SECURITIES PURCHASE AGREEMENT
THIS
SECURITIES PURCHASE AGREEMENT (this “Agreement”)
is
dated as of January 9, 2008, among China Clean Energy Inc., a Delaware
corporation (the “Company”),
and
each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser”
and
collectively the “Purchasers”).
WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant
to
Section 4(2) of the Securities Act of 1933, as amended (the “Securities
Act”),
and
Rule 506 promulgated thereunder, the Company desires to issue and sell to each
Purchaser, and each Purchaser, severally and not jointly, desires to purchase
from the Company, securities of the Company as more fully described in this
Agreement.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and each Purchaser agree as follows:
ARTICLE
I.
DEFINITIONS
Section
1.01 Definitions.
In
addition to the terms defined elsewhere in this Agreement, for all purposes
of
this Agreement, the following terms have the meanings indicated in this Section
1.01:
“Action”
shall
have the meaning ascribed to such term in Section 3.01(j).
“Affiliate”
means
any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person as such
terms are used in and construed under Rule 144 under the Securities Act. With
respect to a Purchaser, any investment fund or managed account that is managed
on a discretionary basis by the same investment manager as such Purchaser will
be deemed to be an Affiliate of such Purchaser.
“Business
Day”
means
any day except Saturday, Sunday, any day which shall be a federal legal holiday
in the United States or any day on which banking institutions in the State
of
New York are authorized or required by law or other governmental action to
close.
“Class
A Warrants”
shall
have the meaning set forth in Section 2.02(a)(iii).
“Closing”
means
a
closing of the purchase and sale of the Warrants and Shares pursuant to Section
2.01.
“Closing
Date”
means
a
Trading Day when all of the Transaction Documents have been executed and
delivered by the Company and each of the Purchasers purchasing Securities at
the
relevant Closing, and all conditions precedent to (i) the Purchasers’
obligations to pay the Subscription Amount for the Securities being purchased
and (ii) the Company’s obligations to deliver the Securities being purchased
have been satisfied or waived.
“Closing
Price”
means
on any particular date (a) the last reported closing bid price per share of
Common Stock on such date on the Trading Market (as reported by Bloomberg L.P.
at 4:15 PM (New York time)), or (b) if there is no such price on such date,
then
the closing bid price on the Trading Market on the date nearest preceding such
date (as reported by Bloomberg L.P. at 4:15 PM (New York time)), or (c) if
the
Common Stock is not then listed or quoted on the Trading Market and if prices
for the Common Stock are then reported in the “pink sheets” published by Pink
Sheets LLC (or a similar organization or agency succeeding to its functions
of
reporting prices), the most recent bid price per share of the Common Stock
so
reported, or (d) if the shares of Common Stock are not then publicly traded
the
fair market value of a share of Common Stock as determined by an appraiser
selected in good faith by the Purchasers of a majority in interest of the Shares
then outstanding.
“Commission”
means
the U.S. Securities and Exchange Commission.
“Common
Stock”
means
the common stock of the Company, par value $0.001 per share, and any other
class
of securities into which such securities may hereafter be reclassified or
changed into.
“Common
Stock Equivalents”
means
any securities of the Company or the Subsidiaries that would entitle the holder
thereof to acquire at any time Common Stock, including, without limitation,
any
debt, preferred stock, rights, options, warrants or other instrument that is
at
any time convertible into or exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock.
“Disclosure
Schedules”
means
the Disclosure Schedules of the Company delivered concurrently herewith.
“Effective
Date”
means
the date that the initial Registration Statement filed by the Company pursuant
to the Registration Rights Agreement is first declared effective by the
Commission.
“Escrow
Agreement”
means
the Escrow Agreement between the Company, Westminster and the Escrow Agent,
pursuant to which each Purchaser shall deposit its Subscription Amount with
the
Escrow Agent pursuant to Section 2.01(a) below.
“Escrow
Agent”
means
Signature Bank, a New York State chartered bank.
“Evaluation
Date”
shall
have the meaning ascribed to such term in Section 3.01(r).
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
“Exempt
Issuance”
means
the issuance of (a) shares of Common Stock or options to employees, officers,
directors or consultants of the Company pursuant to any stock or option plan
duly adopted by the Board of Directors of the Company (provided, however, any
such issuances to consultants shall not exceed 750,000 shares of Common Stock
and Common Stock Equivalents, in the aggregate, in any 12 month period), (b)
securities (including shares of Common Stock) upon the exercise or exchange
of
or conversion of any Securities issued hereunder and/or other securities
exercisable or exchangeable for or convertible into shares of Common Stock
issued and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement to increase
the number of such securities or to decrease the exercise, exchange or
conversion price of such securities, (c) shares issuable upon exercise of the
Company’s Class A Warrants and (d) securities issued pursuant to acquisitions or
strategic transactions approved by a majority of the disinterested directors
of
the Company.
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“GAAP”
shall
have the meaning ascribed to such term in Section 3.01(h).
“Indebtedness”
shall
have the meaning ascribed to such term in Section 3.01(aa).
“Initial
Closing”
shall
have the meaning ascribed to such term in Section 2.01(a).
“Initial
Closing Date”
shall
have the meaning ascribed to such term in Section 2.01(a).
“Intellectual
Property Rights”
shall
have the meaning ascribed to such term in Section 3.01(o).
“Liens”
means
a
lien, charge, security interest, encumbrance, right of first refusal, preemptive
right or other restriction.
“Lock-Up
Agreements”
means
those certain lock-up agreements among the Company, Westminster and each of
the
Company’s executive officers, directors and holders of 5% or more of the Common
Stock, in the form of Exhibit
A
attached
hereto.
“Make
Good Escrow Agreement”
means
that certain escrow agreement among the Company and certain stockholders of
the
Company pursuant to which such stockholders will deposit into escrow 1,500,000
shares of Common Stock, in the form of Exhibit
B
hereto.
“Make
Good Shares”
means
those 1,500,000 shares of Common Stock to be deposited into escrow pursuant
to
the Make Good Escrow Agreement.
“Material
Adverse Effect”
shall
have the meaning ascribed to such term in Section 3.01(b).
“Material
Permits”
shall
have the meaning ascribed to such term in Section 3.01(m).
“Participation
Maximum”
shall
have the meaning ascribed to such term in Section 4.12.
“Per
Share Purchase Price”
means
$1.50.
“Person”
means
an individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any kind.
“Placement
Agent”
means
Westminster.
“Pre-Notice”
shall
have the meaning ascribed to such term in Section 4.12.
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“Proceeding”
means
an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.
“Purchaser
Party”
shall
have the meaning ascribed to such term in Section 4.08.
“Registration
Rights Agreement”
means
the Registration Rights Agreement, dated the date hereof, among the Company
and
the Purchasers, in the form of Exhibit
C
attached
hereto.
“Registration
Statement”
means
a
registration statement meeting the requirements set forth in the Registration
Rights Agreement and covering the resale by the Purchasers of the Shares and
the
Warrant Shares.
“Required
Approvals”
shall
have the meaning ascribed to such term in Section 3.01(e).
“Rule
144”
means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as
such
Rule.
“SEC
Reports”
shall
have the meaning ascribed to such term in Section 3.01(h).
“Securities”
means
the Shares, the Warrants and the Warrant Shares.
“Securities
Act”
means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Shares”
means
the shares of Common Stock issued or issuable to each Purchaser pursuant to
this
Agreement.
“Short
Sales”
means
all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange
Act (but shall not be deemed to include the location and/or reservation of
borrowable shares of Common Stock).
“Subscription
Amount”
means,
as to each Purchaser, the aggregate amount to be paid for Shares and Warrants
purchased hereunder as specified below such Purchaser’s name on the signature
page of this Agreement and next to the heading “Subscription Amount”, in United
States dollars and in immediately available funds. Except with the consent
of
Westminster, in no event shall a Purchaser’s Subscription Amount be less than
$30,000.
“Subsequent
Closing Date”
shall
have the meaning ascribed to such term in Section 2.01(a).
“Subsequent
Financing”
shall
have the meaning ascribed to such term in Section 4.12.
