FIXED PRICE STANDBY EQUITY DISTRIBUTION AGREEMENT
THIS AGREEMENT dated as of the ___ day of May, 2007 (the "Agreement")
between GULF RESOURCES, INC., a corporation organized and existing under the
laws of the state of Delaware (the "Company"), and each of the investors whose
names are set forth on the signature page hereto (individually, an "Investor,"
collectively, the "Investors").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investors,
from time to time as provided herein, and the Investors shall purchase from the
Company up to Sixty Million U.S. Dollars ($60,000,000) of the Company's common
stock, par value $.001 per share (the "Common Stock"); and
WHEREAS, such investments will be made in reliance upon the provisions of
Regulation D ("Regulation D") and Regulation S ("Regulation S") of the
Securities Act of 1933, as amended, and the regulations promulgated thereunder
(the "Securities Act"), and or upon such other exemption from the registration
requirements of the Securities Act as may be available with respect to any or
all of the investments to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I.
Certain Definitions
Section 1.1. "Advance" shall mean the portion of the Commitment Amount
requested by the Company in the Advance Notice.
Section 1.2. "Advance Date" shall mean the date the Xxxxx & Xxx Xxxxxx LLP
(the "Escrow Agent") Trust Account is in receipt of the funds from the Investors
and the Escrow Agent is in possession of certificates representing the shares to
be issued to the Investors in consideration of such advance and therefore an
Advance by the Investors to the Company can be made and the Escrow Agent can
release the certificates representing the shares to the Investors. The Advance
Date in respect of each Advance shall be the fifth business day in the State of
New York ("Business Day") after delivery of the Advance Notice to the Investors.
For purposes hereof a Business Day shall mean any day that banks in the State of
New York are not required or permitted to be closed.
Section 1.3. "Advance Notice" shall mean a written notice to the Investors
delivered in accordance with Section 2.1 setting forth the Advance amount that
the Company requests from the Investors and the Advance Date.
Section 1.4. "Advance Notice Date" shall mean each date the Company
delivers to the Investors an Advance Notice requiring the Investors to advance
funds to the Company, subject to the terms of this Agreement. No Advance Notice
Date shall be less than fifteen (15) days after the prior Advance Notice Date.
Section 1.5. "Closing" shall mean one of the closings of a purchase and
sale of Common Stock pursuant to Section 2.3.
Section 1.6. "Commitment Amount" shall mean the aggregate amount of up to
Sixty Million U.S. Dollars ($60,000,000) which the Investors have agreed to
provide to the Company in order to purchase the Company's Common Stock pursuant
to the terms and conditions of this Agreement. The Commitment Amount of each
Investor is the amount set forth opposite the name of the Investor on Schedule 1
hereto.
Section 1.7. "Commitment Period" shall mean the period commencing on the
earlier to occur of (i) the Effective Date, or (ii) such earlier date as the
Company and the Investors may mutually agree in writing, and expiring on the
earliest to occur of (x) the date on which the Investors shall have made payment
of Advances pursuant to this Agreement in the aggregate amount of Sixty Million
U.S. Dollars ($60,000,000), (y) the date this Agreement is terminated pursuant
to Section 2.4, or (z) the date occurring eighteen (18) months after the
Effective Date.
Section 1.8. "Common Stock" shall mean the Company's common stock, par
value $.001 per share.
Section 1.9. "Condition Satisfaction Date" shall have the meaning set
forth in Section 7.2.
Section 1.10. "Damages" shall mean any loss, claim, damage, liability,
costs and expenses (including, without limitation, reasonable attorney's fees
and disbursements and costs and expenses of expert witnesses and investigation).
Section 1.11. "Effective Date" shall mean the date on which the SEC first
declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in Section 7.2(a).
Section 1.12. "Escrow Agreement" shall mean the escrow agreement among the
Company, the Investors, and the Escrow Agent, dated the date hereof.
Section 1.13. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
Section 1.14. "Material Adverse Effect" shall mean any condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company to enter into and perform any of its obligations
under this Agreement or the Registration Rights Agreement in any material
respect.
Section 1.15. "Maximum Advance Amount" shall be Ten Million U.S. Dollars
(US$10,000,000) per Advance Notice.
Section 1.16. "NASD" shall mean the National Association of Securities
Dealers, Inc.
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Section 1.17. "Person" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
Section 1.18. "Purchase Price" shall be set at $2.00 per share of Common
Stock.
Section 1.19. "Registrable Securities" shall mean the shares of Common
Stock to be issued hereunder (i) in respect of which a Registration Statement
has not been declared effective by the SEC, (ii) which have not been sold under
circumstances meeting all of the applicable conditions of Rule 144 (or any
similar provision then in force) under the Securities Act ("Rule 144") or (iii)
which have not been otherwise transferred to a holder who may trade such shares
without restriction under the Securities Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing a
restrictive legend.
Section 1.20. "Registration Rights Agreement" shall mean the Registration
Rights Agreement dated the date hereof, regarding the filing of the Registration
Statement for the resale of the Registrable Securities, entered into between the
Company and the Investor.
Section 1.21. "Registration Statement" shall mean a registration statement
on Form S-1 or SB-2 (if use of such form is then available to the Company
pursuant to the rules of the SEC and, if not, on such other form promulgated by
the SEC for which the Company then qualifies and which counsel for the Company
shall deem appropriate, and which form shall be available for the resale of the
Registrable Securities to be registered thereunder in accordance with the
provisions of this Agreement and the Registration Rights Agreement, and in
accordance with the intended method of distribution of such securities), for the
registration of the resale by the Investor of the Registrable Securities under
the Securities Act.
Section 1.22. "SEC" shall mean the Securities and Exchange Commission.
