INVESTMENT AGREEMENT
EXECUTION
COPY
INVESTMENT
AGREEMENT
(the
"Agreement"),
dated
as of April 5, 2007, by and among Xxxxx Pharmaceutical, Inc., a Delaware
corporation, with headquarters located at Xxxxxxxxxx Xxxxx, 00xx
Xxxxx,
Xx.0 Xxxxxxx Xxxx, Xxxxx, Xxxxx Xxxxxxxx, People’s Republic of China
(the "Company"),
and
the undersigned buyers (each, a "Buyer",
and
collectively, the "Buyers").
WHEREAS:
A. The
Company, through its subsidiary Hubei Tongji Xxxxx Ebei Pharmaceutical Co.,
Ltd,
a People’s Republic of China entity) (“Tongji
Xxxxx”)
has
entered into various share purchase agreements with certain shareholders of
Shenzhan Sibiono Gene Tech Co., Ltd, a People’s Republic of China company
(“Sibiono” and the shareholders referred to as the “Sibiono
Shareholders”)
pursuant to which the Company, through Tongji Xxxxx, would acquire approximately
sixty eight percent (68%), and possibly more, of the outstanding capital stock
of Sibiono (the “Sibiono
Acquisition”)
which
is anticipated to be completed and close on or around April 1, 2007.
B. In
order
to obtain additional funding to complete the Sibiono Acquisition, the Company
wishes to sell and Buyer wishes to purchase, upon the terms and conditions
stated in this Agreement, that aggregate number of Units set forth opposite
such
Buyer's name in column (3) on the Schedule of Buyers attached hereto. As used
herein, a "Unit" shall consist (i) a convertible promissory note (a
“Note”)
in the
original principal Amount (“Principal Amount”) of Thirty Thousand Dollars
($30,000) which shall be convertible into 54,087 shares of the Company's common
stock, par value $0.001 per share (the "Common
Stock"),
in
substantially the form attached hereto as Exhibit
“A”,
and
(ii) a warrant, in substantially the form attached hereto as Exhibit
B
(a
“Warrant”)
to
acquire 54,087 shares of Common Stock (defined herein) at an exercise price
of
$0.555 per share. Each Warrant shall be exercisable to purchase shares of Common
Stock upon the terms and conditions set forth in the Warrants. The shares of
Common Stock to be issued upon conversion of the Note are referred to herein
as
the “Note
Shares”
and
those to be issued upon exercise of a Warrant are referred to herein as the
“Warrant
Shares”.
C. The
Company and Buyer are executing and delivering this Agreement in reliance upon
the exemption from securities registration afforded by Section 4(2) of the
Securities Act of 1933, as amended (the "1933
Act"),
and
Rule 506 of Regulation D ("Regulation D")
as
promulgated by the United States Securities and Exchange Commission (the
"SEC")
under
the 1933 Act.
D.
Contemporaneously with the Closing, the parties hereto will execute and deliver
a Registration Rights Agreement, substantially in the form attached hereto
as
Exhibit
C
(the
"Registration
Rights Agreement"),
pursuant to which the Company will agree to provide certain registration rights
with respect to the Registrable Securities (as defined in the Registration
Rights Agreement) under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
E. The
Units, the Notes, the Note Shares, the Warrants and the Warrant Shares
collectively are referred to herein as the "Securities".
F. The
Company previously entered into a Securities Purchase Agreement (the
“SPA”)
dated
November 15, 2006 between and among the Company, Ever Leader Holdings, Limited
and the investors (the “Buyers”) listed on the Schedule of Buyers attached
thereto. Pursuant to the SPA the Company issued a certain number of shares
of
Common Stock to the Buyers and warrants (“SPA
Warrants”)
to
purchase additional shares of Common Stock of the Company upon the terms and
conditions set forth in the SPA Warrants. The Company also entered into a
registration rights agreement with the Buyers (the “SPA Registration Rights
Agreement”). In addition, the Company and certain other parties entered into a
Make-Good Agreement dated November 15, 2006 (the “Make-Good
Agreement”)
pursuant to which the number of shares of Common Stock to be issued to the
Buyers could be increased and the exercise price and number of shares to be
issued pursuant to the SPA Warrants could be adjusted in certain circumstances.
NOW,
THEREFORE,
the
Company and Buyer hereby agree as follows:
1. PURCHASE
AND SALE OF UNIT.
(a) Purchase
of Unit.
(i) Units. Subject
to the satisfaction (or waiver) of the conditions set forth in Sections 6 and
7
below, the Company shall issue and sell to Buyer, and Buyer agrees to purchase
from the Company on the Closing Date (as defined below), the Units.
(ii) Closing.
The
date and time of the Closing shall be 10:00 a.m., Eastern Standard Time, on
the
Closing Date (or such later date as is mutually agreed to by the Company and
Buyer) after notification of satisfaction (or waiver) of the conditions to
the
Closing set forth in Sections 6 and 7 below, at the offices of Buyer’s.
Alternatively, the closing can take place by the exchange of final executed
closing documents between legal counsel for the Company and Buyer.
(iii) Purchase
Price.
The
purchase price for each Unit (the "Purchase
Price")
shall
be Thirty Thousand Dollars ($30,000).
(b) Form
of Payment.
On the
Closing Date, subject to the satisfaction of the conditions to closing, (i)
Buyer shall deliver by wire transfer to an account designated by the Company
no
later than the close of business, on April 5, 2007 or check, the aggregate
Purchase Price for the Units, and (ii) the Company shall deliver to Buyer
the Note and Warrant comprising the Units purchased by Buyer, duly executed
on
behalf of the Company and registered in the name of Buyer or its
designee.
-2-
2. BUYER'S
REPRESENTATIONS AND WARRANTIES.
Buyer
represents and warrants that:
(a) No
Sale or Distribution.
Buyer
is acquiring the Units, Note and Warrant comprising the Units, and upon
conversion of the Note and exercise of the Warrant (other than pursuant to
a
Cashless Exercise (as defined in the Warrant)) will acquire the Note Shares
and
Warrant Shares issuable upon the conversion or exercise of the Note or Warrant,
as the case may be, for its own account and not with a view towards, or for
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933 Act; provided, however,
that by making the representations herein, Buyer does not agree to hold any
of
the Securities for any minimum or other specific term and reserves the right
to
dispose of the Securities at any time and from time to time in accordance with
or pursuant to a registration statement or an exemption under the 1933 Act
and
pursuant to the applicable terms of the Transaction Documents (as defined in
Section 3(b)). Buyer is acquiring the Securities hereunder in the ordinary
course of its business. Buyer does not presently have any agreement or
understanding, directly or indirectly, with any Person to distribute any of
the
Securities.
(b) Accredited
Investor Status.
Buyer
is an "accredited investor" as that term is defined in Rule 501(a) of Regulation
D.
(c) Reliance
on Exemptions.
Buyer
understands that the Securities are being offered and sold to it in reliance
on
specific exemptions from the registration requirements of United States federal
and state securities laws and that the Company is relying in part upon the
truth
and accuracy of, and Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of Buyer set forth herein in
order to determine the availability of such exemptions and the eligibility
of
Buyer to acquire the Securities.
(d) Information.
Buyer
and its advisors, if any, have been furnished with all materials relating to
the
business, finances and operations of the Company and materials relating to
the
offer and sale of the Securities that have been requested by Buyer. Buyer and
its advisors, if any, have been afforded the opportunity to ask questions of
the
Company. Neither such inquiries nor any other due diligence investigations
conducted by Buyer or its advisors, if any, or its representatives shall modify,
amend or affect Buyer's right to rely on the Company's representations and
warranties contained herein. Buyer understands that its investment in the
Securities involves a high degree of risk and is able to afford a complete
loss
of such investment. Buyer has sought such accounting, legal and tax advice
as it
has considered necessary to make an informed investment decision with respect
to
its acquisition of the Securities.
(e) No
Governmental Review.
Buyer
understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation
or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.
(f) Transfer
or Resale.
Buyer
understands that except as provided in the Registration Rights Agreement: (i)
the Securities have not been and are not being registered under the 1933 Act
or
any state securities laws, and may not be offered for sale, sold, assigned
or
transferred unless (A) subsequently registered thereunder, (B) Buyer shall
have
delivered to the Company an opinion of counsel, in a generally acceptable form,
to the effect that such Securities to be sold, assigned or transferred may
be
sold, assigned or transferred pursuant to an exemption from such registration,
or (C) Buyer provides the Company with reasonable assurance that such Securities
can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A
promulgated under the 1933 Act, as amended (or a successor rule thereto)
(collectively, "Rule
144");
(ii)
any sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the seller
(or the Person (as defined in Section 3(s)) through whom the sale is made)
may
be deemed to be an underwriter (as that term is defined in the 0000 Xxx) may
require compliance with some other exemption under the 1933 Act or the rules
and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
Person is under any obligation to register the Securities under the 1933 Act
or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder. The Securities may be pledged in connection with a bona
fide margin account or other loan or financing arrangement secured by the
Securities and such pledge of Securities shall not be deemed to be a transfer,
sale or assignment of the Securities hereunder, and should Buyer effect a pledge
of Securities it shall not be required to provide the Company with any notice
thereof or otherwise make any delivery to the Company pursuant to this Agreement
or any other Transaction Document (as defined in Section 3(b)), including,
without limitation, this Section 2(f).
-3-
(g) Legends.
Buyer
understands that the Note and the Warrant and, until such time as the resale
of
the Note Shares or Warrant Shares have been registered under the 1933 Act as
contemplated by the Registration Rights Agreement, the stock certificates
representing the Note Shares and Warrant Shares, except as set forth below,
shall bear any legend as required by the "blue sky" laws of any state and a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL,
IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR
(II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY
THE
SECURITIES.
