SECURITIES PURCHASE AGREEMENT
This
Securities Purchase Agreement (this “Agreement”)
is
entered into as of September 5, 2008, by and between SJ Electronics, Inc.,
a
Nevada corporation (the “Company”),
Yu
Ping “Agatha” Shen (“Shen”)
and
the investors listed on Exhibit A hereto (each an “Investor” and collectively
the “Investors”).
The
Investors, the Company and Shen are also referred to individually herein as
a
“Party”
and
collectively herein as the “Parties.”
WITNESSETH:
WHEREAS,
upon
the terms and subject to the conditions of this Agreement, the Investors wish
to
purchase from the Company and the Company wishes to sell to the Investors,
the
Notes (such capitalized term and all other capitalized terms used in this
Agreement having the meanings provided in Section 1) of the Company to be issued
by the Company to each Investor in the principal amount set forth on the
Investor’s signature page to this Agreement;
WHEREAS,
Shen is
a holder of 700,000 shares of Common Stock which are duly and validly issued,
fully paid and non-assessable;
WHEREAS,
each
Investor will receive one share of Common Stock per each dollar invested in
the
Notes which shares will be transferred by Shen;
NOW
THEREFORE, in
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the Parties agree as follows:
AGREEMENT
The
Parties, intending to be legally bound, agree as follows:
| 1. |
DEFINITIONS.
|
The
following terms used in this Agreement shall have the meanings set forth
below.
“1933
Act”
means
the Securities Act of 1933, as amended.
“Affiliate”
has
the
meaning set forth in Rule 12b-2 of the regulations promulgated under the
Exchange Act.
“Agreement”
means
this Securities Purchase Agreement.
“Business”
means
the business of the Company and its Subsidiaries.
“Business
Day”
means
any day other than a Saturday, Sunday or a day on which commercial banks in
the
City of New York are authorized or required by law or executive order to remain
closed.
1
“Closing”
has
the
meaning set forth in Section
2(b).
“Closing
Date”
has
the
meaning set forth in Section
2(b).
“Common
Stock”
means
the Common Stock, par value $.001 per share, of the Company.
“Disclosure
Documents”
has
the
meaning set forth in Section
3(c).
“Entity”
means
any corporation (including any non profit corporation), general partnership,
limited partnership, limited liability partnership, joint venture, estate,
trust, association, company (including any company limited by shares, limited
liability company or joint stock company), firm, society or other enterprise,
association, organization or entity.
“Exchange
Act”
means
the U.S. Securities Exchange Act of 1934, as amended.
“FINRA”
means
the Financial Industry Regulatory Authority.
“GAAP”
means
United States generally accepted accounting principles as in effect as of the
date of any document purported to be prepared in accordance with GAAP.
“Governmental
Body”
means
any (i) nation, region, state, province, county, xxxxxxxxxxxx, xxxx, xxxx,
xxxxxxx, xxxxxxxx or other jurisdiction, (ii) federal, state, provincial,
local, municipal, foreign or other government, (iii) governmental or
quasi-governmental authority of any nature (including any governmental agency,
branch, department or other Entity and any court or other tribunal),
(iv) multinational organization, (v) body exercising, or entitled to
exercise, any administrative, executive, judicial, legislative, policy,
regulatory or taxing authority or power of any nature or (vi) official of
any of the foregoing.
“Investors”
means
the investors listed on Exhibit A.
“Law”
means
any foreign, federal, state and local statute, law, constitution, treaty, rule,
regulation, by-law, ordinance, code, regulation, resolution, order,
determination, writ, injunction, awards (including, without limitation, awards
of any arbitrator), judgment, decree, binding case law, principle of common
law
or notice of any Governmental Body (for the avoidance of doubt, including,
but
not limited to, the Laws of the United States of America and the People’s
Republic of China).
“Liabilities”
includes liabilities or obligations of any nature, whether known or unknown,
whether absolute, accrued, contingent, xxxxxx, inchoate or otherwise, whether
due or to become due, and whether or not required to be reflected on a balance
sheet prepared in accordance with GAAP, including any Liability for
Taxes.
“Material
Adverse Effect”
means
a
material adverse effect on (A) the business, properties, operations, condition
(financial or other), results of operations or prospects of the Company and
the
Subsidiaries, taken as a whole; (B) the validity or enforceability of, or the
ability of the Company to perform its obligations under, the Transaction
Documents; or (C) the rights and remedies of the Investors under or in
connection with the Transaction Documents.
“Party”
and
“Parties”
have
the meanings set forth in the preamble to this Agreement.
2
“Person”
means
an individual or an Entity, including a Governmental Body or any other body
with
legal personality separate from its equity holders or members, including if
established by any Governmental Body.
“Placement
Agent”
means
Primary Capital, LLC.
“Proceeding”
means
any action, arbitration, audit, examination, investigation, claim, demand,
inquiry, hearing, litigation, suit or appeal (whether civil, criminal,
administrative, judicial or investigative, whether formal or informal, and
whether public or private) commenced, brought, conducted, heard by or before
or
otherwise involving any Governmental Body or arbitrator.
“Purchase
Price”
means
the amount equal to the principal amount of the Note to be purchased by the
Investor as set forth in Exhibit A.
