Exhibit (1)
CONVERTIBLE DEBENTURE AND WARRANT PURCHASE AGREEMENT
This Convertible Debenture and Warrant Purchase Agreement (this
"Agreement") is made and entered into as of December 21, 1999 by and between
Tengtu International Corp., a Delaware corporation (the "Company") and Top Eagle
Holdings Limited, a British Virgin Island international business company (the
"Investor").
Whereas, the Company desires to issue to the Investor, and the Investor
desires to purchase from the Company, the Company's convertible debenture, in
the form attached to this Agreement as Exhibit A (the "Convertible Debenture"),
and the Company's common stock warrant, in the form attached to this Agreement
as Exhibit B (the "Warrant"), on the terms and conditions set forth in this
Agreement;
Now, therefore, the parties hereby agree as follows:
1. AGREEMENT TO PURCHASE AND SELL THE CONVERTIBLE DEBENTURE AND THE
WARRANT. The Company agrees to issue to the Investor, and the Investor agrees to
purchase from the Company, at the Closing (as defined below), (a) the Debenture
for an aggregate principal amount of One Million Five Hundred Thousand U.S.
Dollars (US$1,500,000) and (b) the Warrant for US$0 (collectively, the "Purchase
Price"). The Investor will notify the Company of the aggregate principal amount
of Purchase Price in writing not less than two (2) business days prior to the
Closing.
2. CLOSING. The purchase and sale of the Convertible Debenture and the
Warrant will take place at the offices of Hecht & Steckman, P.C., 60 East 42nd
Street, Suite 5101, New York, New York 10165-5101, U.S.A., at 10:00 a.m. New
York time, on December 23, 1999 or at such other time and place as the Company
and the Investor mutually agree upon (which time and place are referred to in
this Agreement as the "Closing"). At the Closing, the Company will deliver to
the Investor the original Convertible Debenture and the original Warrant each
executed by the Company against delivery to the Company by the Investor of the
Purchase Price, paid by wire transfer of immediately available funds to the
account designated by the Company in writing prior to the Closing.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Investor that, except as set forth in the
Schedule of Exceptions ("Schedule of Exceptions") attached to this Agreement as
Exhibit C (which Schedule of Exceptions, when read together with this Section 3,
shall be deemed to be representations and warranties to the Investor by the
Company under this Section 3), the statements in the following paragraphs of
this Section 3 are all true and complete as of the date hereof:
3.1 Organization, Good Standing and Qualification. The Company
has been duly incorporated and organized, and is validly existing and, except as
set forth in the Schedule of Exceptions, in good standing, under the laws of the
State of Delaware. The Company has the corporate power and authority to enter
into and perform this Agreement, the Convertible Debenture, the Warrant, and
that certain Investor Rights Agreement dated as of the date hereof, between,
inter alia, the Company and the Investor, the form of which is attached to this
Agreement as Exhibit D (the "Investor Rights Agreement"), to own and operate its
properties and assets and to carry on its business as currently conducted. To
the best of its knowledge, the Company is duly qualified and is in good standing
as a foreign corporation to do business in every jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, including, without limitation, British Columbia,
Canada.
3.2 CAPITALIZATION. The capitalization of the Company
immediately prior to the Closing consists of the following:
(a) COMMON STOCK. A total of one hundred million
(100,000,000) authorized common shares, par value US$0.01 per share (the
"Ordinary Shares"), of which a maximum of twenty million seven-hundred
fifty-seven thousand six hundred seven (20,757,607) shares (including 210,000
shares issued or to be issued pursuant to options exercised by Hecht & Steckman,
P.C. prior to the date hereof, and 750,000 shares to be issued to Zhang Fan Qi,
a Company Director, pursuant to the terms of a July 20, 1999 agreement) are
issued and outstanding.
(b) PREFERRED STOCK. A total of ten million (10,000,000)
authorized preferred shares, par value US$0.01 per share (the "Preferred
Shares"), of which none are issued and outstanding.
(c) OPTIONS, WARRANTS, RESERVED SHARES. The Company
currently has options outstanding for the purchase of 2,650,000 Ordinary Shares.
No single option holder has the option to purchase more than 300,000 Ordinary
Shares. The Compensation Committee of the Company's Board of Directors has
authorized the issuance of options to purchase up to an aggregate of 350,000
Ordinary Shares to an officer, to one of the Company's outside legal counsel and
to a consultant, and has approved in principle an employment agreement with
Comadex Industries, Ltd., a consulting company owned by Pak Kwan Cheung,
Chairman and Chief Executive Officer of the Company (a draft of which is
attached as Exhibit H hereto) providing for the issuance of up to Three Million
(3,000,000) Ordinary Shares and options to purchase up to One Million
(1,000,000) additional Ordinary Shares upon the occurrence of certain events.
Except as set forth above there are no outstanding options, warrants, rights
(including conversion or preemptive rights) or agreements for the purchase or
acquisition from the Company of any Ordinary Shares or Preferred Shares or any
securities convertible into or ultimately exchangeable or exercisable for any
Ordinary Shares or Preferred Shares. No Ordinary Shares or Preferred Shares, or
shares issuable upon exercise or exchange of any outstanding options, warrants
or rights, or other shares issuable by the Company, are subject to any
preemptive rights, rights of first refusal or other rights to purchase such
shares (whether in favor of the Company or any other person), pursuant to any
agreement or commitment of the Company.
(d) AUTHORIZATION. The outstanding Ordinary Shares of the
Company are duly authorized and validly issued, fully paid and nonassessable,
and have been approved by all requisite director, and, if required, shareholder
action.