The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which
it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for resale under the 1933 Act, (ii) in connection
with
a sale, assignment or other transfer, such holder provides the Company with
an
opinion of a law firm reasonably acceptable to the Company (with Wells, Moore,
Xxxxxxx & Xxxxxxx, PLLC being deemed acceptable), in a generally acceptable
form, to the effect that such sale, assignment or transfer of the Securities
may
be made without registration under the applicable requirements of the 1933
Act,
or (iii) such holder provides the Company with reasonable assurance that the
Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule
144A. If the Company shall fail for any reason or for no reason to issue to
the
holder of the Securities within three (3) Trading Days (as defined below) (after
the occurrence of any of (i) through (iii) above, a certificate without such
legend to the holder or to issue such Securities to such holder by electronic
delivery at the applicable balance account at DTC or if the Company fails to
deliver unlegended Securities within 3 Trading Days of the holder’s election to
receive such unlegended Securities pursuant to clause (ii) below, and if on
or
after such Trading Day the holder purchases (in an open market transaction
or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
holder of such Securities that the holder anticipated receiving without legend
from the Company (a "Buy-In"),
then
the Company shall, within three (3) Business Days after the holder's request
and
in the holder's discretion, either (i) pay cash to the holder in an amount
equal
to the holder's total purchase price (including brokerage commissions, if any)
for the shares of Common Stock so purchased (the "Buy-In
Price"),
at
which point the Company's obligation to deliver such unlegended Securities
shall
terminate, or (ii) promptly honor its obligation to deliver to the holder such
unlegended Securities as provided above and pay cash to the holder in an amount
equal to the excess (if any) of the Buy-In Price over the product of (A) such
number of shares of Common Stock, times (B) the Closing Bid Price (as defined
in
the Warrants) on the date of exercise.
-4-
(h) Validity;
Enforcement.
This
Agreement and the Registration Rights Agreement to which Buyer is a party have
been duly and validly authorized, executed and delivered on behalf of Buyer
and
shall constitute the legal, valid and binding obligations of Buyer enforceable
against Buyer in accordance with their respective 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.
(i) No
Conflicts.
The
execution, delivery and performance by Buyer of this Agreement and the
Registration Rights Agreement and the consummation by Buyer of the transactions
contemplated hereby and thereby will not (i) result in a violation of the
organizational documents of Buyer 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 Buyer 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
Buyer, 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 Buyer to perform its obligations hereunder.
(j) Certain
Trading Activities.
Other
than with respect to the transactions contemplated herein, since the time that
Buyer was first contacted by the Company or any other Person regarding this
investment in the Company neither Buyer nor any Affiliate of Buyer which (x)
had
knowledge of the transactions contemplated hereby, (y) has or shares discretion
relating to Buyer's investments or trading or information concerning Buyer's
investments and (z) is subject to Buyer's review or input concerning such
Affiliate's investments or trading (collectively, "Trading
Affiliates")
has
directly or indirectly, nor has any Person acting on behalf of or pursuant
to
any understanding with Buyer or Trading Affiliate, effected or agreed to effect
any transactions in the securities of the Company. Buyer hereby covenants and
agrees not to, and shall cause its Trading Affiliates not to, engage, directly
or indirectly, in any transactions in the securities of the Company or involving
the Company's securities during the period from the date hereof until such
time
as (i) the transactions contemplated by this Agreement are first publicly
announced as described in Section 4(i) hereof or (ii) this Agreement is
terminated in full pursuant to Section 8 hereof. Notwithstanding
the foregoing, for avoidance of doubt, nothing contained herein shall constitute
a representation or warranty, or preclude any actions, with respect to the
identification of the availability of, or securing of, available shares to
borrow in order to effect short sales or similar transactions in the
future.
-5-
3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The
Company represents and warrants to Buyer that, as of the date hereof and as
of
the Closing Date as follows (which representations and warranties shall be
deemed to apply, as appropriate, to each subsidiary of the Company, including,
without limitation and including Sibiono assuming that the Sibiono Acquisition
has been fully consummated as of the date hereof):
(a) Organization
and Qualification.
The
Company and its "Subsidiaries"
(which
for purposes of this Agreement means any joint venture or any entity in which
the Company, directly or indirectly, owns any of the capital stock or holds
an
equity or similar interest, including without limitation, Sibiono) are entities
duly organized and validly existing and, to the extent legally applicable,
in
good standing under the laws of the jurisdiction in which they are formed,
and
have the requisite power and authorization to own their properties and to carry
on their business as now being conducted. Each of the Company and its
Subsidiaries is duly qualified as a foreign entity to do business and to the
extent legally applicable, is in good standing in every jurisdiction in which
its ownership of property or the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not 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, taken as a whole, or on the transactions
contemplated hereby and the other Transaction Documents or by the agreements
and
instruments to be entered into in connection herewith or therewith, or on the
authority or ability of the Company to perform its obligations under the
Transaction Documents (as defined below). The Company Subsidiaries are set
forth
on Schedule
3(a).
(b) Authorization;
Enforcement; Validity.
The
Company has the requisite corporate power and authority to enter into and
perform its obligations under this Agreement, the Registration Rights Agreement,
the Note, the Warrant and each of the other agreements entered into by the
parties hereto in connection with the transactions contemplated by this
Agreement (collectively, the "Transaction
Documents")
and to
issue the Securities in accordance with the terms hereof and thereof. The
execution and delivery of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Units and the Note and the
Warrant comprising the Units, the reservation for issuance and the issuance
of
the Note Shares and the Warrant Shares issuable upon conversion of the Note
or
exercise of the Warrant, as the case may be, have been duly authorized by the
Company's Board of Directors and other than as set forth in Section 3(e), no
further filing, consent, or authorization is required by the Company, its Board
of Directors or its stockholders. This Agreement and the other Transaction
Documents of even date herewith have been duly executed and delivered by the
Company, and constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their 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.
-6-
(c) Issuance
of Securities.
The
issuance of the Units and Note and Warrant comprising the Units, are duly
authorized and upon issuance in accordance with the terms of the Transaction
Documents shall be free from all taxes, liens and charges with respect to the
issue thereof. As of the Closing, a number of shares of Common Stock shall
have
been duly authorized and reserved for issuance which equals or exceeds the
sum
of 150% of the maximum aggregate number of shares of Common Stock issuable
upon
conversion of the Note and exercise of the Warrant. Upon conversion in
accordance with the Note and exercise in accordance with the Warrant, the Note
Shares and Warrant Shares will be validly issued, fully paid and nonassessable
and free from all preemptive or similar rights, taxes, liens and charges with
respect to the issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock. Assuming the accuracy of each of the
representations and warranties set forth in Section 2 of this Agreement, the
offer and issuance by the Company of the Securities is exempt from registration
under the 1933 Act.
(d) No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby
and
thereby (including, without limitation, the issuance of the Unit and the Note
and Warrant which comprise such Unit and reservation for issuance and issuance
of the Note Shares and Warrant Shares) will not (i) result in a violation of
any
certificate of incorporation, certificate of formation, any certificate of
designations or other constituent documents of the Company or any of its
Subsidiaries, any capital stock of the Company or any of its Subsidiaries or
bylaws of the Company or any of its Subsidiaries or (ii) conflict with, or
constitute a default or breach (or an event which with notice or lapse of time
or both would become a default or breach) 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 National
Association of Securities Dealer's OTC Bulletin Board (the "Principal
Market"))
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 clauses (ii) and (iii) above, to the extent that such violations
conflict, default or right would not reasonably be expected to have a Material
Adverse Effect.
-7-
(e) 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 the Transaction Documents, in each case in accordance
with the terms hereof or thereof, except for the filing with the SEC of one
or
more Registration Statements in accordance with the requirements of the
Registration Rights Agreement (which is not required to be filed before the
Closing). 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 Common Stock in the foreseeable future, except as described
on
Schedule 3(e). .
(f) Acknowledgment
Regarding Buyer's Purchase of Securities.
The
Company acknowledges and agrees that Buyer is acting solely in the capacity
of
an arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that Buyer is not (i) an
officer or director of the Company, (ii) an "affiliate" of the Company or any
of
its Subsidiaries (as defined in Rule 144 of the 0000 Xxx) or (iii) to the
knowledge of the Company, a "beneficial owner" of more than 10% of the shares
of
Common Stock (as defined for purposes of Rule 13d-3 of the Securities Exchange
Act of 1934, as amended (the "1934
Act")).
The
Company further acknowledges that Buyer is not acting as a financial advisor
or
fiduciary of the Company or any of its Subsidiaries (or in any similar capacity)
with respect to the Transaction Documents and the transactions contemplated
hereby and thereby, and any advice given by Buyer or any of its representatives
or agents in connection with the Transaction Documents and the transactions
contemplated hereby and thereby is merely incidental to Buyer's purchase of
the
Securities. The Company further represents to Buyer that the Company's decision
to enter into the Transaction Documents has been based solely on the independent
evaluation by the Company and its representatives.
(g) No
General Solicitation; Placement Agent's Fees.
Neither
the Company, nor any of its Subsidiaries or affiliates, nor any Person acting
on
its or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the offer
or
sale of the Securities. The Company shall be responsible for the payment of
any
placement agent's fees, if any, financial advisory fees, or brokers' commissions
(other than for persons engaged by Buyer or its investment advisor) relating
to
or arising out of the transactions contemplated hereby.
(h) No
Integrated Offering.
None of
the Company, its Subsidiaries, any of their affiliates, and any Person acting
on
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 require registration of any of the Securities under the 1933 Act or cause
this offering of the Securities to be integrated with prior offerings by the
Company for purposes of any applicable stockholder approval provisions,
including, without limitation, under the rules and regulations of any exchange
or automated quotation system on which any of the securities of the Company
are
listed or designated. None of the Company, its Subsidiaries, their affiliates
and any Person acting on their behalf will take any action or steps referred
to
in the preceding sentence that would require registration of any of the
Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings.
-8-
(i) Dilutive
Effect.
The
Company understands and acknowledges that the number of Note Shares and/or
Warrant Shares issuable upon conversion of the Note or exercise of the Warrant,
as the case may be, will increase in certain circumstances. The Company further
acknowledges that its obligation to issue the Note Shares and Warrant Shares
upon conversion of the Note and/or exercise of the Warrant in accordance with
this Agreement, the Note and the Warrant is, in each case, absolute and
unconditional regardless of the dilutive effect that such issuance may have
on
the ownership interests of other stockholders of the Company.
(j) Application
of Takeover Protections; Rights Agreement.
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 Certificate of Incorporation
(as defined in Section 3(r)) or the laws of the state of its incorporation
which
is or could become applicable to Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company's
issuance of the Securities and Buyer's ownership of the Securities. The Company
and its board of directors have taken all necessary action, if any, in order
to
render inapplicable any stockholder rights plan or similar arrangement relating
to accumulations of beneficial ownership of Common Stock or a change in control
of the Company.
(k) SEC
Documents; Financial Statements.