“Purchase
Price Escrow Agreement”
has
the
meaning set forth in Section
2(b).
“register”,
“registered”,
and
“registration”
refer
to a registration effected by preparing and filing a registration statement
or
statements in compliance with the 1933 Act and pursuant to Rule 415, and the
declaration or ordering of effectiveness of such registration statement by
the
SEC.
“Registration
Statement”
has
the
meaning provided in Section 4(k).
“Regulation
D”
means
Regulation D under the 1933 Act.
“Regulation
S”
means
Regulation S under the 1933 Act.
“Rule
144”
means
Rule 144 promulgated under the 1933 Act or any other similar rule or regulation
of the SEC that may at any time provide a “safe harbor” exemption from
registration under the 1933 Act so as to permit a holder to sell securities
of
the Company to the public without registration under the 1933 Act.
“Rule
144A”
means
Rule 144A under the 1933 Act or any successor rule thereto.
“SEC”
means
the U.S. Securities and Exchange Commission.
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Securities”
means,
collectively, the Note and the Shares.
“Shares”
has
the
meaning provided in Section 2(a).
“Short
Sales”
shall
have the meaning provided in Regulation SHO under the Exchange Act as in effect
on the date of this Agreement (but shall not be deemed to include the location
and/or reservation of borrowable shares of Common Stock).
“Subsidiary”
means
any corporation or other entity of which a majority of the capital stock or
other ownership interests having ordinary voting power to elect a majority
of
the board of directors or other persons performing similar functions are at
the
time directly or indirectly owned by the Company.
3
“Tax”
means
any federal, state, local, or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental, customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
“Tax
Return”
means
any return, declaration, report, claim for refund, or information return or
statement required to be supplied to any governmental authority relating to
Taxes, including any schedule or attachment thereto, and including any amendment
thereof.
“Transaction
Documents”
means,
collectively, this Agreement, the Note, the Purchase Price Escrow Agreement
and
the other agreements, instruments and documents contemplated hereby and
thereby.
| 2. |
PURCHASE
AND SALE OF NOTES; TRANSFER OF COMMON
STOCK.
|
(a) Purchase
and Sale of Notes; Transfer of Common Stock.
Upon
the
terms and subject to the conditions of this Agreement, the Investors hereby
agree to purchase from the Company, and the Company hereby agrees to sell to
the
Investors, on the Closing Date, the Notes in the principal amounts set forth
opposite the names of the Investors in Exhibit A and having the terms and
conditions as set forth in the form of the Note attached hereto as Annex
I
for the
Purchase Price.
(i)The
Notes
will be offered and sold to the Investors pursuant to Regulation S and/or
Regulation D under the 1933 Act. Upon original issuance of the Notes, and until
such time as it is no longer required under the applicable requirements of
the
1933 Act, the Notes shall bear the legends relating to the offer and the sale
of
the Notes as required by (A) Regulation S under the 1933 Act or (B) any other
applicable laws or regulations relating to the issuance of the
Notes.
(ii)
Upon
the
terms and subject to the conditions of this Agreement, Shen hereby agrees to
transfer to the Investors up to 700,000 shares of Common Stock in the aggregate
(the “Shares”) with each Investor receiving one share of Common Stock for each
dollar paid by the Investor for the Note the Investor is purchasing pursuant
to
this Agreement. Upon transfer of the Shares, and until such time as it is no
longer required under the applicable requirements of the 1933 Act, the Shares
shall bear the legends as required by (A) Regulation S under the 1933 Act,
(B)
Regulation S under the 1933 Act or (C) any other applicable laws or regulations
relating to the Shares.
(b)
Closing.
The
issuance and sale of the Notes and the transfer of shares of Common Stock
shall
occur on the Closing Date at 10 a.m. at the offices of Guzov Ofsink, LLC,
14th
Floor,
000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 or at such other location and
time
as the parties may agree. At the closing, upon the terms and subject to the
conditions of this Agreement, (1) the Company shall issue and deliver to
the
Investors the Notes against payment by the Investors to the Company of an
amount
equal to the Purchase Price, (2) as payment in full for the Notes, and against
delivery of the Notes, the Investors shall have delivered to the Escrow Agent
the Purchase Price pursuant to that certain escrow agreement, and all amendments
thereto, by and among the Escrow Agent and the Company, a copy of which is
attached as Annex
II
(such
agreement, the “Purchase
Price Escrow Agreement”)
and
the Escrow Agent shall have delivered the aggregate Purchase Price for the
Notes
to the Company less any fees payable to the Escrow Agent pursuant to the
Purchase Price Escrow Agreement, and (3) up to 700,000 shares of Common Stock
shall be transferred by Shen to the Investors (such events, the “Closing”).
The
release to the Company of the Purchase Price less all applicable fees shall
be
effected in accordance with the terms of this Agreement and the Purchase
Price
Escrow Agreement. At the Closing, the Investors and the Company shall deliver
to
each other all of the various certificates, instruments, and documents referred
to in Section 6.
4
| 3. |
REPRESENTATIONS
AND WARRANTIES CONCERNING THE COMPANY AND ITS
SUBSIDIARIES.
|
The
Company represents and warrants to the Investors that the statements contained
in this Section
3
are
correct and complete as of the date of this Agreement.