Section 1.23. "SEC Documents" shall mean Annual Reports on Form 10-KSB or
Form 20-F, Quarterly Reports on Form 10-QSB, Current Reports on Form 8-K or 6-K
and Proxy Statements of the Company as supplemented to the date hereof, filed by
the Company for a period of at least twelve (12) months immediately preceding
the date hereof or the Advance Date, as the case may be, until such time as the
Company no longer has an obligation to maintain the effectiveness of a
Registration Statement as set forth in the Registration Rights Agreement.
Section 1.24. "Trading Day" shall mean any day during which the New York
Stock Exchange shall be open for business
ARTICLE II.
Advances
Section 2.1. Investments.
(a) Advances. Upon the terms and conditions set forth herein
(including, without limitation, the provisions of Article VII hereof), on any
Advance Notice Date the Company may request an Advance by the Investors by the
delivery of an Advance Notice. The number of shares of Common Stock that the
Investors shall receive for each Advance shall be determined by dividing the
amount of the Advance by the Purchase Price. No fractional shares shall be
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issued. Fractional shares shall be rounded to the next higher whole number of
shares. The aggregate maximum amount of all Advances that the Investors shall be
obligated to make under this Agreement shall not exceed the Commitment Amount.
Each Investor shall be required to purchase such portion of the number of shares
of Common Stock to be sold in connection with any Advance (the "Advance Amount")
as is equal to the product the Advance Amount multiplied by a fraction, the
numerator of which is the total amount of the Advances committed to by the
Investor and the denominator of which is Sixty Million ($60,000,000).
Section 2.2. Mechanics.
(a) Advance Notice. At any time during the Commitment Period, the
Company may deliver an Advance Notice to the Investors, subject to the
conditions set forth in Section 7.2; provided, however, the amount for each
Advance as designated by the Company in the applicable Advance Notice, shall not
be more than the Maximum Advance Amount. The aggregate amount of the Advances
pursuant to this Agreement shall not exceed the Commitment Amount. The Company
acknowledges that the Investors may sell shares of the Company's Common Stock
corresponding with a particular Advance Notice on the day the Advance Notice is
received by the Investors.
(b) Date of Delivery of Advance Notice. An Advance Notice shall be
deemed delivered on (i) the day after it is received by facsimile or otherwise
by the Investors if such notice is received prior to 12:00 noon Eastern United
States Time, or (ii) the immediately succeeding day if it is received by
facsimile or otherwise after 12:00 noon Eastern United States Time on a day or
at any time on a day which is not Business Day. No Advance Notice may be deemed
delivered on a day that is not a Business Day.
(c) Pre-Closing Share Credit. Within three (3) business days after
the Advance Notice Date, the Company shall credit shares of the Company's Common
Stock to the Escrow Agent's balance account with The Depository Trust Company
through its Deposit Withdrawal At Custodian system, in an amount equal to the
amount of the requested Advance divided by the Purchase Price. In no event shall
the number of shares issuable to any Investor pursuant to an Advance exceed nine
and 9/10 percent (9.9%) of the then outstanding Common Stock of the Company.
(d) Hardship. In the event any Investor sells the Company's Common
Stock to be delivered pursuant to subsection (c) above and the Company fails to
perform its obligations as mandated in Section 2.5 and 2.2 (c), and specifically
fails to provide the Investor with the shares of Common Stock for the applicable
Advance, the Company acknowledges that the Investor shall suffer financial
hardship and therefore shall be liable for any and all losses, commissions,
fees, or financial hardship caused to the Investor.
Section 2.3. Closings. On each Advance Date, which shall be the fifth
Business Day after the applicable Advance Notice Date (i) the Company shall
instruct the Company's transfer agent to deliver to the Escrow Agent, shares of
the Company's Common Stock, representing the amount of the Advance by each
Investor pursuant to Section 2.1 herein, registered in the names of the
Investors which shall be delivered to the Investors, or otherwise in accordance
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with the Escrow Agreement and (ii) each Investor shall deliver to Escrow Agent
its proportionate share of the amount of the Advance specified in the Advance
Notice by wire transfer of immediately available funds which shall be delivered
to the Company, or otherwise in accordance with the Escrow Agreement. In
addition, on or prior to the Advance Date, each of the Company and the Investors
shall deliver to the other through the Escrow Agent counsel, all documents,
instruments and writings required to be delivered by either of them pursuant to
this Agreement in order to implement and effect the transactions contemplated
herein. Payment of funds to the Company and delivery of the Company's Common
Stock to the Investors shall occur in accordance with the conditions set forth
above and those contained in the Escrow Agreement.
Section 2.4. Termination of Investment. The obligation of the Investor to
make an Advance to the Company pursuant to this Agreement shall terminate
permanently (including with respect to an Advance Date that has not yet
occurred) in the event that (i) there shall occur any stop order or suspension
of the effectiveness of the Registration Statement for an aggregate of sixty
(60) Trading Days, other than due to the acts of the Investors, during the
Commitment Period, and (ii) the Company shall at any time fail materially to
comply with the requirements of Article VI and such failure is not cured within
thirty (30) days after receipt of written notice from the Investors, provided,
however, that this termination provision shall not apply to any period
commencing upon the filing of a post-effective amendment to such Registration
Statement and ending upon the date on which such post effective amendment is
declared effective by the SEC.
Section 2.5. Agreement to Advance Funds.
(a) Each Investor agrees to advance its proportionate shares of the
amount specified in the Advance Notice to the Company after the completion of
each of the following conditions and the other conditions set forth in this
Agreement:
(i) the execution and delivery by the Company, and the
Investors, of this Agreement and the Exhibits hereto;
(ii) the Escrow Agent shall have received the shares of Common
Stock applicable to the Advance in accordance with Section 2.2(c) hereof;
(iii) the Company's Registration Statement with respect to the
resale of the Registrable Securities in accordance with the terms of the
Registration Rights Agreement shall have been declared effective by the SEC;
(iv) the Company shall have obtained all material permits and
qualifications required by any applicable state for the offer and sale of the
Registrable Securities, or shall have the availability of exemptions therefrom.
