shall, if capable of cure, not have been cured within five (5)
business days after receipt by the party in breach of a notice from the
non-breaching party setting forth in detail the nature of such
breach.
SECURITIES
PURCHASE AGREEMENT BETWEEN
DELI
SOLAR (USA), INC. AND XXXXXX PARTNERS LP
PAGE
24
10.2 Effect
of Termination.
Except
as otherwise provided herein, in the event of the termination of this Agreement
pursuant to Section 10.1 hereof, there shall be no liability on the part of
the
Company or any Investor or any of their respective officers, directors, agents
or other representatives and all rights and obligations of any party hereto
shall cease.
10.3 Amendment.
This
Agreement may be amended by the parties hereto any time prior to the Closing
Date by an instrument in writing signed by the parties hereto; provided,
however
that
the
4.9% Limitation may not be amended or waived.
10.4 Waiver.
At any
time prior to the Closing Date, the Company or the Investors, as appropriate,
may: (a) extend the time for the performance of any of the obligations or other
acts of the other party or; (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered pursuant hereto
which have been made to it or them; or (c) waive compliance with any of the
agreements or conditions contained herein for its or their benefit other than
the 4.9% Limitation which may not be waived. Any such extension or waiver shall
be valid only if set forth in an instrument in writing signed by the party
or
parties to be bound thereby.
Article
11
GENERAL
PROVISIONS
11.1 Transaction
Costs
Except
as otherwise provided herein, each of the parties shall pay all of his or its
costs and expenses (including attorney fees and other legal costs and expenses
and accountants’ fees and other accounting costs and expenses) incurred by that
party in connection with this Agreement; provided, the Company shall pay the
Investors the due diligence expenses as described in Section 6.22.
11.2 Indemnification.
(a) The
Investors agrees to indemnify, defend and hold the Company (following the
Closing Date) and its officers and directors harmless against and in respect
of
any and all claims, demands, losses, costs, expenses, obligations, liabilities
or damages, including interest, penalties and reasonable attorney’s fees, that
any of them shall incur or suffer, which arise out of or result from any breach
of this Agreement by the Investors or failure by the Investors to perform with
respect to the representations, warranties or covenants contained in this
Agreement or in any exhibit or other instrument furnished or to be furnished
under this Agreement. The indemnification by the Investors shall be limited
to
$50,000.00.
(b) The
Company agrees to indemnify, defend and hold the Investors (following the
Closing Date) harmless against and in respect of any and all claims, demands,
losses, costs, expenses, obligations, liabilities or damages, including
interest, penalties and reasonable attorney’s fees, that it shall incur or
suffer, which arise out of, result from or relate to any breach of this
Agreement or failure by the Company to perform with respect to the
representations, warranties or covenants contained in this Agreement or in
any
exhibit or other instrument furnished or to be furnished under this
Agreement.
SECURITIES
PURCHASE AGREEMENT BETWEEN
DELI
SOLAR (USA), INC. AND XXXXXX PARTNERS LP
PAGE
25
(c)
In no
event shall the Company or the Investors be entitled to recover consequential
or
punitive damages resulting from a breach or violation of this Agreement nor
shall any party have any liability hereunder in the event of gross negligence
or
willful misconduct of the indemnified party. In the event of the failure of
the
Company to issue the Series A Preferred Stock and Warrants in violation of
the
provisions of this Agreement, the Investors, as their sole remedy, shall be
entitled to pursue a remedy of specific performance upon tender into the Court
an amount equal to the Purchase Price hereunder. This Section 11.2 shall not
relate to indemnification under the Registration Rights Agreement.
11.3 Headings.
The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of
this Agreement.
11.4 Entire
Agreement.
This
Agreement (together with the Schedule, Exhibits, and agreements and documents
referred to herein) constitute the entire agreement of the parties and
supersedes all prior agreements and undertakings, both written and oral, between
the parties, or any of them, with respect to the subject matter hereof.
11.5 Notices.
All
notices and other communications hereunder shall be in writing and shall be
deemed to have been given (i) on the date they are delivered if delivered in
person; (ii) on the date initially received if delivered by facsimile
transmission followed by registered or certified mail confirmation; (iii) on
the
date delivered by an overnight courier service; or (iv) on the third business
day after it is mailed by registered or certified mail, return receipt requested
with postage and other fees prepaid as follows:
If
to
the Company:
Mr.
Deli
Du, CEO
Deli
Solar (USA), Inc.