(a) Organization
and Standing. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada, with full and unrestricted corporate
power and authority to own, operate and lease its assets, to carry on the
Business (and any other business) as currently conducted (and proposed to be
conducted), to execute and deliver this Agreement and the Transaction Documents
and to carry out the transactions contemplated hereby and thereby. The Company
is duly qualified to do business and is in good standing (to the extent such
concept is applicable in the relevant jurisdiction) in all jurisdictions in
which either the ownership or use of the properties owned or used by it, or
the
nature of the activities conducted by it, requires such qualification, except
where the failure to so qualify will not have a Material Adverse Effect. .
(b) Authorization
of Transaction. The
Company has full corporate power and authority to execute and deliver this
Agreement, each of the Transaction Documents, and any applicable ancillary
agreement and to perform its obligations hereunder and thereunder. The execution
and delivery of this Agreement and any Transaction Documents by the Company
and
the consummation by the Company of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the
part
of the Company. This Agreement constitutes the valid and legally binding
obligation of the Company, enforceable in accordance with its terms and
conditions, except to the extent that such enforcement may be limited by
bankruptcy, reorganization, insolvency and other similar Laws and court
decisions relating to or affecting the enforcement of creditors rights generally
and by the application of general equitable principles.
(c) Disclosure
Documents; Common Stock Trading.
(i) The
Company has timely filed with, or furnished to, the SEC each form, proxy
statement or report required to be filed with, or furnished to, the SEC by
the
Company pursuant to the Exchange Act since February 14, 2008 (collectively,
the
“Disclosure
Documents”).
To
the knowledge of the Company, the Disclosure Documents complied, as of the
date
of their filing with the SEC, in all respects with the requirements of the
Securities Act, the Exchange Act and the Xxxxxxxx-Xxxxx Act of 2002 and the
rules and regulations promulgated thereunder. The information contained or
incorporated by reference in the Disclosure Documents was true, complete and
correct in all material respects as of the respective dates of the filing
thereof with the SEC and, as of such respective dates, the Disclosure Documents
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except to the extent updated or superseded by any Disclosure
Document subsequently filed by the Company with the SEC prior to the date
hereof. To the knowledge of the officers of the Company, there is no event,
fact
or circumstance that would cause any certification signed by any such officer
in
connection with any Disclosure Document pursuant to the requirements of the
Sarbanes Oxley-Act of 2002 to be untrue, inaccurate or incorrect in any
respect.
5
(ii) The
financial statements of the Company included in the Disclosure Documents have
been prepared in accordance with the published rules and regulations of the
SEC
and in conformity with GAAP applied on a consistent basis throughout the periods
indicated therein, except as may be indicated therein or in the notes thereto,
and presented fairly, in all material respects, the consolidated financial
position of the Company and its Subsidiaries as of the dates indicated, and
the
consolidated results of the operations and cash flows of the Company and its
Subsidiaries for the periods therein specified (except in the case of quarterly
financial statements for the absence of footnote disclosure and subject, in
the
case of interim periods, to normal year-end adjustments).
(iii) The
Common Stock is validly, properly and effectively registered under the Exchange
Act in accordance with all applicable federal securities laws and is quoted
on
the OTC Bulletin Board. The Company is currently in compliance with all
applicable FINRA and OTC Bulletin Board requirements and standards. There is
no
revocation order, suspension order, injunction or other Proceeding or Law
(whether issued by the SEC, the FINRA or other Governmental Body) affecting
the
effectiveness of the Company’s Exchange Act registration or the trading of the
Common Stock. The consummation of the transactions contemplated by this
Agreement and the Transaction Documents do not conflict with, and will not
result in any violation of, any FINRA or OTC Bulletin Board trading requirement
or standard applicable to the Company or its Common Stock.
(d) Absence
of Litigation.
To the
Company’s knowledge, there is no Proceeding pending or threatened by or before
any Governmental Body against the Company or any of its Subsidiaries. As of
the
date hereof, to the Company’s knowledge, there is no Proceeding pending or, to
the Company’s knowledge, threatened by or before any Governmental Body (i)
seeking to prevent, hinder, modify or challenge any of the transactions
contemplated by this Agreement or any of the Transaction Documents, or (ii)
that
would cause any of the transactions contemplated by this Agreement or any of
the
Transaction Documents to be illegal, invalid, voidable or otherwise
rescinded.
(e) Legal
Compliance.
Each
of
the Company and its Subsidiaries and their respective predecessors and
Affiliates is currently in compliance and, except to the extent that
noncompliance will not and could not reasonably be expected to have a material
adverse effect upon the Business or the financial condition of the Company
and
any of its Subsidiaries as currently conducted or proposed to be conducted,
has
been in compliance with all applicable Laws, and no Proceeding has been filed
or
commenced against any of them alleging any failure so to comply.
(f) Tax
Matters. The
Company and each of its Subsidiaries has made or filed all federal, state and
foreign income and all other tax returns, reports and declarations required
by
any jurisdiction to which it is subject (unless and only to the extent that
the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and
has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside
on
its books provisions 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. The Company has not executed a waiver with respect
to
the statute of limitations relating to the assessment or collection of any
foreign, federal, statute or local tax. None of the Company’s tax returns is
presently being audited by any taxing authority.