The sale and issuance of the Registrable Securities shall be legally permitted
by all laws and regulations to which the Company is subject;
(v) the Company shall have filed with the Commission in a
timely manner all reports, notices and other documents required of a "reporting
company" under the Exchange Act and applicable Commission regulations; and
(vi) the conditions set forth in Section 7.2 shall have been
satisfied.
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(vii) the Company shall have provided to the Investors an
acknowledgement, from the Company's independent auditors as to its ability to
provide all consents required in order to file a registration statement in
connection with this transaction;
(viii) The Company's transfer agent shall be DWAC eligible.
ARTICLE III.
Representations and Warranties of Investors
Each Investor hereby severally represents and warrants to the Company with
respect to itself, and agrees with the Company that the following are true and
as of the date hereof and as of each Advance Date:
Section 3.1. Organization and Authorization. The Investor is duly
incorporated or organized and validly existing in the jurisdiction of its
incorporation or organization and has all requisite power and authority to
purchase and hold the securities issuable hereunder. The decision to invest and
the execution and delivery of this Agreement by such Investor, the performance
by such Investor of its obligations hereunder and the consummation by such
Investor of the transactions contemplated hereby have been duly authorized and
requires no other proceedings on the part of the Investor. The undersigned has
the right, power and authority to execute and deliver this Agreement and all
other instruments (including, without limitations, the Registration Rights
Agreement), on behalf of the Investor. This Agreement has been duly executed and
delivered by the Investor and, assuming the execution and delivery hereof and
acceptance thereof by the Company, will constitute the legal, valid and binding
obligations of the Investor, enforceable against the Investor in accordance with
its terms.
Section 3.2. Evaluation of Risks. The Investor has such knowledge and
experience in financial tax and business matters as to be capable of evaluating
the merits and risks of, and bearing the economic risks entailed by, an
investment in the Company and of protecting its interests in connection with
this transaction. It recognizes that its investment in the Company involves a
high degree of risk.
Section 3.3. No Legal Advice From the Company. The Investor acknowledges
that it had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with his or its own legal counsel and investment
and tax advisors. The Investor is relying solely on such counsel and advisors
and not on any statements or representations of the Company or any of its
representatives or agents for legal, tax or investment advice with respect to
this investment, the transactions contemplated by this Agreement or the
securities laws of any jurisdiction.
Section 3.4. Investment Purpose. The securities are being purchased by the
Investor for its own account, for investment and without any view to the
distribution, assignment or resale to others or fractionalization in whole or in
part. The Investor agrees not to assign or in any way transfer the Investor's
rights to the securities or any interest therein and acknowledges that the
Company will not recognize any purported assignment or transfer except in
accordance with applicable Federal and state securities laws. No other person
has or will have a direct or indirect beneficial interest in the securities. The
Investor agrees not to sell, hypothecate or otherwise transfer the Investor's
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securities unless the securities are registered under Federal and applicable
state securities laws or unless, in the opinion of counsel satisfactory to the
Company, an exemption from such laws is available.
Section 3.5. Accredited Investor. (a) The Investor is an "Accredited
Investor" as that term is defined in Rule 501(a)(3) of Regulation D of the
Securities Act. The Investor is not a "US Person" as that term is defined in
Rule 902(k) of Regulation S promulgated under the Securities Act. The Investor
resides outside of the United States and does not maintain a place of business
within the United States.
(b) Dealer; Distributor. Investor represents that it is not a distributor
or dealer as such term is defined in Section 2(a)(12) of the Securities Act, or
a person receiving a selling concession, fee or other remuneration in connection
with the Securities.
(c) Hedging Transactions. Investor agrees not to engage in hedging
transactions with regard to the securities issuable pursuant hereto prior to the
expiration of one-year after the purchase of any such securities.
Section 3.6. Information. The Investor and its advisors (and its counsel),
if any, have been furnished with all materials relating to the business,
finances and operations of the Company and information it deemed material to
making an informed investment decision. The Investor and its advisors, if any,
have been afforded the opportunity to ask questions of the Company and its
management. Neither such inquiries nor any other due diligence investigations
conducted by such Investor or its advisors, if any, or its representatives shall
modify, amend or affect the Investor's right to rely on the Company's
representations and warranties contained in this Agreement. The Investor
understands that its investment involves a high degree of risk. The Investor is
in a position regarding the Company, which, based upon employment, family
relationship or economic bargaining power, enabled and enables such Investor to
obtain information from the Company in order to evaluate the merits and risks of
this investment. The Investor has sought such accounting, legal and tax advice,
as it has considered necessary to make an informed investment decision with
respect to this transaction.
Section 3.7. Receipt of Documents. The Investor and its counsel have
received and read in their entirety: (i) this Agreement and the Exhibits annexed
hereto; (ii) all due diligence and other information necessary to verify the
accuracy and completeness of such representations, warranties and covenants;
(iii) the Company's Form 10-KSB for the year ended December 31, 2007; and (iv)
answers to all questions the Investor submitted to the Company regarding an
investment in the Company; and the Investor has relied on the information
contained therein and has not been furnished any other documents, literature,
memorandum or prospectus.
Section 3.8. Registration Rights Agreement and Escrow Agreement. The
parties have entered into the Registration Rights Agreement and the Escrow
Agreement, each dated the date hereof.
Section 3.9. No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the shares of Common Stock offered hereby.
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Section 3.10. Not an Affiliate. The Investor is not an officer, director
or a person that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with the Company or any
"Affiliate" of the Company (as that term is defined in Rule 405 of the
Securities Act). Neither the Investor nor its Affiliates has an open short
position in the Common Stock of the Company, and the Investor agrees that it
will not, and that it will cause its Affiliates not to, engage in any short
sales of or hedging transactions with respect to the Common Stock, provided that
the Company acknowledges and agrees that upon receipt of an Advance Notice the
Investor will sell the Shares to be issued to the Investor pursuant to the
Advance Notice, even if the Shares have not been delivered to the Investor.