3.3 SUBSIDIARIES.
(a) GENERAL. Except for the companies described in the
Schedule of Subsidiaries attached to this Agreement as Exhibit E (the
"Subsidiaries"), the Company does not presently own or control, directly or
indirectly, any interest in any other corporation, partnership, trust, joint
venture, association or other entity. Each of the Subsidiaries is duly organized
and validly existing under the laws of its jurisdiction of organization or
incorporation as stated in Exhibit E; has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted, and is duly qualified as a foreign corporation in all
jurisdictions inwhich it is required to be so qualified. The Company's ownership
percentage of each Subsidiary and the capitalization of each Subsidiary is as
stated on Exhibit E. The Company's interest in each Subsidiary (as stated on
Exhibit E) is owned by the Company free and clear of all liens, claims, charges
and encumbrances, and except for holders of the common stock of each Subsidiary
as set forth in Schedule E and pursuant to the terms of the Joint Venture
Agreement July 30, 1996 between Tengtu Enterprises Limited and Beijing Tengtu
Culture and Education Electronic Development Co., Ltd., as amended March 26,
1998, by an agreement between Tengtu International Corp. and Beijing Tengtu
Culture and Education Electronic Development Co., Ltd., with respect to Tengtu
United Electronics Development Co., Ltd., a sino-foreign entity joint venture
duly organized and validly existing with the status of a legal person under the
laws of the PRC (the "China Joint Venture") no person or entity has any right to
participate in, or receive any payment based on any amount relating to, the
revenue, income, value or net worth of the Subsidiaries or any component or
portion thereof, or any increase or decrease in any of the foregoing. Each of
the Subsidiaries engages only in the businesses set out with respect to such
Subsidiary on Exhibit E.
(b) GOVERNMENT APPROVALS. To the best of the Company's
knowledge, all required approvals, permits, licenses or registrations relating
to the formation and operations of each Subsidiary have been properly obtained,
and each of these approvals, permits, licenses or registrations of each such
company is valid and effective, and as of the date hereof none of them has been
revoked or modified.
(c) COMPLIANCE WITH LAW. To the best of the Company's
knowledge, the scope of business of each Subsidiary and the actual operations
thereof fully comply with all current applicable laws in its jurisdiction of
organization or incorporation and in each jurisdiction in which it is required
to be duly qualified as a foreign corporation or to be otherwise licensed to
conduct business therein.
(d) BEIJING SUBSIDIARY. With respect to TIC Beijing
Electronics Co., Ltd., a Chinese company (the "Beijing Subsidiary"): all of the
registered capital of the Beijing Subsidiary has been fully paid by the Company
and the Beijing Subsidiary has received a capital payment verification
certificate issued by an authorized People's Republic of China ("PRC")
accounting firm confirming that the amounts set forth with respect to such
company in the preceding sentence have been paid in full. The Beijing Subsidiary
has not reduced or increased its registered capital.
(e) China Joint Venture. With respect to the China Joint
Venture, all of the registered capital of the China Joint Venture has been fully
paid by the Company and Beijing Tengtu Culture and Education Electronic
Development Co., Ltd. and the China Joint Venture has received a capital payment
verification certificate issued by an authorized PRC accounting firm confirming
that the amounts set forth with respect to such companies in the preceding
sentence have been paid in full. The China Joint Venture has not reduced or
increased its registered capital.
(f) LAND USE RIGHTS. Neither the China Joint Venture nor
the Beijing Subsidiary has any land use rights in the PRC.
3.4 DUE AUTHORIZATION. All corporate action on the part of the
Company's directors and shareholders necessary for the authorization, execution,
delivery of, and the performance of all obligations of the Company under this
Agreement, the Convertible Debenture, the Warrant and the Investor Rights
Agreement, the authorization, issuance, reservation for issuance and delivery of
all of the Ordinary Shares of the Company issuable upon conversion of the
Convertible Debenture or upon exercise of the Warrant (collectively, the
"Conversion Shares") has been taken or will be taken prior to the Closing, and
this Agreement constitutes, and the Convertible Debenture, the Warrant and the
Investor Rights Agreement, when executed and delivered, will constitute, valid
and legally binding obligations of the Company, enforceable in accordance with
their respective terms. The consummation of the transactions contemplated by
this Agreement, the Convertible Debenture, the Warrant and the Investor Rights
Agreement does not require the making of any amendment to the Certificate of
Incorporation or the By-Laws of the Company, a true, correct and complete copy
of each of which is attached to this Agreement as Exhibit F.
3.5 VALID ISSUANCE OF STOCK.
(a) The Convertible Debenture and the Warrant, when issued
and paid for as provided in this Agreement, will be duly authorized and validly
issued. The Conversion Shares have been duly and validly reserved for issuance
thereof upon conversion of the Convertible Debenture or exercise of the Warrant
and, when issued upon such conversion or exercise in accordance with the
Convertible Debenture or the Warrant, as the case may be, will be duly
authorized and validly issued, fully paid and nonassessable.
(b) Based in part on the representations made by the
Investor in Section 4 hereof and in the Investment Letter attached as Exhibit G
hereto (the "Investment Letter"), the offer and sale of the Convertible
Debenture and the Warrant solely to the Investor in accordance with this
Agreement and (assuming no change in currently applicable law or the Certificate
of Incorporation of the Company, no transfer of the Convertible Debenture or the
Warrant by a holder thereof and no commission or other remuneration is paid or
given, directly or indirectly, for soliciting the issuance of Conversion Shares
upon conversion of the Convertible Debenture or exercise of the Warrant) the
issuance of the Conversion Shares to the Investor will be exempt from the
registration and prospectus delivery requirements of the U.S. Securities Act of
1933, as amended (the "1933 Act").
3.6 GOVERNMENTAL CONSENTS. To the best of the Company's
knowledge, no consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with any court, governmental
agency, regulatory authority or political subdivision thereof, or any other
entity, is required in connection with the execution, delivery and performance
by the Company of this Agreement, the Convertible Debenture, the Warrant and the
Investor Rights Agreement in order to consummate the transactions contemplated
in this Agreement, the Convertible Debenture, the Warrant and the Investor
Rights Agreement to which it is a party.