6
(g) Books
and Records. The
books
of account, minute books, equity record books and other records of the Company
and its Subsidiaries, all of which have been made available to the Investors
prior to Closing, are accurate and complete in all material respects and have
been maintained in accordance with sound business practices.
(h) Private
Offering. Based
on
the representations provided by each Investor in Section
4,
the
offer and sale of the Shares to each Investor is, and the offer and sale of
the
Securities to the Investors will be, exempt from the registration and prospectus
delivery requirements of the Securities Act and any other securities Laws.
Neither the Company nor any Person acting on its behalf has offered or sold
or
will offer or sell any securities, or has taken or will take any other action
(including, without limitation, any offering of securities of the Company under
circumstances that would require, under the Securities Act, the integration
of
such offering with the offer and sale of the Securities) which would subject
the
offer and sale of the Securities to the registration provisions of the
Securities Act.
(i) Brokers’
Fees. Except
for the fees due to the Placement Agent in connection with this offering which
fees will be paid by the Company at the Closing, neither
the Company not any of its Subsidiaries, nor any of their shareholders,
employees, officer or directors, has any Liability to pay any fees or
commissions or other consideration to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement, including any Liability
or
obligations for which the Investors can become liable or obligated.
(j) Directing
Selling Efforts. No
form
of “directed selling efforts” (as defined in Rule 902 of Regulation S under the
1933 Act), general solicitation or general advertising in violation of the
1933
Act has been or will be used nor will any offers by means of any directed
selling efforts in the United States be made by the Investors or any of their
representatives in connection with the offer and sale of the Notes.
| 4. |
REPRESENTATIONS
AND WARRANTIES OF THE INVESTORS.
|
Each
Investor severally (as to itself only) represents and warrants to the Company
that the statements contained in this Section
4
are
correct and complete as of the date of this Agreement.
(a) Organization
and Standing. Authorization
of Transaction. Each
Investor represents and warrants that it is an Entity duly organized and validly
existing under the laws of its jurisdiction of organization, holding power
and
authority to own, operate and lease its assets and to carry on its business
as
currently conducted, to execute and deliver this Agreement and the Transaction
Documents and to carry out the transactions contemplated hereby and
thereby. Each
Investor has full corporate or partnership power and authority, as applicable
(or capacity, if an individual), to execute and deliver this Agreement, the
Transaction Documents and any applicable ancillary agreement and to perform
its
obligations hereunder and thereunder. This Agreement constitutes the valid
and
legally binding obligation of the Investor, enforceable in accordance with
its
terms and conditions, except to the extent that such enforcement may be limited
by bankruptcy, reorganization, insolvency and other similar Laws and court
decisions relating to or affecting the enforcement of creditors’ rights
generally and by the application of general equitable principles. Except as
otherwise required by applicable federal or state securities Laws, the Investor
need not provide any notice to, make any filing with, or obtain any
authorization, consent, or approval of, any Governmental Body of any other
Person in order to consummate the transactions contemplated by this Agreement,
any Transaction Document, or any ancillary agreement.
7
(b) Circumstances
of Purchase.
The
Investor is purchasing the Notes for its own account and not with a view towards
the public sale or distribution thereof within the meaning of the 1933 Act;
and
the Investor will acquire any Shares issued to the Investor for its own account
and not with a view towards the public sale or distribution thereof, within
the
meaning of the 1933 Act, and the Investor has no intention of making any
distribution, within the meaning of the 1933 Act, of the Shares, except in
compliance with the registration requirements of the 1933 Act or pursuant to
an
exemption therefrom. The Investor is acquiring the Securities hereunder in
the
ordinary course of its business.
(c) Brokers’
Fees.
The
Investor has no Liability to pay any fees or commissions or other consideration
to any broker, finder, or agent with respect to the transactions contemplated
by
this Agreement for which the Company or any of its Subsidiaries could become
liable or obligated.
(d) No
Registration. The
Investor understands that (1) the Notes are being offered and sold to the
Investors without registration and (2) the Shares are being transferred to
the
Investors, in each such case in reliance on one or more exemptions from the
registration requirements of the 1933 Act, including, without limitation,
Regulation S and Regulation D, and exemptions from state securities laws and
that the Company is relying upon the truth and accuracy of, and the Investor’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Investor set forth herein in order to determine the
availability of such exemptions and the eligibility of the Investor to acquire
or receive an offer to acquire the Notes and to receive the Shares. The
Investor (A) agrees that it will not offer, sell or otherwise transfer the
Note
or the Shares nor, unless in compliance with the 1933 Act, engage in hedging
transactions involving such Securities, on or prior to (x) the date which is
one
year after the later of the date of the commencement of the offering and the
date of original issuance (or of any predecessor of any Security proposed to
be
transferred by the Investor) and (y) such later date, if any, as may be required
by applicable law, except (a) to the Company, (b) pursuant to a registration
statement that has been declared effective under the 1933 Act, (c) for so long
as any Security is eligible for resale pursuant to Rule 144 under the 1933
Act,
(d) for so long as any Security is eligible for resale pursuant to Rule 144A
under the 1933 Act, to a person it reasonably believes is a “qualified
institutional buyer” as defined in Rule 144A that purchases for its own account
or for the account of another qualified institutional buyer to whom notice
is
given that the transfer is being made in reliance on Rule 144A, (e) pursuant
to
offers and sales to Persons who are not “U.S. Persons” (within the meaning of
Regulation S) that occur outside the United States within the meaning of
Regulation S or (f) pursuant to any other available exemption from the
registration requirements of the 1933 Act, and (B) agrees that it will give
to
each person to whom such Security is transferred a notice substantially to
the
effect of this paragraph.
