CONVERSION AGREEMENT
CONVERSION AGREEMENT (the
"Agreement"), dated as
of December 30, 2009, by and between A-Power Energy Generation Systems, Ltd., a
company organized under the laws of British Virgin Islands, with headquarters
located at Xx. 00 Xxxxxxxx Xxxx, Xxxxx Xxxxxxxx, Xxxxxxxx Liaoning Province,
China 110021 (the "Company"), and
__________________________ (the "Investor").
WHEREAS:
A. The
Investor purchased from the Company the senior convertible notes due 2014
convertible into the Company's Common Shares par value $0.0001 per share (the
"Common Shares") in the
aggregate principal amount plus accrued and unpaid interest thereon as set forth
in Schedule 1
attached hereto (the "Existing
Notes") pursuant to that certain Securities Purchase Agreement dated as
of June 18, 2009 by and among the Company and the buyers signatories thereto
(the "Securities Purchase
Agreement").
B. The
Company and the Investor desire to enter into this Agreement, pursuant to which
upon satisfaction of certain conditions, among other things, (x) the Investor
will convert the Existing Notes pursuant to this Agreement and (y) the Company
will issue upon conversion of the Existing Notes such number of Common Shares as
is set forth in Schedule 1 attached
hereto which shares shall be freely tradable immediately upon issuance on the
Principal Market (as defined in the Securities Purchase Agreement) without any
restriction under the securities laws, the rules and regulations of the
Principal Market or otherwise (such freely tradable shares, the "Agreement Conversion
Shares").
C. Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings ascribed to them in the Securities Purchase Agreement.
NOW, THEREFORE, the Company
and the Investor hereby agree as follows:
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1.
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ISSUANCE OF AGREEMENT
CONVERSION SHARES.
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(a) Closing. Subject
to satisfaction (or waiver) of the conditions set forth in Sections 5 and
6, (i) the Investor shall convert the Existing Notes pursuant to this
Agreement (the "Closing") and (ii) the Company
at the Closing (as defined below) shall issue to the Investor the Agreement
Conversion Shares free of any restrictive legend by electronic delivery at the
balance account of the Investor at the Depositary Trust Company ("DTC") as set forth on Schedule 1 attached
hereto.
(b) Closing
Date. The date and time of the Closing (the "Closing Date") shall be 10:00
a.m., New York Time, on the date of satisfaction (or waiver) of the conditions
to the Closing set forth in Sections 5 and 6 below (or such later date as is
mutually agreed to by the Company and the Investor). The Closing
shall occur on the Closing Date at the offices of Xxxxxxx Xxxx & Xxxxx LLP,
000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. In no event shall the
Closing Date be later than 2:00 p.m. (New York City time) on Thursday, December
31, 2009.
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2.
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INVESTOR'S
REPRESENTATIONS AND
WARRANTIES.
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The Investor represents and warrants as
of the date hereof and as of the Closing Date:
(a) Validity;
Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Investor and shall
constitute the legal, valid and binding obligations of the Investor enforceable
against the Investor in accordance with its terms, except as such enforceability
may be limited by general principles of equity or to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors'
rights and remedies.
(b) No
Conflicts. The execution, delivery and performance by the
Investor of this Agreement and the consummation by the Investor of the
transactions contemplated hereby and thereby will not (i) result in a violation
of the organizational documents of the Investor or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Investor is a party, or (iii) result in a violation of
any law, rule, regulation, order, judgment or decree (including
federal and state securities laws) applicable to the Investor, except in the
case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or
violations which would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the ability of the Investor to
perform its obligations hereunder.
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3.
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COMPANY'S
REPRESENTATIONS AND
WARRANTIES.
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The Company represents and warrants as
of the date hereof and as of the Closing Date:
(a) Authorization; Enforcement;
Validity. The Company has the requisite power and authority to
enter into and perform its obligations under this Agreement and to issue the
Agreement Conversion Shares in accordance with the terms hereof. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated hereby, including, without
limitation, the issuance of the Agreement Conversion Shares have been duly
authorized by the Company's Board of Directors and no further filing, consent,
or authorization is required by the Company, its Board of Directors or its
shareholders. This Agreement has been duly executed and delivered by
the Company, and shall constitute the legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with its respective
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of applicable creditors' rights and remedies.