3.7 LITIGATION. There is no action, suit, proceeding, claim,
arbitration or investigation pending (or, to the best knowledge of the Company,
currently threatened) against the Company or any Subsidiary, their respective
activities, properties or assets or, to the best of the Company's knowledge,
against any officer, director or key employee of the Company or any Subsidiary
in connection with such officer's, director's or key employee's relationship
with, or actions taken on behalf of, the Company or any Subsidiary. The Company
has no knowledge or belief that there is pending or threatened any claim or
litigation against the Company contesting its right to produce, manufacture,
sell, use or offer any product, process, method, substance, part or other
material or service presently produced, manufactured, sold, used or offered or
planned to be produced, manufacture, sold, used or offered by the Company or any
of its Subsidiaries. The Company has no knowledge or belief that there exists,
or there is pending or planned, any patent, invention, device, application or
principle, which would materially adversely affect the condition, financial or
otherwise, or the operations of the Company or its Subsidiaries.
3.8 STATUS OF PROPRIETARY ASSETS.
(a) STATUS. To the best of its knowledge, the Company and
each of its Subsidiaries has full title and ownership of, or is duly licensed
under or otherwise authorized to use, all patents, patent applications,
trademarks, service marks, trade names, copyrights, mask works, trade secrets,
confidential and proprietary information, designs and proprietary rights (all of
the foregoing collectively hereinafter referred to as the "Proprietary Assets"),
necessary to enable it to carry on its business as now conducted without any
conflict with or infringement of the rights of others. The Schedule of
Exceptions sets forth all of the Company's and the Subsidiaries' Proprietary
Assets. The Company has not received any notice or claim of, nor does it have
any knowledge of, any infringement or misappropriation by the Company or any
Subsidiary of the asserted rights of others. The Company is not aware of any
infringement or misappropriation by others of its or its Subsidiaries'
Proprietary Assets. The Company and each Subsidiary has taken substantially all
reasonable steps necessary or appropriate to establish and maintain its
ownership of its Proprietary Assets. The Company has no actual knowledge that
any of its or its Subsidiaries' key employees is obligated under any contract or
other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of his or her best
efforts to promote the interests of the Company or that would conflict with the
Company's business as proposed to be conducted. Except as set forth on the
Schedule of Exceptions, the Company does not believe it is or will be necessary
to utilize any inventions, trade secrets or proprietary information of any of
its key employees made prior to their employment by the Company or any
Subsidiary, except for inventions, trade secrets or proprietary information that
have been assigned or licensed to the Company.
(b) LICENSES; Other Agreements. Except for the licenses
and co-operation agreements described in the Schedule of Licenses attached to
this Agreement as Exhibit I or as set forth on the Schedule of Exceptions,
neither the Company nor any Subsidiary has granted, and, to the best of the
Company's knowledge, there are not outstanding, any options, licenses or
agreements of any kind relating to any Proprietary Asset of the Company or any
Subsidiary, nor is the Company or any Subsidiary bound by or a party to any
option, license or agreement of any kind with respect to any of its Proprietary
Assets. Neither the Company nor any Subsidiary is obligated to pay any royalties
or other payments to third parties with respect to the marketing, sale,
distribution, manufacture, license or use of any Proprietary Asset or any other
property or rights other than as set forth in the Schedule of Exceptions.
3.9 COMPLIANCE WITH LAW AND DOCUMENTS. To the best of the
Company's knowledge, neither the Company nor any Subsidiary is in violation or
default of any provisions of its respective charter documents, as amended, and
to the best of the Company's knowledge, except for any violations that
individually and in the aggregate would have no material adverse impact on the
Company's business or its consolidated financial condition, the Company and each
Subsidiary is in compliance with all applicable statutes, laws, regulations and
executive orders of the governmental bodies and agencies having jurisdiction
over the Company's (or any Subsidiary's) or its respective business or
properties. The Company has not received any notice of any violation of any such
statute, law, regulation or order which has not been remedied prior to the
Closing. The execution, delivery and performance of this Agreement, the
Convertible Debenture, the Warrant and the Investor Rights Agreement and the
consummation of the transactions contemplated hereby or thereby will not result
in any such violation or default, or be in conflict with or result in a
violation or breach of, the Certificate of Incorporation or the By-Laws of the
Company, any judgment, order or decree of any court or arbitrator to which the
Company or any Subsidiary is a party or is subject, any agreement or contract of
the Company or any Subsidiary, or, to the Company's best knowledge, a violation
of any statute, law, regulation or order, or an event which results in the
creation of any lien, charge or encumbrance upon any asset of the Company or any
Subsidiary.
3.10 RELATED-PARTY TRANSACTIONS. No employee, officer or
director of the Company or any Subsidiary or member of his or her immediate
family is indebted to the Company or any Subsidiary, nor is the Company or any
Subsidiary indebted (or committed to make loans or extend or guarantee credit)
to any of them, except as otherwise described in the Schedule of Exceptions. To
the best of the Company's knowledge, none of such persons has any direct or
indirect ownership in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation that competes with the Company and its Subsidiaries, except that
employees, officers or directors of the Company and its Subsidiaries and members
of their immediate families may own non-controlling interests in stock of
publicly traded companies that may compete with the Company. To the best of the
Company's knowledge, no such officer or director or any member of their
immediate families is, directly or indirectly, interested in any material
contract with the Company or any Subsidiary.
3.11 PERMITS. To the best of the Company's knowledge, the
Company and each of its Subsidiaries has, or is in the process of obtaining, all
franchises, permits, licenses and any similar authority necessary for the
conduct of its business as now being conducted by it, the lack of which could
materially and adversely affect its business, properties or financial condition
and believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted. Neither
the Company nor any Subsidiary is in default in any material respect under any
of such franchises, permits, licenses or other similar authority.
3.12 REGISTRATION RIGHTS AND OTHER SHAREHOLDER RIGHTS. Except
as provided in the Investor Rights Agreement, the Company is not under any
obligation to register under the 1933 Act, any of its currently outstanding
securities or any securities issuable upon exercise or conversion of its
currently outstanding securities nor is the Company obligated to register or
qualify any such securities under the securities laws of any state of the United
States or to list any of its shares in any other jurisdiction. To the best of
the Company's knowledge, except as contemplated in this Agreement or the
Investor Rights Agreement and except for a voting trust arrangement among Pak
Kwan Cheung, Jing Lian, Nan Hai and Xiofeng Lin, President of the Joint Venture
and Beijing Tengtu Culture and Education Electronic Development Co., Ltd. (the
"Voting Group") and Pak Kwan Cheung pursuant to which Pak Kwan Cheung has the
right to vote the shares of the Voting Group, no voting or similar agreements
exist related to the Company's securities which are presently outstanding or
that may hereafter be issued.