(e) Investor
Status. INITIAL
BELOW IF APPLICABLE. In
the
case of an offer made in reliance upon Regulation S, at
the
time the Investor was offered the Securities, the Investor was not, and at
the
date hereof it is not, a “U.S. Person” (as defined in Rule 902 of Regulation S
under the 1933 Act),it understands that no action has been or will be taken
in
any jurisdiction by the Company that would permit a public offering of the
Securities in any country or jurisdiction where action for that purpose is
required and it is not acquiring the Securities for the account or benefit
of
any U.S. persons, except in accordance with one or more available exemptions
from the registration requirements of the 1933 Act or in a transaction not
subject thereto.
8
___________________
Initial
(f) Accredited
Investor Status. Each
Investor which is acquiring Securities in reliance upon Regulation D is an
“accredited investor” as defined in Regulation D promulgated under the 1933 Act.
Each Investor is not required to be registered as a broker-dealer under Section
15 of the Exchange Act and such Investor is not a broker-dealer, nor an
affiliate of a broker-dealer.
(g) Information
Provided. Each
Investor and its advisors, if any, have requested, received and considered
all
information relating to the business, properties, operations, condition
(financial or other), results of operations or prospects of the Company and
information relating to the offer and sale of the Notes deemed relevant by
them;
each Investor and its advisors, if any, have been afforded the opportunity to
ask questions of the Company concerning the terms of the offering of the
Securities and the business, properties, operations, condition (financial or
other), results of operations and prospects of the Company and the Subsidiaries.
Without limiting the generality of the foregoing, the Investor has had the
opportunity to obtain and to review the Disclosure Documents; in connection
with
its decision to purchase the Notes, each Investor has relied solely upon the
Disclosure Documents, the representations, warranties, covenants and agreements
of the Company set forth in this Agreement and to be contained in the
Transaction Documents, as well as any investigation of the Company completed
by
the Investor or its advisors; each Investor understands that its investment
in
the Securities involves a high degree of risk.
(h) Investment
Experience. The
Investor understands the risks of investing in companies which have their
business operations domiciled in the People’s Republic of China and that the
purchase of the Notes involves substantial risk. The
Investor, either alone or together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in
the
Securities, and have so evaluated the merits and risks of such investment.
The
Investor is able to bear the economic risk of an investment in the Securities
and, at the present time, is able to afford a complete loss of such investment.
The Investor has had the opportunity to ask questions of management of the
Company.
(i) Short
Sales and Confidentiality prior to the Date Hereof. Other
than the transaction contemplated hereunder, the Investor has not directly
or
indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with the Investor, executed any disposition, including Short
Sales
(but not including the location and/or reservation of borrowable shares of
Common Stock), in the securities of the Company during the period
commencing from the time that the Investors first received a term sheet from
the
Company or any other Person setting forth the material terms of the transactions
contemplated hereunder until the date hereof (the “Discussion
Time”).
(j)
Non-solicitation and Non-reliance.
Each
Investor represents and warrants that he has not been solicited in connection
with the offering and sale of the Notes and transfer of the Shares by means
of
the registration statement on Form S-1 (the “Registration Statement”) filed by
the Company with the SEC on August 4, 2008 nor has such Investor read such
Registration Statement or any part thereof. Each Investor further represents
and
warrants that he has not relied in any aspect in connection with the offering
and sale of the Notes and transfer of the Shares on the information that
was
made publicly available by the Company by means of the filing of the
Registration Statement with the SEC.
9
| 5. |
POST-CLOSING
COVENANTS.
|
The
Parties agree as follows with respect to the period following the
Closing.
(a) Transfer
Restrictions.