Section 3.11. Trading Activities. The Investor's trading activities with
respect to the Company's Common Stock shall be in compliance with all applicable
federal and state securities laws, rules and regulations and the rules and
regulations of the Principal Market on which the Company's Common Stock is
listed or traded. Neither the Investor nor its affiliates has an open short
position in the Common Stock of the Company and, except as set forth below, the
Investor shall not and will cause its affiliates not to engage in any short sale
as defined in any applicable SEC or National Association of Securities Dealers
rules on any hedging transactions with respect to the Common Stock. Without
limiting the foregoing, the Investor agrees not to engage in any naked short
transactions in excess of the amount of shares owned (or an offsetting long
position) during the Commitment Period. The Investor shall be entitled to sell
Common Stock during the applicable Pricing Period.
ARTICLE IV.
Representations and Warranties of the Company
Except as stated below, on the disclosure schedules attached hereto or in
the SEC Documents (as defined herein), the Company hereby represents and
warrants to, and covenants with, the Investor that the following are true and
correct as of the date hereof:
Section 4.1. Organization and Qualification. The Company is duly
incorporated or organized and validly existing in the jurisdiction of its
incorporation or organization and has all requisite power and authority
corporate power to own its properties and to carry on its business as now being
conducted. Each of the Company and its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a Material Adverse Effect on the Company and its
subsidiaries taken as a whole.
Section 4.2. Authorization, Enforcement, Compliance with Other
Instruments. (i) The Company has the requisite corporate power and authority to
enter into and perform this Agreement, the Registration Rights Agreement, the
Escrow Agreement, and any related agreements, in accordance with the terms
hereof and thereof, (ii) the execution and delivery of this Agreement, the
Registration Rights Agreement, the Escrow Agreement and any related agreements
by the Company and the consummation by it of the transactions contemplated
hereby and thereby, have been duly authorized by the Company's Board of
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Directors and no further consent or authorization is required by the Company,
its Board of Directors or its stockholders, (iii) this Agreement, the
Registration Rights Agreement, the Escrow Agreement and any related agreements
have been duly executed and delivered by the Company, (iv) this Agreement, the
Registration Rights Agreement, the Escrow Agreement and assuming the execution
and delivery thereof and acceptance by the Investor and any related agreements
constitute the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.
Section 4.3. Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of 70,000,000 shares of Common Stock, no par value
and 1,000,000 shares of Preferred Stock of which 48,195,340 shares of Common
Stock and no shares of Preferred Stock were issued and outstanding. All of such
outstanding shares have been validly issued and are fully paid and
nonassessable. Except as disclosed in the SEC Documents, no shares of Common
Stock are subject to preemptive rights or any other similar rights or any liens
or encumbrances suffered or permitted by the Company. Except as disclosed in the
SEC Documents, as of the date hereof, (i) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, (ii) there are no outstanding debt
securities (iii) there are no outstanding registration statements other than on
Form S-8 and (iv) there are no agreements or arrangements under which the
Company or any of its subsidiaries is obligated to register the sale of any of
their securities under the Securities Act (except pursuant to the Registration
Rights Agreement). There are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by this Agreement or
any related agreement or the consummation of the transactions described herein
or therein. The Company has furnished to the Investor true and correct copies of
the Company's Certificate of Incorporation, as amended and as in effect on the
date hereof (the "Certificate of Incorporation"), and the Company's By-laws, as
in effect on the date hereof (the "By-laws"), and the terms of all securities
convertible into or exercisable for Common Stock and the material rights of the
holders thereof in respect thereto.
Section 4.4. No Conflict. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby will not (i) result in a violation of the Certificate of
Incorporation, any certificate of designations of any outstanding series of
preferred stock of the Company or By-laws or (ii) conflict with or constitute a
default (or an event which with notice or lapse of time or both would become a
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default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, or result in a violation of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and the rules and regulations of the
Principal Market on which the Common Stock is quoted) applicable to the Company
or any of its subsidiaries or by which any material property or asset of the
Company or any of its subsidiaries is bound or affected and which would cause a
Material Adverse Effect. Except as disclosed in the SEC Documents, neither the
Company nor its subsidiaries is in violation of any term of or in default under
its Articles of Incorporation or By-laws or their organizational charter or
by-laws, respectively, or any material contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its subsidiaries. The business
of the Company and its subsidiaries is not being conducted in violation of any
material law, ordinance, regulation of any governmental entity. Except as
specifically contemplated by this Agreement and as required under the Securities
Act and any applicable state securities laws, the Company 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 its obligations under or contemplated by this
Agreement or the Registration Rights Agreement in accordance with the terms
hereof or thereof. All consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof. The
Company and its subsidiaries are unaware of any fact or circumstance which might
give rise to any of the foregoing.
Section 4.5. SEC Documents; Financial Statements. Since January 1, 2006,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC under of the Exchange Act. The
Company has delivered to the Investor or its representatives, or made available
through the SEC's website at xxxx://xxx.xxx.xxx, true and complete copies of the
SEC Documents. As of their respective dates, the financial statements of the
Company disclosed in the SEC Documents (the "Financial Statements") complied as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and, fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Investor which is not included in the SEC Documents contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
Section 4.6. 10b-5. The SEC Documents do not include any untrue statements
of material fact, nor do they omit to state any material fact required to be
stated therein necessary to make the statements made, in light of the
circumstances under which they were made, not misleading.