3.13 TITLE TO PROPERTY AND ASSETS. Except as set forth on the
Schedule of Exceptions, the properties and assets the Company and each
Subsidiary owns are owned by it free and clear of all mortgages, deeds of trust,
liens, encumbrances and security interests except for statutory liens for the
payment of current taxes that are not yet delinquent and liens, encumbrances and
security interests which arise in the ordinary course of business and which do
not affect material properties and assets of the Company or such Subsidiary.
With respect to the property and assets it leases, the Company and each
Subsidiary is in material compliance with such leases. The Company owns or
leases all properties and assets necessary to conduct its business and
operations as presently conducted.
3.14 FINANCIAL STATEMENTS. Except as set forth on the Schedule
of Exceptions, the Company has previously furnished to the Investor an audited
consolidated balance sheet as of June 30, 1999 for the Company and the
Subsidiaries and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the two fiscal years in the
period the ended (collectively, the "Financial Statements"). The Financial
Statements have been prepared in accordance with GAAP applied on a consistent
basis, and fairly present the consolidated financial position of the Company and
its Subsidiaries as of such date. The Company has no material liabilities
(matured or unmatured, fixed or contingent) other than those set forth on the
Schedule of Exceptions.
3.15 ACTIVITIES SINCE JUNE 30, 1999. Since June 30, 1999,
there has not been:
(a) any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the assets, properties,
financial condition, operating results, prospects or business of the Company and
its Subsidiaries (as presently conducted and as presently proposed to be
conducted);
(b) any waiver by the Company or its Subsidiaries of a
valuable right or of a material debt owed to any of them;
(c) any material change or amendment to a material
contract or arrangement by which the Company or its Subsidiaries or any of their
respective assets or properties is bound or subject, except as set forth on the
Schedule of Exceptions;
(d) any resignation or termination of any key officers of
the Company or its Subsidiaries, and the Company, to the best of its knowledge,
does not know of the impending resignation or termination of employment of any
such officer;
(e) any declaration or payment of any dividend or other
distribution of the assets of the Company or its Subsidiaries;
(f) any debt, obligation or liability incurred, assumed or
guaranteed by the Company or its Subsidiaries, except those for immaterial
amounts and for current liabilities incurred in the ordinary course of business;
and
(g) any material adverse change in the assets, properties,
financial condition or operating results of the Company or its Subsidiaries.
3.16 LABOR AGREEMENTS AND ACTIONS. Neither the Company nor any
Subsidiary is bound by or subject to any contract, commitment or arrangement
with any labor union, and, to the best of the Company's knowledge, no labor
union has requested, sought or attempted to represent any employees,
representatives or agents of the Company or any Subsidiary. There is no strike
or other labor dispute involving the Company or any Subsidiary pending nor, to
the best of the Company's knowledge, threatened, nor is the Company aware of any
labor organization activity involving its or its Subsidiary's employees. To the
best of the Company's knowledge, no key employee of the Company or any
Subsidiary is or will be in violation of any judgment, decree or order, or any
term of any employment contract, patent disclosure agreement, or other contract
or agreement relating to the relationship of any such employee with the Company
or any other party because of the nature of the business conducted by the
Company or its Subsidiaries or to the use by the employee of his best efforts
with respect to such business. Except as set forth in the Schedule of
Exceptions, neither the Company nor any Subsidiary is a party to or bound by any
currently effective employment contract (other than contracts that can be
terminated on an at-will basis), deferred compensation agreement, bonus plan,
incentive plan, profit sharing plan, retirement agreement, or other employee
compensation agreement. The Company is not aware that any officer or key
employee, or any group of key employees, intends to terminate their employment
with the Company or any Subsidiary, nor does the Company or any Subsidiary have
a present intention to terminate the employment of any of the foregoing.
3.17 DISCLOSURE. To the best of the Company's knowledge, no
representation, warranty or statement by the Company in this Agreement, or in
any exhibit, schedule, statement or certificate furnished to the Investor
pursuant to this Agreement, when read as a whole, contains any untrue statement
of a material fact or omits to state a material fact necessary to make the
statements made herein, in light of the circumstances under which they were
made, not misleading.
3.18 PROJECTIONS; MATERIAL FACTS. In connection with the
transactions contemplated by this Agreement, the Company has furnished to the
Investor certain projected budgets, financial statements and forecasts. Such
projected budgets, financial statements and forecasts were prepared by the
Company in good faith based on its best knowledge, information and belief. The
Company knows of no information or fact which has or would have a material
adverse effect on the financial condition, business or business prospects of the
Company which has not been disclosed to the Investor.
3.19 MINUTE BOOKS. Except as set forth in the Schedule of
Exceptions, the minute books of the Company contain a complete summary of all
meetings of directors and stockholders since the time of incorporation and
reflect all transactions referred to in such minutes are accurately described in
all material respects. The Subsidiaries of the Company have not maintained
minute books.
3.20 CONTRACTS AND COMMITMENTS, ETC. Except as set forth in
the Schedule of Exceptions, neither the Company nor any Subsidiary is a party to
any contracts or commitments (or group of related contracts or commitments)
other than contracts entered into in the ordinary course of business and which
do not involve more than US$100,000 or have a term (including renewals or
extensions optional with another party) of more than one year from the date
thereof. For the purpose of this Section 3.20, "ordinary course of business"
shall mean the business conducted by the Company or any Subsidiary as set forth
in the Company's report on Form 10-KSB for the fiscal year ended June 30, 1999
or any business substantially similar to such business. Neither the Company nor
any Subsidiary is in default in the performance, observance or fulfillment of
any of the obligations, covenants or conditions contained in any agreement or
instrument to which any of them is a party which may result in any material
adverse change in the condition, financial or other, of the Company and its
Subsidiaries.