(b) Issuance of
Securities. The issuance of the Agreement Conversion Shares
are duly authorized and, upon issuance in accordance with the terms of this
Agreement, the Agreement Conversion Shares will be validly issued, fully paid
and nonassessable, free from any restrictive legend and free from all preemptive
or similar rights, taxes, liens and charges with respect to the issue thereof,
with the Investor being entitled to all rights accorded to a holder of Common
Shares.
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(c) No
Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby will not (i) result in a violation of the organizational
documents of the Company or any of its Subsidiaries, any capital stock of the
Company or any of its Subsidiaries or the articles of association or bylaws of
the Company or any of its Subsidiaries or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) in any respect under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including foreign, federal and state securities laws and regulations and the
rules and regulations of the Principal Market and applicable laws of the British
Virgin Islands and of China) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected, except in the case of clause (ii) or clause
(iii) above, to the extent such conflicts, defaults or violations could not
reasonably be expected to have a "Material Adverse Effect." As used
in this Agreement, "Material
Adverse Effect" means any material adverse effect on the business,
properties, assets, operations, results of operations, condition (financial or
otherwise) or prospects of the Company and its Subsidiaries, individually or
taken as a whole, or on the transactions contemplated hereby or by the
agreements and instruments to be entered into in connection herewith, or on the
authority or ability of the Company to perform its obligations under this
Agreement.
(d) Consents. Neither
the Company nor any of its Subsidiaries is required to obtain any consent,
authorization or order of, or make any filing or registration with, any court,
governmental agency or any regulatory or self-regulatory agency or any other
Person in order for it to execute, deliver or perform any of its obligations
under or contemplated by this Agreement in accordance with the terms
hereof. All consents, authorizations, orders, filings and
registrations which the Company is required to obtain prior to the Closing Date
pursuant to the preceding sentence have been obtained or effected on or prior to
the Closing Date, and the Company and its Subsidiaries are unaware of any facts
or circumstances that might prevent the Company from obtaining or effecting any
of the registration, application or filings pursuant to the preceding
sentence. The Company is not in violation of the listing requirements
of the Principal Market and has no knowledge of any facts that would reasonably
lead to delisting or suspension of the Agreement Conversion Shares in the
foreseeable future. The issuance by the Company of the Agreement
Conversion Shares shall not have the effect of delisting or suspending the
Common Shares from the Principal Market ; provided, however, that each of
the parties to this Agreement understands and acknowledges that the Company is
required to file an application to list certain additional securities with the
Nasdaq Stock Market in respect of certain of the Agreement Conversion
Shares. The Company hereby undertakes to submit such application to
the Nasdaq Stock Market no later than 5 business days after the Closing
Date..
(e) No Event of
Default. The Company represents and warrants to the Investor
that after giving effect to the terms of this Agreement, no default or Event of
Default (as defined in the Existing Notes) shall have occurred and be continuing
as of the date hereof.
(f) Disclosure. The
Company confirms that neither it nor any other Person acting on its behalf has
provided Investor or its agents or counsel with any information that constitutes
or could reasonably be expected to constitute material, nonpublic information
other than the existence of the transactions contemplated by this
Agreement. The Company understands and confirms that Investor will
rely on the foregoing representations made on the date hereof and as of the
Closing Date in effecting transactions in securities of the
Company. All disclosure provided to Investor regarding the Company,
or any of its Subsidiaries, their business and the transactions contemplated
hereby, including furnished by or on behalf of the Company 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 the
light of the circumstances under which they were made, not
misleading. Each press release issued by the Company or any of its
Subsidiaries during the twelve (12) months preceding the date of this Agreement
did not at the time of release contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. No event or circumstance has
occurred or information exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, prospects, operations or
financial conditions, which, under applicable law, rule or regulation, requires
public disclosure or announcement by the Company but which has not been so
publicly announced or disclosed, other than the occurrence of the Closing under
this Agreement. The Company acknowledges and agrees that no Investor
has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section
2.
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4.