Building
3 Xx 00, Xxxx Xxx Xxxxx Xxxx,
Xxxxxxx,
XXXXX 000000
E-mail:
With
a
copy to:
Guzov
Ofsink, LLC
000
Xxxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxx Xxxxxx
E-mail:
xxxxxxx@xxxxxxxxx.xxx
Fax:
(000) 000-0000
SECURITIES
PURCHASE AGREEMENT BETWEEN
DELI
SOLAR (USA), INC. AND XXXXXX PARTNERS LP
PAGE
26
If
to
Xxxxxx:
Xxxxxx
Partners L.P.
c/o
Barron Capital Advisors, LLC
000
Xxxxx
Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attn:
Xxxxxx Xxxxxx Xxxxxx
E-mail:
xxx@xxxxxxxxxxxxxx.xxx
and
xxx@xxxxxxxxxxxxxx.xxx
Fax:
(000)
000-0000
If
to the
other Investors, at their addresses set forth on Appendix A.
11.6 Severability.
If any
term or other provision of this Agreement is invalid, illegal or incapable
of
being enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon
such
determination that any such term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith
to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
11.7 Binding
Effect.
All the
terms and provisions of this Agreement whether so expressed or not, shall be
binding upon, inure to the benefit of, and be enforceable by the parties and
their respective administrators, executors, legal representatives, heirs,
successors and assignees.
11.8 Preparation
of Agreement.
This
Agreement shall not be construed more strongly against any party regardless
of
who is responsible for its preparation. The parties acknowledge each contributed
and is equally responsible for its preparation. In
resolving any dispute regarding, or construing any provision in, this Agreement,
there shall be no presumption made or inference drawn because of the drafting
history of the Agreement, or because of the inclusion of a provision not
contained in a prior draft or the deletion or modification of a provision
contained in a prior draft.
11.9 Governing
Law.
This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of New York, without giving effect to applicable principles of
conflicts of law.
11.10 Jurisdiction;
Waiver of Jury Trial.
If
any action is brought among the parties with respect to this Agreement or
otherwise, by way of a claim or counterclaim, the parties agree that in any
such
action, and on all issues, the parties irrevocably waive their right to a trial
by jury.
Exclusive jurisdiction and venue for any such action shall be the federal and
state courts situated in the City, County and State of New York. In the event
suit or action is brought by any party under this Agreement to enforce any
of
its terms, or in any appeal therefrom, it is agreed that the prevailing party
shall be entitled to reasonable attorneys fees to be fixed by the arbitrator,
trial court, and/or appellate court if such party prevails on substantially
all
issues in dispute.
11.11
Preparation
and Filing of Securities and Exchange Commission
filings.
The
Investors shall reasonably assist and cooperate with the Company in the
preparation of all filings with the SEC after the Closing Date due after the
Closing Date.
11.12 Further
Assurances, Cooperation.
Each
party shall, upon reasonable request by the other party, execute and deliver
any
additional documents necessary or desirable to complete the transactions herein
pursuant to and in the manner contemplated by this Agreement. The parties hereto
agree to cooperate and use their respective best efforts to consummate the
transactions contemplated by this Agreement.
SECURITIES
PURCHASE AGREEMENT BETWEEN
DELI
SOLAR (USA), INC. AND XXXXXX PARTNERS LP
PAGE
27
11.13 Survival.
The
representations, warranties, covenants and agreements made herein shall survive
the Closing of the transaction contemplated hereby.
11.14 Third
Parties.
Except
as disclosed in this Agreement, nothing in this Agreement, whether express
or
implied, is intended to confer any rights or remedies under or by reason of
this
Agreement on any persons other than the parties hereto and their respective
administrators, executors, legal representatives, heirs, successors and
assignees. Nothing in this Agreement is intended to relieve or discharge the
obligation or liability of any third persons to any party to this Agreement,
nor
shall any provision give any third persons any right of subrogation or action
over or against any party to this Agreement.
11.15 Failure
or Indulgence Not Waiver; Remedies Cumulative.
No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty, covenant or
agreement herein, nor shall nay single or partial exercise of any such right
preclude other or further exercise thereof or of any other right. All rights
and
remedies existing under this Agreement are cumulative to, and not exclusive
of,
any rights or remedies otherwise available.
11.16 Counterparts.
This
Agreement may be executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed shall
be
deemed to be an original, but all of which taken together shall constitute
one
and the same agreement. A facsimile transmission of this signed Agreement shall
be legal and binding on all parties hereto.
[SIGNATURES
ON FOLLOWING PAGE]
SECURITIES
PURCHASE AGREEMENT BETWEEN
DELI
SOLAR (USA), INC. AND XXXXXX PARTNERS LP
PAGE
28
IN
WITNESS WHEREOF,
the
Investors and the Company have as of the date first written above executed
this
Agreement.
| THE COMPANY: | ||||
| DELI SOLAR (USA), INC. | ||||
| By: | /s/ Deli Du | |||
|
Deli Du, President and |
||||
| Chief Executive Officer | ||||
| INVESTORS: | ||||
| XXXXXX PARTNERS LP | ||||
| By: | Xxxxxx Capital Advisors, LLC, its General Partner | |||
| /s/ Xxxxxx Xxxxxx Xxxxxx | ||||
|
Xxxxxx Xxxxxx Xxxxxx, President |
||||
| EOS HOLDINGS | ||||
| By: | /s/ Xxx X.Xxxxxx | |||
|
Xxx X.Xxxxxx, President |
||||
| /s/ Xxxxxxx Xxxxxx | ||||
|
Xxxxxxx Xxxxxx |
||||
The
undersigned hereby agrees to be bound by the provisions of Sections 6.15, 6.16
and 6.23 of this Agreement.