3.21 NO DIRECTED SELLING EFFORTS. The Company has not engaged
in any advertising or any other promotional activity in the United States that
would constitute "Directed Selling Efforts" (as such term is defined in Rule
902(b) of Regulation S of the Securities Act) during the twelve (12) months
immediately preceding the date hereof.
3.22 YEAR 2000. To the best of the Company's knowledge, all
computer systems (including hardware, equipment with embedded computer chips,
software, networks, interfaces and data storage) (the "Systems") used or
incorporated in products manufactured and distributed by the Company and each
Subsidiary, which are material to its respective business, are Year 2000
Compliant. For purposes of this Section 3.22, "Year 2000 Compliance" of a System
means that neither its performance nor functionality will be affected by dates
prior to, during or after the year 2000 and which would have a material adverse
effect on the Company or such Subsidiary.
3.23 INVESTMENT COMPANY ACT. The Company is not an "investment
company" under the Investment Company Act of 1940, as amended.
3.24 TAX MATTERS.
(a) Except for those filings required for the Company's
fiscal year ending June 30, 1999, the Company and each Subsidiary have filed all
Tax Returns which they are required to file under all applicable laws; all such
Tax Returns are true and accurate and have been prepared in compliance with all
applicable laws; each of the Company and each Subsidiary has paid all Taxes due
and owing by it (whether or not such Taxes are required to be shown on a Tax
Return) and has withheld and paid over to the appropriate taxing authorities all
Taxes which it is required to withhold from amounts paid or owing by it to any
employee, stockholder, creditor or other third party, and since June 30, 1999,
the charges, accruals and reserves for Taxes with respect to the Company
(including any provisions for deferred income taxes) reflected on the books of
the Company are adequate to cover any Tax liability of the Company if its
current tax year were treated as ending on the date hereof.
(b) No Claim has been made by a taxing authority in a
jurisdiction where neither the Company nor any Subsidiary does not file Tax
Returns that such corporation is or may be subject to taxation by the
jurisdiction. There are no foreign, federal, state or local tax audits or
administrative or judicial proceedings pending or being conducted with respect
to the Company or any of its Subsidiaries; no information related to Tax matters
has been requested by any foreign, federal, state or local taxing authority.
There are no material unresolved questions or claims concerning the Tax
liability of the Company or any Subsidiary.
(c) For purposes of this Section 3.24: (i) "Tax" or
"Taxes" means federal, state, county, local, foreign or other income, gross
receipts, ad valorem, franchise, profits, sales or use, transfer, registration,
excise, utility, environmental, communications, real or personal property,
capital stock, license, payroll, wage or other withholding, employment, social
security, severance, stamp, estimated and other taxes of any kind whatsoever
(including, without limitation, deficiencies, penalties, additions to tax and
interest attributable thereto) whether disputed or not; and (ii) "Tax Return"
means any return, information report or filing with respect to Taxes, including
any schedules attached thereto and including any amendment thereof.
3.25 FURTHER REPRESENTATIONS REGARDING ORDINARY SHARES. The
Company is in compliance with all requirements for the continued trading or
quotation of the Ordinary Shares and the Ordinary Shares are currently traded or
quoted on the National Association of Securities Dealers Over the Counter
Bulletin Board Market ("OTCBB"). The Company has not received any notice
regarding, and to the best of its knowledge there is no threat, of the
termination or discontinuance of the eligibility of the Ordinary Shares for such
listing or the commencement of any enforcement action by the United States
Securities and Exchange Commission. The Company does not have, and is not
currently required to have, any shares registered under the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF INVESTOR. The
Investor hereby represents and warrants to, and agrees with, the Company that:
4.1 AUTHORIZATION. This Agreement constitutes its valid and
legally binding obligation, enforceable in accordance with its terms. The
Investor represents that it has full power and authority to enter into this
Agreement, the Investor Rights Agreement and the Ancillary Agreements to which
it is a party.
4.2 PURCHASE FOR OWN ACCOUNT. The Convertible Debenture and
the Warrant to be purchased by such Investor hereunder, including the Conversion
Shares, will be acquired for investment for such Investor's own account, not as
a nominee or agent, and not with a view to the public resale or distribution
thereof, and such Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same. The Investor also
represents that the sole shareholder of such Investor has not been formed for
the specific purpose of acquiring the Convertible Debenture and the Warrant.
4.3 DISCLOSURE OF INFORMATION. The Investor believes it has
received or has had full access to all the information it considers necessary or
appropriate to make an informed investment decision with respect to the
Convertible Debenture and the Warrant to be purchased by the Investor under this
Agreement. The Investor further has had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the
offering of the Convertible Debenture and the Warrant and to obtain additional
information (to the extent the Company possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify any
information furnished to such Investor or to which the Investor had access. The
foregoing, however, does not in any way limit or modify the representations and
warranties made by the Company in Section 3. The Investor has not relied on any
oral representation made by the Company or any Subsidiary, or any officer,
director or employee of the Company or any Subsidiary.
4.4 INVESTMENT EXPERIENCE. The Investor understands that the
purchase of the Convertible Debenture and the Warrant involves substantial risk.
The Investor (a) has experience as an investor in securities of companies in the
development stage and acknowledges that the Investor can bear the economic risk
of the Investor's investment in the Convertible Debenture and the Warrant and
has such knowledge and experience in financial or business matters that the
Investor is capable of evaluating the merits and risks of this investment in the
Convertible Debenture and the Warrant and protecting its own interests in
connection with this investment and/or (b) has a preexisting business
relationship with the Company and certain of its officers, directors or
controlling persons of a nature and duration that enables the Investor to be
aware of the character, business acumen and financial circumstances of such
persons.
4.5 ACCREDITED INVESTOR STATUS. The Investor is an "accredited
investor" within the meaning of Regulation D promulgated under the 1933 Act.