Section 4.7. No Default. Except as disclosed in the SEC Documents, the
Company is not in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust or other material instrument or agreement to which it is
a party or by which it is or its property is bound and neither the execution,
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nor the delivery by the Company, nor the performance by the Company of its
obligations under this Agreement or any of the exhibits or attachments hereto
will conflict with or result in the breach or violation of any of the terms or
provisions of, or constitute a default or result in the creation or imposition
of any lien or charge on any assets or properties of the Company under its
Certificate of Incorporation, By-Laws, any material indenture, mortgage, deed of
trust or other material agreement applicable to the Company or instrument to
which the Company is a party or by which it is bound, or any statute, or any
decree, judgment, order, rules or regulation of any court or governmental agency
or body having jurisdiction over the Company or its properties, in each case
which default, lien or charge is likely to cause a Material Adverse Effect on
the Company's business or financial condition.
Section 4.8. Absence of Events of Default. Except for matters described in
the SEC Documents and/or this Agreement, no Event of Default, as defined in the
respective agreement to which the Company is a party, and no event which, with
the giving of notice or the passage of time or both, would become an Event of
Default (as so defined), has occurred and is continuing, which would have a
Material Adverse Effect on the Company's business, properties, prospects,
financial condition or results of operations.
Section 4.9. Intellectual Property Rights. The Company and its
subsidiaries own or possess adequate rights or licenses to use all material
trademarks, trade names, service marks, service xxxx registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and rights necessary to conduct their
respective businesses as now conducted. The Company and its subsidiaries do not
have any knowledge of any infringement by the Company or its subsidiaries of
trademark, trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service xxxx registrations, trade secret
or other similar rights of others, and, to the knowledge of the Company, there
is no claim, action or proceeding being made or brought against, or to the
Company's knowledge, being threatened against, the Company or its subsidiaries
regarding trademark, trade name, patents, patent rights, invention, copyright,
license, service names, service marks, service xxxx registrations, trade secret
or other infringement; and the Company and its subsidiaries are unaware of any
facts or circumstances which might give rise to any of the foregoing.
Section 4.10. Employee Relations. Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened. None of the
Company's or its subsidiaries' employees is a member of a union and the Company
and its subsidiaries believe that their relations with their employees are good.
Section 4.11. Environmental Laws. The Company and its subsidiaries are (i)
in compliance with any and all applicable material foreign, federal, state and
local laws and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants ("Environmental Laws"), (ii) have received all permits, licenses
or other approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (iii) are in compliance with all terms
and conditions of any such permit, license or approval.
-11-
Section 4.12. Title. Except as set forth in the SEC Documents, the Company
has good and marketable title to its properties and material assets owned by it,
free and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest other than such as are not material to the business of the
Company. Any real property and facilities held under lease by the Company and
its subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
subsidiaries.
Section 4.13. Insurance. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
subsidiaries are engaged. Neither the Company nor any such subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its subsidiaries, taken as a whole.
Section 4.14. Regulatory Permits. The Company and its subsidiaries possess
all material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
Section 4.15. Internal Accounting Controls. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
Section 4.16. No Material Adverse Breaches, etc. Except as set forth in
the SEC Documents, neither the Company nor any of its subsidiaries is subject to
any charter, corporate or other legal restriction, or any judgment, decree,
order, rule or regulation which in the judgment of the Company's officers has or
is expected in the future to have a Material Adverse Effect on the business,
properties, operations, financial condition, results of operations or prospects
of the Company or its subsidiaries. Except as set forth in the SEC Documents,
neither the Company nor any of its subsidiaries is in breach of any contract or
agreement which breach, in the judgment of the Company's officers, has or is
expected to have a Material Adverse Effect on the business, properties,
operations, financial condition, results of operations or prospects of the
Company or its subsidiaries.
-12-
Section 4.17. Absence of Litigation. Except as set forth in the SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board, government agency, self-regulatory organization
or body pending against or affecting the Company, the Common Stock or any of the
Company's subsidiaries, wherein an unfavorable decision, ruling or finding would
(i) have a Material Adverse Effect on the transactions contemplated hereby (ii)
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, this Agreement or any of the
documents contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents, have a Material Adverse Effect on the business, operations,
properties, financial condition or results of operation of the Company and its
subsidiaries taken as a whole.
Section 4.18. Subsidiaries. Except as disclosed in the SEC Documents, the
Company does not presently own or control, directly or indirectly, any interest
in any other corporation, partnership, association or other business entity.
Section 4.19. Tax Status. Except as disclosed in the SEC Documents, the
Company and each of its subsidiaries has made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject and (unless and only to the extent that the
Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) has paid
all taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.
Section 4.20. Certain Transactions. Except as set forth in the SEC
Documents none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company (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 corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
Section 4.21. Fees and Rights of First Refusal. The Company is not
obligated to offer the securities offered hereunder on a right of first refusal
basis or otherwise to any third parties including, but not limited to, current
or former shareholders of the Company, underwriters, brokers, agents or other
third parties.
Section 4.22. Further Representation and Warranties of the Company. For so
long as any securities issuable hereunder held by the Investors remain
outstanding, the Company acknowledges, represents, warrants and agrees that it
will maintain the listing of its Common Stock on the Principal Market.
-13-
Section 4.23. Dilution. The Company is aware and acknowledges that
issuance of shares of the Company's Common Stock could cause dilution to
existing shareholders and could significantly increase the outstanding number of
shares of Common Stock.
ARTICLE V.
Indemnification
Each Investor and the Company represents to the other the following with
respect to itself:
Section 5.1. Indemnification.
(a) In consideration of the Investor's execution and delivery of
this Agreement, and in addition to all of the Company's other obligations under
this Agreement, the Company shall defend, protect, indemnify and hold harmless
the Investor, and all of its officers, directors, partners, employees and agents
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Investor
Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Investor Indemnitee is a
party to the action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the "Indemnified
Liabilities"), incurred by the Investor Indemnitees or any of them as a result
of, or arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in this Agreement or the
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement or the Registration Rights
Agreement or any other certificate, instrument or document contemplated hereby
or thereby, or (c) any cause of action, suit or claim brought or made against
such Investor Indemnitee not arising out of any action or inaction of an
Investor Indemnitee, and arising out of or resulting from the execution,
delivery, performance or enforcement of this Agreement or any other instrument,
document or agreement executed pursuant hereto by any of the Investor
Indemnitees. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.