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CERTAIN COVENANTS AND
AGREEMENTS
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(a) Registration
Statement. The Company agrees and acknowledges that the
Agreement Conversion Shares issued pursuant to the terms of this Agreement are
registered for resale by the Investor pursuant to the Company's Registration
Statement with SEC File No. 333-161983 (the "Registration Statement"),
which was declared effective by the SEC on December 8, 2009 and which remains
effective and available for the resale of the Agreement Conversion Shares. The
Company covenants and agrees not to add any restrictive legends to the Agreement
Conversion Shares and to file any required prospectus supplements to the
Registration Statement. No later than five (5) business days after
the Closing Date, the Company shall file a prospectus supplement to the
Registration Statement updating the existing prospectus with certain information
concerning this Agreement.
(b) Holding
Period. For the purposes of Rule 144, the Company acknowledges
that the holding period of the Agreement Conversion Shares may be tacked onto
the holding period of the Existing Notes and the Company agrees not to take a
position contrary to this Section 4(b), and as a result, the Agreement
Conversion Shares are freely tradable immediately upon issuance on the Principal
Market without any restriction under the securities laws, the rules and
regulations of the Principal Market or otherwise.
(c)
Fees and
Expenses. Except as otherwise set forth in this Agreement,
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 stamp and other taxes and
duties levied in connection with the issuance of the Agreement Conversion
Shares.
(d) Existing
Warrants. Investor herby agrees that the conversion of
its Notes under this Agreement and the issuance of the Agreement Conversion
Shares pursuant hereto shall not result in any adjustment to the Exercise Price
(as defined in the Warrants) of any of its Warrants to Purchase Common Shares
issued by the Company pursuant to the Securities Purchase
Agreement.
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(e) Disclosure of Transactions
and Other Material Information. On or before 8:30 a.m., New
York City time, on the first Business Day after this Agreement has been
executed, the Company shall issue a press release and file a Current Report on
Form 6-K describing the material terms of the transactions contemplated hereby
in the form required by the 1934 Act and attaching a form of this Agreement and
a form of the confirmation letter agreement executed contemporaneously with this
Agreement as exhibits to such filing) (including all attachments, the "6 K
Filing"). From and after the filing of the 6-K Filing with the SEC,
the Investor shall not be in possession of any material, nonpublic information
received from the Company, any of its Subsidiaries or any of their respective
officers, directors, employees or agents, that is not disclosed in the 6-K
Filing.
(f) Legal Opinions; Transfer
Agent Fees. The Company agrees to take all actions reasonably
necessary, including the issuance by its legal counsel of any necessary legal
opinions addressed to the transfer agent, to issue to the Agreement Conversion
Shares without restriction and not containing any restrictive legend without the
need for any action by the Investor. The Company shall pay all fees
and expenses of its transfer agent in connection with the transactions
contemplated by this Agreement.
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5.
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COMPANY'S CLOSING
DELIVERIES.
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At the
Closing, the Company shall deliver or cause to be delivered to the Investor the
following:
(i) The
Agreement Conversion Shares registered in the name of the Investor free of any
restrictive legend by electronic delivery at the applicable balance account of
the Investor at the DTC.
(ii) Such
other documents relating to the transactions contemplated by this Agreement as
the Investor or its counsel may reasonably request.
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6.
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INVESTOR'S CLOSING
DELIVERIES.
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At the
Closing, promptly after confirmation of the receipt of the Agreement Conversion
Shares in such Investor’s balance account at DTC, the Investor shall deliver or
cause to be delivered to the Company the Investor’s Existing Notes.
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7.
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MISCELLANEOUS.
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(a) Governing Law; Jurisdiction;
Jury Trial. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address for such notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. The Company hereby appoints C T Corporation System,
with offices at 000 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as its agent for
service of process in New York. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any manner permitted by
law. EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
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(b) Counterparts. This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party. In
the event that any signature is delivered by facsimile transmission or by an
e-mail which contains a portable document format (.pdf) file of an executed
signature page, such signature page shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if the
signature were an original.
(c) Headings. The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
(d) Severability. If
any provision of this Agreement is prohibited by law or otherwise determined to
be invalid or unenforceable by a court of competent jurisdiction, the provision
that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable,
and the invalidity or unenforceability of such provision shall not affect the
validity of the remaining provisions of this Agreement so long as this Agreement
as so modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal obligations of
the parties or the practical realization of the benefits that would otherwise be
conferred upon the parties. The parties will endeavor in good faith
negotiations to replace the prohibited, invalid or unenforceable provision(s)
with a valid provision(s), the effect of which comes as close as possible to
that of the prohibited, invalid or unenforceable provision(s).