4.6 RESTRICTED SECURITIES. The Investor understands that the
Convertible Debenture and the Warrant and, if applicable, the Conversion Shares,
are characterized as "restricted securities" under the 1933 Act inasmuch as they
are being acquired from the Company in a transaction not involving a public
offering and that under the 1933 Act and applicable regulations thereunder such
securities may be resold without registration under the 1933 Act only in certain
limited circumstances. In this connection, such Investor represents that the
Investor is familiar with Rule 144 of the U.S. Securities and Exchange
Commission (the "SEC"), as presently in effect, and understands the resale
limitations imposed thereby and by the 1933 Act. The Investor understands that
the Company is under no obligation to register any of the securities sold
hereunder except as provided in the Investor Rights Agreement. The Investor
understands that no public market now exists for either of the Convertible
Debenture or the Warrants and that it is uncertain whether a public market will
ever exist for the Convertible Debenture, the Warrant or the Conversion Shares.
4.7 FURTHER LIMITATIONS ON DISPOSITION. Without in any way
limiting the representations set forth above, the Investor further agrees not to
make any disposition of all or any portion of the Convertible Debenture, the
Warrant or the Conversion Shares except:
(a) pursuant to a registration statement under the 1933
Act covering such disposition; or
(b) pursuant to an exemption from registration under the
1933 Act, including, without limitation, Rule 144, Rule 144A or Regulation S
thereunder.
4.8 LEGENDS. It is understood that the certificates evidencing
the Convertible Debenture, the Warrant and the Conversion Shares will bear the
respective legends set forth below:
CONVERTIBLE DEBENTURE
---------------------
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON
CONVERSION HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE OR CANADIAN PROVINCE, OR UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). THESE SECURITIES ARE RESTRICTED AND MAY NOT BE
OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE
ACT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION
FROM SUCH REGISTRATION REQUIREMENTS.
WARRANT
-------
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR
CANADIAN PROVINCE, OR UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THESE SECURITIES ARE RESTRICTED AND MAY NOT BE OFFERED, RESOLD,
PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS.
CONVERSION SHARES
-----------------
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE OR CANADIAN PROVINCE, OR UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"). THESE SECURITIES ARE RESTRICTED AND MAY NOT BE
OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE
ACT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION
FROM SUCH REGISTRATION REQUIREMENTS.
The legends set forth above shall be removed by the Company from any certificate
evidencing the Convertible Debenture, the Warrant or Conversion Shares upon
delivery to the Company of an opinion by counsel, reasonably satisfactory to the
Company, that a registration statement under applicable securities laws is at
that time in effect with respect to the legended security or that such security
can be freely transferred in a public sale without such a registration statement
being in effect and that such transfer will not jeopardize the exemption or
exemptions from registration pursuant to which the Company issued the
Convertible Debenture, the Warrant or Conversion Shares.
4.9 NO RELIANCE ON ORAL STATEMENTS. The Investor, in
purchasing the Convertible Debenture and Warrant, is not relying on any oral
representations, promises or statements made by the Company, any Subsidiary or
any officer, director or employee of the Company or a Subsidiary.
4.10 TRANSFEREE UNDERTAKING. In connection with any
disposition of all or any portion of the Convertible Debenture, the Warrant or
the Conversion Shares (collectively, the "Securities") permitted pursuant to
Section 4.7, the Investors shall obtain an undertaking from each offeree or
purchaser of the Securities pursuant to which the offeree or purchaser shall
represent and warrant the following:
(a) It understands that the Securities have not been
registered under the 1933 Act and that, if in the future it decides to offer,
sell, pledge or otherwise transfer such Securities, such Securities may be
offered, sold, pledged or otherwise transferred only (i) to a person whom the
seller reasonably believes is a qualified institutional buyer in a transaction
meting the requirements of Rule 144A, (ii) in an offshore transaction pursuant
to and in compliance with Regulation S, (ii) pursuant to an exemption from
registration under the 1933 Act provided by Rule 144, if available, or (iv)
pursuant to a registration statement under the 1933 Act covering such
disposition, in all cases in accordance with all applicable securities laws of
any state of the United States or any Canadian province.
(b) It understands that the Securities will contain a
legend to the following effect unless the Company determines such legend is not
necessary under applicable laws:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED, AN SUCH SECURITIES MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A UNDER SUCH ACT IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION PURSUANT
TO REGULATION S UNDER SUCH ACT OR (3) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT PROVIDED BY RULE 144, IF AVAILABLE, IN EACH
CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR CANADIAN PROVINCE."
(c) If the oferree or transferee is a qualified
institutional buyer as defined in Rule 144A of the 1933 Act, that it is aware
that the sale to it is being made in reliance on Rule 144A and it is acquiring
the Securities for its own account or for the account of a qualified
institutional buyer.
5. CONDITIONS TO INVESTOR'S OBLIGATIONS AT CLOSING. The obligations of
the Investor under Section 2 of this Agreement are subject to the fulfillment or
waiver, on or before the Closing, of each of the following conditions:
5.1 Representations and Warranties True. Each of the
representations and warranties of the Company contained in Section 3 shall be
true and complete on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the date of the
Closing.
5.2 PERFORMANCE. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing and
shall have obtained all approvals, consents and qualifications necessary to
complete the purchase and sale described herein.
5.3 COMPLIANCE CERTIFICATE. The Company shall have delivered
to the Investor at the Closing a certificate signed on its behalf by the
Chairman of the Company's Board of Directors certifying that the conditions
specified in Sections 5.1, 5.2 and 5.3 have been fulfilled and stating that
there shall have been no material adverse change in the business, affairs,
operations, properties, assets or condition of the Company or any of its
Subsidiaries not previously disclosed to the Investor in writing.
5.4 SECURITIES EXEMPTIONS. The offer and sale of the
Convertible Debenture and the Warrant to the Investor pursuant to this Agreement
shall be exempt from the registration requirements of the 1933 Act.
5.5 PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to the Investor, and it shall each have received all such counterpart
originals and certified or other copies of such documents as it may reasonably
request. Such documents shall include (but not be limited to) the following:
(a) CERTIFIED CHARTER DOCUMENTS. A copy of the Certificate
of Incorporation and the By-Laws of the Company (as amended through the date of
the Closing) and a copy of the charter documents of each Subsidiary, certified
by the Chairman of the Company's Board of Directors as true and correct copies
thereof as of the Closing.