“Subsequent
Financing Notice”
shall
have the meaning ascribed to such term in Section 4.12.
“Subsidiary”
means
any subsidiary of the Company as set forth on Schedule
3.01(a).
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“Termination
Date”
shall
have the meaning ascribed to such term in Section 2.01(a).
“Trading
Day”
means
a
day on which the Common Stock is traded on a Trading Market.
“Trading
Market”
means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the American Stock Exchange, the Nasdaq
Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market,
the
New York Stock Exchange or the OTC Bulletin Board.
“Transaction
Documents”
means
this Agreement, the Warrants, the Registration Rights Agreement, the Escrow
Agreement and any other documents or agreements executed in connection with
the
transactions contemplated hereunder.
“Transfer
Agent”
means
Continental Stock Transfer & Trust Company, with a mailing address of 00
Xxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 and a facsimile number of (000)
000-0000, and any successor transfer agent of the Company.
“Warrants”
means
collectively the Common Stock purchase warrants delivered to the Purchasers
at
each Closing in accordance with Section 2.02(a) hereof, which Warrants shall
be
exercisable immediately and have a term of exercise equal to five years, in
the
form of Exhibit
D
attached
hereto.
“Warrant
Shares”
means
the shares of Common Stock issuable upon exercise of the Warrants.
“Westminster”
means
Westminster Securities Corporation.
ARTICLE
II.
PURCHASE
AND SALE
Section
2.01 Closing.
(a) On
the
initial Closing Date (the “Initial
Closing Date”),
upon
the terms and subject to the conditions set forth herein, substantially
concurrent with the execution and delivery of this Agreement by the parties
hereto, the Company agrees to sell, and each Purchaser purchasing Shares and
Warrants at the initial Closing (the “Initial
Closing”),
severally and not jointly, agrees to purchase up to $15,000,000 of Shares and
Warrants, but in no event less than $8,010,000 of Shares and Warrants in the
aggregate. Upon satisfaction of the conditions set forth in Sections 2.02 and
2.03, the Initial Closing shall occur at the offices of Xxxxxx and Xxxxx, LLP,
000 Xxxx 00xx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000 or such other
location as the parties shall mutually agree. Thereafter, on any subsequent
Closing Date (each a “Subsequent
Closing Date”),
upon
the terms and subject to the conditions set forth herein, substantially
concurrent with the execution and delivery of this Agreement by the Purchasers
purchasing Shares and Warrants on such Subsequent Closing Date, the Company
agrees to sell, and each Purchaser purchasing Securities at such subsequent
Closing, severally and not jointly, agrees to purchase up to $15,000,000 of
Shares and Warrants, less the amount of Shares and Warrants issued and sold
at
all previous closings. Each Purchaser purchasing Shares and Warrants on a
Closing Date shall deliver to the Escrow Agent, via wire transfer (in accordance
with the wiring instructions set forth on Exhibit
E
attached
hereto) or a certified check, immediately available funds equal to its
Subscription Amount and the Company shall deliver to each Purchaser its
respective Shares and Warrants as determined pursuant to Section 2.02(a), and
the Company and each Purchaser shall deliver the other items set forth in
Section 2.02 deliverable at each Closing. Notwithstanding anything herein to
the
contrary, each Closing Date shall occur on or before January 15, 2008, or on
such date as the Placement Agent and the Company may agree upon, but in no
event
following January 31, 2008 (such outside date, “Termination
Date”).
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(b) If
a
Closing is not held on or before the Termination Date, the Company shall cause
all subscription documents and funds to be returned, without interest or
deduction to each prospective Purchaser. The Company shall also cause any
subscription documents or funds received following the final Closing to be
returned, without interest or deduction, to each applicable prospective
Purchaser. Notwithstanding the foregoing, the Company in its sole discretion
may
elect not to sell to any Person any or all of the Shares and Warrants requested
to be purchased hereunder, provided that the Company causes all corresponding
subscription documents and funds received from such Person to be promptly
returned.
Section
2.02 Deliveries.
(a) On
or
prior to each Closing Date, the Company shall deliver or cause to be delivered
to each Purchaser purchasing Shares and Warrants on such Closing Date each
of
the following:
(i) this
Agreement duly executed by the Company;
(ii) a
copy of
the irrevocable instructions to the Transfer Agent instructing the Transfer
Agent to deliver, on an expedited basis, a certificate evidencing that number
of
Shares equal to such Purchaser’s Subscription Amount divided by the Per Share
Purchase Price, registered in the name of such Purchaser; provided that in
the
event the funds delivered by a Purchaser are not evenly divisible by the Per
Share Purchase Price, the Company may round down to the nearest whole number
the
number of Shares to be sold to such Purchaser and the Company shall be entitled
to retain any additional funds remaining due to such rounding;
(iii) a
Warrant, designated as the Company’s Class A Common Stock Purchase Warrant (a
“Class
A Warrant(s)”),
registered in the name of such Purchaser to purchase up to that number of shares
of Common Stock equal to 50% of the Shares purchased by such Purchaser
hereunder, with an exercise price equal to $2.00 per share;
(iv) the
Registration Rights Agreement duly executed by the Company; and
(v) the
Lock-Up Agreements, duly executed by each of the Company’s executive officers,
directors and holders of 5% or more of the Common Stock.
(b) On
or
prior to each Closing Date, each Purchaser purchasing Shares and Warrants on
such Closing Date shall deliver or cause to be delivered to the Company the
following:
(i) this
Agreement duly executed by such Purchaser;
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(ii) such
Purchaser’s Subscription Amount by wire transfer or certified check to the
account as specified in writing by the Escrow Agent; and
(iii) the
Registration Rights Agreement duly executed by such Purchaser.
Section
2.03 Closing
Conditions.
(a) The
obligations of the Company hereunder in connection with each Closing are subject
to the following conditions being met:
(i) the
accuracy in all material respects when made and on such Closing Date of the
representations and warranties of the Purchasers contained herein;
(ii) all
obligations, covenants and agreements of the Purchasers required to be performed
at or prior to such Closing Date shall have been performed; and
(iii) the
delivery by the Purchasers of the items set forth in Section 2.02(b) of this
Agreement.
(b) The
respective obligations of the Purchasers hereunder in connection with each
Closing are subject to the following conditions being met:
(i) the
accuracy in all material respects on such Closing Date of the representations
and warranties of the Company contained herein;
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(ii) all
obligations, covenants and agreements of the Company required to be performed
at
or prior to such Closing Date shall have been performed;
(iii) at
least
$8,010,000 shall have been received by the Escrow Agent from Purchasers in
connection with the purchase of Shares and Warrants pursuant to this Agreement
prior to the Initial Closing;
(iv) the
delivery by the Company of the items set forth in Section 2.02(a) of this
Agreement;
(v) the
delivery by the Company to the Placement Agent of the Make Good Escrow
Agreement, duly executed by the Company, the escrow agent signatory thereto
and
each of the stockholders signatory;
(vi) the
delivery by the stockholders party to the Make Good Escrow Agreement to the
escrow agent identified in such agreement of the Make Good Shares, duly endorsed
in blank with Medallion Guarantee, or its equivalent, affixed to each applicable
certificate representing the Make Good Shares;
(vii) there
shall have been no Material Adverse Effect with respect to the Company since
the
date hereof; and
(viii) from
the
date hereof to such Closing Date, trading in the Common Stock shall not have
been suspended by the Commission or the Company’s principal Trading Market
(except for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to such Closing), and,
at
any time prior to such Closing Date, trading in securities generally as reported
by Bloomberg L.P. shall not have been suspended or limited, or minimum prices
shall not have been established on securities whose trades are reported by
such
service, or on any Trading Market, nor shall a banking moratorium have been
declared either by the United States or New York State authorities nor shall
there have occurred any material outbreak or escalation of hostilities or other
national or international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market that, in each case, in the
reasonable judgment of each Purchaser, makes it impracticable or inadvisable
to
purchase the Shares at such Closing.
ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES
Section
3.01 Representations
and Warranties of the Company.