Each
Investor severally acknowledges and agrees that (1) the Notes have not been
and
are not being registered under the provisions of the 1933 Act or any state
securities laws and the Shares have not been and are not being registered under
the 1933 Act or any state securities laws, and that the Notes may not be
transferred unless an Investor shall have delivered to the Company such
representations or certificates as the Company shall reasonably request to
enable counsel to the Company to be able to deliver an opinion to the transfer
agent of the Company that the Note to be transferred may be transferred without
such registration; (2) no sale, conveyance assignment or other transfer of
the
Notes or any interest therein may be made except in accordance with the terms
hereof and thereof; (3) the Shares may not be resold by an Investor unless
the
resale has been registered under the 1933 Act or is made pursuant to an
applicable exemption from such registration and the Company shall have received
the opinion of counsel provided for in the third to last sentence of this
Section 5(a); (4) 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 the exemption
provided by Rule 144 is not available, any resale of the Securities under
circumstances in which the seller, or the Person through whom the sale is made,
may be deemed to be an underwriter, as that term is used in the 1933 Act, may
require compliance with some other exemption under the 1933 Act or the rules
and
regulations of the SEC thereunder; and (5) the Company is under no obligation
to
register the Securities under the 1933 Act or, to comply with the terms and
conditions of any exemption thereunder. Nothing in any of the Transaction
Documents shall limit the right of a holder of the Securities to make a bona
fide pledge thereof to an institutional lender and the Company agrees to
cooperate with any Investor who seeks to effect any such pledge by providing
such information and making such confirmations as reasonably
requested. Provided
that Rule 144 has not been amended in any material respect between the date
of
this Agreement and the delivery thereof, the delivery to the Company of
a
signed representation letter in the form of Exhibit 5(a)(1) (the “Investor
Representation Letter”) shall be sufficient to satisfy the requirement stated in
clause (1) of this Section 5(a) in the case of a request to remove a restrictive
legend from the Note or a request to transfer the Note to a third person free
of
restrictive legend. If the Company receives a signed Investor Representation
Letter, then, if required to remove the restrictive legend from the Note or
facilitate the transfer of the Note free of restrictive legend, within 5
Business Days after the Investor Representation Letter is given, the Company,
without charge to any Investor, shall cause its legal counsel to deliver to
the
transfer agent or registrar for the Notes an opinion in form and substance
reasonably satisfactory to the transfer agent or registrar that the restrictive
legend under the 1933 Act may be removed from the Note and/or that the transfer
may be made without violating the registration provisions of the 1933
Act..
(b) Restrictive
Legends.
(1)
Each
Investor severally acknowledges and agrees that the Notes shall bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the Notes):
10
THE
ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE
ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER [REGULATION
S
(“REGULATION S”)] [REGULATION D (“REGULATION D”)] PROMULGATED UNDER THE ACT. 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
ACT, OR (B) AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER, IN
A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT
OR
(II) UNLESS SOLD PURSUANT TO, AND IN ACCORDANCE WITH, RULE 144 OR RULE 000X
XXXXX XXX XXX XX XXXXXXX XXX XXXXXX XXXXXX IN ACCORDANCE WITH RULE 904 OF
REGULATION S UNDER THE ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND
REGULATIONS. NOTWITHSTANDING THE FOREGOING, SUBJECT TO COMPLIANCE WITH
APPLICABLE SECURITIES LAWS, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH
A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY
THE
SECURITIES.
(2) Each
Investor further severally acknowledges and agrees that until such time, if
any,
as the Shares have been registered for resale under the 1933 Act or are eligible
for resale under Rule 144 under the 1933 Act, the certificates for the Shares
may bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for
the
Shares):
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”). THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE RESOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
1933
ACT OR AN OPINION OF COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933
ACT.
(3) Certificates
evidencing the Shares shall not contain any legend (including the legend set
forth in Section 5(b)(2) hereof): (i) following any sale of such Shares pursuant
to Rule 144, or (ii) if such legend is not required under applicable
requirements of the 1933 Act (including judicial interpretations and
pronouncements issued by the SEC). If such legend is not otherwise required
under applicable requirements of the 1933 Act (including judicial
interpretations thereof) then such Shares shall be issued free of all legends.
(c) Transfer
of Shares.
The
Company agrees that no later than ten Trading Days following the Closing, the
transfer of Shares will be completed and certificates representing Shares,
as
applicable, will be issued to each Investor.
(d) Debt
Obligation.
So
long
as any portion of the Note is outstanding, the Company shall cause its books
and
records to reflect the Note as a debt of the Company in its unpaid principal
amount, shall cause its financial statements to reflect the Note as a debt
of
the Company in such amount as shall be the greatest amount permitted in
accordance with Generally Accepted Accounting Principles.
(e) Press
Releases. The
Company shall, contemporaneously with the closing on the Closing Date or as
promptly as possible thereafter on the Closing Date, issue a press release
concerning the transactions contemplated hereby.
11
(f) Form
8-K; Limitation on Information and Investor Obligations.
Within
four Business Days after the Closing Date, the Company will publicly report
the
issue and sale of the Notes entered into on or before the Closing Date by filing
with the SEC a Current Report on Form 8-K under the Exchange Act, which report
shall describe the material terms of the transactions contemplated hereby and
thereby and include copies of the forms of the Transaction Documents as exhibits
to such report.
(g) Short
Sales and Confidentiality after the Date Hereof. Each
Investor covenants that neither it nor any Affiliates acting on its behalf
or
pursuant to any understanding with it will execute any Short Sales during the
period commencing from the time that the Investor first received a term sheet
from the Company or any other Person setting forth the material terms of the
transactions contemplated hereunder and ending on the earlier of (i) the date
that the transactions contemplated by this Agreement are first publicly
announced as described in Section 5(f) and (ii) the date, if applicable, that
this Agreement is terminated pursuant to Section 7(n). The Investor covenants
that until such time as the transactions contemplated by this Agreement are
publicly disclosed by the Company as described in Section 5(f) or the earlier
termination of this Agreement, the Investor will maintain the confidentiality
of
all disclosures made to it in connection with this transaction (including the
existence and terms of this transaction). Notwithstanding the foregoing, the
Investor does not make any representation, warranty or covenant hereby that
it
will not engage in Short Sales in the securities of the Company after the
earlier of (i) the date that the transactions contemplated by this Agreement
are
first publicly announced as described in Section 5(f) and (ii) the date, if
applicable, that this Agreement is terminated pursuant to Section 7(n).