(b) CORPORATE ACTIONS. A copy of the resolutions of the
Board of Directors of the Company evidencing the adoption of resolutions
authorizing the execution, delivery and performance of this Agreement and the
Investor Rights Agreement, the execution, issuance and performance of the
Convertible Debenture and the Warrant and the other matters contemplated hereby
and thereby, certified by an Executive Director of the Company to be true,
complete and correct.
5.6 OPINION OF COMPANY COUNSEL. The Investor shall have
received an opinion from Hecht & Steckman, P.C. in form and substance reasonably
satisfactory to the Investor that:
(a) the Convertible Debenture and Warrant are validly
issued;
(b) upon conversion of the Convertible Debenture or
exercise of the Warrant, the Conversion Shares will be validly issued, fully
paid and non-assessable;
(c) the Company has been duly incorporated and is validly
existing in good standing under the laws of the State of Delaware, has the
corporate authority to enter into and perform this Agreement and the Investor
Rights Agreement and has the corporate power to own and operate its properties
and assets and to carry on its business as currently conducted;
(d) the capitalization of the Company is as set forth
herein;
(e) all corporate action on the part of the Company's
directors and shareholders necessary for the authorization, execution and
delivery of, and the performance of all obligations of the Company under this
Agreement, the Investor Rights Agreement, the Convertible Debenture and the
Warrant has been taken and that this Agreement, the Investor Rights Agreement,
the Convertible Debenture and the Warrant will constitute valid and legally
binding obligations of the Company, enforceable in accordance with their
respective terms;
(f) the execution, delivery and performance of this
Agreement, the Convertible Debenture, the Warrant and the Investor Rights
Agreement, and the compliance by the Company with the terms and provisions
thereof do not contravene any law, public rule or regulation or the Certificate
of Incorporation of the Company, and do not require the consent or approval of,
or the giving of notice to, or the registration or filing with or the taking of
any other action in respect of, any governmental or judicial authority or
agency;
(g) the offer and sale of the Convertible Debenture and
Warrant to the Investor in accordance with this Agreement and the issuance of
the Conversion Shares to the Investor will be exempt from the registration and
prospectus delivery requirements of the Securities Act of 1933; and
(h) the Company is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
5.7 INVESTOR RIGHTS AGREEMENT. The Company, Pak Kwan Cheung,
the Majority Shareholders (as defined in the Investor Rights Agreement) and the
Investor shall have executed and delivered the Investor Rights Agreement.
5.8 RESERVATION OF UNDERLYING STOCK. The Ordinary Shares
issuable on conversion of the Convertible Debenture and the exercise of the
Warrant shall have been duly authorized and reserved for issuance upon such
conversion and exercise.
5.9 COMPLETION OF DUE DILIGENCE. The Investor shall have
completed its legal and financial due diligence, the results of which shall be
reasonably satisfactory to the Investor, and the Company shall have reasonably
cooperated with the Investor in connection therewith.
5.10 EXHIBITS. The Company shall be provided the completed
Schedule of Exceptions and Exhibit E to the Investor, the form and substance of
each of which shall be acceptable to the Investor in its absolute and sole
discretion.
5.11 INSURANCE. The Company and the Investors shall have
agreed upon an insurance plan for the Company and its Subsidiaries, including
the amount and types of coverage to be put into place.
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to the Investor under this Agreement are subject to the
fulfillment or waiver on or before the Closing of each of the following
conditions by the Investor:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Investor contained in Section 4 shall be true and complete on
the date of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.
6.2 Payment of Purchase Price. The Investor shall have
delivered to the Company the Purchase Price in accordance with the provisions of
Section 2.
6.3 Securities Exemptions. The offer and sale of the
Convertible Debenture and the Warrant to the Investor pursuant to this Agreement
shall be exempt from the registration requirements of the 1933 Act.
7. POST-CLOSING COVENANTS OF INVESTOR.
7.1 CONFIDENTIALITY.
(a) The Investor acknowledges that the Company could be
irreparably damaged if confidential information concerning the business and
affairs of the Company were disclosed to or utilized on behalf of any person.
The Investor covenants and agrees to and with the Company that, except as
otherwise provided in this Agreement, it will not, at any time, directly or
indirectly, without the prior written consent of the Company, divulge, or permit
any of its partners, shareholders, directors, officers, employees or agents to
divulge to any person any non-public information concerning the business or
financial or other affairs, or any of the methods of doing business used by the
Company or any of its Subsidiaries, nor release any information provided
pursuant to or concerning this Agreement, the Investor Rights Agreement or any
Ancillary Agreement or the transactions contemplated by this Agreement, the
Investor Rights Agreement or any Ancillary Agreement if such release is intended
for, or may result in, its public dissemination. The foregoing requirements of
confidentiality shall not apply to information: (i) that is now or in the future
becomes freely available to the public through no fault of or action by the
using or disclosing party; (ii) that is in the possession of the using or
disclosing party prior to the time such information was obtained from the
Company or that is independently acquired by the using or disclosing party
without the aid, application or use of such other information; (iii) that is
obtained by the using or disclosing party in good faith without knowledge of any
breach of a secrecy arrangement from a third party; (iv) that is required to be
disclosed by applicable law or order of government agency or self-regulatory
body; or (v) that is disclosed in connection with any bona-fide offer to
purchase any shares in the Company; provided that the proposed transferor
obtains an undertaking from the proposed transferee to keep such information
confidential in accordance with the provision of this Section 7.1 prior to such
disclosure.
(b) The Investor and the Company agree to consult with
each other (and to take into consideration any comments reasonably raised by any
such party) prior to the dissemination of any press release or public
communication concerning this Agreement, the Investor Rights Agreement or any
Ancillary Agreement or the transactions contemplated by this Agreement, the
Investor Rights Agreement or any Ancillary Agreement. Any such press release or
public communication shall be subject to the approval of both the Company and
the Investor.
(c) This Section 7.1 will survive termination of this
Agreement, the Investor Rights Agreement and the Ancillary Agreements.