During
the two (2) years prior to the date hereof, the Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it
with
the SEC pursuant to the reporting requirements of the 1934 Act (all of the
foregoing filed prior to the date hereof and all exhibits included therein
and
financial statements, notes and schedules thereto and documents incorporated
by
reference therein being hereinafter referred to as the "SEC
Documents").
The
Company recently changed its fiscal year end to December 31. Therefore, no
filings have been made by the Company for the period of October 1, 2006 through
December 31, 2006. However, when the Company files its December 31, 2006 Form
10-KSB, this gap period will be accounted for. The Company has delivered to
Buyer or its representatives true, correct and complete copies of the SEC
Documents not available on the XXXXX system. As of their respective filing
dates, the SEC Documents complied in all material respects with the requirements
of the 1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time
they
were filed with the SEC, 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. As of their respective filing dates,
the
financial statements of the Company included in the SEC Documents complied
as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as
may
be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in
all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company
to
Buyer which is not included in the SEC Documents, including, without limitation,
information referred to in Section 2(d) of this Agreement or in any disclosure
schedules, contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements therein, in the
light of the circumstance under which they are or were made not misleading.
-9-
(l) Absence
of Certain Changes.
Since
November 15, 2006, there has been no material adverse change and no material
adverse development in the business, properties, operations, condition
(financial or otherwise), results of operations or prospects of the Company
or
its Subsidiaries. Except as disclosed in Schedule
3(l),
and in
accordance with the Use of proceeds for the SPA, since November 15, 2006, the
Company has not (i) declared or paid any dividends, (ii) sold any assets,
individually or in the aggregate, in excess of $100,000 outside of the ordinary
course of business or (iii) had capital expenditures, individually or in the
aggregate, in excess of $250,000. Neither the Company nor any of its
Subsidiaries has taken any steps to seek protection pursuant to any bankruptcy
law nor does the Company have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy proceedings or any actual
knowledge of any fact that would reasonably lead a creditor to do so. The
Company and its Subsidiaries, individually and on a consolidated basis, are
not
as of the date hereof, and after giving effect to the transactions contemplated
hereby to occur at the Closing, will not be Insolvent (as defined below). For
purposes of this Section 3(l), "Insolvent"
means,
with respect to any Person (as defined in Section 3(s)), (i) the present fair
saleable value of such Person's assets is less than the amount required to
pay
such Person's total Indebtedness (as defined in Section 3(s)), (ii) such Person
is unable to pay its debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured, (iii)
such
Person intends to incur or believes that it will incur debts that would be
beyond its ability to pay as such debts mature or (iv) such Person has
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be
conducted.
(m) No
Undisclosed Events, Liabilities, Developments or Circumstances.
No
event, liability, development or circumstance has occurred or exists, or is
contemplated to occur with respect to the Company, its Subsidiaries or their
respective business, properties, prospects, operations or financial condition,
that would be required to be disclosed by the Company under applicable
securities laws on a registration statement on Form S-1 (or SB-2) filed with
the
SEC relating to an issuance and sale by the Company of its Common Stock and
which has not been publicly announced.
(n) Conduct
of Business; Regulatory Permits.
Neither
the Company nor any of its Subsidiaries is in violation of any term of or in
default under its Certificate of Incorporation, any certificate of designations
of any outstanding series of preferred stock of the Company or the Bylaws or
their organizational charter or bylaws, respectively. Neither the Company nor
any of its Subsidiaries is in violation of any judgment, decree or order or
any
statute, ordinance, rule or regulation applicable to the Company or its
Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct
its business in violation of any of the foregoing, except for possible
violations which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Without limiting the generality
of
the foregoing, the Company is not in violation of any of the rules, regulations
or requirements of the Principal Market and has no knowledge of any facts or
circumstances that would reasonably lead to delisting or suspension of the
Common Stock by the Principal Market in the foreseeable future, except as
disclosed in Schedule 3(e). During the two (2) years prior to the date hereof,
(i) the Common Stock has been designated for quotation on the Principal Market,
(ii) trading in the Common Stock has not been suspended by the SEC or the
Principal Market and (iii) the Company has received no communication, written
or
oral, from the SEC or the Principal Market regarding the suspension or delisting
of the Common Stock from the Principal Market. The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
regulatory authorities necessary to conduct their respective businesses, except
where the failure to possess such certificates, authorizations or permits would
not have, individually or in the aggregate, a Material Adverse Effect, and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit.
-10-
(o) Foreign
Corrupt Practices.
Neither
the Company nor any of its Subsidiaries nor any director, officer, agent,
employee or other Person acting on behalf of the Company or any of its
Subsidiaries has, in the course of its actions for, or on behalf of, the Company
or any of its Subsidiaries (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign
or
domestic government official or employee.
(p) Xxxxxxxx-Xxxxx
Act.
The
Company is in compliance with any and all applicable requirements of the
Xxxxxxxx-Xxxxx Act of 2002 that are effective as of the date hereof, and any
and
all applicable rules and regulations promulgated by the SEC thereunder that
are
effective as of the date hereof.
(q) Transactions
With Affiliates.
Except
as set forth in the SEC Documents filed at least ten (10) days prior to the
date
hereof, none of the officers, directors or employees of the Company or any
of
its Subsidiaries is presently a party to any transaction with the Company or
any
of its Subsidiaries (other than for ordinary course services as employees,
officers or 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
such officer, director or employee or, to the knowledge of the Company or any
of
its Subsidiaries, any corporation, partnership, trust or other entity in which
any such officer, director, or employee has a substantial interest or is an
officer, director, trustee or partner.
(r) Equity
Capitalization.
As of
the date hereof, the authorized capital stock of the Company consists of
150,000,000 shares of Common Stock, of which as of the date hereof, 96,964,606
are issued and outstanding, 28,557,936 shares are reserved for issuance pursuant
to that certain Stock Purchase Agreement dated November 15, 2006 between the
Company, Ever Leader and the buyers listed on the Schedule of Buyers attached
thereto (the “SPA”) and the warrants issued in connection therewith. All of such
outstanding shares have been, or upon issuance will be, validly issued and
are
fully paid and nonassessable. Except as disclosed in Schedule
3(r):
(i)
none of the Company's capital stock is subject to preemptive rights or any
other
similar rights or any liens or encumbrances suffered or permitted by the
Company; (ii) other than with respect to the SPA, there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into,
or
exercisable or exchangeable for, any capital stock of the Company or any of
its
Subsidiaries, or contracts, commitments, understandings or arrangements by
which
the Company or any of its Subsidiaries is or may become bound to issue
additional capital stock of the Company or any of its Subsidiaries or options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, or exercisable
or exchangeable for, any capital stock of the Company or any of its
Subsidiaries; (iii) there are no outstanding debt securities, notes, credit
agreements, credit facilities or other agreements, documents or instruments
evidencing Indebtedness of the Company or any of its Subsidiaries or by which
the Company or any of its Subsidiaries is or may become bound; (iv) there are
no
financing statements securing obligations in any material amounts, either singly
or in the aggregate, filed in connection with the Company or any of its
Subsidiaries; (v) other than with respect to the SPA, there are no agreements
or
arrangements under which the Company or any of its Subsidiaries is obligated
to
register the sale of any of their securities under the 1933 Act (except pursuant
to the Registration Rights Agreement and the registration rights agreement
executed in connection with the SPA); (vi) there are no outstanding securities
or instruments of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance
of
the Securities; (viii) the Company does not have any stock appreciation rights
or "phantom stock" plans or agreements or any similar plan or agreement; and
(ix) the Company and its Subsidiaries have no liabilities or obligations
required to be disclosed in the SEC Documents but not so disclosed in the SEC
Documents, other than those incurred in the ordinary course of the Company's
or
its Subsidiaries' respective businesses and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect. The Company
has
furnished to Buyer true, correct and complete copies of the Company's
Certificate of Incorporation, as amended and as in effect on the date hereof
(the "Certificate
of Incorporation"),
and
the Company's Bylaws, as amended and as in effect on the date hereof (the
"Bylaws"),
and
the terms of all securities convertible into, or exercisable or exchangeable
for, shares of Common Stock and the material rights of the holders thereof
in
respect thereto.
-11-
(s) Indebtedness
and Other Contracts.
Except
as disclosed in Schedule
3(s),
neither
the Company nor any of its Subsidiaries (i) has any outstanding Indebtedness
(as
defined below), (ii) is a party to any contract, agreement or instrument, the
violation of which, or default under which, by the other party(ies) to such
contract, agreement or instrument could reasonably be expected to result in
a
Material Adverse Effect, (iii) is in violation of any term of or in default
under any contract, agreement or instrument relating to any Indebtedness, except
where such violations and defaults would not result, individually or in the
aggregate, in a Material Adverse Effect, or (iv) is a party to any contract,
agreement or instrument relating to any Indebtedness, the performance of which,
in the judgment of the Company's officers, has or is expected to have a Material
Adverse Effect. Schedule
3(s)
provides
a detailed description of the material terms of any such outstanding
Indebtedness. For purposes of this Agreement: (x) "Indebtedness"
of any
Person means, without duplication (A) all indebtedness for borrowed money,
(B)
all obligations issued, undertaken or assumed as the deferred purchase price
of
property or services, including (without limitation) "capital leases" in
accordance with generally accepted accounting principles (other than trade
payables entered into in the ordinary course of business), (C) all reimbursement
or payment obligations with respect to letters of credit, surety bonds and
other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect
to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in
the
event of default are limited to repossession or sale of such property), (F)
all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment
of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (y) "Contingent
Obligation"
means,
as to any Person, any direct or indirect liability, contingent or otherwise,
of
that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto; and (z) "Person"
means
an individual, a limited liability company, a partnership, a joint venture,
a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
-12-
(t) Absence
of Litigation.
Except
as set forth in Schedule
3(t),
there
is no action, suit, proceeding, inquiry or investigation before or by the
Principal Market, any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries, the Common Stock
or
any of the Company's Subsidiaries or any of the Company's or its Subsidiaries'
officers or directors.
(u) Insurance.
The
Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the Company
nor
any such Subsidiary has been refused any insurance coverage sought or applied
for and neither the Company nor any such Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as
may
be necessary to continue its business at a cost that would not have a Material
Adverse Effect.
-13-
(v) Employee
Relations.