Except
as set forth under the corresponding section of the Disclosure Schedules which
Disclosure Schedules shall be deemed a part hereof and to qualify any
representation or warranty otherwise made herein to the extent of such
disclosure, the Company hereby makes the following representations and
warranties to each Purchaser:
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(a) Subsidiaries.
All of
the direct and indirect subsidiaries of the Company are set forth on
Schedule
3.01(a).
The
Company owns, directly or indirectly, all of the capital stock or other equity
interests of each Subsidiary free and clear of any Liens, and all of the issued
and outstanding shares of capital stock of each Subsidiary are validly issued
and are fully paid, non-assessable and free of preemptive and similar rights
to
subscribe for or purchase securities.
(b) Organization
and Qualification.
The
Company and each of the Subsidiaries is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
requisite power and authority to own and use its properties and assets and
to
carry on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation or default of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the Subsidiaries is duly qualified
to
conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not
have or reasonably be expected to result in (i) a material adverse effect on
the
legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a
“Material
Adverse Effect”)
and no
Proceeding has been instituted in any such jurisdiction revoking, limiting
or
curtailing or seeking to revoke, limit or curtail such power and authority
or
qualification.
(c) Authorization;
Enforcement.
The
Company has the requisite corporate power and authority to enter into and to
consummate the transactions contemplated by each of the Transaction Documents
and otherwise to carry out its obligations hereunder and thereunder. The
execution and delivery of each of the Transaction Documents by the Company
and
the consummation by it of the transactions contemplated hereby and thereby
have
been duly authorized by all necessary action on the part of the Company and
no
further action is required by the Company, its board of directors or its
stockholders in connection therewith other than in connection with the Required
Approvals. Each Transaction Document has been (or upon delivery will have been)
duly executed by the Company and, when delivered in accordance with the terms
hereof and thereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms except
(i)
as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.
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(d) No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company,
the issuance and sale of the Shares and the consummation by the Company of
the
other transactions contemplated hereby and thereby do not and will not (i)
conflict with or violate any provision of the Company’s or any Subsidiary’s
certificate or articles of incorporation, bylaws or other organizational or
charter documents, (ii) conflict with, or constitute a default (or an event
that
with notice or lapse of time or both would become a default) under, result
in
the creation of any Lien upon any of the properties or assets of the Company
or
any Subsidiary, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both)
of,
any agreement, credit facility, debt or other instrument (evidencing a Company
or Subsidiary debt or otherwise) or other understanding to which the Company
or
any Subsidiary is a party or by which any property or asset of the Company
or
any Subsidiary is bound or affected or (iii) subject to the Required Approvals,
conflict with or result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal
and
state securities laws and regulations), or by which any property or asset of
the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not have or reasonably be expected to
result in a Material Adverse Effect.
(e) Filings,
Consents and Approvals.
The
Company is not required to obtain any authorization or order of, give any notice
to, or make any filing or registration with, any court or other federal, state,
local or other governmental authority in connection with the execution, delivery
and performance by the Company of the Transaction Documents, other than (i)
filings required pursuant to Section 4.04 of this Agreement, (ii) the filing
with the Commission of the Registration Statement, (iii) application(s) to
each
applicable Trading Market for the listing of the Securities for trading thereon
in the time and manner required thereby and (iv) the filing of a Form D with
the
Commission and such filings as are required to be made under applicable state
securities laws (collectively, the “Required
Approvals”).
(f) Issuance
of the Securities.
The
Securities are duly authorized and, when issued and paid for in accordance
with
the applicable Transaction Documents, will be duly and validly issued, fully
paid and nonassessable, free and clear of all Liens imposed by the Company
other
than restrictions on transfer provided for in the Transaction Documents. The
Company has reserved from its duly authorized capital stock the maximum number
of shares of Common Stock issuable pursuant to this Agreement and the Warrants.
(g) Capitalization.
The
capitalization of the Company is as set forth on Schedule
3.01(g).
Except
as set forth on Schedule
3.01(g),
(i) the
Company has not issued any capital stock since its most recently filed periodic
report under the Exchange Act, (ii) no Person has any right of first refusal,
preemptive right, right of participation, or any similar right to participate
in
the transactions contemplated by the Transaction Documents, (iii) except as
a
result of the purchase and sale of the Securities, there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or giving any Person any
right to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock
or
Common Stock Equivalents and (iv) the issuance and sale of the Securities will
not obligate the Company to issue shares of Common Stock or other securities
to
any Person (other than the Purchasers) and will not result in a right of any
holder of Company securities to adjust the exercise, conversion, exchange or
reset price under any of such securities. All of the outstanding shares of
capital stock of the Company are validly issued, fully paid and nonassessable,
have been issued in compliance with all federal and state securities laws,
and
none of such outstanding shares was issued in violation of any preemptive rights
or similar rights to subscribe for or purchase securities. No further approval
or authorization of any stockholder, the Board of Directors of the Company
or
others is required for the issuance and sale of the Securities. There are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company’s
stockholders.
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(h) SEC
Reports; Financial Statements.
Since
October 24, 2006, the Company has filed all reports, schedules, forms,
statements and other documents required to be filed by the Company under the
Securities Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof (the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein, being collectively referred to
herein as the “SEC
Reports”)
on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such extension. As
of
their respective dates, the SEC Reports complied in all material respects with
the requirements of the Securities Act and the Exchange Act, as applicable,
and
none of the SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing.
Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(i) Material
Changes; Undisclosed Events, Liabilities or Developments.
Since
the date of the latest audited financial statements included within the SEC
Reports, except as specifically disclosed in a subsequent SEC Report filed
prior
to the date hereof, (i) there has been no event, occurrence or development
that
has had or that could reasonably be expected to result in a Material Adverse
Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company’s financial statements pursuant to
GAAP or disclosed in filings made with the Commission, (iii) the Company has
not
altered its method of accounting, (iv) the Company has not declared or made
any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares
of
its capital stock and (v) the Company has not issued any equity securities
to
any officer, director or Affiliate, except pursuant to existing Company stock
incentive plans. The Company does not have pending before the Commission any
request for confidential treatment of information. Except for the issuance
of
the Securities contemplated by this Agreement or as set forth on Schedule
3.01(i),
no
event, liability or development has occurred or exists with respect to the
Company or its Subsidiaries or their respective business, properties, operations
or financial condition, that would be required to be disclosed by the Company
under applicable securities laws at the time this representation is made that
has not been publicly disclosed at least 1 Trading Day prior to the date that
this representation is made.
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11 -
(j) Litigation.
There
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting
the
Company, any Subsidiary or any of their respective properties before or by
any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”)
that
(i) adversely affects or challenges the legality, validity or enforceability
of
any of the Transaction Documents or the Securities or (ii) could, if there
were
an unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect. Neither the Company nor any Subsidiary, nor any director or
officer thereof, is or has been the subject of any Action involving a claim
of
violation of or liability under federal or state securities laws or a claim
of
breach of fiduciary duty. There has not been, and to the knowledge of the
Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer
of
the Company. The Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the Exchange Act or the Securities Act.
(k) Labor
Relations.
No
material labor dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company that could reasonably be
expected to result in a Material Adverse Effect. None of the Company’s or its
Subsidiaries’ employees is a member of a union that relates to such employee’s
relationship with the Company, and neither the Company nor any of its
Subsidiaries is a party to a collective bargaining agreement, and the Company
and its Subsidiaries believe that their relationships with their employees
are
good. No executive officer, to the knowledge of the Company, is, or is now
expected to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does
not
subject the Company or any of its Subsidiaries to any liability with respect
to
any of the foregoing matters. The Company and its Subsidiaries are in compliance
with all U.S. federal, state, local and foreign laws and regulations relating
to
employment and employment practices, terms and conditions of employment and
wages and hours, except where the failure to be in compliance could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(l) Compliance.
Neither
the Company nor any Subsidiary (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is
in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its business
and all such laws that affect the environment, except in each case as could
not
have or reasonably be expected to result in a Material Adverse Effect.
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12 -
(m) Regulatory
Permits.
The
Company and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described in
the
SEC Reports, except where the failure to possess such permits could not have
or
reasonably be expected to result in a Material Adverse Effect (“Material
Permits”),
and
neither the Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
(n) Title
to Assets.