(b) In consideration of the Company's execution and delivery of this
Agreement, and in addition to all of the Investor's other obligations under this
Agreement, the Investor shall defend, protect, indemnify and hold harmless the
Company and all of its officers, directors, shareholders, employees and agents
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Company
Indemnitees") from and against any and all Indemnified Liabilities incurred by
the Company Indemnitees or any of them as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any representation or
warranty made by the Investor in this Agreement, the Registration Rights
Agreement, or any instrument or document contemplated hereby or thereby executed
by the Investor, (b) any breach of any covenant, agreement or obligation of the
Investor(s) contained in this Agreement, the Registration Rights Agreement or
-14-
any other certificate, instrument or document contemplated hereby or thereby
executed by the Investor, or (c) any cause of action, suit or claim brought or
made against such Company Indemnitee based on misrepresentations or due to a
breach by the Investor and arising out of or resulting from the execution,
delivery, performance or enforcement of this Agreement or any other instrument,
document or agreement executed pursuant hereto by any of the Company
Indemnitees. To the extent that the foregoing undertaking by the Investor may be
unenforceable for any reason, the Investor shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.
(c) The obligations of the parties to indemnify or make contribution
under this Section 5.1 shall survive termination.
ARTICLE VI.
Covenants of the Company
Section 6.1. Registration Rights. The Company shall cause the Registration
Rights Agreement to remain in full force and effect and the Company shall comply
in all material respects with the terms thereof.
Section 6.2. Listing of Common Stock. The Company shall maintain the
Common Stock's authorization for quotation on the National Association of
Securities Dealers Inc.'s Over the Counter Bulletin Board or on such market or
electronic exchange of greater stature for which the Company's securities
hereafter qualify.
Section 6.3. Exchange Act Registration. The Company will cause its Common
Stock to continue to be registered under Section 12(g) of the Exchange Act, will
file in a timely manner all reports and other documents required of it as a
reporting company under the Exchange Act and will not take any action or file
any document (whether or not permitted by Exchange Act or the rules thereunder)
to terminate or suspend such registration or to terminate or suspend its
reporting and filing obligations under said Exchange Act.
Section 6.4. Transfer Agent Instructions. Not later than two (2) business
days after each Advance Notice Date and prior to each Closing and the
effectiveness of the Registration Statement and resale of the Common Stock by
the Investor, the Company will deliver instructions to its transfer agent to
issue shares of Common Stock free of restrictive legends.
Section 6.5. Corporate Existence. The Company will take all steps
necessary to preserve and continue the corporate existence of the Company.
Section 6.6. Notice of Certain Events Affecting Registration; Suspension
of Right to Make an Advance. The Company will immediately notify the Investor
upon its becoming aware of the occurrence of any of the following events in
respect of a registration statement or related prospectus relating to an
offering of Registrable Securities: (i) receipt of any request for additional
information by the SEC or any other Federal or state governmental authority
during the period of effectiveness of the Registration Statement for amendments
or supplements to the registration statement or related prospectus; (ii) the
issuance by the SEC or any other Federal or state governmental authority of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
-15-
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) the happening of any event that makes any statement made in the
Registration Statement or related prospectus of any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the related prospectus, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (v) the Company's reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate; and the Company
will promptly make available to the Investor any such supplement or amendment to
the related prospectus. The Company shall not deliver to the Investor any
Advance Notice during the continuation of any of the foregoing events.
Section 6.7. Expectations Regarding Advance Notices. Within ten (10) days
after the commencement of each calendar quarter occurring subsequent to the
commencement of the Commitment Period, the Company must notify the Investors, in
writing, as to its reasonable expectations as to the dollar amount it intends to
raise during such calendar quarter, if any, through the issuance of Advance
Notices. Such notification shall constitute only the Company's good faith
estimate and shall in no way obligate the Company to raise such amount, or any
amount, or otherwise limit its ability to deliver Advance Notices. The failure
by the Company to comply with this provision can be cured by the Company's
notifying the Investor, in writing, at any time as to its reasonable
expectations with respect to the current calendar quarter.
Section 6.8. Consolidation; Merger. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all the assets of the Company to
another entity (a "Consolidation Event") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument the
obligation to deliver to the Investor such shares of stock and/or securities as
the Investor is entitled to receive pursuant to this Agreement.
Section 6.9. Issuance of the Company's Common Stock. The sale of the
shares of Common Stock shall be made in accordance with the provisions and
requirements of Regulation D and any applicable state securities law.
ARTICLE VII.
Conditions for Advance and Conditions to Closing
Section 7.1. Conditions Precedent to the Obligations of the Company. The
obligation hereunder of the Company to issue and sell the shares of Common Stock
to the Investors incident to each Closing is subject to the satisfaction, or
waiver by the Company, at or before each such Closing, of each of the conditions
set forth below.
-16-
(a) Accuracy of the Investor's Representations and Warranties. The
representations and warranties of the Investors shall be true and correct in all
material respects.
(b) Performance by the Investor. The Investors shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement and the Registration Rights Agreement to
be performed, satisfied or complied with by the Investor at or prior to such
Closing.