(i) Neither
the Company nor any of its Subsidiaries is a party to any collective bargaining
agreement or employs any member of a union. The Company and its Subsidiaries
believe that their relations with their employees are good. No executive officer
of the Company or any of its Subsidiaries (as defined in Rule 501(f) of the
0000
Xxx) has notified the Company or any such Subsidiary that such officer intends
to leave the Company or any such Subsidiary or otherwise terminate such
officer's employment with the Company or any such Subsidiary. No executive
officer of the Company or any of its Subsidiaries, is, or is now expected to
be,
in violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, 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.
(ii) The
Company and its Subsidiaries, to their knowledge, are in compliance with all
federal, state, local and foreign laws and regulations respecting labor,
employment and employment practices and benefits, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not, either individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.
(w) Title.
The
Company and its Subsidiaries have good and marketable title in fee simple to
all
real property and good and marketable title to all personal property owned
by
them which is material to the business of the Company and its Subsidiaries,
in
each case free and clear of all liens, encumbrances and defects except such
as
are described in Schedule
3(w)
or such
as do not materially affect the value of such property and do not interfere
with
the use made and proposed to be made of such property by the Company and any
of
its Subsidiaries. Any real property and facilities held under lease by the
Company and any of its Subsidiaries are held by them under valid, subsisting
and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by
the
Company and its Subsidiaries.
(x) Intellectual
Property Rights.
The
Company and its Subsidiaries own or possess adequate rights or licenses to
use
all trademarks, service marks and all applications and registrations therefor,
trade names, patents, patent rights, copyrights, original works of authorship,
inventions, trade secrets and other intellectual property rights ("Intellectual
Property Rights")
necessary to conduct their respective businesses as now conducted. None of
the
Company's registered, or applied for, Intellectual Property Rights have expired
or terminated or have been abandoned, or are expected to expire or terminate
or
expected to be abandoned, within three years from the date of this Agreement.
The Company does not have any knowledge of any infringement by the Company
or
its Subsidiaries of Intellectual Property Rights of others. There is no claim,
action or proceeding being made or brought, or to the knowledge of the Company,
being threatened, against the Company or its Subsidiaries regarding its
Intellectual Property Rights. Neither the Company nor any of its Subsidiaries
is
aware of any facts or circumstances which might give rise to any of the
foregoing infringements or claims, actions or proceedings. The Company and
its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their Intellectual Property
Rights.
-14-
(y) Environmental
Laws.
The
Company and its Subsidiaries, to their knowledge, (i) are in compliance with
any
and all Environmental Laws (as hereinafter defined), (ii) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or approval
where, in each of the foregoing clauses (i), (ii) and (iii), the failure to
so
comply could be reasonably expected to have, individually or in the aggregate,
a
Material Adverse Effect. The term "Environmental
Laws"
means
all federal, state, local or foreign laws relating to pollution or protection
of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, "Hazardous
Materials") into
the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved
thereunder.
(z) Subsidiary
Rights.
The
Company or one of its Subsidiaries has the unrestricted right to vote, and
(subject to limitations imposed by applicable law) to receive dividends and
distributions on, all capital securities of its Subsidiaries as owned by the
Company or such Subsidiary.
(aa) Tax
Status.
The
Company and each of its Subsidiaries (i) has made or filed all foreign, federal
and state income and all other tax returns, reports and declarations required
by
any jurisdiction to which it is subject, (ii) has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and (iii) has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to
the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority
of
any jurisdiction, and the officers of the Company know of no basis for any
such
claim.
(bb) Internal
Accounting and Disclosure Controls.
The
Company and each of its Subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to
maintain asset and liability accountability, (iii) access to assets or
incurrence of liabilities is permitted only in accordance with management's
general or specific authorization and (iv) the recorded accountability for
assets and liabilities is compared with the existing assets and liabilities
at
reasonable intervals and appropriate action is taken with respect to any
difference. The Company maintains disclosure controls and procedures (as such
term is defined in Rule 13a-14 under the 0000 Xxx) that are effective in
ensuring that information required to be disclosed by the Company in the reports
that it files or submits under the 1934 Act is recorded, processed, summarized
and reported, within the time periods specified in the rules and forms of the
SEC, including, without limitation, controls and procedures designed in to
ensure that information required to be disclosed by the Company in the reports
that it files or submits under the 1934 Act is accumulated and communicated
to
the Company's management, including its principal executive officer or officers
and its principal financial officer or officers, as appropriate, to allow timely
decisions regarding required disclosure. During the twelve months prior to
the
date hereof neither the Company nor any of its Subsidiaries have received any
notice or correspondence from any accountant relating to any potential material
weakness in any part of the system of internal accounting controls of the
Company or any of its Subsidiaries.
-15-
(cc) Off
Balance Sheet Arrangements.
There
is no transaction, arrangement, or other relationship between the Company and
an
unconsolidated or other off balance sheet entity that is required to be
disclosed by the Company in its 1934 Act filings and is not so disclosed or
that
otherwise would be reasonably likely to have a Material Adverse
Effect.
(dd) Investment
Company Status.
The
Company is not, and upon consummation of the sale of the Securities will not
be,
an "investment company," a company controlled by an "investment company" or
an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company" as such terms are defined in the Investment Company Act
of
1940, as amended.
(ee) Transfer
Taxes.
On the
Closing Date, all stock transfer or other taxes (other than income or similar
taxes) which are required to be paid in connection with the sale and transfer
of
the Securities to be sold to Buyer hereunder will be, or will have been, fully
paid or provided for by the Company, and all laws imposing such taxes will
be or
will have been complied with.
(ff) Manipulation
of Price.
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) other than the
Placement Agent sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) other than the
Placement Agent paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company.
(gg) Disclosure.
The
Company confirms that neither it nor any other Person acting on its behalf
has
provided Buyer or its agents or counsel with any information that constitutes
or
could reasonably be expected to constitute material, nonpublic information.
The
Company understands and confirms that Buyer will rely on the foregoing
representations in effecting transactions in securities of the Company. All
disclosure provided to Buyer regarding the Company or any of its Subsidiaries,
their business and the transactions contemplated hereby, including the Schedules
to this Agreement, 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.
-16-
(hh) Acknowledgement
Regarding Buyer's Trading Activity.
Anything in this Agreement or elsewhere herein to the contrary notwithstanding,
but subject to compliance by Buyer with applicable law and the provisions of
Section 2(k) hereto, it is understood and acknowledged by the Company (i) that
Buyer has not been asked by the Company or its Subsidiaries to agree, nor has
Buyer agreed with the Company or its Subsidiaries, 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 Buyer, 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 Buyer, and counter parties in
"derivative" transactions to which Buyer is a party, directly or indirectly,
presently may have a "short" position in the Common Stock, and (iv) that Buyer
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) Buyer may engage in hedging and/or trading
activities at various times during the period that the Securities are
outstanding, including, without limitation, during the periods that the value
of
the Note Shares and/or Warrant Shares deliverable with respect to Securities
are
being determined and (b) such hedging and/or trading activities (if any) could
reduce the value of the existing stockholders' equity interests in the Company
at and after the time that the hedging and/or trading activities are being
conducted.
(ii) U.S.
Real Property Holding Corporation.
The
Company is not, nor has it ever been, a U.S. real property holding corporation
within the meaning of Section 897 of the Internal Revenue Code of 1986, as
amended, and the Company shall so certify upon any Buyer's request.
(jj) Sibiono
Acquisition Matters.
(i) Tongji
Xxxxx has the requisite corporate power and authority to enter into and perform
its obligations under the Sibiono Acquisition Agreements and to consummate
the
Sibiono Acquisition in accordance with the terms thereof. The execution and
delivery of the Sibiono Acquisition Agreements by Tongji Xxxxx and the
consummation by Tongji Xxxxx of the transactions contemplated thereby,
including, without limitation, the issuance of any shares of Common Stock to
certain Sibiono Shareholders, have been duly authorized by the Boards of
Directors of the Company and Tongji Xxxxx, and other than as set forth in
Section 3(e), no further filing, consent, or authorization is required by the
Company, Tongji Xxxxx, the Boards of Directors or stockholders of the Company
or
Tongji Xxxxx, or any other Person or entity. The Sibiono Acquisition Agreements
and all other documents delivered in connection with the Sibiono Acquisition
have been duly executed and delivered by the Company and/or Tongji Xxxxx, as
the
case may be, and constitute the legal, valid and binding obligations of the
Company, Tongji Xxxxx and the Sibiono Shareholders, enforceable in accordance
with their 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.
-17-
(ii) The
execution, delivery and performance of the Sibiono Acquisition Agreements by
Tongji Xxxxx and the consummation of the transactions contemplated thereby
(including, without limitation, the issuance of shares of Common Stock to
certain of the Sibiono Shareholders) will not (i) result in a violation of
any
certificate of incorporation, certificate of formation, any certificate of
designations or other constituent documents of the Company or Tongji Xxxxx,
any
capital stock of the Company or Tongji Xxxxx or bylaws of the Company or Tongji
Xxxxx or (ii) conflict with, or constitute a default or breach (or an event
which with notice or lapse of time or both would become a default or breach)
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 National Association of Securities Dealer's OTC Bulletin
Board (the "Principal
Market"))
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 clauses (ii) and (iii) above, to the extent that such violations
conflict, default or right would not reasonably be expected to have a Material
Adverse Effect.
(iii) Neither
the Company, Tongji Xxxxx nor any other Subsidiary 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 the Sibiono Acquisition Agreements in
each
case in accordance with the terms thereof.
(iv) The
Company is not aware of any facts which would reasonably lead it to believe
that
the Sibiono Acquisition Transaction will or may not be closed in accordance
with
the terms of the Sibiono Acquisition Agreements.
4. COVENANTS.
(a) Best
Efforts.
Each
party shall use its best efforts timely to satisfy each of the conditions to
be
satisfied by it as provided in Sections 6 and 7 of this Agreement.
(b) Form
D
and Blue Sky.
The
Company agrees to file a Form D (if required due to the fact that an applicable
exemption under the Securities Act or 1934 is nor available) with respect to
the
Securities as required under Regulation D and to provide a copy thereof to
Buyer
promptly after such filing. The Company shall, on or before the Closing Date,
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 Buyer at
the
Closing pursuant to this Agreement under applicable securities or "Blue Sky"
laws of the states of the United States (or to obtain an exemption from such
qualification), and shall provide evidence of any such action so taken to Buyer
on or prior to the Closing Date. The Company shall make all filings and reports
relating to the offer and sale of the Securities required under applicable
securities or "Blue Sky" laws of the states of the United States following
the
Closing Date.