Except
as set forth in Schedule
3.01(n),
the
Company and the Subsidiaries have good and marketable title in fee simple to
all
real property owned by them that is material to the business of the Company
and
the Subsidiaries and good and marketable title in all personal property owned
by
them that is material to the business of the Company and the Subsidiaries,
in
each case free and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not materially interfere with the
use
made and proposed to be made of such property by the Company and the
Subsidiaries and Liens for the payment of federal, state or other taxes, the
payment of which is neither delinquent nor subject to penalties. Any real
property and facilities held under lease by the Company and the Subsidiaries
are
held by them under valid, subsisting and enforceable leases with which the
Company and the Subsidiaries are in compliance.
(o) Patents
and Trademarks.
The
Company and the Subsidiaries have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
trade secrets, inventions, copyrights, licenses and other intellectual property
rights and similar rights necessary or material for use in connection with
their
respective businesses as described in the SEC Reports and that the failure
to so
have could result in a Material Adverse Effect (collectively, the “Intellectual
Property Rights”).
Neither the Company nor any Subsidiary has received a notice (written or
otherwise) that the Intellectual Property Rights used by the Company or any
Subsidiary violates or infringes upon the rights of any Person. To the knowledge
of the Company, all such Intellectual Property Rights are enforceable and there
is no existing infringement by another Person of any of the Intellectual
Property Rights. The Company and its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all of their
intellectual properties, except where failure to do so could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(p) Insurance.
The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are
customary in the businesses in which the Company and the Subsidiaries are
engaged. Neither the Company nor any Subsidiary has any reason to believe that
it will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may
be
necessary to continue its business without a significant increase in cost.
(q) Transactions
With Affiliates and Employees.
Except
as set forth in the SEC Reports, none of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest
or
is an officer, director, trustee or partner, in each case in excess of $120,000
other than (i) for payment of salary or consulting fees for services rendered,
(ii) reimbursement for expenses incurred on behalf of the Company and (iii)
for
other employee benefits, including stock option agreements under any stock
option plan of the Company.
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13 -
(r) Xxxxxxxx-Xxxxx;
Internal Accounting Controls.
The
Company is in material compliance with all provisions of the Xxxxxxxx-Xxxxx
Act
of 2002 that are applicable to it. The Company and the 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 GAAP 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. The Company has established disclosure controls and procedures
(as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or submits
under
the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the Commission’s rules and forms. The Company’s
certifying officers have evaluated the effectiveness of the Company’s disclosure
controls and procedures as of the end of the period covered by the Company’s
most recently filed periodic report under the Exchange Act (such date, the
“Evaluation
Date”).
The
Company presented in its most recently filed periodic report under the Exchange
Act the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no changes in the
Company’s internal control over financial reporting (as such term is defined in
the Exchange Act) that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial reporting.
(s) Certain
Fees.
All
brokerage or finder’s fees or commissions payable by the Company to any broker,
financial advisor or consultant, finder, placement agent, investment banker,
bank or other Person with respect to the transactions contemplated by the
Transaction Documents are as set forth on Schedule
3.01(s).
The
Purchasers shall have no obligation with respect to any fees or with respect
to
any claims made by or on behalf of other Persons for fees of a type contemplated
in this Section that may be due in connection with the transactions contemplated
by the Transaction Documents.
(t) Private
Placement.
Assuming the accuracy of the Purchasers representations and warranties set
forth
in Section 3.02, no registration under the Securities Act is required for the
offer and sale of the Securities by the Company to the Purchasers as
contemplated hereby. The issuance and sale of the Securities hereunder does
not
contravene the rules and regulations of the Trading Market.
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14 -
(u) Investment
Company.
The
Company is not, and is not an Affiliate of, and immediately after receipt of
payment for the Securities, will not be or be an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.
The Company shall conduct its business in a manner so that it will not become
subject to the Investment Company Act of 1940, as amended.
(v) Registration
Rights.
Except
as set forth on Schedule
3.01(v),
other
than each of the Purchasers, no Person has any right to cause the Company to
effect the registration under the Securities Act of any securities of the
Company.
(w) Listing
and Maintenance Requirements.
The
Company has not, in the 12 months preceding the date hereof, received notice
from any Trading Market on which the Common Stock is or has been listed or
quoted to the effect that the Company is not in compliance with the listing
or
maintenance requirements of such Trading Market. The Company is, and has no
reason to believe that it will not in the foreseeable future continue to be,
in
compliance with all such listing and maintenance requirements.
(x) Application
of Takeover Protections.
The
Company and its Board of Directors have taken all necessary action, if any,
in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s certificate of
incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Purchasers as a result
of the Purchasers and the Company fulfilling their obligations or exercising
their rights under the Transaction Documents, including, without limitation,
as
a result of the Company’s issuance of the Securities and the Purchasers’
ownership of the Securities.
(y) Disclosure.
Except
to a Purchaser who has entered into a non-disclosure agreement with the Company
and except with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms that neither
it
nor any other Person acting on its behalf has provided any of the Purchasers
or
their agents or counsel with any information that it believes constitutes or
might constitute material, non-public information. The Company understands
and
confirms that the Purchasers will rely on the foregoing representation in
effecting transactions in securities of the Company. All disclosure furnished
by
or on behalf of the Company to the Purchasers regarding the Company, its
business and the transactions contemplated hereby, including the Disclosure
Schedules to this Agreement, is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. The press releases disseminated by the
Company during the twelve months preceding the date of this Agreement taken
as a
whole do not contain any untrue statement of a material fact or omit to state
a
material fact required to be stated therein or necessary in order to make the
statements, in light of the circumstances under which they were made and when
made, not misleading.
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15 -
(z) No
Integrated Offering.
Assuming the accuracy of the Purchasers’ representations and warranties set
forth in Section 3.02, neither the Company, nor any of its Affiliates, nor
any
Person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the Securities
Act in a manner that would require the registration under the Securities Act
of
the sale of the Securities to the Purchasers or any applicable shareholder
approval provisions of any Trading Market on which any of the securities of
the
Company are listed or designated.
(aa) Solvency.
Based
on the financial condition of the Company, after giving effect to the receipt
by
the Company of the proceeds from the sale of the Securities hereunder, (i)
the
fair saleable value of the Company’s assets exceeds the amount that will be
required to be paid on or in respect of the Company’s existing debts and other
liabilities (including known contingent liabilities) as they mature; (ii) the
Company’s assets do not constitute unreasonably small capital to carry on its
business as now conducted and as proposed to be conducted including its capital
needs taking into account the particular capital requirements of the business
conducted by the Company, and projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company, together
with the proceeds the Company would receive, were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its liabilities when such
amounts are required to be paid. The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be payable on or in respect of its debt). The
Company has no knowledge of any facts or circumstances that lead it to believe
that it will file for reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the Initial Closing
Date. Schedule
3.01(aa)
sets
forth all outstanding secured and unsecured Indebtedness of the Company or
any
Subsidiary, or for which the Company or any Subsidiary has commitments. For
the
purposes of this Agreement, “Indebtedness”
shall
mean (a) any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of business),
(b) all guaranties, endorsements and other contingent obligations in respect
of
Indebtedness of others, whether or not the same are or should be reflected
in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value
of
any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any Subsidiary
is
in default with respect to any Indebtedness.
(bb) Tax
Status.
Except
for matters that would not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect, the Company and each
Subsidiary have filed all necessary federal, state and foreign income and
franchise tax returns and has paid or accrued all taxes shown as due thereon,
and the Company has no knowledge of a tax deficiency that has been asserted
or
threatened against the Company or any Subsidiary.
(cc) No
General Solicitation.
Neither
the Company nor any person acting on behalf of the Company has offered or sold
any of the Securities by any form of general solicitation or general
advertising. The Company has offered the Securities for sale only to the
Purchasers and certain other “accredited investors” within the meaning of Rule
501 under the Securities Act.
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16 -
(dd) Foreign
Corrupt Practices.