Section 7.2. Conditions Precedent to the Right of the Company to Deliver
an Advance Notice and the Obligation of the Investors to Purchase Shares of
Common Stock. The right of the Company to deliver an Advance Notice and the
obligation of the Investors hereunder to acquire and pay for shares of the
Company's Common Stock incident to a Closing is subject to the fulfillment by
the Company, on (i) the date of delivery of such Advance Notice and (ii) the
applicable Advance Date (each a "Condition Satisfaction Date"), of each of the
following conditions:
(a) Registration of the Common Stock with the SEC. The Company shall
have filed with the SEC a Registration Statement with respect to the resale of
the Registrable Securities in accordance with the terms of the Registration
Rights Agreement. As set forth in the Registration Rights Agreement, the
Registration Statement shall have previously become effective and shall remain
effective on each Condition Satisfaction Date and (i) neither the Company nor
the Investors shall have received notice that the SEC has issued or intends to
issue a stop order with respect to the Registration Statement or that the SEC
otherwise has suspended or withdrawn the effectiveness of the Registration
Statement, either temporarily or permanently, or intends or has threatened to do
so (unless the SEC's concerns have been addressed and the Investors are
reasonably satisfied that the SEC no longer is considering or intends to take
such action), and (ii) no other suspension of the use or withdrawal of the
effectiveness of the Registration Statement or related prospectus shall exist.
The Registration Statement must have been declared effective by the SEC prior to
the first Advance Notice Date.
(b) Authority. The Company shall have obtained all permits and
qualifications required by any applicable state in accordance with the
Registration Rights Agreement for the offer and sale of the shares of Common
Stock, or shall have the availability of exemptions therefrom. The sale and
issuance of the shares of Common Stock shall be legally permitted by all laws
and regulations to which the Company is subject.
(c) Fundamental Changes. There shall not exist any fundamental
changes to the information set forth in the Registration Statement which would
require the Company to file a post-effective amendment to the Registration
Statement.
(d) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement (including, without limitation, the
conditions specified in Section 2.5 hereof) and the Registration Rights
Agreement to be performed, satisfied or complied with by the Company at or prior
to each Condition Satisfaction Date.
-17-
(e) 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 or directly and adversely affects any of the transactions contemplated
by this Agreement, and no proceeding shall have been commenced that may have the
effect of prohibiting or adversely affecting any of the transactions
contemplated by this Agreement.
(f) No Suspension of Trading in or Delisting of Common Stock. The
trading of the Common Stock is not suspended by the SEC or the Principal Market
(if the Common Stock is traded on a Principal Market). The issuance of shares of
Common Stock with respect to the applicable Closing, if any, shall not violate
the shareholder approval requirements of the Principal Market (if the Common
Stock is traded on a Principal Market). The Company shall not have received any
notice threatening the continued listing of the Common Stock on the Principal
Market (if the Common Stock is traded on a Principal Market).
(g) Maximum Advance Amount. The amount of an Advance requested by
the Company shall not exceed the Maximum Advance Amount. In addition, in no
event shall the number of shares issuable to any Investor pursuant to an Advance
exceed nine and 9/10 percent (9.9%) of the then outstanding Common Stock of the
Company.
(h) No Knowledge. The Company has no knowledge of any event which
would be more likely than not to have the effect of causing such Registration
Statement to be suspended or otherwise ineffective.
(i) Other. On each Condition Satisfaction Date, the Investors shall
have received the certificate executed by an officer of the Company in the form
of Exhibit A attached hereto.
ARTICLE VIII.
Due Diligence Review; Non-Disclosure of Non-Public Information
Section 8.1. Due Diligence Review. Prior to the filing of the Registration
Statement the Company shall make available for inspection and review by each
Investor, its advisors and representatives, and any underwriter participating in
any disposition of the Registrable Securities on behalf of an Investor pursuant
to the Registration Statement, any such registration statement or amendment or
supplement thereto or any blue sky, NASD or other filing, all financial and
other records, all SEC Documents and other filings with the SEC, and all other
corporate documents and properties of the Company as may be reasonably necessary
for the purpose of such review, and cause the Company's officers, directors and
employees to supply all such information reasonably requested by each Investor
or any such representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investors and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
-18-
Section 8.2. Non-Disclosure of Non-Public Information.
(a) The Company shall not disclose non-public information to any
Investor, its advisors, or its representatives, unless prior to disclosure of
such information the Company identifies such information as being non-public
information and provides the Investor, such advisors and representatives with
the opportunity to accept or refuse to accept such non-public information for
review. The Company may, as a condition to disclosing any non-public information
hereunder, require an Investor's advisors and representatives to enter into a
confidentiality agreement in form reasonably satisfactory to the Company and the
Investor.
(b) Nothing herein shall require the Company to disclose non-public
information to any Investor or its advisors or representatives, and the Company
represents that it does not disseminate non-public information to any investors
who purchase stock in the Company in a public offering, to money managers or to
securities analysts, provided, however, that notwithstanding anything herein to
the contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of an Investor and, if any, underwriters, of any
event or the existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware, constituting
non-public information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in the Registration Statement
would cause such prospectus to include a material misstatement or to omit a
material fact required to be stated therein in order to make the statements,
therein, in light of the circumstances in which they were made, not misleading.
Nothing contained in this Section 8.2 shall be construed to mean that such
persons or entities other than an Investor (without the written consent of the
Investors prior to disclosure of such information) may not obtain non-public
information in the course of conducting due diligence in accordance with the
terms of this Agreement and nothing herein shall prevent any such persons or
entities from notifying the Company of their opinion that based on such due
diligence by such persons or entities, that the Registration Statement contains
an untrue statement of material fact or omits a material fact required to be
stated in the Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading.
ARTICLE IX.
Choice of Law/Jurisdiction
Section 9.1. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York without regard
to the principles of conflict of laws. The parties further agree that any action
between them shall be heard in New York City, New York, and expressly consent to
the jurisdiction and venue of the State Courts of New York, sitting in New York
City, New York and the United States District Court of the Southern District of
New York, for the adjudication of any civil action asserted pursuant to this
paragraph.
ARTICLE X.
Assignment; Termination
Section 10.1. Assignment. Neither this Agreement nor any rights of the
Company hereunder may be assigned to any other Person.