(c) Reporting
Status.
Until
the date on which Buyer shall have sold all of the Note Shares and Warrant
Shares outstanding,
(the "Reporting
Period"),
the
Company shall timely file all reports required to be filed with the SEC pursuant
to the 1934 Act, and the Company shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would permit such termination.
-18-
(d) Use
of
Proceeds.
The
Company will use the proceeds from the sale of the Securities in connection
with
the closing of the Sibiono Acquisition Transaction, and for working capital
purposes. If the Sibiono Acquisition Transaction does not close by April 15,
2007, this Agreement shall be deemed null and void. The Note shall be
accelerated and the Warrant shall be cancelled.
(e) Financial
Information.
The
Company agrees to send the following to Buyer during the Reporting Period (i)
unless the following are filed with the SEC through XXXXX and are available
to
the public through the XXXXX system, within one (1) Business Day after the
filing thereof with the SEC, a copy of its Annual Reports and Quarterly Reports
on Form 10-K, 10-KSB, 10-Q or 10-QSB, any interim reports or any consolidated
balance sheets, income statements, stockholders' equity statements and/or cash
flow statements for any period other than annual, any Current Reports on Form
8-K and any registration statements (other than on Form S-8) or amendments
filed
pursuant to the 1933 Act, (ii) on the same day as the release thereof, facsimile
or e-mailed copies of all press releases issued by the Company or any of its
Subsidiaries, and (iii) copies of any notices and other information made
available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the
stockholders. As used herein, "Business
Day"
means
any day other than Saturday, Sunday or other day on which commercial banks
in
The City of New York are authorized or required by law to remain
closed.
(f) Listing.
The
Company shall promptly secure the listing of all of the Registrable Securities
(as defined in the Registration Rights Agreement), except for the Warrants,
upon
each national securities exchange and automated quotation system, if any, upon
which the Common Stock is then listed (subject to official notice of issuance)
and shall maintain, in accordance with the Note and Warrant, such listing of
all
Registrable Securities from time to time issuable under the terms of the
Transaction Documents. The Company shall maintain the Common Stocks'
authorization for quotation on the Principal Market. Neither the Company nor
any
of its Subsidiaries shall take any action which would be reasonably expected
to
result in the delisting or suspension of the Common Stock on the Principal
Market. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4(f).
(g) Fees.
The
Company shall be responsible for the payment of any placement agent's fees,
if
any, financial advisory fees, or broker's commissions relating to or arising
out
of the transactions contemplated hereby, including, without limitation, any
fees
payable to the Placement Agent. The Company shall pay, and hold Buyer harmless
against, any liability, loss or expense (including, without limitation,
reasonable attorney's fees and out-of-pocket expenses) arising in connection
with any claim relating to any such payment. The Company shall reimburse Buyer
for its legal fees and expenses incurred in connection with this transaction
promptly upon demand therefore, provided this reimbursement obligation shall
not
exceed $20,000.
-19-
(h) Pledge
of Securities.
The
Company acknowledges and agrees that the Securities may be pledged by Buyer
in
connection with a bona fide margin agreement or other loan or financing
arrangement that is secured by the Securities. The pledge of Securities shall
not be deemed to be a transfer, sale or assignment of the Securities hereunder,
and should Buyer effect a pledge of Securities, it shall not be required to
provide the Company with any notice thereof or otherwise make any delivery
to
the Company pursuant to this Agreement or any other Transaction Document,
including, without limitation, Section 2(f) hereof; provided that Buyer and
its
pledgee shall be required to comply with the provisions of Section 2(f) hereof
in order to effect a sale, transfer or assignment of Securities to such pledgee.
The Company hereby agrees to execute and deliver such documentation as a pledgee
of the Securities may reasonably request in connection with a pledge of the
Securities to such pledgee by Buyer.
(i) Disclosure
of Transactions and Other Material Information.
On or
before 8:30 a.m., New York City time, within four (4) Business Days following
the Closing Date, the Company shall issue a press release and file a Current
Report on Form 8-K describing the terms of the transactions contemplated by
the
Transaction Documents in the form required by the 1934 Act and attaching the
material Transaction Documents (including, without limitation, this Agreement,
the form of Note, the form of Warrant, the form of Make Good Agreement, the
form
of Make Good Escrow Agreement and the form of the Registration Rights Agreement
and such financial statements and other information as required in connection
with the Exchange Agreement) as exhibits to such filing (including all
attachments, the "8-K
Filing").
From
and after the filing of the 8-K Filing with the SEC, Buyer 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 8-K Filing. The Company shall not, and
shall
cause each of its Subsidiaries and its and each of their respective officers,
directors, employees and agents, not to, provide Buyer with any material,
nonpublic information regarding the Company or any of its Subsidiaries from
and
after the filing of the 8-K Filing with the SEC without the express written
consent of Buyer. If Buyer has, or believes it has, received any such material,
nonpublic information regarding the Company or any of its Subsidiaries, it
shall
provide the Company with written notice thereof. The Company shall, within
five
(5) Trading Days (as defined in the Warrants) of receipt of such notice, make
public disclosure of such material, nonpublic information. In the event of
a
breach of the foregoing covenant by the Company, any of its Subsidiaries, or
any
of its or their respective officers, directors, employees and agents, in
addition to any other remedy provided herein or in the Transaction Documents,
Buyer shall have the right to make a public disclosure, in the form of a press
release, public advertisement or otherwise, of such material, nonpublic
information without the prior approval by the Company, its Subsidiaries, or
any
of its or their respective officers, directors, employees or agents. Buyer
shall
not have any liability to the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees, stockholders or agents for any such
disclosure. Subject to the foregoing, neither the Company, its Subsidiaries
nor
Buyer shall issue any press releases or any other public statements with respect
to the transactions contemplated hereby; provided, however, that the Company
shall be entitled, without the prior approval of Buyer, to make any press
release or other public disclosure with respect to such transactions (i) in
substantial conformity with the 8-K Filing and contemporaneously therewith
and
(ii) as is required by applicable law and regulations (provided that in the
case
of clause (i) Buyer shall be consulted by the Company in connection with any
such press release or other public disclosure prior to its release). Without
the
prior written consent of Buyer, neither the Company nor any of its Subsidiaries
or affiliates shall disclose the name of Buyer in any filing, announcement,
release or otherwise, unless required by law.
-20-
(j) Variable
Securities; Dilutive Issuances.
So long
as the Note or Warrant is outstanding, the Company will not issue any other
securities that would cause a breach or default under the Note or Warrant.
For
so long as any Note or Warrant remain outstanding, the Company shall not, in
any
manner, issue or sell any rights, warrants or options to subscribe for or
purchase Common Stock or directly or indirectly convertible into or exchangeable
or exercisable for Common Stock at a price which varies or may vary with the
market price of the Common Stock, including by way of one or more reset(s),
to
any fixed price unless the conversion, exchange or exercise price of any such
security cannot be less than the then applicable Conversion Price (as defined
in
the Note) and Exercise Price (as defined in the Warrant) with respect to the
Common Stock into which any Note is convertible or Warrant is exercisable.
For
so long as any Note or Warrant remain outstanding, the Company shall not, in
any
manner, enter into or affect any Dilutive Issuances (as defined in the Warrant)
if the effect of such Dilutive Issuance is to cause the Company to be required
to issue upon conversion of any Note or exercise of any Warrant any shares
of
Common Stock in excess of that number of shares of Common Stock which the
Company may issue upon conversion of the Note and exercise of the Warrant
without breaching the Company's obligations under the rules or regulations
of
the Principal Market.
(k) Corporate
Existence.
So long
as Buyer beneficially owns any Securities, the Company shall not be party to
any
Fundamental Transaction (as defined in the Warrants) unless the Company is
in
compliance with the applicable provisions governing Fundamental Transactions
set
forth in the Note and Warrant.
(l) Reservation
of Shares.
The
Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance, no less than 150% of the maximum number
of
shares of Common Stock issuable upon conversion of the Note and exercise of
the
Warrant issued at the Closing.
(m) Conduct
of Business.
The
business of the Company and its Subsidiaries shall not be conducted in violation
of any law, ordinance or regulation of any governmental entity, except where
such violations would not result, either individually or in the aggregate,
in a
Material Adverse Effect.
(n) Additional
Issuances of Securities.
(i) For
purposes of this Section 4(n), the following definitions shall
apply.
(1) "Convertible
Securities"
means
any stock or securities (other than Options) convertible into or exercisable
or
exchangeable for shares of Common
Stock.
(2) "Options"
means
any rights, warrants or options to subscribe for or purchase shares of
Common
Stock or
Convertible Securities.
-21-
(3) "Common
Stock Equivalents"
means,
collectively, Options and Convertible Securities.
(4) “SPA
Registrable Shares”
means
the shares of Common Stock subject to the SPA Registration Rights
Agreement.
(ii) For
so
long as the Note is outstanding, in whole or in part, or any Warrant is
outstanding, the Company will not, directly or indirectly, file any registration
statement with the SEC other than the Registration Statement (as defined in
the
Registration Rights Agreement) and pursuant to the SPA Registration Rights
Agreement; and in addition, the Company will not, directly or indirectly, offer,
sell, grant any option to purchase, or otherwise dispose of (or announce any
offer, sale, grant or any option to purchase or other disposition of) any of
its
or its Subsidiaries' equity or equity equivalent securities, including without
limitation any debt, preferred stock or other instrument or security that is,
at
any time during its life and under any circumstances, convertible into or
exchangeable or exercisable for shares of Common Stock or Common Stock
Equivalents of the Company or any Subsidiary, including Sibiono (any such offer,
sale, grant, disposition or announcement being referred to as a "Subsequent
Placement").
Notwithstanding the foregoing, the term Subsequent Placement shall not apply
to
shares of Common Stock issued in the Sibiono Acquisition Transaction or shares
of Common Stock issued in connection with a stock option agreement adopted
by
the Company.
(iii) For
so
long as the Note or Warrant remain outstanding, in whole or in part, the Company
will not, directly or indirectly, effect any Subsequent Placement unless the
Company shall have first complied with this Section 4(n)(iii).