Neither
the Company, nor to the knowledge of the Company, any agent or other person
acting on behalf of the Company, has (i) directly or indirectly, used any funds
for unlawful contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from corporate funds, (iii)
failed to disclose fully any contribution made by the Company (or made by any
person acting on its behalf of which the Company is aware) that is in violation
of law or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
(ee) Accountants.
The
Company’s accountants are set forth on Schedule
3.01(ee)
of the
Disclosure Schedule. To the knowledge of the Company, such accountants, who
the
Company expects will express their opinion with respect to the financial
statements to be included in the Company’s Annual Report on Form 10-KSB for the
year ending December 31, 2007, are a registered public accounting firm as
required by the Exchange Act.
(ff) No
Disagreements with Accountants and Lawyers.
There
are no disagreements of any kind presently existing, or reasonably anticipated
by the Company to arise, between the Company and the accountants and lawyers
formerly or presently employed by the Company and the Company is current with
respect to any fees owed to its accountants and lawyers.
(gg) Acknowledgment
Regarding Purchasers’ Purchase of Securities.
To the
Company’s knowledge, each of the Purchasers is acting solely in the capacity of
an arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated thereby. The Company acknowledges that no Purchaser
is
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to the Transaction Documents and the transactions
contemplated thereby and any advice given by any Purchaser or any of their
respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely incidental to
the
Purchasers’ purchase of the Securities. The Company further represents to each
Purchaser that the Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent evaluation of
the
transactions contemplated hereby by the Company and its representatives.
(hh) Acknowledgement
Regarding Purchaser’s Trading Activity.
Anything in this Agreement or elsewhere herein to the contrary notwithstanding
(except for Sections 3.02(f) and 4.14), it is understood and acknowledged by
the
Company (i) that none of the Purchasers have been asked to agree, nor has any
Purchaser agreed, to desist from purchasing or selling, long and/or short,
securities of the Company, or “derivative” securities based on securities issued
by the Company or to hold the Securities for any specified term; (ii) that
past
or future open market or other transactions by any Purchaser, including Short
Sales, and specifically including, without limitation, Short Sales or
“derivative” transactions, before or after the closing of this or future private
placement transactions, may negatively impact the market price of the Company’s
publicly-traded securities; (iii) that any Purchaser, and counter-parties in
“derivative” transactions to which any such Purchaser is a party, directly or
indirectly, presently may have a “short” position in the Common Stock, and (iv)
that each Purchaser shall not be deemed to have any affiliation with or control
over any arm’s length counter-party in any “derivative” transaction. The Company
further understands and acknowledges that (a) one or more Purchasers may engage
in hedging activities at various times during the period that the Securities
are
outstanding, including, without limitation, during the periods that the value
of
the Warrant Shares deliverable with respect to Securities are being determined
and (b) such hedging activities (if any) could reduce the value of the existing
stockholders' equity interests in the Company at and after the time that the
hedging activities are being conducted. The Company acknowledges that such
aforementioned hedging activities do not constitute a breach of any of the
Transaction Documents.
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17 -
(ii) Regulation
M Compliance.
The
Company has not, and to its knowledge no one acting on its behalf has, (i)
taken, directly or indirectly, any action designed to cause or to result in
the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
purchased, or, paid any compensation for soliciting purchases of, any of the
Securities or (iii) paid or agreed to pay to any Person any compensation for
soliciting another to purchase any other securities of the Company, other than,
in the case of clauses (ii) and (iii), compensation paid to the Placement Agent
in connection with the placement of the Securities.
Section
3.02 Representations
and Warranties of the Purchasers.
Each
Purchaser hereby, for itself and for no other Purchaser, represents and warrants
as of the date hereof and as of the Closing Date on which such Purchaser is
purchasing Shares and Warrants hereunder to the Company as follows:
(a) Organization;
Authority.
If such
Purchaser is an entity, such Purchaser is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority
to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution, delivery and performance by such Purchaser of the transactions
contemplated by this Agreement have been duly authorized by any necessary
corporate or similar action on the part of such Purchaser. Each Transaction
Document to which it is a party has been duly executed by such Purchaser, and
when delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, except (i) as limited
by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may
be
limited by applicable law.
(b) Own
Account.
Such
Purchaser understands that the Securities are “restricted securities” and have
not been registered under the Securities Act or any applicable state securities
law and is acquiring the Securities as principal for its own account and not
with a view to or for distributing or reselling such Securities or any part
thereof in violation of the Securities Act or any applicable state securities
law, has no present intention of distributing any of such Securities in
violation of the Securities Act or any applicable state securities law and
has
no direct or indirect arrangement or understandings with any other persons
to
distribute or regarding the distribution of such Securities (this representation
and warranty not limiting such Purchaser’s right to sell the Securities pursuant
to the Registration Statement or otherwise in compliance with applicable federal
and state securities laws) in violation of the Securities Act or any applicable
state securities law. If such Purchaser is not an individual, such Purchaser
is
acquiring the Securities hereunder in the ordinary course of its business.
If
such Purchaser is an individual, such Purchaser must fill out an individual
investor questionnaire provided by Westminster and deliver such questionnaire
if
requested by Westminster.
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18 -
(c) Purchaser
Status.
At the
time such Purchaser was offered the Securities, it was, and at the date hereof
it is, and on each date on which it exercises any Warrants, it will be an
“accredited investor” as defined in Rule 501(a) under the Securities Act. All
information provided by such Purchaser in the Accredited Investor Questionnaire,
attached hereto as Exhibit
F
and made
a part hereof, is true and accurate in all respects, and such Purchaser
acknowledges that the Company will be relying on such information to its
possible detriment in deciding whether the Company can sell the Securities
to
such Purchaser without giving rise to the loss of the exemption from
registration under applicable securities laws. Such Purchaser is not required
to
be registered as a broker-dealer under Section 15 of the Exchange Act.
(d) Experience
of Such Purchaser.
Such
Purchaser, either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial matters
so as
to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of such
investment.
(e) General
Solicitation.
Such
Purchaser is not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities published in
any
newspaper, magazine or similar media or broadcast over television or radio
or
presented at any seminar or any other general solicitation or general
advertisement.
(f) Short
Sales and Confidentiality Prior To The Date Hereof.
Other
than the transaction contemplated hereunder, such Purchaser has not, nor has
any
Person acting on behalf of or pursuant to any understanding with such Purchaser,
directly or indirectly executed any transaction, including Short Sales, in
the
securities of the Company during the period commencing from the time that such
Purchaser first received a term sheet (written or oral) from the Company or
any
other Person setting forth the material terms of the transactions contemplated
hereunder until the date hereof (“Discussion
Time”).
Notwithstanding the foregoing, in the case of a Purchaser that is a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Purchaser’s assets, the representation set forth
above shall only apply with respect to the portion of assets managed by the
portfolio manager that made the investment decision to purchase the Securities
covered by this Agreement. Other than to other Persons party to this Agreement,
such Purchaser has maintained the confidentiality of all disclosures made to
it
in connection with this transaction (including the existence and terms of this
transaction).
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19 -
(g) Information
on Company.
Such
Purchaser has been furnished with or has had access at the XXXXX Website of
the
Commission to the Company’s periodic reports filed with the Commission. In
addition, such Purchaser has received in writing from the Company such other
information concerning its operations, financial condition and other matters
as
the Purchaser has requested, and considered all factors such Purchaser deems
material in deciding on the advisability of investing in the Securities.
(h) Fees.
Such
Purchaser is not required to pay fees to any broker or finder with respect
to
the transactions contemplated by the Transaction Documents.
(i) Lock-Up
Acknowledgement.
Such
Purchaser acknowledges that the Lock-Up Agreements are being entered into for
the benefit of the Company and such Purchaser has no rights thereunder as a
third-party beneficiary or otherwise. Such Purchaser further acknowledges that
the provisions of any Lock-Up Agreement may be waived by the Placement Agent,
in
its sole discretion.
ARTICLE
IV.
OTHER
AGREEMENTS OF THE PARTIES
Section
4.01 Transfer
Restrictions.