(e) Entire Agreement;
Amendments. This Agreement supersedes all other prior oral or
written agreements between the Investor, the Company, their affiliates and
Persons acting on their behalf with respect to the matters discussed herein, and
this Agreement, and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor any Investor makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
party against whom enforcement is sought. No provision hereof may be
waived other than by an instrument in writing signed by the party against whom
enforcement is sought. The Company has not, directly or indirectly, made any
agreements with the Investor relating to the terms or conditions of the
transactions contemplated hereby except as set forth or referenced herein as
amended or cancelled by this Agreement
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(f) Notices. Any
notices, consents, waivers or other communications required or permitted to be
given under the terms of this Agreement must be made in accordance with Section
9(f) of the Securities Purchase Agreement.
(g) Successors and
Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns, including
any purchasers of the Agreement Conversion Shares.
(h) No Third Party
Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person.
(i) Survival. The
representations and warranties of the Company and the Investor contained herein,
and the agreements and covenants set forth herein shall survive the
Closing.
(j) Further
Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(k) No Strict
Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any
party.
(l) Remedies. The
Investor shall have all rights and remedies set forth in this Agreement and all
rights and remedies which such holders have been granted at any time under any
other agreement or contract and all of the rights which such holders have under
any law. Any Person having any rights under any provision of this
Agreement shall be entitled to enforce such rights specifically (without posting
a bond or other security), to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by
law. Furthermore, the Company recognizes that in the event that it
fails to perform, observe, or discharge any or all of its obligations under this
Agreement, any remedy at law may prove to be inadequate relief to the
Investor. The Company therefore agrees that the Investor shall be
entitled to seek temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages and without posting a bond or
other security.
(m) Currency. Unless
otherwise indicated, all dollar amounts referred to in this Agreement are in
United States Dollars. All amounts owing under this Agreement shall
be paid in US dollars. All amounts denominated in other currencies
shall be converted in the US dollar equivalent amount in accordance with the
Exchange Rate on the date of calculation. "Exchange Rate" means, in
relation to any amount of currency to be converted into US dollars pursuant to
this Agreement, the US dollar exchange rate as published in The Wall Street
Journal on the relevant date of calculation.
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(n) Judgment
Currency.
(i) If
for the purpose of obtaining or enforcing judgment against the Company in any
court in any jurisdiction it becomes necessary to convert into any other
currency (such other currency being hereinafter in this Section 7(n) referred to
as the "Judgment
Currency") an amount due in US Dollars under this Agreement, the
conversion shall be made at the Exchange Rate prevailing on the Business Day
immediately preceding:
(a) the
date of actual payment of the amount due, in the case of any proceeding in the
courts of New York or in the courts of any other jurisdiction that will give
effect to such conversion being made on such date: or
(b) the
date on which the foreign court determines, in the case of any proceeding in the
courts of any other jurisdiction (the date as of which such conversion is made
pursuant to this Section being hereinafter referred to as the "Judgment Conversion
Date").
(ii) If
in the case of any proceeding in the court of any jurisdiction referred to in
Section 7(n)(i)(2) above, there is a change in the Exchange Rate prevailing
between the Judgment Conversion Date and the date of actual payment of the
amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of US Dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.
(iii) Any
amount due from the Company under this provision shall be due as a separate debt
and shall not be affected by judgment being obtained for any other amounts due
under or in respect of this Agreement.
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IN
WITNESS WHEREOF, the Investor and the Company have caused their respective
signature page to this Agreement to be duly executed as of the date first
written above.
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By:
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| Name: Xxxx X. Xxx | |||
| Title: COO | |||
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IN
WITNESS WHEREOF, the Investor and the Company have caused their respective
signature page to this Agreement to be duly executed as of the date first
written above.
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By:
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SCHEDULE
1
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Principal Amount of Existing
Notes Plus Accrued and
Unpaid Interest Thereon
and Make-Whole Amount
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Number of Agreement
Conversion Shares
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Electronic Delivery
Instructions
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