(1) The
Company shall deliver to Buyer an irrevocable written notice
(the "Offer
Notice")
of any
proposed or intended issuance or sale or exchange (the "Offer")
of the
securities being offered (the "Offered
Securities")
in a
Subsequent Placement, which Offer Notice shall (w) identify and describe the
Offered Securities, (x) describe the price and other terms upon which they
are to be issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged, (y) identify the persons or
entities (if known) to which or with which the Offered Securities are to be
offered, issued, sold or exchanged and (z) offer to issue and sell to or
exchange with Buyer the Offered Securities, allocated among Buyer and the Buyers
under the SPA (a) based on Buyer's pro rata portion that the (x) the aggregate
number of (i) Note Shares issued upon one or more conversions of the Note,
plus
(ii) the aggregate number of Note Shares that would be issued upon conversion
of
the entire Note then outstanding (such number referred to herein as the
“Total
Note Shares”)
bears
to (y) the aggregate of the number of Total Note Shares plus the total number
of
shares of Common Stock purchased pursuant to the SPA (Buyer’s portion being
referred to as the "Buyer
Basic Amount"),
and
(b) if Buyer elects to purchase its Buyer Basic Amount, any additional portion
of the Offered Securities offered to the Buyers under the SPA as Buyer shall
indicate it will purchase or acquire should any such Buyer subscribe for less
than their respective share of Offered Securities (the "Undersubscription
Amount"),
which
process shall be repeated until Buyer shall have an opportunity to subscribe
for
any remaining Undersubscription Amount.
-22-
(2) To
accept
an Offer, in whole or in part, Buyer must deliver a written notice to the
Company prior to the end of the tenth (10th)
Business Day after Buyer's receipt of the Offer Notice (the "Offer
Period"),
setting forth the portion of Buyer's Basic Amount that Buyer elects to purchase
and, if Buyer shall elect to purchase all of its Buyer Basic Amount, the
Undersubscription Amount, if any, that Buyer elects to purchase (in either
case,
the "Notice
of Acceptance”).
If
the aggregate of (i) the Buyer Basic Amount subscribed for by Buyer pursuant
hereto, plus (ii) the aggregate amount of Offered Securities subscribed for
by
the Buyers pursuant to the SPA, be less than the total amount of Offered
Securities, then if Buyer has set forth an Undersubscription Amount in its
Notice of Acceptance, it shall be entitled to purchase, in addition to the
Buyer
Basic Amount subscribed for, the Undersubscription Amount it has subscribed
for;
provided,
however,
that if
the aggregate Undersubscription Amounts subscribed for by Buyer and all Buyers
under the SPA exceed the difference between the total amount of Offered
Securities and the aggregate of the Buyer Basic Amount and amounts subscribed
for by the Buyers under the SPA (the "Available
Undersubscription Amount"),
Buyer
shall be entitled to purchase only the portion of the Available
Undersubscription Amount used to determine the Buyer Basic Amount, subject
to
rounding by the Company to the extent its deems reasonably
necessary.
(3) The
Company shall have fifteen (15) Business Days from the expiration of the Offer
Period above to offer, issue, sell or exchange all or any part of such Offered
Securities as to which a Notice of Acceptance has not been given by Buyer and
notices of acceptance have been given by the Buyers pursuant to the SPA (the
"Refused
Securities"),
but
only to the offerees described in the Offer Notice (if so described therein)
and
only upon terms and conditions (including, without limitation, unit prices
and
interest rates) that are not more favorable to the acquiring person or persons
or less favorable to the Company than those set forth in the Offer Notice and
(ii) to publicly announce (a) the execution of such Subsequent Placement
Agreement, and (b) either (x) the consummation of the transactions contemplated
by such Subsequent Placement Agreement or (y) the termination of such Subsequent
Placement Agreement, which shall be filed with the SEC on a Current Report
on
Form 8-K with such Subsequent Placement Agreement and any documents contemplated
therein filed as exhibits thereto.
(4) In
the
event the Company shall propose to sell less than all the Refused Securities
(any such sale to be in the manner and on the terms specified in Section
4(n)(iii)(3) above), then Buyer may, at its sole option and in its sole
discretion, reduce the number or amount of the Offered Securities specified
in
its Notice of Acceptance to an amount that shall be not less than the number
or
amount of the Offered Securities that Buyer elected to purchase pursuant to
Section 4(n)(iii)(2) above multiplied by a fraction, (i) the numerator of which
shall be the number or amount of Offered Securities the Company actually
proposes to issue, sell or exchange (including Offered Securities to be issued
or sold to Buyer pursuant to Section 4(n)(iii)(3) above prior to such reduction)
and (ii) the denominator of which shall be the original amount of the Offered
Securities. In the event that Buyer so elects to reduce the number or amount
of
Offered Securities specified in its Notice of Acceptance, the Company may not
issue, sell or exchange more than the reduced number or amount of the Offered
Securities unless and until such securities have again been offered to Buyer
in
accordance with Section 4(n)(iii)(1) above.
-23-
(5) Upon
the
closing of the issuance, sale or exchange of all or less than all of the Refused
Securities, Buyer shall acquire from the Company, and the Company shall issue
to
Buyer, the number or amount of Offered Securities specified in the Notices
of
Acceptance, as reduced pursuant to Section 4(p)(iii)(3) above if Buyer has
so
elected, upon the terms and conditions specified in the Offer. Notwithstanding
anything to the contrary contained in this Agreement, if the Company does not
consummate the closing of the issuance, sale or exchange of all or less than
all
of the Refused Securities within fifteen (15) Business Days of the expiration
of
the Offer Period, the Company shall issue to Buyer the number or amount of
Offered Securities specified in the Notices of Acceptance, as reduced pursuant
to Section 4(n)(iii)(4) above if Buyer has so elected, upon the terms and
conditions specified in the Offer. The purchase by Buyer of any Offered
Securities is subject in all cases to the preparation, execution and delivery
by
the Company and Buyer of a purchase agreement relating to such Offered
Securities reasonably satisfactory in form and substance to Buyer and its
counsel.
(6) Any
Offered Securities not acquired by Buyer or other persons in accordance with
Section 4(o)(iii)(3) above or the SPA may not be issued, sold or exchanged
until
they are again offered to Buyer under the procedures specified in this
Agreement.
(7) The
Company and Buyer agree that if Buyer elects to participate in the Offer, (x)
neither the Subsequent Placement Agreement with respect to such Offer nor any
other transaction documents related thereto (collectively, the "Subsequent
Placement Documents")
shall
include any term or provisions whereby Buyer shall be required to agree to
any
restrictions in trading as to any securities of the Company owned by Buyer
prior
to such Subsequent Placement, and (y) any registration rights set forth in
such
Subsequent Placement Documents shall be similar in all material respects to
the
registration rights contained in the Registration Rights Agreement.
(8) Notwithstanding
anything to the contrary in this Section 4(o) and unless otherwise agreed to
by
Buyer, the Company shall either confirm in writing to Buyer that the transaction
with respect to the Subsequent Placement has been abandoned or shall publicly
disclose its intention to issue the Offered Securities, in either case in such
a
manner such that Buyer will not be in possession of material non-public
information, by the fifteen (15th)
Business Day following delivery of the Offer Notice. If by the fifteen
(15th)
following delivery of the Offer Notice no public disclosure regarding a
transaction with respect to the Offered Securities has been made, and no notice
regarding the abandonment of such transaction has been received by Buyer, such
transaction shall be deemed to have been abandoned and Buyer shall not be deemed
to be in possession of any material, non-public information with respect to
the
Company. Should the Company decide to pursue such transaction with respect
to
the Offered Securities, the Company shall provide Buyer with another Offer
Notice and Buyer will again have the right of participation set forth in this
Section 4(n)(iii). The Company shall not be permitted to deliver more than
one
such Offer Notice to Buyer in any 60 day period.
-24-
(iv) The
restrictions contained in subsections (ii) and (iii) of this Section 4(n) shall
not apply in connection with the issuance of any Excluded Securities (as defined
in the Warrants).
(o) Sibiono
Acquisition Agreement.
The
Company may not amend or waive any provision of the Sibiono Acquisition
Agreements without the consent of the holders of at least a majority of the
aggregate number of Registrable Securities issued and issuable hereunder and
“Registrable Securities” issued and issuable under the SPA Registration Rights
Agreement.
(p) D&O
Insurance; Corporate Governance.
As soon
as practicable, the Company shall (i) use reasonable commercial efforts to
retain directors and officers insurance coverage for its directors and officers
in coverage and amounts presently in force; and (ii) institute and diligently
pursue corporate governance procedures necessary to effect the listing of the
Company's Common Stock on The NASDAQ Capital Market.
(q) Listing
on The NASDAQ Capital Market.
As soon
as practicable, the Company shall file a listing application with The NASDAQ
Capital Market with respect to the Company's Common Stock and all of the
Registrable Securities, and the Company shall use its best efforts to cause
such
securities to be listed on The NASDAQ Capital Market as soon as practicable
thereafter.
(r) Audited
Financial Statements.
On or
prior to the date which is forty five (45) days after the Closing Date (the
"Audited
Financial Statement Delivery Deadline"),
the
Company shall deliver to Buyer its financial statements for the years ended
December 31, 2006 and December 31, 2005, audited by Xxxxxxxx & Company
Certified Public Accountants, P.C. In addition, the Company shall deliver to
Buyer audited financial statements for Sibiono for the required time periods
for
the Form 8-K filing required by the SEC within the prescribed time period (a
maximum of 75 days from closing of the Sibiono transaction). In each case,
the
financial statements referred to above shall be prepared in accordance with
generally accepted accounting principles, consistently applied, during each
years involved (except as may be otherwise indicated in such financial
statements or the notes thereto) and fairly presenting in all material respects
the financial position of the Company and Sibiono, as the case may be, as of
the
dates thereof and the results of its operations and cash flows for each such
year then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
(s) Performance
and New Audit Adjustments. The
Make-Good Agreement contains certain provisions relative to a targeted net
income of the Company for fiscal year end 2007 (referred to therein as
“FY07
Net Income”)
as
well as “New Audited Revenue” and “New Audited Cash Flow from Operations”, as
those terms are defined in the Make-Good Agreement. The parties hereto intend
that adjustments similar to those in the Make-Good Agreement would be applied
in
this Agreement, except as set forth herein. As such, the Company covenants
to
Holder that “FY07 Net Income” will be greater than or equal to $10.0 million
(adjusted for any non-cash charges associated with this Agreement and the SPA)
(the "Performance
Threshold").