(a) The
Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement or Rule 144, to the Company
or
to an Affiliate of a Purchaser or in connection with a pledge as contemplated
in
Section 4.01(b), the Company may require the transferor thereof to provide
to
the Company an opinion of counsel selected by the transferor and reasonably
acceptable to the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Securities under the Securities
Act. As a condition of transfer, any such transferee shall agree in writing
to
be bound by the terms of this Agreement and shall have the rights of a Purchaser
under this Agreement and the Registration Rights Agreement.
(b) The
Purchasers agree to the imprinting, so long as is required by this Section
4.01,
of a legend on any of the Securities in the following form:
THIS
SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE
SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.
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The
Company acknowledges and agrees that a Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or
grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and the Registration Rights Agreement and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured Securities to the
pledgees or secured parties. Such a pledge or transfer would not be subject
to
approval of the Company and no legal opinion of legal counsel of the pledgee,
secured party or pledgor shall be required in connection therewith. Further,
no
notice shall be required of such pledge. At the appropriate Purchaser’s expense,
the Company will execute and deliver such reasonable documentation as a pledgee
or secured party of Securities may reasonably request in connection with a
pledge or transfer of the Securities, including, if the Securities are subject
to registration pursuant to the Registration Rights Agreement, the preparation
and filing of any required prospectus supplement under Rule 424(b)(3) under
the
Securities Act or other applicable provision of the Securities Act to
appropriately amend the list of Selling Stockholders thereunder.
(c) Certificates
evidencing the Shares and Warrant Shares shall not contain any legend (including
the legend set forth in Section 4.01(b)), (i) following any sale of such Shares
or Warrant Shares pursuant to a registration statement (including the
Registration Statement) covering the resale of such Shares and Warrant Shares
that is effective under the Securities Act, (ii) following any sale of such
Shares or Warrant Shares pursuant to Rule 144, or (iii) if such Shares or
Warrant Shares are eligible for sale under Rule 144 without volume limitations,
provided that the Company is current in its public reporting obligations, if
applicable, or (iv) if such legend is not required under applicable requirements
of the Securities Act (including judicial interpretations and pronouncements
issued by the staff of the Commission). The Company agrees that at such time
as
such legend is no longer required under this Section 4.01(c), it will, no later
than three Trading Days following the delivery by a Purchaser to the Company
or
the Transfer Agent of a certificate representing Shares or Warrant Shares,
as
the case may be, issued with a restrictive legend (such third Trading Day,
the
“Share
Delivery Date”),
deliver or cause to be delivered to such Purchaser a certificate representing
such shares that is free from all restrictive and other legends. The Company
may
not make any notation on its records or give instructions to any Transfer Agent
of the Company that enlarge the restrictions on transfer set forth in this
Section. Certificates for Securities subject to legend removal hereunder shall
be transmitted by the Transfer Agent of the Company to the Purchasers by
crediting the account of the Purchaser or Purchaser’s prime broker with the
Depository Trust Company System.
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(d) In
addition to such Purchaser’s other available remedies, the Company shall pay to
a Purchaser, in cash, as partial liquidated damages and not as a penalty, for
each $1,000 of Shares or Warrant Shares (based on the Closing Price of the
Common Stock on the date such Securities are submitted to the Transfer Agent)
delivered for removal of the restrictive legend and subject to Section 4.01(c),
$10 per Trading Day (increasing to $20 per Trading Day five (5) Trading Days
after such damages have begun to accrue) for each Trading Day after the Legend
Removal Date until such certificate is delivered without a legend. Nothing
herein shall limit such Purchaser’s right to pursue actual damages for the
Company’s failure to deliver certificates representing any Securities as
required by the Transaction Documents, and such Purchaser shall have the right
to pursue all remedies available to it at law or in equity including, without
limitation, a decree of specific performance and/or injunctive
relief.
(e) Each
Purchaser, severally and not jointly with the other Purchasers, agrees that
the
removal of the restrictive legend from certificates representing Securities
as
set forth in this Section 4.01 is predicated upon the Purchaser selling its
Securities pursuant to either the registration requirements of the Securities
Act, including any applicable prospectus delivery requirements, or an exemption
therefrom, and that if Securities are sold pursuant to a Registration Statement,
that such Securities were sold in compliance with the plan of distribution
set
forth therein.
Section
4.02 Furnishing
of Information.
As long
as any Purchaser owns Securities, the Company covenants to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act. As long as any Purchaser owns Securities, if
the
Company is not required to file reports pursuant to the Exchange Act, it will
prepare and furnish to the Purchasers and make publicly available in accordance
with Rule 144(c) such information as is required for the Purchasers to sell
the
Securities under Rule 144. The Company further covenants that it will take
such
further action as any holder of Securities may reasonably request, to the extent
required from time to time to enable such Person to sell such Securities without
registration under the Securities Act within the requirements of the exemption
provided by Rule 144.
Section
4.03 Integration.
The
Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities in a
manner that would require the registration under the Securities Act of the
sale
of the Securities to the Purchasers or that would be integrated with the offer
or sale of the Securities for purposes of the rules and regulations of any
Trading Market such that it would require shareholder approval prior to the
closing of such other transaction unless shareholder approval is obtained before
the closing of such subsequent transaction.
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Section
4.04 Securities
Laws Disclosure; Publicity.
The
Company shall, by 5:30 p.m. New York City time on the fourth Business Day
immediately following the date hereof, issue a press release disclosing the
material terms of the transactions contemplated hereby, and file a Current
Report on Form 8-K disclosing the same and filing the Transaction Documents
as
exhibits thereto within the time period required by law. Each Purchaser shall
consult with the Company prior to issuing any press releases with respect to
the
transactions contemplated hereby, and no Purchaser shall issue any such press
release or otherwise make any such public statement without the prior consent
of
the Company, which consent shall not unreasonably be withheld or delayed, except
if such disclosure is required by law, in which case such Purchaser shall
promptly provide the Company with prior notice of such public statement or
communication. The Company shall not publicly disclose the name of any
Purchaser, or include the name of any Purchaser in any press release or filing
with the Commission or any regulatory agency or Trading Market, without the
prior written consent of such Purchaser, except (i) as required by federal
securities law in connection with (A) any registration statement contemplated
by
the Registration Rights Agreement and (B) the filing of final Transaction
Documents (including signature pages thereto) with the Commission and (ii)
to
the extent such disclosure is required by law or Trading Market regulations,
in
which case the Company shall provide the Purchasers with prior notice of such
disclosure permitted under this subclause (ii).
Section
4.05 Shareholder
Rights Plan.
No
claim will be made or enforced by the Company or, with the consent of the
Company, any other Person, that any Purchaser is an “Acquiring Person” under any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or similar anti-takeover plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the provisions of any such plan or arrangement,
by
virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchasers.
Section
4.06 Non-Public
Information.
Except
with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company covenants and agrees
that
neither it nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Purchaser
shall have executed a written agreement regarding the confidentiality and use
of
such information. The Company understands and confirms that each Purchaser
shall
be relying on the foregoing representations in effecting transactions in
securities of the Company.
Section
4.07 Use
of
Proceeds.
The use
of proceeds is set forth on Schedule
4.07
attached
hereto. Except as set forth on Schedule
4.07
attached
hereto, the Company shall use the net proceeds from the sale of the Securities
hereunder for working capital purposes and not for the satisfaction of any
portion of the Company’s debt (other than payment of trade payables in the
ordinary course of the Company’s business and prior practices), to redeem any
Common Stock or Common Stock Equivalents or to settle any outstanding
litigation.
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Section
4.08 Indemnification
of Purchasers.