Notwithstanding the foregoing, in the case of an Investor that is a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Investor's assets and the portfolio managers have
no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Investor's assets, the covenant set forth above
shall only apply with respect to the portion of assets managed by the portfolio
manager that made the investment decision to purchase the Securities covered
by
this Agreement.
| 6. |
CONDITIONS
TO OBLIGATION TO CLOSE.
|
(a) Conditions
to Obligation of the Investors.
The
obligation of each of the Investors to consummate the transactions to be
performed by it in connection with the Closing is subject to satisfaction of
the
following conditions:
(i) No
legal
action, suit or proceeding shall be pending or threatened which seeks to
restrain or prohibit the transactions contemplated by this
Agreement;
(ii) The
representations and warranties of the Company contained in this Agreement shall
have been true and correct on the date of this Agreement and shall be true
and
correct on the Closing Date as if given on and as of the Closing Date (except
for representations given as of a specific date, which representations shall
be
true and correct as of such date), and on or before the Closing Date the Company
shall have performed all covenants and agreements of the Company contained
herein or in any of the other Transaction Documents required to be performed
by
the Company on or before the Closing Date.
Any
Investor may waive as to itself any condition specified in this Section
6(a)
if it
executes and delivers to the Company at the Closing a writing so
stating.
12
(b) Conditions
to Obligation of the Company.
The
obligation of the Company to consummate the transactions to be performed by
them
in connection with the Closing is subject to satisfaction of the following
conditions:
(i) On
the
Closing Date, no legal action, suit or proceeding shall be pending or threatened
which seeks to restrain or prohibit the transactions contemplated by this
Agreement; and
(ii) The
representations and warranties of all of the Investors contained in this
Agreement shall have been true and correct on the date of this Agreement and
on
the Closing Date as if made on the Closing Date and on or before the Closing
Date all of the Investors shall have performed all covenants and agreements
of
the Investors contained in this Agreement and required to be performed by the
Investors on or before the Closing Date.
The
Company may waive any condition specified in this Section
6(b)
if it
executes and delivers to the Investors at the Closing a writing so
stating.
| 7. |
MISCELLANEOUS.
|
(a) No
Third Party Beneficiaries.
This
Agreement shall not confer any rights or remedies upon any Person other than
the
Parties and their respective successors and permitted assigns.
(b) Entire
Agreement.
This
Agreement (including any Transaction Documents) constitutes the entire agreement
among the Parties and supersedes any prior understandings, agreements, or
representations by or among the Parties, written or oral, to the extent they
related in any way to the subject matter hereof.
(c) Succession
and Assignment.
This
Agreement shall be binding upon and inure to the benefit of the Parties named
herein and their respective successors and permitted assigns. No Party may
assign either this Agreement or any of his or its rights, interests, or
obligations hereunder without the prior written approval of the other Party;
provided,
however,
that
each Investor may (i) assign any or all of its rights and interests
hereunder to one or more of its Affiliates and (ii) designate one or more
of its Affiliates to perform its obligations hereunder (in any or all of which
cases the Investors shall no longer remain responsible for the performance
of
all of its obligations hereunder).
(d) Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original but all of which together will constitute one and the same
instrument.
(e) Headings.
The
section headings contained in this Agreement are inserted for convenience only
and shall not affect in any way the meaning or interpretation of this
Agreement.
(f) Notices.
All
notices, consents, waivers and other communications under this Agreement must
be
in writing and will be deemed given to a Party when (a) delivered to the
appropriate address by hand or by nationally recognized overnight courier
service (costs prepaid), (b) sent by facsimile or e-mail with confirmation
of transmission by the transmitting equipment, or (c) received or rejected
by the addressee, if sent by certified mail, return receipt requested; in each
case to the following addresses, facsimile numbers or e-mail addresses and
marked to the attention of the individual (by name or title) designated below
(or to such other address, facsimile number, e-mail address or individual as
a
party may designate by notice to the other parties):
13
If
to the
Investors to the addresses set forth in Exhibit A
If
to the
Company or Shen:
0X,
Xx.000, Xxxxx 0xx
Xxxx
Xxxxx
Xxxxxxxx, Xxxxxx Xxxx
Xxxxxx
Attention:
Xxxxxx Xxxx
Telephone
No.: 000-0000-0000-0000
Facsimile
No.: 011-8862-8791-1368
E-mail:
Xxxxxx@xxxxxxx.xxx.xx
with
a copy (which shall not constitute notice) to:
Guzov
Ofsink, LLC
000
Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxx X. Xxxxxx
Telephone
No.: (000) 000-0000
Facsimile
No.: (000) 000-0000
E-mail:
xxxxxxx@xxxxxxxxx.xxx
(g) Controlling
Law; Venue.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York without regard to choice of law provisions, statutes,
regulations or principles of this or any other jurisdiction. Each Party hereby
irrevocably submits to the exclusive jurisdiction (including personal
jurisdiction) of the state and federal courts of the State of New York for
any
action, suit or proceeding arising in connection with this Agreement, and agrees
that any such action suit or proceeding shall be brought only in such court
(and
waives any objection based on forum non conveniens or any other jurisdiction
to
venue therein). Process
in any Proceeding under this Agreement may be served on any Party anywhere
in
the world.