In
the event the Performance Threshold is not attained, then the Company shall
promptly issue, or cause to be issued to Buyer or its designee, a pro rata
portion of One Million (1,000,000) shares of Common Stock for every one (1)
cent
by which the Company’s earnings per share, determined on a fully diluted basis
(“Earnings
Per Share”)
is
less than $0.065 (For
purposes of clarity, should Earnings Per Share be $0.060 cent,
then
the Company would issue to Buyer 500,000 shares). In addition, the Company
shall
promptly issue or cause to be issued to Buyer or its designee Two Thousand
(2,000) shares of Common Stock per Unit held for every percentage point in
excess of 10% in which (A) the Old Audited Revenues exceeds the New Audited
Revenues and (B) the Old Audited Cash Flow from Operations exceeds the New
Cash
Flow From Operations, as those terms are defined in the Make-Good
Agreement. The
maximum amount of shares of Common Stock that can be issued to Buyer shall
be
capped based on a maximum excess of fifteen (15) percentage points. The shares
issued by the Company pursuant to this Section 4(t) shall be in addition to
any
shares of Common Stock issued to the Buyers under the Make-Good Agreement.
The
shares issued by the Company pursuant to this Section 4(t) shall be referred
to
as the “Make
Good Shares.”
-25-
5. REGISTER;
TRANSFER AGENT INSTRUCTIONS.
(a) Register.
The
Company shall maintain at its principal executive offices (or such other office
or agency of the Company as it may designate by notice to each holder of
Securities), a register for the Unit, the Note and the Warrant that comprise
the
Unit in which the Company shall record the name and address of the Person in
whose name the Unit, Note and Warrant
have been issued (including the name and address of each transferee) and the
number of Note Shares and Warrant Shares issuable upon conversion of the Note
and exercise of the Warrant held by such Person. The Company shall keep the
register open and available at all times during business hours for inspection
of
Buyer or its legal representatives.
(b) Transfer
Agent Instructions.
The
Company shall issue irrevocable instructions to its transfer agent, and any
subsequent transfer agent, to issue certificates or credit shares to the
applicable balance accounts at The Depository Trust Company ("DTC"),
registered in the name of Buyer or its respective nominee(s), for the Conversion
Shares issued upon conversion of the Note and Warrant Shares issued upon
exercise of the Warrant in such amounts as specified from time to time by Buyer
to the Company upon conversion of the Note and/or exercise of the Warrant in
the
form of Exhibit
D
attached
hereto (the "Irrevocable
Transfer Agent Instructions").
The
Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5(b), and stop transfer instructions
to
give effect to Section 2(g) hereof, will be given by the Company to its transfer
agent, and that the Securities shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this Agreement
and the other Transaction Documents. If Buyer effects a sale, assignment or
transfer of the Securities in accordance with Section 2(f), the Company shall
permit the transfer and shall promptly instruct its transfer agent to issue
one
or more certificates or credit shares to the applicable balance accounts at
DTC
in such name and in such denominations as specified by Buyer to effect such
sale, transfer or assignment. In the event that such sale, assignment or
transfer involves Conversion Shares or Warrant Shares sold, assigned or
transferred pursuant to an effective registration statement or pursuant to
Rule
144, the transfer agent shall issue such Securities to Buyer, assignee or
transferee, as the case may be, without any restrictive legend.
-26-
(c) Breach.
The
Company acknowledges that a breach by it of its obligations hereunder will
cause
irreparable harm to Buyer. Accordingly, the Company acknowledges that the remedy
at law for a breach of its obligations under this Section 5 will be inadequate
and agrees, in the event of a breach or threatened breach by the Company of
the
provisions of this Section 5, that Buyer shall be entitled, in addition to
all
other available remedies, to an order and/or injunction restraining any breach
and requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being
required.
(d) Additional
Relief.
If the
Company shall fail for any reason or for no reason to issue to such holder
unlegended certificates within three (3) Business Days of receipt of documents
necessary for the removal of legend set forth above (the "Deadline
Date"),
then,
in addition to all other remedies available to the holder, if on or after the
Trading Day (as defined in the Warrant) immediately following such three
Business Day period, the holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
holder of shares of Common Stock that the holder anticipated receiving from
the
Company (a "Buy-In"),
then
the Company shall, within three Business Days after the holder's request and
in
the holder's discretion, either (i) pay cash to the holder in an amount equal
to
the holder's total purchase price (including brokerage commissions, if any)
for
the shares of Common Stock so purchased (the "Buy-In
Price"),
at
which point the Company's obligation to deliver such certificate (and to issue
such shares of Common Stock) shall terminate, or (ii) promptly honor its
obligation to deliver to the holder a certificate or certificates representing
such shares of Common Stock and pay cash to the holder in an amount equal to
the
excess (if any) of the Buy-In Price over the product of (A) such number of
shares of Common Stock, times (B) the Closing Bid Price on the Deadline Date.
"Closing
Bid Price"
means,
for any security as of any date, the last closing price for such security on
the
Principal Market, as reported by Bloomberg, or, if the Principal Market begins
to operate on an extended hours basis and does not designate the closing bid
price then the last bid price of such security prior to 4:00:00 p.m., New York
Time, as reported by Bloomberg, or, if the Principal Market is not the principal
securities exchange or trading market for such security, the last closing price
of such security on the principal securities exchange or trading market where
such security is listed or traded as reported by Bloomberg, or if the foregoing
do not apply, the last closing price of such security in the over-the-counter
market on the electronic bulletin board for such security as reported by
Bloomberg, or, if no closing bid price is reported for such security by
Bloomberg, the average of the bid prices of any market makers for such security
as reported in the "pink sheets" by Pink Sheets LLC (formerly the National
Quotation Bureau, Inc.). If the Closing Bid Price cannot be calculated for
a
security on a particular date on any of the foregoing bases, the Closing Bid
Price of such security on such date shall be the fair market value as mutually
determined by the Company and the holder. If the Company and the holder are
unable to agree upon the fair market value of such security, then such dispute
shall be resolved pursuant to Section 12 of the Warrant. All such determinations
to be appropriately adjusted for any stock dividend, stock split, stock
combination or other similar transaction during the applicable calculation
period.
6. CONDITIONS
TO THE COMPANY'S OBLIGATION TO SELL.
The
obligation of the Company hereunder to issue and sell the Units to Buyer at
the
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its
sole
discretion by providing Buyer with prior written notice thereof:
(i) Buyer
shall have executed each of the Transaction Documents to which it is a party
and
delivered the same to the Company.
-27-
(ii) The
representations and warranties of Buyer shall be true and correct in all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the date when made and as of the Closing Date
as
though made at that time (except for representations and warranties that speak
as of a specific date, which shall be true and correct as of such specified
date), and Buyer shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by Buyer at or prior
to
the Closing Date.
7. CONDITIONS
TO BUYER'S OBLIGATION TO PURCHASE.
The
obligation of Buyer hereunder to purchase the Units at the Closing is subject
to
the satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for Buyer's sole benefit and
may
be waived by Buyer at any time in its sole discretion by providing the Company
with prior written notice thereof:
(i) The
Company shall have duly executed and delivered to Buyer (i) each of the
Transaction Documents and (ii) the Note, and (iii) the Warrant being purchased
by Buyer at the Closing pursuant to this Agreement.
(ii) Buyer
shall have received the opinion of Xxxxxx & Xxxxxx, LLP, the Company’s
outside counsel, dated as of the Closing Date, in substantially the form of
Exhibit E
attached
hereto.
(iii) The
Company shall have delivered to Buyer a certificate evidencing the formation
and
good standing of the Company and each of its Subsidiaries in such entity's
jurisdiction of formation issued by the Secretary of State (or comparable
office) of such jurisdiction, as of a date within 10 days of the Closing Date.
(iv) The
Company shall have delivered to Buyer a certificate evidencing the Company's
qualification as a foreign corporation and good standing issued by the Secretary
of State (or comparable office) of each jurisdiction in which the Company
conducts business, as of a date within 10 days of the Closing Date.
(v) The
Company shall have delivered to Buyer a certified copy of the Certificate of
Incorporation as certified by the Secretary of State of the State of Delaware
within ten (10) days of the Closing Date.
(vi) The
Company shall have delivered to Buyer a certificate, executed by the Secretary
of the Company and dated as of the Closing Date, as to (i) the resolutions
consistent with Section 3(b) as adopted by the Company's Board of Directors
in a
form reasonably acceptable to Buyer, (ii) the Certificate of Incorporation
and
(iii) the Bylaws, each as in effect at the Closing, in the form attached hereto
as Exhibit F
-28-
(vii) The
representations and warranties of the Company shall be true and correct in
all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the date when made and as of the Closing Date
as
though made at that time (except for representations and warranties that speak
as of a specific date, which shall be true and correct as of such specified
date) and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by
the
Transaction Documents to be performed, satisfied or complied with by the Company
at or prior to the Closing Date. Buyer shall have received a certificate,
executed by the Chief Executive Officer of the Company, dated as of the Closing
Date, to the foregoing effect and as to such other matters as may be reasonably
requested by Buyer in the form attached hereto as Exhibit
G.
(viii) The
Company shall have delivered to Buyer a letter from the Company's transfer
agent
certifying the number of shares of Common Stock outstanding as of a date within
five days of the Closing Date.
(ix) The
Common Stock (I) shall be designated for quotation or listed on the Principal
Market and (II) shall not have been suspended, as of the Closing Date, by the
SEC or the Principal Market from trading on the Principal Market nor shall
suspension by the SEC or the Principal Market have been threatened, as of the
Closing Date, either (A) in writing by the SEC or the Principal Market or (B)
by
falling below the minimum listing maintenance requirements of the Principal
Market, if any.
(x) The
Company shall have obtained all governmental, regulatory or third party consents
and approvals, if any, necessary for the sale of the Securities and the
consummation of the Sibiono Acquisition transaction.
(xi) There
shall be no litigation pending or, to the knowledge of the Company or any of
its
Subsidiaries, threatened arising out of or related to the Sibiono Acquisition
Transaction.
(xii) Contemporaneously
with the Closing (or no later than four business days after Closing), the
Company shall file with the SEC a Current Report on Form 8-K disclosing the
Sibiono Acquisition Transaction. Thereafter, within 71 days of filing such
Form
8-K, the Company shall file an amended Form 8-K to such original Form 8-K filing
which shall include financial statements Sibiono (including pro-forma financial
statements) for the required financial statement period, which financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except in the
case of unaudited interim statements, to the extent they may exclude footnotes
or may be condensed or summary statements) and which fairly present in all
material respects the financial position of Sibiono.