Subject
to the provisions of this Section 4.08, the Company will indemnify and hold
each
Purchaser and its directors, officers, shareholders, members, partners,
employees and agents (and any other Persons with a functionally equivalent
role
of a Person holding such titles notwithstanding a lack of such title or any
other title), each Person who controls such Purchaser (within the meaning of
Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, shareholders, agents, members, partners or employees (and
any other Persons with a functionally equivalent role of a Person holding such
titles notwithstanding a lack of such title or any other title) of such
controlling persons (each, a “Purchaser
Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such Purchaser Party may suffer or incur as a result
of
or relating to (a) any breach of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or in the other
Transaction Documents or (b) any action instituted against a Purchaser, or
any
of them or their respective Affiliates, by any stockholder of the Company who
is
not an Affiliate of such Purchaser, with respect to any of the transactions
contemplated by the Transaction Documents (unless such action is based upon
a
breach of such Purchaser’s representations, warranties or covenants under the
Transaction Documents or any agreements or understandings such Purchaser may
have with any such stockholder or any violations by the Purchaser of state
or
federal securities laws or any conduct by such Purchaser which constitutes
fraud, gross negligence, willful misconduct or malfeasance). If any action
shall
be brought against any Purchaser Party in respect of which indemnity may be
sought pursuant to this Agreement, such Purchaser Party shall promptly notify
the Company in writing, and the Company shall have the right to assume the
defense thereof with counsel of its own choosing reasonably acceptable to the
Purchaser Party. Any Purchaser Party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the
fees
and expenses of such counsel shall be at the expense of such Purchaser Party
except to the extent that (i) the employment thereof has been specifically
authorized by the Company in writing, (ii) the Company has failed after a
reasonable period of time to assume such defense and to employ counsel or (iii)
in such action there is, in the reasonable opinion of such separate counsel,
a
material conflict on any material issue between the position of the Company
and
the position of such Purchaser Party, in which case the Company shall be
responsible for the reasonable fees and expenses of no more than one such
separate counsel. The Company will not be liable to any Purchaser Party under
this Agreement (i) for any settlement by a Purchaser Party effected without
the
Company’s prior written consent, which shall not be unreasonably withheld or
delayed; or (ii) to the extent, but only to the extent that a loss, claim,
damage or liability is attributable to any Purchaser Party’s breach of any of
the representations, warranties, covenants or agreements made by such Purchaser
Party in this Agreement or in the other Transaction Documents.
Section
4.09 Reservation
of Common Stock.
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, a sufficient
number of shares of Common Stock for the purpose of enabling the Company to
issue Shares pursuant to this Agreement and Warrant Shares pursuant to any
exercise of the Warrants.
Section
4.10 Listing
of Common Stock.
The
Company hereby agrees to use best efforts to maintain the listing of the Common
Stock on a Trading Market (or, if the Common Stock is then quoted for trading
on
the OTC Bulletin Board, the eligibility for such quotation), and as soon as
reasonably practicable following the Initial Closing (but not later than the
earlier of the Effective Date and the first anniversary of the Initial Closing
Date) to list (or to have included for quotation on the OTC Bulletin Board)
all
of the Shares and Warrant Shares on such Trading Market. The Company further
agrees, if the Company applies to have the Common Stock traded on any other
Trading Market, it will include in such application all of the Shares and
Warrant Shares, and will take such other action as is necessary to cause all
of
the Shares and Warrant Shares to be listed on such other Trading Market as
promptly as possible. The Company will take all action reasonably necessary
to
continue the listing and trading of its Common Stock on a Trading Market (or,
if
the Common Stock is then quoted for trading on the OTC Bulletin Board, the
eligibility for such quotation) and will comply in all respects with the
Company’s reporting, filing and other obligations under the bylaws or rules of
the Trading Market.
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24 -
Section
4.11 Equal
Treatment of Purchasers.
No
consideration shall be offered or paid to any Person to amend or consent to
a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration is also offered to all of the parties to the
Transaction Documents. For clarification purposes, this provision constitutes
a
separate right granted to each Purchaser by the Company and negotiated
separately by each Purchaser, and is intended to treat for the Company the
Purchasers as a class and shall not in any way be construed as the Purchasers
acting in concert or as a group with respect to the purchase, disposition or
voting of Securities or otherwise.
Section
4.12 Participation
in Future Financing.
(a) From
the
date hereof until the date that is the twenty four (24) month anniversary of
the
Initial Closing Date, upon any issuance by the Company or any of its
Subsidiaries of Common Stock or Common Stock Equivalents for cash consideration
(a “Subsequent
Financing”),
the
Purchasers shall have the right to participate in an aggregate of up to 50%
of
the Subsequent Financing (the “Participation
Maximum”)
on the
same terms, conditions and price provided for in the Subsequent Financing.
(b) At
least
5 Trading Days prior to the closing of the Subsequent Financing, the Company
shall deliver to each Purchaser a written notice of its intention to effect
a
Subsequent Financing (“Pre-Notice”),
which
Pre-Notice shall ask such Purchaser if it wants to review the details of such
financing (such additional notice, a “Subsequent
Financing Notice”).
Upon
the request of a Purchaser, and only upon a request by such Purchaser, for
a
Subsequent Financing Notice, the Company shall promptly, but no later than
1
Trading Day after such request, deliver a Subsequent Financing Notice to such
Purchaser. The Subsequent Financing Notice shall describe in reasonable detail
the proposed terms of such Subsequent Financing, the amount of proceeds intended
to be raised thereunder, the Person or Persons through or with whom such
Subsequent Financing is proposed to be effected, and attached to which shall
be
a term sheet or similar document relating thereto.
(c) Any
Purchaser desiring to participate in such Subsequent Financing must provide
written notice to the Company by not later than 5:30 p.m. (New York City time)
on the 5th Trading Day after all of the Purchasers have received the Pre-Notice
that the Purchaser is willing to participate in the Subsequent Financing, the
amount of the Purchaser’s participation, and that the Purchaser has such funds
ready, willing, and available for investment on the terms set forth in the
Subsequent Financing Notice. If the Company receives no notice from a Purchaser
as of such 5th Trading Day, such Purchaser shall be deemed to have notified
the
Company that it does not elect to participate.
(d) If
by
5:30 p.m. (New York City time) on the 5th Trading Day after all of the
Purchasers have received the Pre-Notice, notifications by the Purchasers of
their willingness to participate in the Subsequent Financing (or to cause their
designees to participate) is, in the aggregate, less than the total amount
of
the Subsequent Financing, each Purchasers shall be deemed to have notified
the
Company that it does not elect to participate and the Company may effect the
Subsequent Financing on the terms and with the Persons set forth in the
Subsequent Financing Notice.
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25 -
(e) If
by
5:30 p.m. (New York City time) on the 5th Trading Day after all of the
Purchasers have received the Pre-Notice, the Company receives responses to
a
Subsequent Financing Notice from Purchasers seeking to purchase more than the
aggregate amount of the Participation Maximum, each such Purchaser shall have
the right to purchase the greater of (a) their Pro Rata Portion (as defined
below) of the Participation Maximum and (b) the difference between the
Participation Maximum and the aggregate amount of participation by all other
Purchasers. “Pro
Rata Portion”
is
the
ratio of (x) the Subscription Amount of Securities purchased hereunder by a
Purchaser participating under this Section 4.12 and (y) the sum of the aggregate
Subscription Amounts of Securities purchased hereunder by all Purchasers
participating under this Section 4.12.
(f) The
Company must provide the Purchasers with a second Subsequent Financing Notice,
and the Purchasers will again have the right of participation set forth above
in
this Section 4.12, if the Subsequent Financing subject to the initial Subsequent
Financing Notice is not consummated for any reason on the terms set forth in
such Subsequent Financing Notice within 60 Trading Days after the date of the
initial Subsequent Financing Notice.
(g) Notwithstanding
the foregoing, this Section 4.12 shall not apply in respect of (i) an Exempt
Issuance or (ii) a underwritten or “best efforts” registered public offering of
Common Stock.
Section
4.13 Subsequent
Equity Sales.
(a) Until
the
earlier of (i) twenty-four (24) months following the Initial Closing Date or
(ii) such date that there is an effective registration statement (including
the
Registration Statement) on file with the Commission covering the resale of
all
of the Shares and Warrant Shares, in the event that the Company issues or sells
any shares of Common Stock or any Common Stock Equivalent pursuant to which
shares of Common Stock may be acquired at a price less than $1.50 per share,
then the Company shall promptly issue additional shares of Common Stock to
the
Purchasers in an amount sufficient that the Per Share Purchase Price paid
hereunder, when divided by the total number of shares issued will result in
an
actual Per Share Purchase Price paid by the Purchasers hereunder equal to such
lower price (this is intended to be a “full ratchet” adjustment). Such
adjustment shall be made successively whenever such an issuance is made.