(h) Amendments
and Waivers.
No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by the Company and the Investors holding at
least
a majority of the principal amount of the Notes then outstanding.
(i) Noncontravention.
To the
extent that any of the provisions of this Agreement (i) conflicts with, or
results in any breach of, or constitutes a default under any agreement,
contract or other arrangement (whether written or oral) to
which
the Company or any Subsidiary is a party or by which the Company or its
Subsidiaries or any of their assets may be bound; or (ii) results in the
acceleration of any indebtedness of the Company or any Subsidiary, such
provision shall be invalid and unenforceable, but such provision shall be deemed
to be modified and in its modified form valid, to the maximum extent to which
it
would not so conflict.
(j) Severability.
Any
term
or provision of this Agreement that is invalid or unenforceable in any situation
in any jurisdiction shall not affect the validity or enforceability of the
remaining terms and provisions hereof or the validity or enforceability of
the
offending term or provision in any other situation or in any other jurisdiction.
Furthermore, in lieu of such invalid or unenforceable provision, there shall
be
added automatically as part of this Agreement a provision as similar in terms
to
such invalid or unenforceable provision as may be possible and be legal, valid
and enforceable.
14
(k) Expenses.
Each
of
the Parties will bear his or its own costs and expenses (including legal fees
and expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
(l) Construction.
The
Parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or disfavoring any
Party by virtue of the authorship of any of the provisions of this Agreement.
Any reference to any federal, state, local, or foreign statute or law shall
be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. The word “including” shall mean including
without limitation. The Parties intend that each representation, warranty,
and
covenant contained herein shall have independent significance. If any Party
has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of the first representation,
warranty, or covenant.
(m) Incorporation
of Exhibits and Schedules.
The
Exhibits and Schedules identified in this Agreement are incorporated herein
by
reference and made a part hereof.
(n) Termination.
(1)
Each
Investor shall have the right to terminate this Agreement by giving notice
to
the Company at any time at or prior to the Closing Date if:
(A) the
Company shall have failed, refused, or been unable at or prior to the date
of
such termination of this Agreement to perform any of its obligations hereunder
required to be performed prior to the time of such termination;
(B) any
condition to the Investor’s obligations hereunder is not fulfilled at or prior
to the time such condition is required to be satisfied; or
(C) the
Closing shall not have occurred on or before September 30, 2008, other than
solely by reason of a breach of this Agreement by the Investors.
Any
such
termination shall be effective upon the giving of notice thereof by the
Investors. Upon such termination, the Investor shall have no further obligation
to the Company hereunder and the Company shall remain liable for any breach
of
this Agreement or the other documents contemplated hereby which occurred on
or
prior to the date of such termination.
(2) The
Company shall have the right to terminate this Agreement by giving notice to
the
Investors at any times at or prior to the Closing Date if the Closing shall
not
have occurred on or before September 30, 2008, other than solely by reason
of a
breach of this Agreement by the Company, so long as the Company is not in breach
of this Agreement at the time it gives such notice. Any such termination shall
be effective upon the giving of notice thereof by the Company. Upon such
termination, neither the Company nor the Investors shall have any further
obligation to one another hereunder.
15
(o) Investor
Status.
The
Investor is not acting as part of a “group” (as that term is used in Section
13(d) of the Exchange Act) with any other Person who is or proposes to become
a
party to this Agreement, or who is acquiring or holds any Notes, in negotiating
and entering into this Agreement or purchasing the Notes or acquiring, disposing
of or voting any of the Shares. The Company hereby confirms that it understands
and agrees that the Investors are not acting as part of any such
group.
[Remainder
of page intentionally left blank
Signature
pages follow]
16
The
Parties have executed and delivered this Agreement as of the date indicated
in
the first sentence of this Agreement.
|
By:__________________________________
Name:_____________________________
Title:______________________________
______________________________________
Yu
Ping “Agatha” Shen
|
[Remainder
of page intentionally left blank
Signature
pages for Investors follow]
The
Parties have executed and delivered this Agreement as of the date indicated
in
the first sentence of this Agreement.
|
INVESTOR:
|
|
(Name
of Investor)
|
|
By:________________________________________________
|
|
Name:______________________________________________
|
|
Title:_______________________________________________
|
|
Principal
Amount of the Note:$___________________________
|
|
Number
of Shares:____________________________________
|
|
Tax
ID No.:__________________________________________
|
|
ADDRESS
FOR NOTICE
|
|
Attention:___________________________________________
|
|
Tel:________________________________________________
|
|
Fax:________________________________________________
|
|
DELIVERY
INSTRUCTIONS
|
|
(if
different from above)
|
|
Attention:__________________________________________
|
|
Tel:_______________________________________________
|
|
Fax:_______________________________________________
|