-29-
(xiii) The
Company shall have delivered to Buyer such other documents relating to the
transactions contemplated by this Agreement as Buyer or its counsel may
reasonably request.
8. TERMINATION.
In
the
event that the Closing shall not have occurred on or before ten (10) Business
Days from the date hereof due to the Company's or Buyer's failure to satisfy
the
conditions set forth in Sections 6 and 7 above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching
party
at the close of business on such date without liability of any party to any
other party; provided,
however,
that if
this Agreement is terminated pursuant to this Section 8, the Company shall
remain obligated to reimburse for the expenses described in Section 4(g)
above.
9. MISCELLANEOUS.
(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. 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.
(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;
provided that a facsimile signature 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, not a facsimile signature.
(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.
-30-
(d) Severability.
If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(e) Entire
Agreement; Amendments.
This
Agreement and the other Transaction Documents supersede all other prior oral
or
written agreements between Buyer, the Company, their affiliates and Persons
acting on their behalf with respect to this transaction (by way of
clarification, specifically not including any agreements or documents executed
in connection with the SPA), and this Agreement, the other Transaction Documents
and the instruments referenced herein and therein 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 Buyer 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 Company and the holders
of
at least a majority of the aggregate number of Registrable Securities issued
and
issuable hereunder, and any amendment to this Agreement made in conformity
with
the provisions of this Section 9(e) shall be binding on Buyer and holders of
Securities as applicable. No provision hereof may be waived other than by an
instrument in writing signed by the party against whom enforcement is sought.
No
such amendment shall be effective to the extent that it applies to less than
all
of the holders of the applicable Securities then outstanding. 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 also is offered to all of the parties to the Transaction
Documents, and the holders of the Warrants. The Company has not, directly or
indirectly, made any agreements with Buyer relating to the terms or conditions
of the transactions contemplated by the Transaction Documents except as set
forth in the Transaction Documents. Without limiting the foregoing, the Company
confirms that, except as set forth in this Agreement or pursuant to the SPA,
Buyer has not made any commitment or promise or has any other obligation to
provide any financing to the Company or otherwise.
(f) Notices.
Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one Business Day after deposit with an overnight courier service,
in
each case properly addressed to the party to receive the same. The addresses
and
facsimile numbers for such communications shall be:
If
to
Company:
00/X,
Xxxxxxxxxx Xxxxx, 0 Xxxxxxxx Xx
Xxxxx
000000, P.R. China
Telephone: x0
(00
00) 0000-0000
Facsimile: x0
(00
00) 0000-0000
Attention:
Xxxxxx
Xxx
-31-
with
a
copy to:
Xxxxxx
& Jaclin, LLP
000
Xxxxx
0 Xxxxx, Xxxxx 000
Xxxxxxxxx,
Xxx Xxxxxx 00000
Telephone:
(000)
000-0000
Facsimile:
(000)
000-0000
Attention:
Xxxxxxx
X. Xxxxxx, Esq.
If
to a
Buyer, to its address and facsimile number set forth on the Schedule of Buyers
attached hereto, with copies to such Buyer's representatives as set forth on
the
Schedule of Buyers, or to such other address and/or facsimile number and/or
to
the attention of such other Person as the recipient party has specified by
written notice given to each other party five (5) days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by
the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a courier or overnight courier
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
(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 Note or
Warrant. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the holders of at
least a majority of the aggregate number of Registrable Securities issued and
issuable hereunder, including by way of a Fundamental Transaction (unless the
Company is in compliance with the applicable provisions governing Fundamental
Transactions set forth in the Warrants). Buyer may assign some or all of its
rights hereunder without the consent of the Company, in which event such
assignee shall be deemed to be Buyer hereunder with respect to such assigned
rights.
(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.
Unless
this Agreement is terminated under Section 8, the representations and warranties
of the Company and Buyer contained in Sections 2 and 3, and the agreements
and
covenants set forth in Sections 4, 5 and 9 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 any 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) Indemnification.
In
consideration of Buyer's execution and delivery of the Transaction Documents
and
acquiring the Securities thereunder and in addition to all of the Company's
other obligations under the Transaction Documents, the Company shall defend,
protect, indemnify and hold harmless Buyer and each other holder of the
Securities and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons' agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees")
from
and against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "Indemnified
Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to
(a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents
or
any other certificate, instrument or document contemplated hereby or thereby
or
(c) any cause of action, suit or claim brought or made against such Indemnitee
by a third party (including for these purposes a derivative action brought
on
behalf of the Company) and arising out of or resulting from (i) the execution,
delivery, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, (iii) any
disclosure made by Buyer pursuant to Section 4(i), or (iv) the status of Buyer
or a holder of the Securities as an investor in the Company pursuant to the
transactions contemplated by the Transaction Documents. To the extent that
the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction
of
each of the Indemnified Liabilities that is permissible under applicable law.
Except
as otherwise set forth herein, the mechanics and procedures with respect to
the
rights and obligations under this Section 9(k) shall be the same as those set
forth in Section 6 of the Registration Rights Agreement.
-32-
(l) 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.
(m) Remedies.
Buyer
and each holder of the Securities shall have all rights and remedies set forth
in the Transaction Documents 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 the Transaction Documents, any remedy at law may prove to
be
inadequate relief to Buyer. The Company therefore agrees that Buyer 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.
-33-
(n) Rescission
and
Withdrawal Right.
Notwithstanding anything to the contrary contained in (and without limiting
any
similar provisions of) the Transaction Documents, whenever Buyer exercises
a
right, election, demand or option under a Transaction Document and the Company
does not timely perform its related obligations within the periods therein
provided, then Buyer may rescind or withdraw, in its sole discretion from time
to time upon written notice to the Company, any relevant notice, demand or
election in whole or in part without prejudice to its future actions and
rights.
(o) Payment
Set Aside.
To the
extent that the Company makes a payment or payments to Buyer hereunder or
pursuant to any of the other Transaction Documents or Buyer enforces or
exercises its rights hereunder or 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, foreign, 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.
(p) Independent
Nature of Buyer's Obligations and Rights.
Nothing
contained herein or in any other Transaction Document, and no action taken
by
any Buyer pursuant hereto or thereto, shall be deemed to constitute Buyer as,
and the Company acknowledges that Buyer does not so constitute, a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that Buyer is in any way acting in concert or as a group, and the
Company will not assert any such claim with respect to such obligations or
the
transactions contemplated by the Transaction Documents and the Company
acknowledges that Buyer is not acting in concert or as a group with any of
the
Buyers under the SPA (other than Buyer itself) with respect to such obligations
or the transactions contemplated by the Transaction Documents. The Company
acknowledges and Buyer confirms that it has independently participated in the
negotiation of the transaction contemplated hereby with the advice of its own
counsel and advisors. Buyer shall be entitled to independently protect and
enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of any other Transaction Documents, and it shall not
be
necessary for any Buyer under the SPA to be joined as an additional party in
any
proceeding for such purpose.
(q) Agent
for Service of Process (i)
The
Company hereby irrevocably appoints National Corporate Research, Ltd.,
of 000
Xxxx
00xx
Xxxxxx,
Xxxxx 000, Xxx Xxxx, X.X. 00000, X.X.X. ("NCR")
as its
agent for the receipt of service of process in the United States. The Company
agrees that any document may be effectively served on it in connection with
any
action, suit or proceeding in the United States by service on its agents. Buyer
consents and agrees that the Company may, in its reasonable discretion,
irrevocably appoint a substitute agent for the receipt of service of process
located within the Untied States, and that upon such appointment, the
appointment of NCR may be revoked.
(ii)
Any
document shall be deemed to have been duly served if marked for the attention
of
the agent at its address as set forth in this Section 9(q) or such other address
in the United States as may be notified to the party wishing to serve the
document and (a) left at the specified address if its receipt is acknowledged
in
writing; or (b) sent to the specified address by post, registered mail return
receipt requested. In the case of (a), the document will be deemed to have
been
duly served when it is left and signed for. In the case of (b), the document
shall be deemed to have been duly served when received and
acknowledged.
-34-
(iii)
If
the Company’s agent at any time ceases for any reason to act as such, the
Company shall promptly appoint a replacement agent having an address for service
in the United States and shall promptly notify Buyer at such time of the name
and address of the replacement agent. Failing such appointment and notification,
the holders of a majority of the Securities at such time shall be entitled
by
notice to the Company to appoint a replacement agent to act on the Company’s
behalf. The provisions of this Section 9(q) applying to service on an agent
apply equally to service on a replacement agent.
(r) Currency.
As used
herein, "Dollar", "US Dollar" and "$" each mean the lawful money of the United
States.
[Signature
Page Follows]
-35-
IN
WITNESS WHEREOF,
Buyer
and the Company have caused their respective signature page to this Investment
Agreement to be duly executed as of the date first written above.
|
COMPANY:
XXXXX
PHARMACEUTICAL, INC.
|
||
| |
|
|
| By: | ||
|
Name:
Xxxxxx Xxx
Title:
Chief Executive Officer
|
||
-36-
IN
WITNESS WHEREOF,
Buyer
and the Company have caused their respective signature page to this Investment
Agreement to be duly executed as of the date first written above.
|
BUYER:
|
||
| |
|
|
| By: | ||
|
Name:
Title:
|
||
-37-
EXHIBITS
Exhibit
A Form
of
Note
Exhibit
B Form
of
Warrant
Exhibit
C Form
of
Registration Rights Agreement
Exhibit
D Form
of
Irrevocable Transfer Agent Instructions
Exhibit
E Form
of
Opinion of Company’s Counsel
Exhibit
F Form
of
Secretary's Certificate
Exhibit
G Form
of
Officers Certificate
Exhibit
H Form
of
Lock-Up Agreement
SCHEDULES
Schedule
3(a) Subsidiaries
Schedule
3(g) Agents
Schedule
3(l) Absence
of Certain Changes
Schedule
3(r) Equity
Capitalization
Schedule
3(s) Indebtedness
and Other Contracts
Schedule
3(t) Absence
of Litigation
Schedule
3(w) Title
Schedule
4(d) Use
of
Proceeds