Notwithstanding the foregoing, this Section 4.13 shall not apply in respect
of
an Exempt Issuance.
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26 -
(b) From
the
date hereof until 90 days following the Effective Date, the Company shall be
prohibited from effecting or entering into an agreement to effect any Subsequent
Financing involving a “Variable Rate Transaction”. 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 or
(ii) enters into any agreement, including, but not limited to, an equity line
of
credit, whereby the Company may sell securities at a future determined price.
Any Purchaser 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.
(c) Notwithstanding
anything to the contrary contained herein, the Company shall not, until such
time as the Company completes construction of a second plant that produces
biodiesel, without the prior written consent of the Purchasers then holding
at
least a majority of the Securities, directly or indirectly offer, sell, assign,
transfer, pledge, contract to sell, or otherwise dispose of, any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock, other than an Exempt Issuance.
Section
4.14 Short
Sales and Confidentiality After The Date Hereof.
Each
Purchaser, severally and not jointly with the other Purchasers, covenants that
until such time as the transactions contemplated by this Agreement are publicly
disclosed by the Company as described in Section 4.04, such Purchaser will
maintain the confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this transaction). Each
Purchaser understands and acknowledges, severally and not jointly with any
other
Purchaser, that the Commission currently takes the position that coverage of
short sales of shares of the Common Stock “against the box” prior to the
Effective Date of the Registration Statement with the Securities is a violation
of Section 5 of the Securities Act, as set forth in Item 65, Section A, of
the
Manual of Publicly Available Telephone Interpretations, dated July 1997,
compiled by the Office of Chief Counsel, Division of Corporation
Finance.
Section
4.15 Form
D; Blue Sky Filings.
The
Company agrees to timely file a Form D with respect to the Securities as
required under Regulation D and to provide a copy thereof, promptly upon request
of any Purchaser. The Company shall take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for, or to
qualify the Securities for, sale to the Purchasers at each Closing under
applicable securities or “Blue Sky” laws of the states of the United States, and
shall provide evidence of such actions promptly upon request of any
Purchaser.
Section
4.16 Make
Good Escrow Shares.
On the
Initial Closing Date, the Company shall cause certain stockholders of the
Company to enter into the Make Good Escrow Agreement hereto and to deposit
with
the escrow agent thereunder the Make Good Shares to be held for return to the
depositors or distribution to the Purchasers, as provided therein.
ARTICLE
V.
MISCELLANEOUS
Section
5.01 Fees
and Expenses.
Except
as expressly set forth in the Transaction Documents to the contrary, each party
shall pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to
the
negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay all Escrow Agent fees, Transfer Agent fees, stamp taxes
and other taxes and duties levied in connection with the delivery of any
Securities to the Purchasers.
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27 -
Section
5.02 Entire
Agreement.
The
Transaction Documents, together with the exhibits and schedules thereto, contain
the entire understanding of the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings, oral or written,
with respect to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.
Section
5.03 Notices.
Any and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (a) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number set forth on the signature
pages attached hereto prior to 5:30 p.m. (New York City time) on a Trading
Day,
(b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth
on
the signature pages attached hereto on a day that is not a Trading Day or later
than 5:30 p.m. (New York City time) on any Trading Day, (c) the 2nd Trading
Day
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service or (d) upon actual receipt by the party to whom such notice
is
required to be given. The address for such notices and communications shall
be
as set forth on the signature pages attached hereto.
Section
5.04 Amendments;
Waivers.
No
provision of this Agreement may be waived or amended except in a written
instrument signed, in the case of an amendment, by the Company and Purchasers
then holding at least a majority of the Securities or, in the case of a waiver,
by the party against whom enforcement of any such waived provision is sought.
No
waiver of any default with respect to any provision, condition or requirement
of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right.
Section
5.05 Headings.
The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
Section
5.06 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of each Purchaser (other than by merger). Any Purchaser may assign
any
or all of its rights under this Agreement to any Person to whom such Purchaser
assigns or transfers any Securities, provided such transferee agrees in writing
to be bound, with respect to the transferred Securities, by the provisions
of
the Transaction Documents that apply to the “Purchasers.”
Section
5.07 No
Third-Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except as otherwise set
forth
in Section 4.08.
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28 -
Section
5.08 Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of the Transaction Documents shall be governed by and construed and enforced
in
accordance with the internal laws of the State of New York, without regard
to
the principles of conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively
in
the state and federal courts sitting in the City of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect
to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or is an inconvenient venue for
such
proceeding. Each party hereby irrevocably waives personal service of process
and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other
manner permitted by law. THE
PARTIES HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.
If
either party shall commence an action or proceeding to enforce any provisions
of
the Transaction Documents, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its reasonable attorneys’
fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.
Section
5.09 Survival.
The
representations and warranties contained herein shall survive the final Closing
and the delivery of the Shares and Warrant Shares for the applicable statute
of
limitations period.
Section
5.10 Execution.
This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to
the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission or by e-mail delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
facsimile or “.pdf” signature page were an original thereof.
Section
5.11 Severability.
If any
term, provision, covenant or restriction of this Agreement is held by a court
of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be
hereafter declared invalid, illegal, void or unenforceable.
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29 -
Section
5.12 Remedies.
In
addition to being entitled to exercise all rights provided herein or granted
by
law, including recovery of damages, each of the Purchasers and the Company
will
be entitled to specific performance under the Transaction Documents. The parties
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations contained in the Transaction
Documents and hereby agrees to waive and not to assert in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.
Section
5.13 Payment
Set Aside.
To the
extent that the Company makes a payment or payments to any Purchaser pursuant
to
any Transaction Document or a Purchaser enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement
or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation,
any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full
force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
Section
5.14 Independent
Nature of Purchasers’ Obligations and Rights.
The
obligations of each Purchaser under any Transaction Document are several and
not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance or non-performance of the obligations
of any other Purchaser under any Transaction Document. Nothing contained herein
or in any other Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Purchaser shall be entitled to independently protect
and enforce its rights, including without limitation, the rights arising out
of
this Agreement or out of the other Transaction Documents, and it shall not
be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents. The Company has elected to provide all Purchasers with the same
terms
and Transaction Documents for the convenience of the Company and not because
it
was required or requested to do so by the Purchasers.
Section
5.15 Construction.
The
parties agree that each of them and/or their respective counsel has reviewed
and
had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto.
[Signature
Pages Follow]
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30 -
[COMPANY
SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as
of
the date first indicated above.
|
By:
Name:
Xxxx Xxxx
Title:
Chief Financial Officer
With
a copy to (which shall not constitute notice):
Xxxxxx
and Xxxxx, LLP
000
Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxx
Xxxx, Xxx Xxxx 00000
Attention:
Xxxxxx X. Xxxxxx, Esq.
Tel.
No.: (000) 000-0000
Fax
No.: (000) 000-0000
|
Address
for Notice:
c/o
Fujian Zhongde Technology Co., Ltd.
Fulong
Industrial Zone
Longtian
Town Fuqing City
Fujian,
People’s Republic of China 35013
Tel.
No.: x00-000-00000000
Fax
No.: x00-000-00000000
|
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOR PURCHASER FOLLOWS]
[PURCHASER
SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.
| Subscription Amount: | $ |
| # Shares (20,000 per $30,000): | # Class A Warrants | |||
| ($1.50 / Share) | (50% of # Shares; 10,000 per $30,000) |
| Name of Investor (Print) | Name of Joint Investor (if any) (Print) | |
|
Signature
of Investor
|
Signature of Joint Investor (if any) | |
| Capacity of Signatory (for entities) | ||
| Social Security or Taxpayer Identification Number |
Investor Contact Information:
| Street Address | Telephone | Fax |
| City | State | Zip Code | |||
Instructions
for Delivery of Securities:
| o Deposit to my Westminster brokerage account | o Deliver to an alternate address: | ||
| o Deliver to the address above | |||
Broker:
| o Westminster Rep: | o Other Rep: | ||||
[SIGNATURE
PAGES CONTINUE]