8. GENERAL PROVISIONS.
8.1 SURVIVAL OF WARRANTIES; INVESTIGATION. The
representations, warranties and covenants of the Company and the Investor
contained in or made pursuant to this Agreement shall survive the execution and
delivery of this Agreement and the Closing. It shall be no defense to an action
for breach of this Agreement that the Investor or its agents have (or have not)
made investigations into the affairs of the Company or that the Company could
not have known of the misrepresentation or breach of warranty. Damages for
breach of a representation or warranty or other provision of this Agreement
shall not be diminished by alleged tax savings resulting to the complaining
party as a result of the loss complained of.
8.2 SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties, except that the Company may not assign or
transfer any of its rights or obligations under this Agreement.
8.3 GOVERNING LAW; JURISDICTION. This Agreement and the
enforcement thereof shall be governed by and construed under the internal laws
of the State of New York. The parties hereto consent to the non-exclusive
jurisdiction of any New York State or Federal court sitting in the City of New
York and any appellate court from any thereof in any action or proceeding
arising out of or relating to this Agreement.
8.4 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
8.5 HEADINGS. The headings and captions used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to sections,
paragraphs, exhibits and schedules shall, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits and schedules attached hereto, all
of which exhibits and schedules are incorporated herein by this reference.
8.6 NOTICES. Any and all notices required or permitted to be
given to a party pursuant to the provisions of this Agreement will be in writing
and will be effective and deemed to provide such party sufficient notice under
this Agreement on the earliest of the following: (i) at the time of personal
delivery, if delivery is in person; (ii) at the time of transmission by
facsimile, addressed to the other party at its facsimile number specified herein
(or hereafter modified by subsequent notice to the parties hereto), with
confirmation of receipt made by both telephone and printed confirmation sheet
verifying successful transmission of the facsimile; (iii) one (1) business day
after deposit with an express overnight courier for deliveries within a country,
or three (3) business days after such deposit for international deliveries or
(iv) three (3) business days after deposit in mail by certified mail (return
receipt requested) or equivalent for deliveries within a country. For the
purposes of this Section, a delivery between the PRC and Hong Kong shall be
considered an international delivery.
All notices for international delivery will be sent by facsimile or by
express courier. All notices not delivered personally or by facsimile will be
sent with postage and/or other charges prepaid and properly addressed to the
party to be notified at the address or facsimile number indicated for such
party, in the case of the Company, at 206-5050 Kingsway, Burnaby, BC, Canada,V5H
4H2, Attention: Mr. Pak Kwan Cheung, Facsimile: (604) 439-9869, with a copy to
Hecht & Steckman, P.C., 60 East 42nd Street, Suite 5101, New York, NY
10165-5101, Attention: Charles J. Hecht, Esq. or, in the case of the Investor,
c/o Yugang International Ltd., Room 3301-4, China Resources Building, 26 Harbour
Road, Hong Kong, Attention: Mr. Edmond Leung, Facsimile: (852) 2827-5549, or at
such other address or facsimile number as such other party may designate by
giving ten (10) days advance written notice by one of the indicated means of
notice herein to the other parties hereto. Notices by facsimile shall be machine
verified as received.
Any party hereto (and such party's permitted assigns) may by notice so
given change its address for future notices hereunder. Notice shall conclusively
be deemed to have been given in the manner set forth above.
8.7 COSTS, EXPENSES. Each party hereto shall bear its own
costs in connection with the preparation, execution and delivery of this
Agreement and the Investor Rights Agreement and the issuance of the Convertible
Debenture and the Warrant.
8.8 NO FINDER'S FEES. Except for the finder's fee payable by
the Company to Albert Yao and Echo Shine Limited, whose address is 1401-2 Yue
Shing Commercial Building, 16 Queen Victoria Street, Central, Hong Kong, in an
amount equal to six percent (6%) of the Purchase Price plus six percent (6%) of
the amount paid by the Investor upon exercise of the Warrant, each party
represents that it neither is nor will be obligated for any finder's or broker's
fee or commission in connection with this transaction. The Investor agrees to
indemnify and to hold harmless the Company from any liability for any commission
or compensation in the nature of a finders' or broker's fee (and any asserted
liability) for which the Investor or any of its officers, partners, employees,
or representatives is responsible. The Company agrees to indemnify and hold
harmless the Investor from any liability for any commission or compensation in
the nature of a finder's or broker's fee (and any asserted liability) for which
the Company or any of its officers, employees or representatives is responsible.
8.9 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Investor.
No delay or omission to exercise any right, power, or remedy accruing to the
Investor, upon any breach, default or noncompliance of the Company under this
Agreement shall impair any such right, power, or remedy, nor shall it be
construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of any similar breach, default or noncompliance
thereafter occurring. All remedies, either under this Agreement, by law, or
otherwise afforded to the Investor, shall be cumulative and not alternative.
8.10 SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision(s) shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.
8.11 ENTIRE AGREEMENT. This Agreement, together with all
exhibits and schedules hereto, constitutes the entire agreement and
understanding of the parties with respect to the subject matter hereof and
supersedes any and all prior negotiations, correspondence, agreements,
understandings duties or obligations between the parties with respect to the
subject matter hereof.
8.12 FURTHER ASSURANCES. From and after the date of this
Agreement, upon the request of the Investor or the Company, the Company and the
Investor shall execute and deliver such instruments, documents or other writings
as may be reasonably necessary or desirable to confirm and carry out and to
effectuate fully the intent and purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
THE COMPANY:
------------
TENGTU INTERNATIONAL CORP.
By:
Name:
Title:
INVESTOR:
---------
TOP EAGLE HOLDINGS LIMITED
By:
Name:
Title:
CONVERTIBLE DEBENTURE AND WARRANT PURCHASE AGREEMENT
LIST OF EXHIBITS
Exhibit A - Convertible Debenture
Exhibit B - Warrant
Exhibit C - Schedule of Exceptions
Exhibit D - Investor Rights Agreement
Exhibit E - List of Subsidiaries
Exhibit F - Certificate of Incorporation and By-Laws of the Company
Exhibit G - Investment Letter
Exhibit H - Comadex Employment Agreement