| /s/ Deli Du | ||||
|
Deli Du |
||||
Schedule
A
|
Name
and
Address
|
Amount
of Investment
|
Number
of Shares
of
Series A Preferred Stock
|
Number
of
Shares
Underlying Series A Preferred Stock
|
Number
of Shares
Underlying
$1.90 Warrants
|
Number
of Shares
Underlying
$2.40 Warrants
|
|
Xxxxxx
Partners LP
000
Xxxxx Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attn:
Xxxxxx Xxxxxx Xxxxxx
|
$2,550,000
|
1,645,162
|
1,645,162
|
1,645,162
|
1,645,162
|
|
Eos
Holdings, LLC
0000
Xxxxxxxx Xx.
Xxx
Xxxxx, XX 00000
Attn:
Xxx X. Xxxxxx, President
|
$100,000
|
64,516
|
64,516
|
64,516
|
64,516
|
|
Xxxxxxx
Xxxxxx
|
$100,000
|
64,516
|
64,516
|
64,516
|
64,516
|
|
$2,750,000
|
1,774,194
|
1,774,194
|
1,774,194
|
1,774,194
|
Schedule
4.3.1
|
Deli
Solar (USA), Inc.
|
|||||||||||
|
Pre-money
|
9,618,200
|
Mutiple
|
3.21
|
||||||||
|
Outstanding
shares
|
6,205,290
|
6,205,290
|
|||||||||
|
Options
|
0
|
1,774,194
|
|||||||||
|
Warrants:
|
In
Mar 2005 Financing
|
7,979,484
|
|||||||||
|
|
Investors
|
|
Total
Issued
|
1,714,290
|
Post-money
|
12,368,200
|
|||||
|
|
|
Exercised
|
60,000
|
||||||||
|
|
Shares
issuable upon remaining warrants exercise
|
1,654,290
|
1,654,290
|
||||||||
|
|
Subtotal
|
|
|||||||||
|
|
Financial
Advisors
|
common
and common upon warrants exercise
|
171,429
|
Common
and warrants
together
to financial advisors
|
292,771
|
||||||
|
|
To
placement agent for Xxxxxx Investment
|
e.g.
earning
|
2,000,000
|
||||||||
|
|
Trenwith
|
75,000
|
Actual
Pre-money
|
6,412,133
|
|||||||
|
Convertible
Securities
|
0
|
Difference
|
3,206,067
|
||||||||
|
Total:
|
8,106,009
|
Shares
|
2,068,430
|
||||||||
|
|
|
||||||||||
|
Xxxxxx
Securities:
|
|||||||||||
|
|
Preferred
|
1,774,194
|
|||||||||
|
|
Warrant
A
|
1,256,451
|
|||||||||
|
|
Warrant
B
|
1,256,451
|
|||||||||
|
Fully-Diluted
total
|
12,393,105
|
|
|||||||||
Schedule
4.8
Pursuant
to the letter dated March 21st,
2007
between Deli Solar (USA) Inc and Trenwith Securities, LLC (“Trenwith”), Trenwith
shall be paid in cash 6% of the proceeds of this private placement and
shall
receive warrants to purchase 6% of the aggregate number of fully diluted
and /or
converted shares as are purchased by Investors, payable at funding. For
the
purposes of the first tranche of the Investment by Xxxxxx Partners, Trenwith’s
cash fees shall equal $165,000. In addition, for the purposes of the first
tranche, Trenwith shall receive 106,452 warrants, which warrants are exercisable
for five years at the exercise price equal to $1.71 per share.
Schedule
6.1
None.
Exhibit
A
Form
of Certificate of Designation of Preferences, Rights and
Limitations
(Filed
as Exhibit 4.1 to Current Report on Form 8-K filed on June
19, 2007)
Exhibit
B
Closing
Escrow Agreement
(Filed
as Exhibit 10.4 to Current Report on Form 8-K filed on
June 19, 2007)
Exhibit
C
Escrow
Agreement
(Filed
as Exhibit 10.3 to Current Report on Form 8-K filed on
June 19, 2007)
Exhibit
D
Registration
Rights Agreement
(Filed
as Exhibit 10.2 to Current Report on Form 8-K filed on
June 19, 2007)
Exhibit
E-1
$1.90
Warrants
(Filed
as Exhibit 4.2 to Current Report on Form 8-K filed on June
19, 2007)
Exhibit
E-2
$2.40
Warrants
(Filed
as Exhibit 4.3 to Current Report on Form 8-K filed on June
19, 2007)