-19-
Section 10.2. Termination. The obligations of the Investors to make
Advances under Article II hereof shall eighteen (18) months after the Effective
Date.
ARTICLE XI.
Notices
Section 11.1. Notices. Any notices, consents, waivers, or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile,
provided a copy is mailed by a recognized overnight delivery service; (iii)
three (3) after deposit with a nationally recognized overnight delivery service,
in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:
If to the Company, to: Gulf Resources, Inc.
Chenming Industry Park
Shouguang City, Shandong Province, P.R. China 262714
Tel: 00 000 0000000
Fax: 00 000 0000000
E-mail: Xxxxx@xxxxxxxxxxxxxxx.xxx
With a copy to: Xxxxx & Xxx Xxxxxx LLP
0 Xxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, XX 00000
Telephone (000) 000-0000
Facsimile (000) 000-0000
If to the Investor(s): c/o Xxxxxxxx Xx
Topgood International Limited
2nd Living District, Qinghe Oil Factory
Shouguang City, Shandong Province, P.R. China 262714
Each party shall provide five (5) days' prior written notice to the other party
of any change in address or facsimile number.
-20-
ARTICLE XII.
Miscellaneous
Section 12.1. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof, though failure to deliver such copies shall not affect the
validity of this Agreement.
Section 12.2. Entire Agreement; Amendments. This Agreement supersedes all
other prior oral or written agreements between the Investor, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
Section 12.3. Brokerage. Each of the parties hereto represents that it has
had no dealings in connection with this transaction with any finder or broker
who will demand payment of any fee or commission from the other party. The
Company on the one hand, and each Investor, on the other hand, agree to
indemnify the other against and hold the other harmless from any and all
liabilities to any person claiming brokerage commissions or finder's fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
Section 12.4. Confidentiality. If for any reason the transactions
contemplated by this Agreement are not consummated, each of the parties hereto
shall keep confidential any information obtained from any other party (except
information publicly available or in such party's domain prior to the date
hereof, and except as required by court order) and shall promptly return to the
other parties all schedules, documents, instruments, work papers or other
written information without retaining copies thereof, previously furnished by it
as a result of this Agreement or in connection herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Fixed Price
Standby Equity Distribution Agreement to be executed by the undersigned,
thereunto duly authorized, as of the date first set forth above.
COMPANY:
GULF RESOURCES, INC.
By:
---------------------------------
Name: Xxxx Xxxx
Title: CEO
INVESTORS:
TOPGOOD INTERNATIONAL LIMITED
/s/ Xxxxxxxx Xx
Xxxxxxxx Xx, President, Sole Director
TOTAL GIANT GROUP LIMITED
/s/ Xxxxxxx Xxx
Xxxxxxx Xxx, President, Sole Director
TOTAL SHINE GROUP LIMITED
/s/ Xxxx Xxxxx
Xxxx Xxxxx, President, Sole Director
VICTORY HIGH INVESTMENTS LIMITED
/s/ Xxxx Xxxx
Xxxx Xxxx, President, Sole Director
THINK BIG TRADING LIMITED
/s/ Hanzhi Mao
Hanzhi Mao, President, Sole Director
ARJUNO INVESTMENTS LTD
/s/ Xx Xxxxx
Xx Xxxxx, President, Sole Director
BILLION HERO INVESTMENTS LTD
/s/ Xxxxxx Xx
Xxxxxx Xx, President, Sole Director
EVEN BRIGHT INVESTMENTS LTD
/s/ Xxxxxxx Xx
Xxxxxxx Xx, President, Sole Director
-22-
SCHEDULE 1
Number of
Shares of
Common Stock Purchase
Investors Address Acquired Price
--------------------------- ------- ------------------ -------------
TOPGOOD INTERNATIONAL LIMITED 3,750,000 USD 7,500,000
TOTAL GIANT GROUP LIMITED 3,750,000 USD 7,500,000
TOTAL SHINE GROUP LIMITED 3,850,000 USD 7,700,000
VICTORY HIGH INVESTMENTS LIMITED 3,850,000 USD 7,700,000
THINK BIG TRADING LIMITED 3,650,000 USD 7,300,000
ARJUNO INVESTMENTS LTD 3,650,000 USD 7,300,000
BILLION HERO INVESTMENTS LTD 3,700,000 USD 7,400,000
EVEN BRIGHT INVESTMENTS LTD 3,800,000 USD 7,600,000
-23-
EXHIBIT A
ADVANCE NOTICE/COMPLIANCE CERTIFICATE
GULF RESOURCES, INC.
The undersigned, _______________________ hereby certifies, with respect to
the sale of shares of Common Stock of GULF RESOURCES, INC. (the "Company"),
issuable in connection with this Advance Notice and Compliance Certificate dated
___________________ (the "Notice"), delivered pursuant to the Fixed Price
Standby Equity Distribution Agreement (the "Agreement"), as follows:
1. The undersigned is the duly elected ______________ of the Company.
2. There are no fundamental changes to the information set forth in the
Registration Statement which would require the Company to file a post effective
amendment to the Registration Statement.
3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Advance Date
related to the Notice and has complied in all material respects with all
obligations and conditions contained in the Agreement.
4. The undersigned hereby represents, warrants and covenants that it has
made all filings ("SEC Filings") required to be made by it pursuant to
applicable securities laws (including, without limitation, all filings required
under the Securities Exchange Act of 1934, which include Forms 10-Q, 10-K, 8-K,
etc. All SEC Filings and other public disclosures made by the Company,
including, without limitation, all press releases, analysts meetings and calls,
etc. (collectively, the "Public Disclosures"), have been reviewed and approved
for release by the Company's attorneys and, if containing financial information,
the Company's independent certified public accountants. None of the Company's
Public Disclosures contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
5. The Advance requested is _____________________.
The undersigned has executed this Certificate this ____ day of
_________________.
GULF RESOURCES, INC.
By:
-------------------------
Name:
Title:
